Shlensky v. Wrigley

Appellate Court of Illinois · 1968 · Corporations

237 N.E.2d 776 (1968)

Updated August 1, 2026

Corporationsbusiness judgment ruleshareholder derivative suitdirector discretionfraudillegalityconflict of interestgood faith

Facts

Plaintiff alleged that the Cubs were the only major league team not scheduling substantial night home games and that the team had sustained operating losses from direct baseball operations during 1961-65. He claimed the losses were caused by inadequate home attendance and that installing lights at Wrigley Field would increase attendance and revenues sufficiently to offset installation costs. Plaintiff further alleged that Philip K. Wrigley refused to install lights because he believed baseball was a daytime sport and because night games would harm the surrounding neighborhood, and that the other directors acquiesced in that policy. Plaintiff asserted that this policy constituted mismanagement, waste, and negligence.

Issue

Did the amended complaint state a cause of action in a shareholder derivative suit by alleging that the directors refused to install lights and schedule night games for reasons allegedly unrelated to the corporation's financial interests? More specifically, could the court interfere with that board decision absent allegations showing conduct amounting to fraud, illegality, conflict of interest, or comparable dereliction, and where corporate damage was not well pleaded?

Rule

Courts will not substitute their judgment for that of corporate directors on questions of business policy when directors act within the law and exercise honest business judgment in good faith. In a shareholder derivative action challenging such decisions, judicial interference is improper unless the challenged conduct at least borders on fraud, illegality, or conflict of interest, and the complaint must allege actual damage to the corporation through well-pleaded facts rather than conclusions.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakefront Heritage Arena, Inc., a Delaware corporation based in Milwaukee, owns a professional hockey team and its arena. Shareholder Nina Patel files a derivative suit alleging the board acted negligently by refusing to add luxury suites, even though she claims suites would increase revenue and other teams in the league have done so successfully.

If Nina alleges only that the board chose an unwise business policy and that a different policy would likely be more profitable, what is the most likely result?

Explanation. The majority opinion holds that courts do not resolve ordinary questions of corporate business policy merely because a shareholder alleges a different choice would be wiser or more profitable. Absent allegations showing conduct at least bordering on fraud, illegality, or conflict of interest, judicial interference is improper. That principle applies here because the complaint challenges only the wisdom of the board's operational decision.