HF 1534

as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to business corporations; imposing liability 
  1.3             on a corporation and its board for damages caused to 
  1.4             the public interest; prescribing criminal penalties 
  1.5             and civil penalties and remedies; amending Minnesota 
  1.6             Statutes 2002, section 302A.251. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2002, section 302A.251, is 
  1.9   amended to read: 
  1.10     302A.251 [STANDARD OF CONDUCT.] 
  1.11     Subdivision 1.  [STANDARD; LIABILITY.] A director shall 
  1.12  discharge the duties of the position of director (i) in good 
  1.13  faith, (ii) in a manner the director reasonably believes to be 
  1.14  in the best interests of the corporation, but not at the expense 
  1.15  of the environment, human rights, the public health or safety, 
  1.16  the communities in which the corporation operates, or the 
  1.17  dignity of its employees, and (iii) with the care an ordinarily 
  1.18  prudent person in a like position would exercise under similar 
  1.19  circumstances.  A person who so performs those duties is not 
  1.20  liable to the corporation or its shareholders by reason of being 
  1.21  or having been a director of the corporation.  
  1.22     Subd. 2.  [RELIANCE.] (a) In determining only whether a 
  1.23  director has acted in a manner the director reasonably believes 
  1.24  to be in the best interests of the corporation, a director is 
  1.25  entitled to rely on information, opinions, reports, or 
  1.26  statements, including financial statements and other financial 
  2.1   data, in each case prepared or presented by:  
  2.2      (1) one or more officers or employees of the corporation 
  2.3   whom the director reasonably believes to be reliable and 
  2.4   competent in the matters presented; 
  2.5      (2) counsel, public accountants, or other persons as to 
  2.6   matters that the director reasonably believes are within the 
  2.7   person's professional or expert competence; or 
  2.8      (3) a committee of the board upon which the director does 
  2.9   not serve, duly established in accordance with section 302A.241, 
  2.10  as to matters within its designated authority, if the director 
  2.11  reasonably believes the committee to merit confidence.  
  2.12     (b) Paragraph (a) does not apply to a director who has 
  2.13  knowledge concerning the matter in question that makes the 
  2.14  reliance otherwise permitted by paragraph (a) unwarranted.  
  2.15     Subd. 3.  [PRESUMPTION OF ASSENT; DISSENT.] A director who 
  2.16  is present at a meeting of the board when an action is approved 
  2.17  by the affirmative vote of a majority of the directors present 
  2.18  is presumed to have assented to the action approved, unless the 
  2.19  director:  
  2.20     (a) objects at the beginning of the meeting to the 
  2.21  transaction of business because the meeting is not lawfully 
  2.22  called or convened and does not participate thereafter in the 
  2.23  meeting, in which case the director shall not be considered to 
  2.24  be present at the meeting for any purpose of this chapter; 
  2.25     (b) votes against the action at the meeting; or 
  2.26     (c) is prohibited by section 302A.255 from voting on the 
  2.27  action.  
  2.28     Subd. 4.  [ELIMINATION OR LIMITATION OF LIABILITY.] A 
  2.29  director's personal liability to the corporation or its 
  2.30  shareholders for monetary damages for breach of fiduciary duty 
  2.31  as a director may be eliminated or limited in the articles.  The 
  2.32  articles shall not eliminate or limit the liability of a 
  2.33  director: 
  2.34     (a) for any breach of the director's duty of loyalty to the 
  2.35  corporation or its shareholders; 
  2.36     (b) for acts or omissions not in good faith or that involve 
  3.1   intentional misconduct or a knowing violation of law; 
  3.2      (c) under section 302A.559 or 80A.23; 
  3.3      (d) for any transaction from which the director derived an 
  3.4   improper personal benefit; or 
  3.5      (e) for any act or omission occurring prior to the date 
  3.6   when the provision in the articles eliminating or limiting 
  3.7   liability becomes effective. 
  3.8      Subd. 5.  [CONSIDERATIONS.] In discharging the duties of 
  3.9   the position of director, a director may, in considering the 
  3.10  best interests of the corporation, consider the interests of the 
  3.11  corporation's employees, customers, suppliers, and creditors, 
  3.12  the economy of the state and nation, community and societal 
  3.13  considerations, and the long-term as well as short-term 
  3.14  interests of the corporation and its shareholders including the 
  3.15  possibility that these interests may be best served by the 
  3.16  continued independence of the corporation. 
  3.17     Subd. 6.  [CIVIL LIABILITY FOR DAMAGE CAUSED TO THE PUBLIC 
  3.18  INTEREST.] If any corporation formed under this chapter causes 
  3.19  damage to the environment, violates human rights, adversely 
  3.20  affects the public health or safety, damages the welfare of the 
  3.21  communities in which the corporation operates, or violates the 
  3.22  dignity of its employees, any person damaged by this action, may 
  3.23  either in law or in equity, in Minnesota district court, sue 
  3.24  either: 
  3.25     (a) the corporation; or 
  3.26     (b) any person who was a director of the corporation either 
  3.27  at: 
  3.28     (1) the time the damage occurred; or 
  3.29     (2) the time the board of directors approved the corporate 
  3.30  action that led directly to the damage. 
  3.31     Subd. 7.  [EXEMPTIONS FROM LIABILITY IN CERTAIN CASES.] (a) 
  3.32  A director is not liable under this section if: 
  3.33     (1) the damage complained of was the direct result of an 
  3.34  action approved by the corporation's board of directors that the 
  3.35  director had voted against; or 
  3.36     (2) the damage complained of was the direct result of an 
  4.1   action approved by the corporation which approval occurred prior 
  4.2   to the director becoming a member of the board. 
  4.3      (b) This section does not apply to corporations, or the 
  4.4   directors of corporations, consolidated annual revenues of which 
  4.5   as calculated in accordance with generally accepted accounting 
  4.6   principles are less than $50,000,000. 
  4.7      Subd. 8.  [AMOUNT OF DAMAGES.] (a) The damages recoverable 
  4.8   in an action authorized under subdivision 6 shall be the greater 
  4.9   of: 
  4.10     (1) the actual damage caused to the plaintiff; or 
  4.11     (2) three times the savings which accrued to the 
  4.12  corporation as the result of failing to safeguard the public 
  4.13  interest as required by subdivision 1. 
  4.14     (b) The trier of fact may award punitive damages against a 
  4.15  defendant for violation of subdivision 1, if the plaintiff has 
  4.16  established by clear and convincing evidence that the defendant 
  4.17  knowingly, intentionally, or recklessly caused damage to the 
  4.18  environment or injury to any person or community protected by 
  4.19  subdivision 1 and an award is necessary to punish the defendant 
  4.20  for the conduct or to deter the defendant from similar conduct 
  4.21  in like circumstances. 
  4.22     Subd. 9.  [CONTRIBUTION.] Any director against whom a claim 
  4.23  is asserted under subdivision 6 and who is held liable thereon, 
  4.24  is entitled to contribution from the other directors who are 
  4.25  likewise liable thereon or any other director who, if sued 
  4.26  separately, would have been liable to make the same payment. 
  4.27     Subd. 10.  [LIMITATION OF ACTIONS.] An action maintained to 
  4.28  enforce any liability under subdivision 6 must be brought within 
  4.29  two years after the discovery of the damage caused.  No action 
  4.30  shall be brought to enforce any liability under subdivision 6 
  4.31  that accrues prior to the seventh anniversary date of enactment 
  4.32  of this act. 
  4.33     Subd. 11.  [LIABILITY OF CONTROLLING PERSONS.] (a) Every 
  4.34  person who, by or through stock ownership, agency or otherwise, 
  4.35  or who, pursuant to or in connection with an agreement 
  4.36  understanding with one or more other persons by or through stock 
  5.1   ownership, agency or otherwise, controls any person liable under 
  5.2   subdivision 6, is also jointly and severally liable to the same 
  5.3   extent as the controlled person to any person whom the 
  5.4   controlled person is liable, unless the controlling person had 
  5.5   no knowledge of or reasonable grounds to believe in the 
  5.6   existence of the facts by reason of which the liability of the 
  5.7   controlled person is alleged to exist. 
  5.8      (b) For purposes of this subdivision, the term "control," 
  5.9   including the terms "controls," "controlled," and "controlling," 
  5.10  means the possession, direct or indirect, of the power to direct 
  5.11  or cause the direction of the management and policies of a 
  5.12  person, whether through the ownership of voting securities, by 
  5.13  contract or otherwise. 
  5.14     Subd. 12.  [ATTORNEY GENERAL.] (a) Whenever it appears to 
  5.15  the attorney general that any corporation is engaged or about to 
  5.16  engage in any acts or practices which constitute or will 
  5.17  constitute a violation of the provisions of subdivision 1 
  5.18  protecting the environment, human rights, public health or 
  5.19  safety, communities in which a corporation formed under this 
  5.20  chapter operates, or dignity of its employees (collectively, the 
  5.21  public interest), the attorney general may bring an action in 
  5.22  any Minnesota district court to enjoin the acts or practices, 
  5.23  and upon proper showing a permanent or temporary injunction or 
  5.24  restraining order must be granted without bond. 
  5.25     (b) Whenever it appears to the attorney general that any 
  5.26  corporation or person has violated subdivision 1 established to 
  5.27  protect the public interest as defined in paragraph (a), the 
  5.28  attorney general may bring an action in any Minnesota district 
  5.29  court and the court shall have jurisdiction to impose, upon a 
  5.30  proper showing, a civil penalty by the person who committed such 
  5.31  violation.  The penalty must be payable to the state of 
  5.32  Minnesota. 
  5.33     (c) The provisions of this subdivision do not become 
  5.34  effective until seven years from the date of enactment of this 
  5.35  act. 
  5.36     Subd. 13.  [CRIMINAL PENALTIES.] Any director who willfully 
  6.1   violates subdivision 1 shall upon conviction be fined not more 
  6.2   than $1,000,000 or imprisoned not more than five years, or 
  6.3   both.  The monetary penalty does not reduce the amount of any 
  6.4   civil judgment paid under subdivision 8. 
  6.5      Subd. 14.  [ATTORNEY FEES.] Upon motion, a court may award 
  6.6   attorney fees to a successful party against one or more 
  6.7   defendants in any action which has resulted in the enforcement 
  6.8   of this section against a corporation or a director thereof if: 
  6.9      (1) a significant benefit, whether pecuniary or 
  6.10  nonpecuniary, has been conferred on the general public or a 
  6.11  large class of persons; 
  6.12     (2) the necessity and financial burden of private 
  6.13  enforcement are such to make the award appropriate; and 
  6.14     (3) the fees should not in the interest of justice be paid 
  6.15  out of recovery, if any.