In the Ultimate Escapes bankruptcy case, the U.S. District Court for the District of Delaware recently held that the “business judgment rule” may protect fiduciaries who negotiate and enter into unconventional financing agreements in an attempt to save the company. In short, a failed business strategy by itself does not lead to liability for breach of fiduciary duty.
Before the Great Recession, Ultimate Escapes was a luxury destination club providing members with access to high-end vacations. Membership involved a high one-time initiation fee and annual membership dues.
Prior to the bankruptcy, James Tousignant served as President, CEO, and a member of the Board. Richard Keith served as Chairman of the Board. Ultimate Escapes owed its senior lender approximately $90 million secured by all assets of the company. Tousignant and Keith had personally guaranteed the loan.