gross negligence

Trans Union Corporation was a publicly traded diversified holding company whose principal earnings came from its railcar leasing business. During the late 1970s the company generated hundreds of millions of dollars in annual cash flow but faced difficulty utilizing accumulating investment tax credits because accelerated depreciation had reduced available taxable income. In the summer of 1980 Chairman and Chief Executive Officer Jerome W. Van Gorkom concluded that Congress would not make the credits refundable and began exploring a sale of the company. On September 13, 1980, Van Gorkom met privately with corporate takeover specialist Jay A. Pritzker at the latter's home. Without prior consultation with the Board or senior management except the controller, Van Gorkom proposed a cash-out merger at $55 per share, a figure he had selected solely because it appeared feasible for a leveraged buyout financed by Trans Union's projected cash flow and asset sales. Pritzker expressed interest and insisted that the Board act within three days. Van Gorkom called a special Board meeting for noon on September 20 with only two hours' prior notice to most directors. The ten-member Board, consisting of five inside and five outside directors, received a twenty-minute oral presentation from Van Gorkom but no copies of the proposed merger agreement and no independent valuation study. After roughly two hours of discussion the Board approved the merger agreement with Pritzker's New T Company, a wholly owned subsidiary of Marmon Group, Inc. Following public announcement of the agreement, senior management expressed strong opposition. On October 8 and 10 the Board approved amendments that permitted Trans Union to solicit competing offers during a market-test period ending February 10, 1981, although the amendments imposed strict conditions on any withdrawal from the Pritzker deal. Salomon Brothers was retained to seek alternative bids; only General Electric Credit Corporation showed sustained interest, but it declined to proceed without an extension of the February 10 deadline that Pritzker refused to grant. On February 10, 1981, Trans Union stockholders approved the merger by a vote of 69.9 percent in favor. Plaintiffs, a class of shareholders, had filed suit in December 1980 seeking rescission or damages. After trial the Court of Chancery entered judgment for the defendant directors on July 6, 1982, and the plaintiffs appealed to the Delaware Supreme Court.

The defendant Buick Motor Company manufactured automobiles and purchased ready-made wheels from the Imperial Wheel Company of Flint, Michigan. The Imperial company had furnished the defendant with eighty thousand wheels, none of which had proved defective prior to this incident. The defendant sold one such automobile to a firm of automobile dealers in Schenectady, who in turn sold the car to the plaintiff. While the plaintiff was driving the automobile at a speed of only eight miles an hour, a wheel collapsed because it was made of defective wood whose spokes crumbled into fragments. The plaintiff was thrown out and injured. The wheel had been bought from the outside manufacturer rather than produced by the defendant. Evidence showed that the defects could have been discovered by reasonable inspection, which the defendant omitted. There was no claim that the defendant knew of the defect and willfully concealed it. The car was designed to go fifty miles an hour. It had seats for three persons. The plaintiff commenced an action for negligence against the defendant. The case was tried to a jury. The New York Court of Appeals affirmed the judgment with costs.

Roy Daniels was an inmate at the city jail in Richmond, Virginia. While there, he slipped on a pillow that respondent, a correctional deputy stationed at the jail, had left on the prison stairway. The fall caused Daniels to sustain back and ankle injuries. Daniels filed a suit under 42 U.S.C. § 1983 against the deputy. He alleged that the deputy's conduct had caused him injury and that the deputy would rely on sovereign immunity as a defense if Daniels pursued a state tort action instead. The District Court granted the deputy's motion for summary judgment. A panel of the Court of Appeals for the Fourth Circuit affirmed that judgment. On rehearing, the en banc Court of Appeals again affirmed the District Court's judgment, although it employed different reasoning from the panel. Because lower courts had taken inconsistent approaches to determining when tortious conduct by state officials rises to the level of a constitutional violation, the Supreme Court granted certiorari.