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Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International

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Publication Date

Summer 1994




Harvard Law School




Presumptions and burdens of proof are used, among other purposes, to maintain legal stability and at the same time effect change. By imposing the burden of proof on the party asserting a certain outcome, courts can calibrate burdens of proof and substantive rules until experience points to rule retention or amendment. As agents of change, presumptions and burdens of proof are far more flexible and less brittle than rules.1

This Article tells the story of presumptions and burdens of proof in litigation between corporate shareholders and managements. This litigation is replete with volatile presumptions and innovative burdens of proof, demonstrating their effectiveness and flexibility as tools for legal stability and change. This litigation also demonstrates their limits as tools for change: excessive, varied, and undisciplined use can bring chaos. Because burdens* of proof relate to particular facts, constant changes can create too many fact-specific results that defy generalization. More importantly, presumptions impose obligations to respond; burdens of proof constitute the responses. As the courts alter the facts that a party must prove to win, but not the presumptions to which the facts respond, the connections between the presumptions and burdens of proof loosen and disintegrate. With no internal relationship, these presumptions and burdens make little sense and provide little future guidance.

Four presumptions are fundamental to this Article, and all four appear in corporate shareholder-management litigation. They are: (i) experience-based presumptions, for example, the presumption that in financial matters, most people will act in their own self-interest rather than in the interest of others; (ii) tradition-based presumptions, for example, that people will follow the trodden path,2 which underlies the rule that directors must properly inform themselves and deliberate before making decisions; (iii) presumptions of legality, legitimacy, and orderliness, for example, that corporate directors were legally elected, and that fiduciaries hold and manage other peoples' money in accordance with the law;' and (iv) initial presumptions in favor of defendants.4 The set of facts that plaintiffs must prove to win is determined by the initial burden of proof, which in turn varies depending on individual causes of action. In every case, however, plaintiffs must satisfy a burden of proof, however slight.

This Article begins with a discussion of corporate management's duties, then moves to an exposition of presumptions and burdens of proof in shareholder-management litigations, and concludes with an examination of takeover litigation in which changing burdens of proof have rendered the substantive law practically incoherent.



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