North Dakota
How In re The Home Depot, Inc. Derivative Litigation applies in North Dakota: state-specific rules, key cases, and bar exam notes for Corporate Law.
North Dakota's approach to derivative litigation focuses on the duty of care and loyalty owed by directors and officers to the corporation. The law emphasizes protecting shareholder interests while allowing for business judgment as a defense against accusations of mismanagement.
North Dakota Century Code § 10-19.1-01 affords directors a degree of protection from liability if they act in good faith, in the best interests of the corporation, and with the care an ordinarily prudent person would exercise.
The North Dakota Supreme Court ruled that directors must act in good faith and that mere errors in judgment do not constitute a breach of the duty of care.
This case established that the business judgment rule applies to corporate decisions unless there is evidence of gross negligence.
The court detailed that derivative suits must be brought only after addressing demand futility among shareholders.
North Dakota's approach aligns with the federal standards regarding the business judgment rule and the necessity of demonstrating that directors acted with gross negligence. However, North Dakota specifically codifies certain aspects of corporate negligence, reflecting its state-specific development over the federal interpretation.
Derivative litigation principles are tested on the North Dakota bar exam, focusing on the duties of directors and the application of the business judgment rule.