Harhen v. Brown (Massachusetts Supreme Judicial Court)

The Massachusetts Supreme Judicial Court granted John Hancock’s request for further appellate review of an Appeals Court decision that had eviscerated the business judgment rule in Massachusetts. On behalf of Associated Industries of Massachusetts, NELF filed a statement in support of Hancock’s request and an amicus brief on the merits in the SJC. NELF argued that the Appeals Court decision improperly imposed burdens on disinterested boards and directors that, heretofore, were imposed only on interested boards and directors. The SJC rejected the Appeals Court’s analysis and held that, "absent a showing of bad faith or lack of investigation into the demand," the business judgment rule protects the decision of a disinterested board or a disinterested subcommittee of such a board not to pursue litigation. The SJC also created an exception to the requirement that a shareholder make demand on all other shareholders if the board refuses his demand "where a very large number of shareholders is involved."