Once the plaintiff asserts a conflict of interest under § 13.1–691, “the burden shifts to the directors to show that their actions complied with the requirements of that section.” Izadpanah v. Boeing Joint Venture, 243 Va. 81, 83, 412 S.E.2d 708, 709 (1992). DCG & T meets its initial burden of asserting a conflict of interest among the Directors.

Va.Code (1950) §§13.1-870 and -871. The Virginia Supreme Court addressed the differing burdens to invalidate a corporate action under the Virginia Stock Corporation Act in Izadpanah v. Boeing Joint Venture, 243 Va. 81, 412 S.E.2d 708 (1992) (applying Va.Code (1950) §13.1-690 and §13.1-691). It held that:

Va.Code (1950) §§ 13.1–870 and –871. The Virginia Supreme Court addressed the differing burdens to invalidate a corporate action under the Virginia Stock Corporation Act in Izadpanah v. Boeing Joint Venture, 243 Va. 81, 412 S.E.2d 708 (1992) (applying Va.Code (1950) § 13.1–690 and § 13.1–691). It held that:

2. Another entity of which he is a director, officer or trustee is a party to the transaction and the transaction is or should be considered by the board of directors of the corporation. Relying on our decision in Izadpanah v. Boeing Joint Venture, 243 Va. 81, 412 S.E.2d 708 (1992), the circuit court ruled that Willard had the initial burden of establishing a conflict of interests and that he failed to do so. The court determined that A.S. and Rose Mary, in their capacities as directors, did not have an "indirect personal interest" in the transaction, as that term is defined in Code § 13.1-691(B).

Virginia law contains a statutory provision which addresses director conflicts of interest arising from hostile takeover situations. See Va. Code Ann. Section(s) 13.1-691; see also Izadpanah v. Boeing Joint Venture, 243 Va. 81, 83, 412 S.E.2d 708, 709 (1992). The Virginia Code provides:

However, "when a conflict of interest as defined in § 13.1-691 exists ... the burden shifts to the directors to show that their actions complied with the requirements of that section." Izadpanah v. Boeing Joint Venture, 412 S.E.2d 708, 709 (Va. 1992). Section 13.1-691 defines a conflict of interest as "a transaction with the corporation in which a director of the corporation has an interest that precludes the director from being a disinterested director."

Once an interested director transaction is established, the burden of proof shifts to the defendant (interested director) to show that his actions complied with the requirements of § 13.1-691. See Izadpanah v. Boeing Joint Venture, 243 Va. 81, 412 S.E.2d 708 (1992). Thus, the Vivadellis bear the burden of showing that the transaction at issue was fair to the corporation.

As to conflicts not arising inherently from the takeover attempt (that is, between a director and the corporation), however, that jurisprudence finds expression in § 13.1-691. See Izadpanah v. Boeing Joint Venture, 243 Va. 81, 412 S.E.2d 708 (1992). The Magistrate Judge correctly pointed out that no reasonableness inquiry is suggested by that statute, nor inquiry into the advice the director received.

See, e.g., VA. CODE ANN. § 13.1-690.A. (Michie 1950) ("A director shall discharge his duties as a director, including his duties as a member of a committee, in accordance with his good faith business judgment of the best interests of the corporation."); Izadpanah v. Boeing Joint Venture, 243 Va. 81, 412 S.E.2d 708 (1992). Speaking to this element, the debtor asserts that it was "unable to service its mortgage debt . . . [and] pay taxes as they became due."

However, at that stage of the trial, the Challengers enjoyed "all reasonable inferences drawn from the evidence in the light most favorable" to them. Izadpanah v. Boeing Joint Venture , 243 Va. 81, 82, 412 S.E.2d 708, 709 (1992). The presumption in the Challengers’ favor