"`The directors of a corporation are required to exercise reasonable and ordinary care, skill, and diligence in conducting its business, and the failure to observe this standard of care imposes liability on a defaulting director;' Fell v. Pitts, 263 Pa. 314, 319, 106 A. 574, 575; that is, the care, skill and diligence which the ordinary prudent man would exercise in similar circumstances. * * *" Hunt v. Aufderheide, 1938, 330 Pa. 362, at page 366, 199 A. 345, at page 347; see Otis Co. v. Pennsylvania R. Co., D.C.E.D.Pa. 1945, 61 F. Supp. 905, at page 910, affirmed 3 Cir., 1946, 155 F.2d 522; Gamlen Chemical Co. v. Gamlen, D.C.W.D.Pa. 1948, 79 F. Supp. 622, at page 631. The Act of 1933, 15 P.S. § 2852-408, supra, provides: "Officers and directors shall be deemed to stand in a fiduciary relation to the corporation, and shall discharge the duties of their respective positions in good faith and with that diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in their personal business affairs."
The appellant's statutory argument must be rejected in view of the inter-relationship between the above-mentioned I.C.C. "merger" and later "securities" decisions, 276 F. Supp. at 552. The District Court was entirely correct in concluding that Otis Co. v. Pennsylvania R. Co., 61 F. Supp. 905 (E.D.Pa. 1945), aff'd 155 F.2d 522 (3rd Cir. 1946), was inapposite and did not govern this case (276 F. Supp. at 554). We will affirm the order of dismissal for lack of jurisdiction on the basis of the thorough and persuasive opinion of Chief Judge Wright.
The appellant makes the point that the court's conclusion did not properly apply the law to the facts before it. This matter was thoroughly considered by Judge Kalodner in the District Court and every important phase of the matter was discussed in his opinion. 1945, 61 F. Supp. 905. We agree with that opinion and affirm his judgment for the reasons stated by him.
Moreover, the presumption of good faith and reasonable care may be overcome by evidence to the contrary. In Otis Co. v. Pennsylvania R.R. Co., 61 F. Supp. 905 (E.D.Pa. 1945), aff'd per curiam, 155 F.2d 522 (3d Cir. 1946), the court attempted to harmonize the pre-1968 Pennsylvania statutory standard of care and the business judgment rule. After citing § 408 of the Business Corporation Law, the court, citing New York law, held:
Selheimer v. Manganese Corporation of America, supra. See also South Penn Collieries Co. v. Sproul, 52 F.2d 557 (3d Cir. 1931); Otis Co. v. Pennsylvania R. Co., 61 F. Supp. 905 (E.D.Pa. 1945), aff'd, 3 Cir., 155 F.2d 522. The burden does not shift to the defendants to prove the fairness of the transaction. Uccello v. Gold'n Foods Inc., 325 Mass. 314 (1950), 90 N.E.2d 530, 16 A.L.R.2d 459.
Under this rule a Court will not interfere with the internal management and substitute its judgment for that of the directors to enjoin or set aside the transaction or to hold the directors responsible for any resulting loss. Otis Co. v. Pennsylvania R.R. Co., 61 F. Supp. 905 (E.D.Pa. 1945), aff'd 155 F.2d 522 (3rd Cir. 1946); Conviser v. Simpson, 122 F. Supp. 205 (D.Md. 1954); Diston v. Loucks, 62 N.Y.S.2d 138 (Sup.Ct. 1941); Henn, Law of Corporations, § 233 (1st Ed. 1961). Directors and officers of a corporation may become liable to it or the shareholders for negligence in the performance of their corporate duties.
" 334 U.S. at pp. 195, 197-198, 201, 68 S.Ct. at p. 965. Nor does Otis Co. v. Pennsylvania R. Co., 61 F. Supp. 905 (E.D.Pa. 1945) relied upon by plaintiff dictate a contrary result. While it is true that in that case Judge Kalodner concluded that a Federal District Court might, under certain circumstances, properly have jurisdiction to determine the private rights of stockholders which the ICC cannot determine, he clearly envisioned a situation where, unlike the instant case, the liability sought to be imposed was against a group of directors for breach of their fiduciary duties.
It is only when this discretion is abused to the extent that shareholders are left unprotected as a result of the directors' failure to act properly in their roles as fiduciaries that the court will intervene. See Hunt v. Aufderheide, 330 Pa. 362, 199 A. 345 (1938) and the discussion in Otis Co. v. Pennsylvania R. R., 61 F. Supp. 905, 910-911 (E.D.Pa. 1945), aff'd mem. 155 F.2d 522 (3d Cir. 1946). Furthermore, it should be pointed out that when the law has occasion to inquire into these matters, it is not to substitute its judgment as to whether one offer is better than another, or to resolve disagreements as to how the future business pattern of the corporation should proceed, but rather to determine if the directors have acted soundly and in accord with accepted business practices.
In the light of these facts the filing of the consents required by I.T. 3795 by the corporation and the optionees was an act the performance of which was clearly within the discretion of the officers of the corporation in implementing the stockholder approved option plan. See Lynch v. Sapiro, 1935, 117 N.J. Eq. 485, 176 A. 327; Otis Co. v. Pennsylvania R. Co., D.C.E.D.Pa. 1945, 61 F. Supp. 905, affirmed on opinion below, 3 Cir., 1946, 155 F.2d 522. Plaintiff makes some claim that in any event defendants should have sought the consent of the board of directors or of a committee of the board before filing the corporation's consent not to claim a deduction on account of the plan.
However, with respect to the standard of care, skill and diligence required of those defendants who were directors of Carbon and Catalyst the law of Delaware and Maryland, respectively, governs. Otis Company v. Pennsylvania R. Co., E.D.Pa. 1945, 61 F. Supp. 905, at page 912 affirmed 3 Cir., 1946, 155 F.2d 522. As indicated by the cases cited in connection with conclusion of law No. 7, this standard is substantially the same in the three states here involved.