[T][U] Federal Deposit Insurance Corp. v. Castetter

MEMORANDUM* The FDIC brought this action in its capacity as receiver of Balboa National Bank against the bank's former outside directors. A jury verdict in favor of the FDIC was set aside by the district court. The FDIC argues on appeal that the district court erred in granting judgment as a matter of law, and alternatively, granting a new trial. We reverse the district court's grant of judgment as a matter of law, and affirm its order granting a new trial. This controversy centers on the application of the ""business judgment rule."" The rule, codified in section 309 of the California Corporations Code, is intended to protect a director from liability for ""a mistake in business judgment which is made in good faith and in what he or she believes to be in the best interest of the corporation, where no conflict of interest exists."" Barnes v. State Farm Mutual Automobile Ins. Co., 20 Cal. Rptr. 2d 87, 95 (Cal. Ct. App. 1993). The business judgment rule does not, however, insulate a director from liability if he abdicated his corporate responsibility. Gaillard v. Natomas Co., 208 Cal. App. 3d 1250, 256 Cal. Rptr. 702, 710 (Cal. Ct. App.), review denied (June 1, 1989). Rather, to gain the protection of the business judgment rule, a director must have made an informed business decision. See Katz v. Chevron Corp., 22 Cal. App. 4th 1352, 27 Cal. Rptr. 2d 681, 689 (Cal. Ct. App. 1994).