Business Judgment Rule Fails to Upend FDIC Case Against Officials of Defunct Bank

The U.S. District Court for the Northern District of Illinois Sept. 1 said federal regulators can press a $20 million suit against former directors and officers of a failed bank, batting away their efforts to raise the business judgment rule at an early stage in the case (Federal Deposit Insurance Corporation v. Saphir).

The business judgment rule, which generally shields key corporate officials from liability for decisions made on an informed and good-faith basis, is expected to play an important role as bank directors and officers of failed banks defend their actions in court.

The 15-page memorandum opinion ...