15 Pa. Cons. Stat. § 512

Standard of care, justifiable reliance and business judgment rule.

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§ 512. Standard of care, justifiable reliance and business judgment rule.

(a) Directors.--A director of a domestic corporation shall stand in a fiduciary relation to the corporation and shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner the director reasonably believes to be in the best interests of the corporation and with such care, including the skill and diligence that a person of ordinary prudence would use under similar circumstances and reasonable inquiry into those issues required by the statutes of this Commonwealth to be considered in the circumstances and those interests and factors listed in section 515(a) (relating to exercise of powers generally) or 516(a) (relating to alternative standard) that the director considers appropriate. This subsection is subject to subsection (d) where applicable.

(a.1) Justifiable reliance.--In performing the duties of a director, and in satisfying the requirements of subsection (d), a director is entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:

(1) One or more officers or employees of the corporation or an affiliate of the corporation whom the director reasonably believes to be reliable and competent in the matters presented.

(2) Counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person.

(3) A committee of the board upon which the director does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

(b) Effect of actual knowledge.--A director is not considered to be acting in good faith under subsection (a.1) if the director has actual knowledge concerning the matter that causes the director to believe reliance is unwarranted.

(c) Officers.--Except as otherwise provided in the articles, an officer shall perform his duties as an officer in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so performs his duties shall not be liable by reason of having been an officer of the corporation.

(d) Business judgment rule.--A director or officer who makes a business judgment in good faith fulfills the duties under this section if:

(1) the subject of the business judgment does not involve self-dealing by the director or officer or an associate or affiliate of the director or officer;

(2) the director or officer is informed with respect to the subject of the business judgment to the extent the director or officer reasonably believes to be appropriate under the circumstances; and

(3) the director or officer rationally believes that the business judgment is in the best interests of the corporation.

(e) Burden of proof.--A person challenging the conduct of a director or officer as violating the duty of care under this section has the burden of proving:

(1) a breach of the duty of care, including that a requirement for the fulfillment of that duty under subsection (d) has not been met; and

(2) in a damage action, that the breach was the legal cause of damage suffered by the corporation.

(Nov. 3, 2022, P.L.1791, No.122, eff. 60 days)

Cross References. Section 512 is referred to in sections 515, 516, 517 of this title; section 712 of Title 17 (Credit Unions).

Notes of Decisions

Cited in 16 cases (3 in the last 5 years), 1991–2023 · leading case: Seven Springs Farm, Inc. v. Croker

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Seven Springs Farm, Inc. v. Croker (2000) pasuperct · cites it 4× “15 Pa.C.S. §§ 512(a), 1712(a). See also Korman Corp.”

Harold C. Lampe, Jr V. (2011) ca3 · cites it 3× “See 15 Pa. Cons.Stat. Ann. §§ 512(a), 1712 (West 2011); Anchel v.”

Dershaw v. Ciardi (In re Rite Way Electric, Inc.) (2014) paeb “5 Breach of Fiduciary Duty Count VIII of the complaint against the law firm alleges a breach of fiduciary duty. Fiduciary status is defined by statute as well as common law.”

Cuker v. Mikalauskas (1997) pa “03 (duties of directors and officers; the business judgment rule; reliance on committees and other persons) are similar but not identical to the statutory standards found in 15 Pa.C.S. §§ 512, 513, 515, 1712, 1713, and 1715.”

Neal v. Neumann Medical Center (1995) pacommwct · cites it 2× “3 The trial court cited Section 512(a) of the Associations Code, 15 Pa.C.S. § 512(a) in support of its rationale, which is the same statutory section that the United States District Court for the Eastern District of Pennsylvania relied on in Felicetti for its decision that the…”

Westlake Plastic Co. v. O'Donnell (1998) paed · cites it 2× “Similarly, O’Donnell argues that Westlake failed to allege breach of fiduciary duty as set forth in 15 Pa. Cons.Stat. § 512 because Westlake did not suffer damage as a result of the alleged breach of duty.”

White v. George (2004) pactcomplmercer “” 15 Pa.C.S. §512. White alleges in her complaint that “George’s unlawful actions, inactions, omissions and commissions as set forth in this complaint constitute a continuing intentional, reckless and outrageous breach of his fiduciary responsibility to ACG and White.”

Zampogna v. Law Enforcement Health Benefits, Inc. (2013) pacommwct “See also 15 Pa.C.S. § 512(a), which applies to "domestic corporations," and 15 Pa.”

Miller v. Blatstein (In Re Main, Inc.) (1999) paeb “Levine, Current Status of the Duty of Due Care and the Business Judgment Rule, C859 ALI-ABA 797, 799 (1993).”

Confer v. Custom Engineering Co. (1991) ca3 “15, § 1408 (1967) (repealed 1986) (officers are fiduciaries); see also 15 Pa. Cons. Stat.Ann. § 512(c) (1991) (officers owe duty of good faith to corporation).”

Resolution Trust Corp. v. Lutz (1996) paed “The duty owed by an officer or director is set forth in 15 Pa.Cons.Stat.Ann. § 512. This provides that directors and officers shall discharge the duties of their positions “in good faith and with the diligence, care and skill which ordinary prudent men would exercise under…”

Kitty Ward Travel v. Ward, T. (2016) pasuperct “15 Pa.C.S. § 512. 4 Section 523 addresses derivative actions by shareholders.”

Show all 16 citing cases →

— 15 Pa. Cons. Stat. § 512(a) — 5 cases

Seven Springs Farm, Inc. v. Croker (2000) pasuperct “15 Pa.C.S. §§ 512(a), 1712(a). See also Korman Corp.”

Harold C. Lampe, Jr V. (2011) ca3 “See 15 Pa. Cons.Stat. Ann. §§ 512(a), 1712 (West 2011); Anchel v.”

Neal v. Neumann Medical Center (1995) pacommwct “3 The trial court cited Section 512(a) of the Associations Code, 15 Pa.C.S. § 512(a) in support of its rationale, which is the same statutory section that the United States District Court for the Eastern District of Pennsylvania relied on in Felicetti for its decision that the…”

Zampogna v. Law Enforcement Health Benefits, Inc. (2013) pacommwct “See also 15 Pa.C.S. § 512(a), which applies to "domestic corporations," and 15 Pa.”

Miller v. Blatstein (In Re Main, Inc.) (1999) paeb “Levine, Current Status of the Duty of Due Care and the Business Judgment Rule, C859 ALI-ABA 797, 799 (1993).”

— 15 Pa. Cons. Stat. § 512(c) — 4 cases

MINEHAN v. MCDOWELL (2023) paed

T. Levy Associates, Inc. v. Kaplan (2021) paeb

Michael Kaplan and Nina Kaplan (2021) paeb

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