Donald Lewis was a shareholder in S.L.&E., Inc., a corporation that owned land and a complex of buildings in Rochester, New York. The land and buildings were leased to LGT, a tire manufa c turer.
Donald's brothers were shareholders and directors of both S.L.&E. and LGT. Donald had no financial or managerial interest in LGT. S.L.&E. leased the land to LGT at a rate that Donald con sidered damaging to S.L.&E. He pointed out that S.L.&E. collected only $14,000 per year in rent from LGT while paying out $11,000 in taxes.
This rate, he argued, meant that S.L.&E. could never be a profitmaking corporation. Should the directors of LGT and S.L.&E. be judged by the business judgment rule or the fairness rule? Explain.
Lewis v. S.L.&E., Inc., 629 F.2d 764 (2nd Cir.)