Data Key Partners v. Permira Advisors LLC

2014 WI 86

SUPREME COURT OF WISCONSIN
CASE NO.: 2012AP1967
COMPLETE TITLE: Data Key Partners,
Plaintiff-Appellant,
v.
Permira Advisers LLC, Raphael Holding Company
and Raphael
Acquisition Corp.,
Defendants-Respondents,
Terrance D. Paul, Judith Ames Paul, Addison L.
Piper,
Harold E. Jordan, Mark D. Musick, Randall J.
Erickson,
and Glenn R. James,
Defendants-Respondents-Petitioners,
Renaissance Learning, Inc.,
Defendant.

REVIEW OF A DECISION OF THE COURT OF APPEALS
Reported at 350 Wis. 2d 347, 837 N.W.2d 624
(Ct. App. 2013 – Published)
PDC No: 2013 WI App 107

OPINION FILED: July 23, 2014
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: March 18, 2014

SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Wood
JUDGE: Jon B. Counsell

JUSTICES:
CONCURRED:
DISSENTED: ABRAHAMSON, C.J., BRADLEY, CROOKS, JJ., dissent.
(Opinion filed.)
NOT PARTICIPATING:

ATTORNEYS:
For the defendants-respondents-petitioners, there were
briefs by Jonathan C. Medow and Mayer Brown LLP, Chicago; Leon
S. Schmidt Jr. and Schmidt & Grace, Wisconsin Rapids; and Howard
A. Pollack, Michael B. Apfeld, and Godfrey & Kahn, S.C.,
Milwaukee; and oral argument by Jonathan C. Medow and Michael B.
Apfeld.

For the plaintiff-appellant, there was a brief by Richard B.
Brualdi and The Brualdi Law Firm, P.C., New York; and Stacy
Taeuber, Madison; and oral argument by Richard B. Brualdi.

2
 2014 WI 86
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2012AP1967
(L.C. No. 2011CV563)

STATE OF WISCONSIN : IN SUPREME COURT

Data Key Partners,

Plaintiff-Appellant,

v.

Permira Advisers LLC, Raphael Holding Company
and Raphael Acquisition Corp., FILED
Defendants-Respondents, JUL 23, 2014
Terrance D. Paul, Judith Ames Paul, Addison L. Diane M. Fremgen
Piper, Harold E. Jordan, Mark D. Musick, Clerk of Supreme Court
Randall J. Erickson, and Glenn R. James,

Defendants-Respondents-Petitioners,

Renaissance Learning, Inc.,

Defendant.

REVIEW of a decision of the Court of Appeals. Reversed.

¶1 PATIENCE DRAKE ROGGENSACK, J. We review a decision

of the court of appeals1 reversing, in part, an order of the

1
Data Key Partners v. Permira Advisers LLC, 2013 WI App
107, 350 Wis. 2d 347, 837 N.W.2d 624.
 No. 2012AP1967

circuit court2 that dismissed the Second Amended Complaint

because it failed to state a claim upon which relief could be

granted. Plaintiffs claim that defendants violated their

fiduciary duties to the minority shareholder by selling

Renaissance Learning, Inc. to Permira Advisers, LLC.3 Defendant

directors contend that plaintiffs have not pled facts sufficient

to show that they are entitled to relief because they have not

pled around the business judgment rule, codified at Wis. Stat.

§ 180.0828 (2011-12).4 As to the majority shareholders, they

claim that plaintiffs have likewise failed to plead facts

sufficient to show that they are entitled to relief.

¶2 We conclude that Wis. Stat. § 180.0828(1)

unequivocally sets forth the terms on which directors may be

held liable for their decisions. The business judgment rule is

both a substantive law and a procedural device by which to

allocate a burden. Reget v. Paige, 2001 WI App 73, ¶¶17-18, 242

Wis. 2d 278, 626 N.W.2d 302 (the rule "immunize[s] individual

directors from liability and protects the board's actions" and
"creates an evidentiary presumption that the acts of the board

2
The Honorable Jon M. Counsell of Wood County presided.
3
The Second Amended Complaint reflects that plaintiffs are
the entity, Data Key Partners, and "partners of Data Key
Partners" who are suing individually because Data Key Partners
"owned shares of Renaissance's common stock." Second Amended
Complaint, ¶10. The caption, however, indicates that the
partners are suing on behalf of the entity, Data Key Partners.
4
All subsequent references to the Wisconsin Statutes are to
the 2011-12 version unless otherwise indicated.

2
 No. 2012AP1967

of directors were done in good faith"). As such, a party

challenging the decision of a director must plead facts

sufficient to plausibly show that he or she is entitled to

relief, i.e., facts that show the director's actions constitute:

a "willful failure to deal fairly" with a "shareholder[] in

connection with a matter in which the director has a material

conflict of interest"; a "violation of criminal law"; a

"transaction from which the director derived an improper

personal profit"; or "[w]illful misconduct." § 180.0828(1)(a)–

(d). This is a straightforward application of notice pleading

standards to the substantive law of the case because substantive

law drives what facts must be pled.

¶3 The Second Amended Complaint does not plead facts

sufficient to plausibly show that the directors' actions come

within the terms of potential liability, or that Judith and

Terrance Paul (the Pauls) received an improper material benefit

at the expense of the minority shareholders. Accordingly, we

reverse the decision of the court of appeals in regard to the
issues presented to us for review.

I. BACKGROUND

¶4 This lawsuit arises out of the merger and sale

(hereinafter sale) of Renaissance Learning, Inc., a publicly

traded corporation. Plaintiffs are Data Key Partners, a

partnership whose type is not apparent from the pleadings, and

three partners, Lawrence Bass, Paul Berger and Robert Garfield.

The partners allege indirect interests in Renaissance due to the
shares of Renaissance that Data Key Partners owned.
3
 No. 2012AP1967

¶5 The Pauls are the founders of Renaissance. They were

directors of Renaissance and controlled 69 percent of

outstanding Renaissance shares at the time of the sale.

Defendants Addison Piper, Harold Jordan, Mark Musick, Randall

Erickson and Glenn James also were directors of Renaissance at

the time of the challenged transaction (hereinafter non-Paul

directors).

¶6 Defendants Permira Advisers LLC, Raphael Holding

Company and Raphael Acquisition Corporation are business

organizations involved in the purchase of Renaissance. The

claims made against all defendants for failure to disclose and

against these corporate defendants for aiding and abetting are

not part of this review.5 (Counts III and IV, Second Amended

Complaint.)

¶7 During 2010, the Pauls decided to sell their interest

in Renaissance. Permira approached Renaissance, and made

several offers to purchase the entire company. In its final

offer, Permira offered to pay $15 per share to the Pauls and
$16.60 per share to the minority shareholders. Renaissance's

5
Plaintiffs claimed that the directors failed to disclose
necessary information in the proxy statement, such as the Pauls'
relationship to Goldman Sachs, a commercial banking firm that
the directors hired to handle the financial aspects of the
transaction. Plaintiffs also claimed Permira aided and abetted
the directors and the Pauls in breaching their obligations to
minority shareholders. The circuit court dismissed these claims
and the court of appeals affirmed that dismissal. Data Key, 350
Wis. 2d 347, ¶¶47-59. The plaintiffs have not sought review of
the court of appeals decision; accordingly, these two claims are
not before us.

4
 No. 2012AP1967

board of directors approved Permira's offer and Renaissance's

shareholders accepted it, with the sale set to close October 19,

2011. As part of Permira's contract with Renaissance,

Renaissance was obligated to pay a $13 million penalty if

Renaissance cancelled the sale to Permira.

¶8 On September 27, 2011, after the agreement to sell

Renaissance to Permira was reached, Plato Learning, Inc. began a

bidding war. In one bid, Plato offered to purchase Renaissance

for a payment to the Pauls of $15.10 per share and a payment to

minority shareholders of $18 per share. That bid was not

accepted. As a final bid, Plato offered $16.90 per share for

all shareholders' interests, with no difference between minority

and majority shares. This last offer would have netted the

Pauls roughly $38 million more than the sale to Permira. It

also was rejected, but not before plaintiffs sued to stop the

Permira sale.

¶9 On October 7, 2011, plaintiffs sued in federal

district court, claiming violations of the Securities Exchange
Act of 1934 and breach of defendants' fiduciary duty. They

sought to enjoin the sale to Permira. On October 14, 2011, the

federal district court denied plaintiffs' motion to enjoin the

sale, concluding that plaintiffs did not have "any likelihood of

success" on the merits of their claims. Plaintiffs withdrew the

federal claims, thereby raising a question of whether the

federal court had jurisdiction. On November 28, 2011, the

federal case was dismissed.

5
 No. 2012AP1967

¶10 On September 23, 2011, plaintiffs commenced the

lawsuit that is now before us in Wood County. Plaintiffs

contend that Renaissance directors, which include the Pauls,

breached their fiduciary duty to the minority shareholders.

(Count I, Second Amended Complaint.) Plaintiffs also contend

that defendants "are not entitled to any protection of Sec.

180.0828, Wis. Stat. or any protective provision in the

Company's Articles of Incorporation or Bylaws."6

¶11 Plaintiffs further contend that the Pauls breached

their fiduciary duty as majority shareholders by choosing to

sell their majority interest in Renaissance to Permira. (Count

II, Second Amended Complaint.) Plaintiffs alleged that the

"Pauls have put . . . their personal interest in monetizing

their holdings in the Company . . . ahead of that of the Company

and the Company's minority shareholders."7

¶12 The circuit court heard argument that Plato's offer

was subject to many contingencies, and that the board of

directors of Renaissance was concerned that Plato could not
fulfill them in the time remaining before the sale to Permira

was set to close. The Pauls supported the transaction with

Permira because it was more certain to result in an actual sale

for all shareholders and because Renaissance would be subject to

6
Second Amended Complaint, ¶27. As we mentioned
previously, Wis. Stat. § 180.0828 is Wisconsin's codification of
the business judgment rule, which is central to the directors'
actions in regard to the sale of Renaissance.
7
Id., ¶30.

6
 No. 2012AP1967

a $13 million penalty if Renaissance's contract with Permira was

breached. Renaissance was sold, and the sale netted the

minority shareholders a 40 percent premium on the value of their

shares when compared with the public exchange price prior to the

bidding war. Because of the difference in the per share price

paid to minority and majority shareholders, the minority

shareholders received $10 million more than what they would have

received if all shareholders were paid the same per share price

by Permira.

¶13 Based on this information, the circuit court dismissed

the Second Amended Complaint after concluding that it failed to

state a claim upon which relief can be granted. The court

reasoned that the business judgment rule protected the

directors' actions and that the Pauls violated no legal duty

when they chose to sell Renaissance to Permira.

¶14 The court of appeals reversed in part.8 Data Key

Partners v. Permira Advisers LLC, 2013 WI App 107, 350 Wis. 2d

347, 837 N.W.2d 624. It concluded that there were sufficient
facts alleged to show breach of fiduciary duty claims against

the directors and the Pauls. (Counts I and II, Second Amended

Complaint.) The court of appeals criticized the circuit court

for noting that there was a reasonable inference that a deal

with Plato might not close and concluded that the business

judgment rule should not be used to dismiss a complaint. Id.,

¶23.

8
See supra, note 5.

7
 No. 2012AP1967

¶15 We granted defendants' petition for review, and now

reverse the court of appeals on the claims presented to us for

review.

II. DISCUSSION

¶16 Before us, plaintiffs contend that defendants, in

their role as directors of Renaissance, breached their fiduciary

duty to minority shareholders when the sale to Permira occurred.

Plaintiffs further contend that the Pauls, as majority

shareholders, also breached their fiduciary duty to minority

shareholders when they voted their shares in favor of the sale

to Permira. Defendants raise the business judgment rule and the

insufficiency of the facts pleaded in the Second Amended

Complaint as requiring dismissal for failure to state a claim.

A. Standard of Review

¶17 Whether a complaint states a claim upon which relief

can be granted is a question of law for our independent review;

however, we benefit from discussions of the court of appeals and

circuit court. DeBruin v. St. Patrick Congregation, 2012 WI 94,
¶10, 343 Wis. 2d 83, 816 N.W.2d 878.

¶18 When we review a motion to dismiss, factual

allegations in the complaint are accepted as true for purposes

of our review. Strid v. Converse, 111 Wis. 2d 418, 422-23, 331

N.W.2d 350 (1983). However, legal conclusions asserted in a

complaint are not accepted, and legal conclusions are

insufficient to withstand a motion to dismiss. John Doe 67C v.

Archdiocese of Milwaukee, 2005 WI 123, ¶19, 284 Wis. 2d 307, 700

8
 No. 2012AP1967

N.W.2d 180; Mitchell v. Lawson Milk Co., 532 N.E.2d 753, 756

(Ohio 1988).

B. Well-Pleaded Complaint

¶19 "A motion to dismiss for failure to state a claim

tests the legal sufficiency of the complaint." John Doe 1 v.

Archdiocese of Milwaukee, 2007 WI 95, ¶12, 303 Wis. 2d 34, 734

N.W.2d 827 (quoting BBB Doe v. Archdiocese of Milwaukee, 211

Wis. 2d 312, 331, 565 N.W.2d 94 (1997)). Upon a motion to

dismiss, we accept as true all facts well-pleaded in the

complaint and the reasonable inferences therefrom. Kaloti

Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶11, 283

Wis. 2d 555, 699 N.W.2d 205. However, a court cannot add facts

in the process of construing a complaint. John Doe 67C, 284

Wis. 2d 307, ¶19. Furthermore, legal conclusions stated in the

complaint are not accepted as true, and they are insufficient to

enable a complaint to withstand a motion to dismiss. Id.;

Mitchell, 532 N.E.2d at 756. Therefore, it is important for a

court considering a motion to dismiss to accurately distinguish
pleaded facts from pleaded legal conclusions.

¶20 Wisconsin Stat. § 802.02(1) sets the requirements for

a complaint if it is to withstand a motion to dismiss for

failure to state a claim. Section 802.02(1)(a) provides:

General rules of pleading. (1) Contents of
pleadings. A pleading or supplemental pleading that
sets forth a claim for relief, whether an original or
amended claim, counterclaim, cross claim or 3rd-party
claim, shall contain all of the following:

(a) A short and plain statement of the claim,
identifying the transaction or occurrence or series of
9
 No. 2012AP1967

transactions or occurrences out of which the claim
arises and showing that the pleader is entitled to
relief.
¶21 In order to satisfy Wis. Stat. § 802.02(1)(a), a

complaint must plead facts, which if true, would entitle the

plaintiff to relief. Strid, 111 Wis. 2d at 422-23 ("It is the

sufficiency of the facts alleged that control[s] the

determination of whether a claim for relief is properly

[pled]."). Bare legal conclusions set out in a complaint

provide no assistance in warding off a motion to dismiss. See
John Doe 67C, 284 Wis. 2d 307, ¶19. Plaintiffs must allege

facts that, if true, plausibly suggest a violation of applicable

law.9

¶22 In Bell Atlantic Corporation v. Twombly, 550 U.S. 544

(2007), the United States Supreme Court clarified what notice

pleading requires in order to state a claim under Federal Rule

8(a)(2), the federal counterpart of Wis. Stat. § 802.02(1)(a).10

Twombly involved a § 1 Sherman Act claim. Section 1 prohibits

"restraints of trade . . . effected by a contract, combination,

or conspiracy." Id. at 553 (quoting Copperweld Corp. v.
Independence Tube Corp., 467 U.S. 752, 775 (1984)). The

district court had dismissed the complaint for failure to state

9
Factual assertions are evidenced by statements that
describe: "who, what, where, when, why, and how." See State v.
Allen, 2004 WI 106, ¶23, 274 Wis. 2d 568, 682 N.W.2d 433.
10
Subsection 1 of Wis. Stat. § 802.02 is based on Federal
Rule 8(a). Charles D. Clausen & David P. Lowe, The New
Wisconsin Rules of Civil Procedure: Chapters 801-803, 59 Marq.
L. Rev. 1, 37 (1976).

10
 No. 2012AP1967

a claim because the complaint alleged "parallel behavior"

without also alleging "additional facts that 'ten[ded] to

exclude independent self-interested conduct as an explanation

for defendants' parallel behavior.'" Id. at 552 (further

citation omitted). The additional necessary facts were critical

because self-interest in defending one's own territory, although

consistent with a violation, is not, in and of itself, contrary

to the Sherman Act. Id.

¶23 The Court of Appeals for the Second Circuit reversed,

concluding that the district court had tested the complaint "by

the wrong standard." Id. at 553. The Second Circuit "held that

'plus factors are not required to be pleaded to permit an

antitrust claim based on parallel conduct to survive

dismissal.'" Id. (further citation omitted).

¶24 The Supreme Court disagreed. It concluded that while

"a showing of parallel 'business behavior is admissible

circumstantial evidence from which the fact finder may infer

agreement,' it falls short of 'conclusively establish[ing]
agreement or . . . itself constitut[ing] a Sherman Act

offense.'" Id. (quoting Theatre Enters., Inc. v. Paramount Film

Distrib. Corp., 346 U.S. 537, 540-41 (1954)).

¶25 The Supreme Court explained that the case before it

presented the question "of what plaintiff must plead in order to

state a claim under § 1 of the Sherman Act." Id. at 554-55.

The Court explained that Federal Rule 8(a)(2) requires "a short

and plain statement of the claim showing that the pleader is
entitled to relief." Id. at 555; Fed. R. Civ. P. 8(a)(2). The
11
 No. 2012AP1967

Court explained that the district court had applied the correct

standard because plaintiff's pleading obligation required "more

than labels and conclusions, and a formulaic recitation of the

elements of a cause of action." Id. at 555. Furthermore, on a

motion to dismiss, "courts are not bound to accept as true a

legal conclusion couched as a factual allegation." Id.

(citation and internal quotation marks omitted).

¶26 The Court explained that "[t]he need at the pleading

stage for allegations plausibly suggesting (not merely

consistent with) agreement reflects the threshold requirement of

Rule 8(a)(2) that the 'plain statement' possess enough heft to

'sho[w] that the pleader is entitled to relief.'" Id. at 557

(emphasis added). In demonstrating the deficiency of alleging

only parallel conduct as a Sherman Act violation, the Court

instructed that, "it gets the complaint close to stating a

claim, but without some further factual enhancement it stops

short of the line between possibility and plausibility of

'entitle[ment] to relief.'" Id.
¶27 The Court instructed that plaintiffs were not free to

ignore substantive law that governed their claim, and had to

allege facts that suggested more than a "possibility" of a

claim. Id. This was so because with a mere possibility as the

standard "a plaintiff with a 'largely groundless claim' [would]

be allowed to 'take up the time of a number of other people,

with the right to do so representing an in terrorem increment of

the settlement value.'" Id. at 557-58 (quoting Dura
Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 347 (2005)).
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 No. 2012AP1967

Given the potential for abuse, the Court held that "basic

deficienc[ies] should . . . be exposed at the point of minimum

expenditure of time and money by the parties and the court."11

Id. at 558 (citation and internal quotation marks omitted).

¶28 To amplify the force of its decision, the Court

overruled Conley v. Gibson, 355 U.S. 41 (1957). Twombly, 550

U.S. at 562-63. The passage oft quoted from Conley was: "the

accepted rule that a complaint should not be dismissed for

failure to state a claim unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim

which would entitle him to relief." Conley, 355 U.S. at 45-46.

¶29 In overruling Conley, the Supreme Court clarified that

this statement is not a correct statement of Federal Rule

8(a)(2)'s pleading requirements. Twombly, 550 U.S. at 563

(explaining that "this famous observation has earned its

retirement[,]" as the "phrase is best forgotten as an

incomplete, negative gloss on an accepted pleading standard").

The Court explained that Conley's "no set of facts" language
could be incorrectly read as saying that "any statement

revealing the theory of the claim will suffice unless its

factual impossibility may be shown from the face of the

pleadings," when more facts actually are required to

sufficiently state a claim that can proceed. Id. at 561.

11
The Supreme Court recognized that discovery in civil
cases "accounts for as much as 90 percent of litigation costs
when discovery is actively employed." Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 559 (2007).

13
 No. 2012AP1967

¶30 The Supreme Court's decision in Twombly is consistent

with our precedent. See, e.g., Strid, 111 Wis. 2d at 422-23

(concluding that "[i]t is the sufficiency of the facts alleged

that control[s] the determination of whether a claim for relief

is properly [pled]").

¶31 In sum, Twombly makes clear the sufficiency of a

complaint depends on substantive law that underlies the claim

made because it is the substantive law that drives what facts

must be pled. Plaintiffs must allege facts that plausibly

suggest they are entitled to relief. With Twombly and Strid in

mind, we turn to the substantive law that underlies plaintiffs'

claims.

C. All Directors

1. Potential liability

¶32 As a general principle, a corporate director has a

"fiduciary duty to act in good faith and to deal fairly in the

conduct of all corporate business." Reget, 242 Wis. 2d 278,

¶12; Modern Materials, Inc. v. Advanced Tooling Specialists,
Inc., 206 Wis. 2d 435, 442, 557 N.W.2d 835 (Ct. App. 1996). In

Wisconsin, the business judgment rule "immunize[s] individual

directors from liability and protects the board's actions from

undue scrutiny by the courts." Reget, 242 Wis. 2d 278, ¶17

(citing Kenneth B. Davis, Jr., Once More, The Business Judgment

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 No. 2012AP1967

Rule, 2000 Wis. L. Rev. 573 (2000)). Wisconsin's business

judgment rule is codified in Wis. Stat. § 180.0828(1).12

¶33 The business judgment rule is substantive law because

"acts of the board of directors done in good faith and in the

honest belief that its decisions were in the best interest of

the company" cannot form the basis for a legal claim against

directors. Reget, 242 Wis. 2d 278, ¶18. Honest errors of

judgment by directors cannot subject them to personal liability.

Id., ¶17.

12
Wisconsin Stat. § 180.0828(1) provides as follows:

Limited liability of directors. (1) Except as
provided in sub. (2), a director is not liable to the
corporation, its shareholders, or any person asserting
rights on behalf of the corporation or its
shareholders, for damages, settlements, fees, fines,
penalties or other monetary liabilities arising from a
breach of, or failure to perform, any duty resulting
solely from his or her status as a director, unless
the person asserting liability proves that the breach
or failure to perform constitutes any of the
following:

(a) A willful failure to deal fairly with the
corporation or its shareholders in connection with a
matter in which the director has a material conflict
of interest.

(b) A violation of criminal law, unless the
director had reasonable cause to believe that his or
her conduct was lawful or no reasonable cause to
believe that his or her conduct was unlawful.

(c) A transaction from which the director derived
an improper personal profit.

(d) Willful misconduct.

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 No. 2012AP1967

¶34 The business judgment rule is also procedural because

it limits judicial review of internal corporate business

decisions made in good faith. Einhorn v. Culea, 2000 WI 65,

¶19, 235 Wis. 2d 646, 612 N.W.2d 78; Reget, 242 Wis. 2d 278, ¶18

("Procedurally, the business judgment rule creates an

evidentiary presumption that the acts of the board of directors

were done in good faith and in the honest belief that its

decisions were in the best interest of the company."). In so

doing, it precludes courts from second-guessing business

decisions. Id. As we have explained:

[T]his court will not substitute its judgment for that
of the board of directors and assume to appraise the
wisdom of any corporate action. The business of a
corporation is committed to its officers and
directors, and if their actions are consistent with
the exercise of honest discretion, the management of
the corporation cannot be assumed by the court.
Steven v. Hale-Haas Corp., 249 Wis. 205, 221, 23 N.W.2d 620

(1946).

¶35 Wisconsin's codification of the business judgment

rule, Wis. Stat. § 180.0828(1), provides the framework for

analyzing whether the facts pled relative to directors' business

decisions are sufficient to state a claim. This is so because

§ 180.0828(1) provides that "a director is not liable" unless

the facts describing the director's actions constitute: (1) a

"willful failure to deal fairly" with a "shareholder[] in

connection with a matter in which the director has a material

conflict of interest"; (2) acts from which "the director derived

16
 No. 2012AP1967

an improper personal profit"; or (3) "[w]illful misconduct."

§ 180.0828(1)(a), (c) and (d) (emphasis added).13

¶36 Stated otherwise, these exceptions to the substantive

shield from liability for a director's actions identify

potential breaches of a director's fiduciary duty. Accordingly,

plaintiff must plead sufficient facts to plausibly show the

director's acts fall within the parameters of Wis. Stat.

§ 180.0828(1) in order to survive a motion to dismiss.

¶37 This approach is not an addition to the requirements

of notice pleading; rather, this framework applies notice

pleading by requiring facts that show plaintiff is entitled to

relief. See Twombly, 550 U.S. at 555 (explaining that plaintiff

is required to plead "more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action" and

that "courts are not bound to accept as true a legal conclusion

couched as a factual allegation" (citation and internal

quotation marks omitted)).

¶38 Twombly's analysis of pleading requirements is
instructive of the pleading analysis that is required upon a

claim that a director breached his or her fiduciary duty. To

explain further, in Twombly, the pleading of "parallel action"

was insufficient to state a claim because self-interest in

protecting one's own territory by action parallel to that of

another merchant did not contravene anti-trust law. Id. at 556-

13
Wisconsin Stat. § 180.0828(1)(b) addresses a violation of
criminal law. There is no such contention here, so we do not
address it in this opinion.

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 No. 2012AP1967

57. It is only when there is parallel action by agreement that

the Sherman Act engages. Therefore, in order to state a claim

under the Sherman Act, the pleader must allege facts that create

a plausible claim that parallel actions were taken by agreement.

Id. at 557.

¶39 In a similar manner, not all directors' acts are

subject to judicial review because of Wis. Stat. § 180.0828's

limitation on director liability. In order to fall outside of

the protection that the legislature has granted directors,

plaintiffs must plead facts that create a plausible claim that

the directors' acts were taken in contravention of

§ 180.0828(1). Therefore, to survive a motion to dismiss,

plaintiffs must plead facts sufficient to plausibly show that

the directors' actions constitute: (1) a "willful failure to

deal fairly" with the minority shareholders on a matter in which

the director has "a material conflict of interest"; (2) receipt

of an "improper personal profit"; or (3) "[w]illful misconduct."

§ 180.0828(1)(a), (c) and (d).
¶40 A minority of jurisdictions have adopted a different

approach, carving out an exception to notice pleading when the

business judgment rule is at issue. Stephen A. Radin, The

Business Judgment Rule: Fiduciary Duties of Corporate Directors,

58-61 (6th ed. 2009). A leading case taking this approach seems

to be In re Tower Air, Inc., 416 F.3d 229 (3d Cir. 2005).14

14
In re Tower Air, Inc., 416 F.3d 229 (3d Cir. 2005), was
decided before Twombly.

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 No. 2012AP1967

There, the court held that it generally would "not rely on an

affirmative defense such as the business judgment rule to

trigger dismissal of a complaint under Rule 12(b)(6)." Id. at

238. However, because the plaintiff raised the business

judgment rule on the face of the complaint, the court held that

he "must plead around the business judgment rule." Id.

¶41 Plaintiffs in the case before us also asserted the

business judgment rule on the face of the Second Amended

Complaint, claiming that the directors "are not entitled to any

protection of Sec. 180.0828, Wis. Stat."15 To support this

contention, they repeated the legal conclusions set out in

§ 180.0828(1), arguing that the directors engaged in "willful

misconduct by willfully failing to deal fairly with the

Plaintiffs and the Company's other minority public shareholders

in a matter in which they have a material conflict of

interest."16 They failed, however, to plead facts supporting

those conclusions, as we explain in the application section.

Therefore, we note that even if we were to adopt the approach of
Tower Air, we would conclude that the Second Amended Complaint

must be dismissed.

¶42 More importantly, we conclude that Tower Air's

assertion that the pleadings must overcome the business judgment

rule only when it is raised first in the complaint suffers from

two fatal flaws. First, as we explained above, the business

15
Second Amended Complaint, ¶27.
16
Id.

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 No. 2012AP1967

judgment rule is a rule of substantive law, not merely an

affirmative defense to be raised in subsequent pleadings. See

Kaye v. Lone Star Fund V (U.S.), L.P., 453 B.R. 645, 679 (N.D.

Tex. 2011) (concluding that the protections of the business

judgment rule are substantive and largely independent of the

notice purpose of procedural rules of pleading).17 Second, from

a policy perspective, if plaintiffs could bring claims that the

business judgment rule precludes simply by not mentioning the

rule in the complaint, plaintiffs would be given "a powerful and

perverse incentive to 'dummy-up' about the obvious implications

of the business judgment rule." Id. at 679-80 (citation

omitted). This would promote unnecessary, meritless litigation.

¶43 Having explained that notice pleading requires

plaintiffs to plead facts sufficient to avoid the business

judgment rule, even when it is not raised on the face of the

complaint, we now explain that plaintiffs have not done so.

2. Application

¶44 Plaintiffs' Second Amended Complaint is not completely
devoid of facts. It contains facts showing that the Pauls and

the other directors favored the sale to Permira, rather than

pursuing Plato to see if a sale to Plato could be put together.

It also alleges that the directors and the Pauls received

17
See also NCS Healthcare, Inc. v. Candlewood Partners,
LLC, 827 N.E.2d 797, 802-03 (Ohio Ct. App. 2005) ("Fed. R. Civ.
P. 12(b)(6) and Del. Ch. R. 12(b)(6) are textually identical,"
and therefore, a plaintiff must allege "facts sufficient to
overcome the business-judgment-rule protections" under state
law).

20
 No. 2012AP1967

benefits from the Permira sale, including the continuing ability

to serve on the board, vesting of certain stock options,

indemnification, and liquidity for retirement. We now explain,

however, that these factual allegations are not enough because

they fall far short of plausibly showing that plaintiffs are

entitled to relief.

¶45 We begin with plaintiffs' allegation that the non-Paul

directors were not disinterested decision-makers because the

Pauls could, as majority shareholders, vote them off the board

at any time.18 This may imply that a desire to remain a director

created a material conflict of interest for the directors.

However, if desiring to continue on as a director created a

"material conflict of interest" and evidenced "willful failure

to deal fairly with shareholders," no director would be

protected by the business judgment rule because each director

consents to serve, thereby evidencing a desire to be a board

member. Therefore, a plaintiff may not rebut the business

judgment rule by "merely alleg[ing] that a certain decision
might lead to the potential of giving a director a longer tenure

on the board of directors." Wash. Bancorporation v. Said, 812

F. Supp. 1256, 1268 (D.D.C. 1993).

¶46 Additionally, because the directors each owned shares

in the company, any benefit they would receive in their fees as

directors may not have been material, as the fees could be

offset by a decrease in the value of their shares if they made a

18
Second Amended Complaint, ¶5.

21
 No. 2012AP1967

poor decision in regard to selling. See generally McGowan v.

Ferro, 859 A.2d 1012, 1030 (Del. Ch. 2004). Contrary to

plaintiffs' characterization, "stockholdings in a company by

directors create powerful incentives to get the best deal in the

sale of that company." Id.

¶47 Plaintiffs also allege that the directors breached

their duty by supporting the sale to Permira because the Pauls

would not support a potential sale to Plato.19 This allegation

fails for at least three reasons. First, a "controlling

interest of majority stock ownership does not deprive the

corporation's directors of the 'presumptions of independence.'"

Weinstein Enters., Inc. v. Orloff, 870 A.2d 499, 512 (Del. 2005)

(quoting Aronson v. Lewis, 473 A.2d 805, 815 (Del. 1984)

(overruled on other grounds by Brehm v. Eisner, 746 A.2d 244

(Del. 2000))).

¶48 Second, "allegations challenging the independence of

directors fail when the directors alleged to lack independence

are not beholden to anyone who is interested in the transactions
challenged." Radin, supra, at 108 (citation and internal

quotation marks omitted). As we explain in the next section,

plaintiffs have failed to show that the Pauls acted improperly.

It matters not, then, if the directors deferred to the Pauls.

¶49 Most importantly, the pleadings do not show that the

directors' actions were not the product of business judgment.

The bids from Plato were far from creating a certain sale. In

19
Id., ¶25.

22
 No. 2012AP1967

this regard, the directors considered Plato's bids, and they

also considered the significant risks associated with an

evaluation that would be occurring in the eleventh hour, as the

Permira sale was only days away from closing and contained a $13

million penalty if Renaissance backed out of that deal to try to

put together a sale to Plato.

¶50 The sale of a corporation of this size would involve

numerous documents, the terms of which would require negotiation

if a new buyer were chosen; new proxy statements would have to

be submitted to and reviewed by the Securities and Exchange

Commission, to state only a few tasks that trailed along after

Plato began its bidding war.20 Furthermore, no sale could go

forward without the Pauls' support; they controlled 69 percent

of the shares. The directors could in good faith conclude that

a bird in the hand was worth two in the bush. There is nothing

improper about such a decision. See Tower Air, 416 F.3d at 239

(when it is apparent at pleading that there is "an ostensibly

legitimate business purpose for an allegedly egregious
decision," the complaint should be dismissed).

¶51 Next, plaintiffs allege that the directors obtained a

benefit when the directors' restricted shares vested upon the

sale of Renaissance to Permira.21 However, the record shows that

the shares would vest "upon termination of . . . service as a

20
Petitioners' Brief, p. 31.
21
Second Amended Complaint, ¶¶26, 62(a).

23
 No. 2012AP1967

director," regardless of to whom Renaissance was sold.22 In this

regard, the court of appeals appears to have added facts to

those plead, contrary to our direction in John Doe 67C, 284

Wis. 2d 307, ¶19, when it asserted that ¶62 of the Second

Amended Complaint "supports a reasonable inference that the

directors would have received this [vesting] benefit only from a

sale to Permira." Data Key, 350 Wis. 2d 347, ¶28. The Second

Amended Complaint never alleges that vesting would occur only

upon a sale to Permira.

¶52 In coming to its conclusion about stock vesting, the

court of appeals' rationale also is inconsistent. The court of

appeals says that the plaintiffs may "concede" that vesting

would be available on the sale of Renaissance to any purchaser,

not just upon a sale to Permira. Id., ¶29. However, the court

of appeals then discounts plaintiffs' concession and instead

employs vesting as a basis for refusing to dismiss the claim

against the non-Paul directors. Id.

¶53 Plaintiffs also alleged that the directors obtained
rights of indemnification from the sale to Permira.23 They do

not assert that this benefit would occur only upon the sale to

Permira. Furthermore, this allegation cannot satisfy any term

of potential liability in Wis. Stat. § 180.0828(1) because Wis.

Stat. § 180.0851 generally requires "mandatory indemnification"

22
Renaissance's filing with Securities and Exchange
Commission, Appellant's Supplemental Appendix, pp. 110-11.
23
Second Amended Complaint, ¶62(e).

24
 No. 2012AP1967

for corporate directors when sued for actions taken as a

director. See also Malpiede v. Townson, 780 A.2d 1075, 1085

(Del. 2001) (explaining that "[e]xcept in egregious cases, the

threat of personal liability for approving a merger transaction

does not in itself provide a sufficient basis to question the

disinterestedness of directors because the risk of litigation is

present whenever a board decides to sell the company.").

¶54 To explain further, the exceptions from mandatory

indemnification under Wis. Stat. § 180.0851 are the same as the

four exceptions set out in Wis. Stat. § 180.0828(1).

§ 180.0851(2). Therefore, plaintiffs must allege facts

sufficient to show that indemnification was not required due to

the same terms of potential liability as are set out in

§ 180.0828 in regard to the business judgment rule.

¶55 Legislatures, including Wisconsin's, enacted statutory

provisions requiring director indemnification because directors

often were sued for actions taken on behalf of corporations and

that litigation was causing directors to resign and to refuse to
serve on boards of directors. See A Comprehensive Approach:

Director and Officer Indemnification in Wisconsin, 71 Marq. L.

Rev. 407, 411 n.23 (1988). "The director and officer liability

crisis of recent years has led to the expansion of corporate

laws which give added protection to corporate officials who act

within the scope of their corporate duties." Id. at 407.

¶56 In sum, plaintiffs have not plead facts sufficient to

set forth a plausible claim that the directors' actions leading
up to the sale to Permira fall within the terms of potential
25
 No. 2012AP1967

liability set out in § 180.0828(1). Plaintiffs have not pleaded

facts that, if true, would constitute a "willful failure" to

deal fairly with minority shareholders on matters in which the

directors had a "material conflict of interest"; or that the

directors received an "improper personal profit"; or that their

actions demonstrated "willful misconduct." Accordingly, the

Second Amended Complaint in regard to directors' actions must be

dismissed.

D. Majority Shareholders

¶57 The business judgment rule, as codified in Wis. Stat.

§ 180.0828, applies by its terms to officers and directors.

There is no mention of protection for majority shareholders.

Therefore, we do not look to § 180.0828 in regard to plaintiffs'

claims against the Pauls in their role as majority shareholders

of Renaissance.

¶58 Plaintiffs' claim against the Pauls is grounded in the

Pauls' vote to sell Renaissance to Permira. However, unless

restricted by the articles of incorporation or a statute, and
the Second Amended Complaint contains no such allegation, each

outstanding share "is entitled to one vote on each matter voted

on at a shareholders' meeting." Wis. Stat. § 180.0721.

Therefore, the Pauls had a statutory right to vote their shares

in approval of the sale to Permira. Accordingly, any limitation

on the Pauls' statutory right to vote their shares as they saw

fit must be a common law limitation.

¶59 Under common law, majority shareholders have a very
limited fiduciary duty to minority shareholders. Simply stated,
26
 No. 2012AP1967

majority shareholders cannot use their voting power to require

corporate action that grants majority shareholders an improper

material benefit at the expense of minority shareholders. Notz

v. Everett Smith Group, Ltd., 2009 WI 30, ¶4, 316 Wis. 2d 640,

764 N.W.2d 904 (concluding that "majority shareholders'

appropriation of the due diligence paid for by the corporation

[was a] constructive dividend to the majority shareholder[s]" at

the expense of minority shareholders, thereby supporting a

breach of majority shareholders' fiduciary duty); Theis v. Durr,

125 Wis. 651, 661-62, 104 N.W. 985 (1905) (concluding that the

corporate resolution that reduced the amount of capital stock in

the corporation benefitted the majority shareholders, who owed

subscription debt, at the expense of the minority shareholders,

who had fully paid for their shares).

¶60 Plaintiffs contend that the Pauls' receipt of a non-

exclusive, non-transferrable license to employ Renaissance's

software for the internal educational use of the Pauls' family

was the receipt of an "improper personal profit," through which
the Pauls breached their fiduciary duty to the minority

shareholders.24 However, nowhere in the Second Amended Complaint

do the plaintiffs allege that this non-exclusive, non-

transferrable license is worth more than the $10 million bonus

that the minority shareholders received. Accordingly, because

the Pauls may receive benefits in addition to cash payments for

their shares so long as the benefits are not achieved at the

24
Id., ¶62(b).

27
 No. 2012AP1967

expense of the minority shareholders, and because there is no

allegation that this license was worth more than the $10 million

minority shareholder bonus, plaintiffs have not pled facts that

plausibly demonstrate that the Pauls received an improper

material benefit at the expense of minority shareholders.

¶61 Plaintiffs also allege that the Pauls' personal banker

was involved in the sale. They do not explain, however, how the

personal banker's services benefitted the Pauls. Nor do they

allege that the personal banker engaged in any kind of improper

behavior or had something to gain from the Permira sale rather

than a sale to Plato. See generally, McMillan v. Intercargo

Corp., 768 A.2d 492, 496 (Del. Ch. 2000) (director who was a

partner in a law firm that participated in a merger was not

"interested" because "[n]othing in the complaint indicates that

[the director or firm] stood to obtain legal work [from the

company] after the merger"). Again, we fail to see how this

allegation shows that plaintiffs are entitled to relief.

¶62 Finally, plaintiffs allege that the Pauls breached
their fiduciary duty by putting "their personal interest in

monetizing their holdings in the Company . . . ahead of that of

the Company and the Company's minority shareholders."25 There is

no allegation that Renaissance was sold at fire-sale prices or

that the Pauls were facing a financial emergency that required

them to sell their interest in Renaissance quickly. Without

pleading additional facts, the allegation that the Pauls wanted

25
Id., ¶30.

28
 No. 2012AP1967

to sell their interest cannot support the conclusion that they

caused the corporation to provide them with an improper material

benefit at the expense of the minority shareholders.

¶63 In re Synthes, Inc. Shareholder Litigation, 50 A.3d

1022 (2012), provides a useful comparison with the case now

before us. There, a Delaware court considered a minority

shareholder's claim for breach of duty based on conduct of the

majority shareholder. Id. at 1024. The majority shareholder

and founder of Synthes was ready to retire and wanted to divest

his stockholdings in Synthes. Id. at 1025. In the lawsuit that

followed Synthes' sale, plaintiffs alleged that the majority

shareholder breached his fiduciary duty because minority

shareholders received the same equity and cash payment per share

as did the majority shareholders, rather than a full cash

payment. Id. at 1039. In dismissing the complaint for failing

to plead facts sufficient to state a claim, the court instructed

that because the minority and majority shareholders received pro

rata payment when the majority shareholder could have sought a
premium for his controlling interest, the majority shareholder

was in a safe harbor from litigation. Id. at 1024.

¶64 The Pauls' sale of their controlling interest in

Renaissance is on all fours with the majority shareholder's sale

of his interest in Synthes. Both were founders of the

corporations; both wanted to retire; neither had a pressing need

to sell their interests at fire-sale prices; neither received

more per share than did the minority shareholders. As with the
sale of Synthes, plaintiffs here have stated no claim that
29
 No. 2012AP1967

prevents the Pauls' from coming within the safe harbor, as the

minority shareholders received more than a pro rata payment——

they received a premium. Accordingly, we conclude that the

Second Amended Complaint fails to state a claim upon which

relief can be granted in regard to the Pauls and accordingly, it

must be dismissed in its entirety.

III. CONCLUSION

¶65 We conclude that Wis. Stat. § 180.0828(1)

unequivocally sets forth the terms on which directors may be

held liable for their decisions. It is both a substantive law

and a procedural device by which to allocate a burden. Reget,

242 Wis. 2d 278, ¶¶17-18 (the rule "immunize[s] individual

directors from liability and protects the board's actions" and

"creates an evidentiary presumption that the acts of the board

of directors were done in good faith"). As such, a party

challenging the decision of a director must plead facts

sufficient to plausibly show that they are entitled to relief,

i.e., facts that show the director's actions constituted: a
"willful failure to deal fairly" with a "shareholder[] in

connection with a matter in which the director has a material

conflict of interest"; a "violation of criminal law"; a

"transaction from which the director derived an improper

personal profit"; or "[w]illful misconduct." § 180.0828(1)(a)-

(d). This is a straightforward application of notice pleading

standards to the substantive law of the case because substantive

law drives what facts must be pled.

30
 No. 2012AP1967

¶66 The Second Amended Complaint does not plead facts

sufficient to plausibly show that the directors' actions come

within the terms of potential liability, or that the Pauls

received an improper material benefit at the expense of the

minority shareholders. Accordingly, we reverse the decision of

the court of appeals in regard to the issues presented to us for

review.

By the Court.—The decision of the court appeals is

reversed.

31
 No. 2012AP1967.ssa

¶67 SHIRLEY S. ABRAHAMSON, C.J. (dissenting). I would

affirm the court of appeals. I would follow Wisconsin law and

conclude that as a general rule, parties need not plead specific

facts at the motion-to-dismiss phase. In the instant case,

although the plaintiffs raised the business judgment rule in

their complaint, the plaintiffs also set forth sufficient facts

to plead around the rule and provide notice to the defendants of

the claim being alleged.1

¶68 The majority opinion holds that "plaintiffs must

allege facts that, if true, plausibly suggest a violation of

applicable law,"2 the majority opinion relies on Bell Atlantic

Corp. v. Twombly, 550 U.S. 544 (2007).3 In the federal courts,

Twombly's standard is interpreted with the subsequent case

Ashcroft v. Iqbal, 556 U.S. 662 (2009). Twombly required a

plaintiff in an antitrust case alleging violations of the

federal Sherman Act to "state a claim to relief that is

plausible on its face."4 Iqbal required a plaintiff who alleged

a Bivens5 action against federal law enforcement officers for

1
See Data Key Partners v. Permira Advisors LLC, 2013 WI App
107, ¶25, 350 Wis. 2d 347, 837 N.W.2d 624.
2
Majority op., ¶21 (emphasis added). The footnote cited
for this proposition does not describe "plausibility" at all.
Majority op., ¶21 n.9.
3
See majority op., ¶¶22, 28-31, 37-38.
4
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
5
Bivens v. Six Unknown Named Agents of Fed. Bureau of
Narcotics, 403 U.S. 388 (1971).
1
 No. 2012AP1967.ssa

liability regarding the harsh conditions of his confinement to

plead facts that "state a plausible claim for relief."6

¶69 No one is sure what Twombly means: "Exactly how

implausible is 'implausible' remains to be seen . . . ."7

Twombly and Iqbal have created confusion and chaos in the

federal courts regarding the current state of pleading

requirements.8 Under Twombly/Iqbal, federal district courts have

increased the rate at which they grant motions to dismiss.9

¶70 No Wisconsin case has adopted the rule as stated in

Twombly and Iqbal. Twombly was not argued or briefed in the

instant case. The majority opinion relies on the Twombly

heightened pleading standard without any briefing or argument.

I have written before that this court should give counsel the

opportunity to develop arguments before the court in the

adversarial system:

6
Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)
7
Courie v. Alcoa Wheel & Forged Prods., 577 F.3d 625, 630
(6th Cir. 2009) (granting a motion to dismiss a plaintiff's
claim that his union discriminated against him on the basis of
race, despite deeming the plaintiff's claim for relief
"plausible"). See generally 5 Charles Alan Wright & Arthur R.
Miller et al., Federal Practice & Procedure § 1216 (3d ed. 2014)
("[C]ourts continue to struggle to categorize what allegations
meet the [Twombly and Iqbal] decisions' amorphous
requirements.").
8
Patricia W. Hatamyar, The Tao of Pleading: Do Twombly and
Iqbal Matter Empirically?, 59 Am. U. L. Rev. 553, 583 (2010).
9
See, e.g., David Freeman Engstrom, The Twiqbal Puzzle and
Empirical Study of Civil Procedure, 65 Stan. L. Rev. 1203, 1231
(2013) (collecting empirical studies of post-Twombly/Iqbal
grants of motions to dismiss in federal district courts, all of
which demonstrate increases).

2
 No. 2012AP1967.ssa

Some justices proceed to make decisions without
benefit of arguments or briefs by the parties. Others
prefer more restraint. Some justices apparently
perceive that the rule of law is advanced by a sua
sponte approach. We do not.

. . . .

The rule of law is generally best developed when
matters are tested by the fire of adversarial briefs
and oral argument.

. . . .

Indeed, a court's sua sponte determination of an issue
may raise due process considerations: A court may be
depriving parties of their right to a meaningful
appeal, to due process notice, and to adversary
counsel.10
¶71 As Justice Bradley has recently written, this court's

role is to weigh the arguments of counsel, not to make arguments

as counsel:

By raising sua sponte a brand new outcome
determinative issue, an appellate court tends to blur
the lines between the role of the lawyer as advocate
and the role of the judge as impartial decision maker.
In contrast to the other branches of government, the
judicial branch's role seems better fitted to respond
to issues presented rather than creating issues to
present.11

10
Maurin v. Hall, 2004 WI 100, ¶¶119-121, 274 Wis. 2d 28,
682 N.W.2d 866 (Abrahamson, C.J., & Crooks, J., concurring),
(overruled on other grounds by Bartholomew v. Wis. Patients
Comp. Fund, 2006 WI 91, 293 Wis. 2d 38, 717 N.W.2d 216.)
11
Attorney's Title Guar. Fund v. Town Bank, 2014 WI 63,
¶56, ___ Wis. 2d ___, ___ N.W.2d ___ (Bradley, J., dissenting);
see also Maurin, 274 Wis. 2d 28, ¶120 (Abrahamson, C.J. &
Crooks, J., concurring) ("The rule of law is generally best
developed when matters are tested by the fire of adversarial
briefs and oral arguments.").

3
 No. 2012AP1967.ssa

¶72 Rather than provide a detailed critique of the

majority opinion, I am setting forth the opinion I think should

have been written by this court.

* * * *

¶73 This is a review of a published decision of the court

of appeals reversing an order of the circuit court for Wood

County, Jon M. Counsell, Judge.12 The circuit court dismissed

the complaint, concluding that the complaint failed to state a

claim upon which relief can be granted. The court of appeals

reversed the order of the circuit court. I would affirm the

decision of the court of appeals and remand the matter to the

circuit court for further proceedings.

¶74 The plaintiff is Data Key Partners, a minority

shareholder of Renaissance Learning, Inc., a publicly traded

Wisconsin corporation headquartered in Wisconsin Rapids,

Wisconsin. The complaint alleges a breach of fiduciary duty by

the directors and the majority shareholders in accepting a

purchase agreement for the corporation from Permira Advisors
LLC.

¶75 The defendants are Permira Advisors LLC, Raphael

Holding Company, and Raphael Acquisition Corporation

(collectively the buyer-defendants); Terrance D. Paul and Judith

Ames Paul (collectively the Pauls); Addison L. Piper, Harold E.

Jordan, Mark D. Musick, Randall J. Erickson, and Glenn R. James

(collectively the non-Paul director-defendants); and Renaissance

Learning, Inc.

12
Data Key Partners v. Permira Advisors LLC, 2013 WI App
107, 350 Wis. 2d 347, 837 N.W.2d 624.
4
 No. 2012AP1967.ssa

¶76 The claims in the complaint at issue here allege that

minority shareholders were harmed by: (1) the non-Paul director-

defendants' breach of fiduciary duties for failing to

independently investigate the multiple bids for purchase of the

corporation and for acting in their own personal interests

against those of the shareholders; and (2) the Pauls as majority

shareholders for engaging in self-dealing, breaching their

fiduciary duties in accepting the purchase agreement favorable

to their personal interests.13

¶77 The defendants assert that the complaint fails to

allege a claim upon which relief can be granted because it does

not allege facts that, if proven, would establish an exception

to the business judgment rule.14

13
The other two claims——a claim against the directors for
failure to disclose information and a claim against Permira for
allegedly aiding and abetting breaches of fiduciary duty by the
other defendants——were dismissed by the circuit court. The court
of appeals upheld dismissal of these claims. The parties do not
address these claims, and neither do I.
14
Wisconsin Stat. § 180.0828 creates a statutory version of
the business judgment rule: A director is not liable for damages
for liabilities arising from a breach of, or failure to perform,
any duty resulting solely from his or her status as a director,
unless the claimant proves that the breach or failure to perform
falls within one of the exceptions set forth in the statute.

Section 180.0828 reads in full as follows:

(1) Except as provided in sub. (2), a director is not
liable to the corporation, its shareholders, or any
person asserting rights on behalf of the corporation
or its shareholders, for damages, settlements, fees,
fines, penalties or other monetary liabilities arising
from a breach of, or failure to perform, any duty
resulting solely from his or her status as a director,
unless the person asserting liability proves that the
5
 No. 2012AP1967.ssa

¶78 For the reasons set forth, I agree with the court of

appeals that the complaint satisfies Wisconsin's requirements of

notice pleading. Our pleading rules require only that a

complaint plead a "short and plain statement of the claim,

identifying the transaction or occurrence or series of

transactions or occurrences out of which the claim arises and

showing that the pleader is entitled to relief." Wis. Stat.

§ 802.02(1).

¶79 The complaint in the instant case gives fair notice to

the defendants of the claims upon which relief can be granted.

This court is not presented with sufficient reason to create an

exception to our notice pleading requirements in the present

case. Our decision involves only the motion-to-dismiss phase of

the proceedings. I do not comment on the application of the

breach or failure to perform constitutes any of the
following:

(a) A willful failure to deal fairly with the
corporation or its shareholders in connection with a
matter in which the director has a material conflict
of interest.

(b) A violation of criminal law, unless the director
had reasonable cause to believe that his or her
conduct was lawful or no reasonable cause to believe
that his or her conduct was unlawful.

(c) A transaction from which the director derived an
improper personal profit.

(d) Willful misconduct.

(2) A corporation may limit the immunity provided
under this section by its articles of incorporation.
A limitation under this subsection applies if the
cause of action against a director accrues while the
limitation is in effect.

6
 No. 2012AP1967.ssa

business judgment rule to later stages of the proceeding, and I

do not comment on the merits of the plaintiff's claims, only the

sufficiency of the complaint.

¶80 I commend the court of appeals for its thorough

analysis of the claims. I benefited substantially from its

cogent discussion, notably the interplay between our state's

notice pleading rules and the business judgment rule.

¶81 Accordingly, I would affirm the decision of the court

of appeals holding that the circuit court erred in granting the

motions to dismiss the two claims discussed above, and I would

remand the matter to the circuit court for further proceedings

consistent with this opinion.

I

¶82 The facts and procedural history set forth herein are

based on the complaint.

¶83 Renaissance Learning, Inc. was a publicly traded

Wisconsin corporation founded by the Pauls in 1986. The Pauls

were majority shareholders, collectively controlling or owning
69% of the 29 million shares of Renaissance stock. The Pauls

served as directors and occasionally served as corporate

officers.

¶84 Data Key was a minority shareholder, among

approximately 269 total shareholders.

¶85 The Pauls decided to retire and end their involvement

in Renaissance. Because their number of shares was substantial,

the Pauls decided to sell the corporation rather than attempt to
sell their shares on the open market.

7
 No. 2012AP1967.ssa

¶86 To facilitate the sale, Renaissance selected the

Pauls' personal banker, Goldman Sachs, as a financial advisor

for the sale, at the Pauls' request. The sale attracted two

bidders: the buyer-defendant, Permira Advisers LLC, and Plato

Learning, Inc.

¶87 Permira's first offer to purchase Renaissance was for

$14.85 per share. Renaissance entered into an "Agreement and

Plan of Merger" for this price.

¶88 Subsequently, Plato put in a higher bid of $15.50 per

share. The Renaissance board of directors rejected the Plato

offer, deferring to the Pauls' reasoning that the Permira offer

was more likely to be consummated and that Permira would exact a

$13 million penalty if Renaissance backed out of the sale

agreement.

¶89 The Renaissance board of directors then amended its

agreement with Permira. The new terms were that Permira would

pay $15 per share to the majority shareholders (the Pauls) and

$16.60 per share to the minority shareholders, totaling about
$455 million.

¶90 Plato put in a new bid, offering $15.10 per share to

the Pauls and $18 per share for the minority shareholders,

totaling about $471 million. The Pauls informed the other

directors that the Pauls would not vote in favor of the revised

Plato offer. The Pauls were concerned that the Plato deal had a

higher risk of non-consummation; that the Plato deal would take

longer to close; that the Pauls might be held personally liable
if the Permira offer were rejected; and that the Plato deal did

8
 No. 2012AP1967.ssa

not include a licensing grant to Base Camp Learning Services,

Inc., another company controlled by the Pauls.

¶91 Plato made yet another higher bid, this time of $496

million, leaving open to further negotiation the exact price per

share for the Pauls and the minority shareholders.

¶92 The Renaissance board of directors rejected the latest

offer from Plato and finalized the sale to Permira at $15 per

share for the Pauls and $16.60 per share for the minority

shareholders.

¶93 The plaintiff initiated a suit alleging four separate

claims, of which only the following two are relevant here:

(1) Against the Pauls as directors and the other director-

defendants, for breach of fiduciary duties of good

faith, loyalty, fair dealing, and due care regarding

the sale, including, inter alia, that the non-Paul

director-defendants abdicated their responsibility by

allowing the Pauls to manage the sale and that the

Pauls received personal benefits including
indemnification from the sale;15

(2) Against the Pauls as majority shareholders for breach

of fiduciary duties to the minority shareholders

regarding the sale, specifically that they used their

15
For a general discussion of a director's fiduciary duty
to the corporation and shareholders, see American Law Institute,
Principles of Corporate Governance: Analysis and
Recommendations, Part V. Duty of Fair Dealing, Introductory Note
at 199-204 (1994).

9
 No. 2012AP1967.ssa

influence on the board to force the sale to Permira

for their own personal benefit.

¶94 The defendants filed motions, pursuant to Wis. Stat.

§ 802.06(2)(a)6., to dismiss the complaint for failure to state

a claim upon which relief can be granted.16

¶95 Regarding the first claim described above for the non-

Paul director-defendants' breach of fiduciary duty, the circuit

court ruled that the complaint failed to allege sufficient facts

to overcome the business judgment rule, "which limits judicial

review of corporate decision making when corporate directors

make decisions on an informed basis in good faith and in the

honest belief that the action taken is in the best interests of

the company."

¶96 Regarding the second claim described above for the

Pauls' breach of fiduciary duty, the circuit court ruled that

the Pauls had the right to sell their shares and to vote their

shares in their own interests.

¶97 The court of appeals reversed the circuit court with
regard to both claims. Regarding the first claim, the court of

appeals reasoned that the complaint adhered to the requirements

of notice pleading and that the circuit court erred in applying

16
Wisconsin Stat. 802.06(2)(a)6. provides:

[T]he following defenses may at the option of the
pleader be made by motion:

. . . .

6. Failure to state a claim upon which relief can be
granted.

10
 No. 2012AP1967.ssa

the business judgment rule in deciding the motion to dismiss the

complaint.

¶98 Regarding the second claim, the court of appeals

reasoned that the allegations in the complaint were sufficient

to give rise to an inference that the Pauls' actions and undue

influence over the board's actions went beyond the mere sale of

their shares and violated the Pauls' duty to minority

shareholders.

¶99 The court of appeals remanded the matter to the

circuit court for further proceedings on these surviving claims.

II

¶100 A motion to dismiss a complaint tests the legal

sufficiency of the complaint. Whether the complaint states a

claim upon which relief can be granted is a question of law.17

Accordingly, this court decides a motion to dismiss a complaint

for failure to state a claim upon which relief can be granted

independently of the circuit court and court of appeals,

benefiting from their analysis.18
¶101 For purposes of deciding a motion to dismiss, a court

must accept as true the facts pleaded and all reasonable

inferences that may be drawn from the pleadings.19 The pleadings

17
Johnson v. Rogers Mem'l Hosp., Inc., 2001 WI 68, ¶15, 244
Wis. 2d 364, 627 N.W.2d 890.
18
MBS-Certified Public Accountants, LLC v. Wis. Bell, Inc.,
2012 WI 15, ¶25, 338 Wis. 2d 647, 809 N.W.2d 857.
19
Below v. Norton, 2008 WI 77, ¶18, 310 Wis. 2d 713, 751
N.W.2d 351.

11
 No. 2012AP1967.ssa

are to be liberally construed so as to do substantial justice.20

The complaint is not required to state all the ultimate facts

constituting each cause of action.21 The complaint should be

dismissed as legally insufficient only if it is clear that under

no circumstances can the claimant recover.22 A court should not

dismiss a claim unless it appears to a certainty that no relief

can be granted under any set of facts that a claimant can prove

in support of the allegations in the complaint.23

¶102 To survive a motion to dismiss, the complaint must

satisfy the notice pleading requirements of Wisconsin's Rules of

Civil Procedure. Wisconsin Stat. § 802.02 requires that a

pleading contain a short and plain statement identifying the

transaction or occurrences out of which the claim arises and

showing that the pleader is entitled to relief.

¶103 Section 802.02 provides as follows:

20
Wis. Stat. § 802.02(6) ("All pleadings shall be so
construed as to do substantial justice."); Doe v. Archdiocese of
Milwaukee, 2005 WI 123, ¶35, 284 Wis. 2d 307, 700 N.W.2d 180
("[C]laims are to be liberally construed so as to do substantial
justice.") (internal quotation marks and citations omitted);
Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶11, 283
Wis. 2d 555, 699 N.W.2d 205 ("[P]leadings are liberally
construed.").
21
Ollerman v. O'Rourke Co., Inc., 94 Wis. 2d 17, 24, 288
N.W.2d 95 (1980) (citations omitted); Anderson v. Cont'l Ins.
Co., 85 Wis. 2d 675, 683, 271 N.W.2d 368, 373 (1978) (citing
Charles D. Clausen & David P. Lowe, The New Wisconsin Rules of
Civil Procedure: Chapters 801-803, 59 Marq. L. Rev. 1, 38
(1976)).
22
Anderson, 85 Wis. 2d at 683 (citing Clausen & Lowe, supra
note 21, at 38); Ollerman, 94 Wis. 2d at 24 (citations omitted).
23
Doe, 284 Wis. 2d 307, ¶20 (internal quotation marks and
citations omitted).

12
 No. 2012AP1967.ssa

(1) Contents of pleadings. A pleading or supplemental
pleading that sets forth a claim for relief, whether
an original or amended claim, counterclaim, cross
claim or 3rd-party claim, shall contain all of the
following:

(a) A short and plain statement of the claim,
identifying the transaction or occurrence or series of
transactions or occurrences out of which the claim
arises and showing that the pleader is entitled to
relief.

(b) A demand for judgment for the relief the pleader
seeks.
Wis. Stat. § 802.02(1).

¶104 When Wisconsin adopted Wis. Stat. § 802.02(1) in 1976

as part of a revision of the Wisconsin Rules of Civil Procedure,

the state discarded the concept of "ultimate fact" pleading and

instead endorsed the notion of "notice pleading."24 Notice

pleading in § 802.02(1) is based on the Federal Rules of Civil

Procedure.25

¶105 Under notice pleading, a pleading need provide only

fair notice to the defendant sufficient for the defendant to

raise a defense: "[I]t is immaterial whether a pleading states

'facts' or 'conclusions' so long as fair notice is given, and

24
For background on the adoption of notice pleading, see
Charles D. Clausen and David P. Lowe, The New Wisconsin Rules of
Civil Procedure: Chapters 801-803, 59 Marq. L. Rev. 1, 36-42
(1976). See also Alonge v. Rodriquez, 89 Wis. 2d 544, 552-53,
279 N.W.2d 207 (1979) (describing the change from "ultimate
fact" pleading to "notice" pleading).
25
"Subsection (1) [of Wis. Stat. § 802.02] is based on
Federal Rule 8(a). Unlike the Federal Rule, however, this rule
does not require a jurisdictional statement in the original
pleading since Wisconsin state courts do not have the
jurisdictional problems of minimum dollar amount or diversity of
citizenship." Clausen & Lowe, supra note 21, at 37.

13
 No. 2012AP1967.ssa

the statement of the claim is short and plain."26 In other

words, "[t]he purpose of pleadings is to notify the opposing

party of the pleader's position in the case and to frame the

issues to be resolved in the action for the benefit of the

litigants and the court."27

¶106 This is not to say that the complaint can be

completely devoid of facts. The pleading must identify the

transaction, occurrence, or event out of which the claim arises.

Notice pleading "forbids pleadings which are so vague or

ambiguous that a party cannot reasonably be required to frame a

responsive pleading."28 As the court recently stated regarding

the factual requirements of notice pleading:

A bare conclusion does not fulfill a plaintiff's duty
of stating the elements of a claim in general terms.
In short, we will dismiss a complaint if, under the
guise of notice pleading, the complaint before us
requires the court to indulge in too much speculation
leaving too much to the imagination of the court. It
is not enough for the plaintiff to contend that the
requisite facts will be supplied by the discovery
process.29
¶107 Specific and limited exceptions to notice pleading

exist. For example, Wis. Stat. § 802.03(2) governs pleadings

for fraud or mistake, requiring that "the circumstances

26
Id. at 38.
27
Hansher v. Kaishian, 79 Wis. 2d 374, 385, 255 N.W.2d 564
(1977).
28
Clausen & Lowe, supra note 21, at 39 (citing Wis. Stat.
§ 802.06(5)).
29
Doe, 284 Wis. 2d 307, ¶36 (internal quotations marks and
citations omitted).

14
 No. 2012AP1967.ssa

constituting fraud or mistake shall be stated with

particularity" but allowing that "[m]alice, intent, knowledge,

and other condition of mind of a person may be averred

generally." Similarly, § 802.03(6) governs pleadings for libel

and slander, requiring that "the particular words complained of

shall be set forth in the complaint, but their publication and

their application to the plaintiff may be stated generally."

None of the provisions in § 802.03 governing exceptions to

notice pleading applies to the instant case.

¶108 Thus, this court must determine whether the complaint

sets forth a short and plain statement of the claim, identifying

the transaction or occurrence or series of transactions or

occurrences out of which the claim arises and showing that the

pleader is entitled to relief.

¶109 I look to each claim in turn, first the claim against

the Pauls as directors and the non-Paul director-defendants, and

then the claim against the Pauls as majority shareholders.

III
¶110 I first examine the plaintiff's claim that the

director-defendants (including the Pauls) breached their

fiduciary duty to the shareholders. Because the plaintiff's

claim focuses on the directors' abdication of their duties by

entrusting the sale of the company to the Pauls, I look

specifically at the claim against the non-Paul director-

defendants.

¶111 The elements for a claim of breach of fiduciary duty
are as follows: (1) the defendant had a fiduciary duty; (2) the

15
 No. 2012AP1967.ssa

defendant breached that duty; and (3) the breach of duty caused

injury to the plaintiff.30

¶112 On the first element, the plaintiff alleges that the

defendants, as directors of a publicly held company, owe

fiduciary duties to the shareholders.31

¶113 The plaintiff's allegation is in accord with our

state's law. Wisconsin has long recognized that a trust

relationship exists between the shareholders and the directors

and that fiduciary duties of the directors to the shareholders

arise from the relationship.32 Directors owe fiduciary duties to

individual stockholders, not merely to the corporation itself.33

"[O]fficers and directors of a corporation occupy a position of

trust and confidence, and are considered in the law as standing

in a fiduciary relation toward the stockholders and as trustees

for them."34

30
Reget v. Paige, 2001 WI App 73, ¶12, 242 Wis. 2d 278, 626
N.W.2d 302.
31
Second Amended Complaint, ¶24.
32
Grognet v. Fox Valley Trucking Serv., 45 Wis. 2d 235,
241-42, 172 N.W.2d 812 (1969).
33
Rose v. Schantz, 56 Wis. 2d 222, 228, 201 N.W.2d 593
(1972).
34
Grognet, 45 Wis. 2d at 242 (internal quotation marks)
(citing Timme v. Kopmeier, 162 Wis. 571, 575, 156 N.W. 961
(1916)).

16
 No. 2012AP1967.ssa

¶114 On the second element, the nature of this fiduciary

duty is one of good faith, fair dealing, and loyalty.35

¶115 The plaintiff alleges essentially two breaches of

fiduciary duty: (1) that the directors abdicated their duty of

care in allowing the Pauls to run the sale of the company

without oversight; and (2) that the directors received self-

interested benefits that led them to vote for the Permira offer

over the Plato offer.

¶116 I conclude that the plaintiff sufficiently alleges a

breach of the directors' fiduciary duty.

¶117 The director-defendants assert that the complaint does

not overcome the business judgment rule and consequently must be

dismissed for failure to state a claim. The director-defendants

point to Wis. Stat. § 180.0828 for support. They argue that

because the complaint fails to state facts demonstrating

specific circumstances that overcome the business judgment rule,

the complaint cannot survive a motion to dismiss.

¶118 Wisconsin Stat. § 180.0828 creates a statutory version
of the business judgment rule: A director is not liable for

damages for liabilities arising from a breach of, or failure to

perform, any duty resulting solely from his or her status as a

director, unless the claimant proves that the breach or failure

35
See Zastrow v. Journal Communic'ns, Inc., 2006 WI 72,
¶¶28-29, 291 Wis. 2d 426, 718 N.W.2d 51 (holding that fiduciary
duty includes duty of loyalty and duty to refrain from acting in
self-interest); Modern Materials, Inc. v. Advanced Tooling
Specialists, Inc., 206 Wis. 2d 435, 442, 557 N.W.2d 835 (Ct.
App. 1996) ("It is well established that a corporate officer
or director is under a fiduciary duty of loyalty, good faith and
fair dealing in the conduct of corporate business.").

17
 No. 2012AP1967.ssa

to perform falls within one of the exceptions set forth in the

statute.

¶119 Section 180.0828, the business judgment rule statute,

reads in full as follows:

(1) Except as provided in sub. (2), a director is not
liable to the corporation, its shareholders, or any
person asserting rights on behalf of the corporation
or its shareholders, for damages, settlements, fees,
fines, penalties or other monetary liabilities arising
from a breach of, or failure to perform, any duty
resulting solely from his or her status as a director,
unless the person asserting liability proves that the
breach or failure to perform constitutes any of the
following:

(a) A willful failure to deal fairly with the
corporation or its shareholders in connection with a
matter in which the director has a material conflict
of interest.

(b) A violation of criminal law, unless the director
had reasonable cause to believe that his or her
conduct was lawful or no reasonable cause to believe
that his or her conduct was unlawful.

(c) A transaction from which the director derived an
improper personal profit.

(d) Willful misconduct.

(2) A corporation may limit the immunity provided
under this section by its articles of incorporation.
A limitation under this subsection applies if the
cause of action against a director accrues while the
limitation is in effect (emphasis added).36
¶120 The director-defendants read this statute as providing

blanket immunity for directors unless the complaint alleges that

the directors' liability is based on conduct falling within Wis.

36
Limitations provided by articles of incorporation are not
at issue in the present case.

18
 No. 2012AP1967.ssa

Stat. § 180.0828 (1)(a)-(d). Thus the director-defendants

request that the court create an exception to the notice

pleading requirements of Wis. Stat. § 802.02(2) and require the

complaint to plead facts that, if proven, would meet the

enumerated statutory circumstances necessary to overcome the

business judgment rule and impose liability on directors.

¶121 The director-defendants argue that the notice pleading

requirements are surpassed by the need for specific fact

pleading in a suit against corporate directors for breach of

fiduciary duty. Specific fact pleading in the complaint is

required, according to the director-defendants, to limit court

involvement in business decisions in which courts have no

expertise and to encourage people to serve as directors by

ensuring that honest errors of judgment will not subject them to

personal liability.37

¶122 Like the court of appeals, I reject the director-

defendants' position. I agree with the court of appeals that

courts in notice pleading jurisdictions traditionally disfavor
application of the business judgment rule at the motion-to-

dismiss stage because the rule generally requires a fact-

intensive analysis incompatible with notice pleading. I agree

with the court of appeals that the complaint is not required to

37
"The business judgment rule . . . contributes to judicial
economy by limiting court involvement in business decisions
where courts have no expertise and contributes to encouraging
qualified people to serve as directors by ensuring that honest
errors of judgment will not subject them to personal liability."
Reget, 242 Wis. 2d 278, ¶17 (a summary judgment case).

19
 No. 2012AP1967.ssa

include allegations with considerable specificity sufficient to

defeat the defense of the business judgment rule.38

¶123 Regardless of whether the business judgment rule is

viewed as a "mere rule of evidence,"39 an "affirmative defense,"40

an "evidentiary presumption,"41 or, as the defendants aver, a

"blanket rule of non-liability,"42 application of the business

judgment rule is inherently fact-based, ordinarily requiring

investigation of the particular acts, interests, and decision-

making processes of various actors.43

¶124 My holding that notice pleading requirements disfavor

specific fact pleading regarding the business judgment rule at

the motion-to-dismiss stage is supported by cases in other

notice-pleading jurisdictions. The paradigmatic case in this

regard is In re Tower Air, Inc., 416 F.3d 229, 238-39 (3d Cir.

2005).

38
The court of appeals discusses its reasoning in more
detail in its opinion, Data Key Partners, 350 Wis. 2d 347, ¶¶23-
26.
39
Defendants-Respondents-Petitioners' Brief at 17.
40
Data Key Partners, 350 Wis. 2d 347, ¶24; Defendants-
Respondents-Petitioners' Brief at 16.
41
Reget, 242 Wis. 2d 278, ¶¶18-22.
42
Defendants-Respondents-Petitioners' Brief at 16.
43
See Yates v. Holt-Smith, 2009 WI App 79, ¶¶22-26, 319
Wis. 2d 756, 768 N.W.2d 213 (business judgment rule does not
shield director who evidence shows has acted in bad faith);
Reget, 242 Wis. 2d 278, ¶20 (deciding application of business
judgment rule on summary judgment after review of "sufficient
evidentiary facts").

20
 No. 2012AP1967.ssa

¶125 In Tower Air, the United States Court of Appeals for

the Third Circuit stated that as a general rule it would not

rely on the business judgment rule to trigger dismissal under

Federal Rule of Civil Procedure 12(b)(6), the analogous federal

rule to Wisconsin's § 802.06(2)(a)6. The Third Circuit reasoned

that the business judgment rule is an affirmative defense, which

will trigger dismissal if it is raised and unanswered on the

face of the complaint itself.

¶126 In Tower Air, the shareholder claimant alleged, inter

alia, that the directors of Tower Air breached their fiduciary

duty to act in good faith by ignoring various deficiencies in

Tower Air's management and business deals and by failing to

review and provide oversight for those deficiencies. In Tower

Air, the trial court dismissed the complaint, requiring the

claimant to allege specific facts upon which the claim is based.

¶127 The Third Circuit rejected the trial court's position,

stating that the trial court "erroneously preempted discovery on

certain claims by imposing a heightened pleading standard not
required by [the] Federal Rule[s] of Civil Procedure" by

requiring the shareholder to plead specific facts.44 The Third

Circuit distinguished between Delaware's heightened pleading

requirements and the relaxed pleading standards of the federal

courts that "do not require a claimant to set out in detail the

facts upon which he bases his claim."45
44
In re Tower Air, Inc., 416 F.3d 229, 237 (3d Cir. 2005).
45
Id. at 237 (quoting Leatherman v. Tarrant County
Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168
(1993)).

21
 No. 2012AP1967.ssa

¶128 In a notice pleading jurisdiction, "supporting facts

should be alleged, but only those necessary to provide the

defendant fair notice of the plaintiff's claim and the grounds

upon which it rests." Tower Air, 416 F.3d at 237 (internal

quotation marks and citation omitted).

¶129 Based on this reasoning, the Third Circuit held that

as a general rule, "we will not rely on an affirmative defense

such as the business judgment rule to trigger dismissal of a

complaint . . . ." Tower Air, 416 F.3d at 238.

¶130 The Tower Air court's analysis did not stop here. It

further reasoned that if "an unanswered affirmative defense

appears on [the] face" of the complaint, the shareholder

claimant had to "plead around the business judgment rule."

Tower Air, 416 F.3d at 238 (citing ALA, Inc. v. CCAIR, Inc., 29

F.3d 855, 859 (3d Cir. 1994)).46

Tower Air was decided prior to Twombly, 550 U.S. 544, and
Iqbal, 555 U.S. 1030, regarding the federal pleading standard
necessary to survive a motion to dismiss under Rule 12(b)(6).

No Wisconsin case has adopted the Twombly/Iqbal standard of
heightened pleading requirements.
46
When the business judgment rule is not explicitly stated
on the face of the complaint, courts applying the Tower Air rule
have "rejected the argument that dismissal is appropriate where
the business judgment rule is implicitly raised." See Ad Hoc
Committee of Equity Holders of Tectonic Network, Inc. v.
Wolford, 554 F. Supp. 2d 538, 557 (D. Del. 2008) (emphasis
added) (citing Shamrock Holdings, Inc. v. Arenson, 456 F. Supp.
2d 599 (2006)). Absent an explicit mention of the business
judgment rule, "defendants are not required to plead around the
business judgment rule at [the motion-to-dismiss] stage in the
proceedings." Shamrock, 456 F. Supp. 2d at 609.

22
 No. 2012AP1967.ssa

¶131 In Tower Air, the shareholder claimant specifically

alleged in each of his claims that the decisions of the

directors "merited no business judgment protection because they

were taken in bad faith." Tower Air, 416 F.3d at 234. Thus,

the Tower Air court reasoned that the shareholder claimant had

"[pled] around the business judgment rule." Id. at 238.

¶132 In the instant case, the plaintiff refers to the

business judgment rule statute, Wis. Stat. § 180.0828, on the

face of the complaint and also pleads around the rule.

¶133 Specifically, the plaintiff alleges that the rule is

inapplicable in the instant case because the director-defendants

engaged in "willful misconduct," one of the exceptions to the

applicability of Wis. Stat. § 180.0828:

Notably, because the Director Defendants have
willfully failed to deal fairly with the minority
shareholders, and have derived or will derive an
improper personal benefit and/or have engaged in
willful misconduct, they are not entitled to any
protection of Sec. 180.0828, Wis. Stat. or any
protective provision in the Company's Articles of
Incorporation or Bylaws.
Second Amended Complaint, ¶27.

¶134 I agree with the court of appeals that, construed

liberally, the complaint sufficiently alleges facts that, if

true, plead around the business judgment rule:

Data Key alleged in its complaint, among many other
substantive allegations, that the directors engaged in
"willful misconduct by willfully failing to deal
fairly with the Plaintiffs and the Company's other
minority public shareholders in a matter in which they
have a material conflict of interest." The defendants
acknowledge this allegation but nonetheless argue that
Data Key's complaint comes "nowhere close to
satisfying" the exceptions to the business judgment
23
 No. 2012AP1967.ssa

rule and that "nothing resembling" willful misconduct
is alleged in Data Key's complaint. The defendants
thus appear to take the position that application of
the rule at the motion to dismiss stage of proceedings
requires that a plaintiff plead facts sufficient to
defeat the defense with considerable specificity. Such
specificity is generally not required for purposes of
notice pleading.
Data Key Partners, 350 Wis. 2d 347, ¶25 (emphasis added).

¶135 To successfully plead the "willful misconduct" of the

director-defendants necessary to fall within the exception to

the business judgment rule listed in Wis. Stat.
§ 180.0828(1)(d), the plaintiff need not state the ultimate

facts.

¶136 The plaintiff's allegations sufficiently plead facts

regarding the deliberate, intentional, or knowing misconduct of

the director-defendants that could give rise to "willful

misconduct." The plaintiff alleged that the director-defendants

"abdicated their responsibilities" by allowing the Pauls to run

the sale and deliberately failed to independently investigate

the sale due to their self-interested dealings in receiving

payments and benefits from the Permira sale.47

¶137 In the instant case, I would embrace the holding of

Tower Air that, as a general rule, courts in notice pleading

jurisdictions will not rely on the business judgment rule to

dismiss a complaint on a motion to dismiss.

¶138 The Third Circuit's reasoning is consistent with the

general trend of federal cases both before and after Tower Air,

which note that the business judgment rule is a fact-intensive

47
See ¶93, infra.

24
 No. 2012AP1967.ssa

inquiry that is inappropriate for resolution at the motion-to-

dismiss phase.48

¶139 The director-defendants assert that to survive a

motion to dismiss, a claimant must allege facts to overcome the

presumption of the business judgment rule. They claim that "a

majority of jurisdictions outside of Wisconsin . . . require

allegations of fact that call into question the availability of

the Business Judgment Rule . . . ."49 They cite 1 Stephen A.

Radin, The Business Judgment Rule 58-61 (6th ed. 2009), as

support for this proposition of law. I do not read Radin this

way.

¶140 Radin contrasts Delaware law, which requires a

complaint to plead facts with specificity, with federal law,

which requires notice pleading.50 Radin's overview of the

federal case law supports the proposition that the Tower Air

test is the norm in federal courts, in which no special fact

48
The court of appeals, Data Key Partners, 350 Wis. 2d 347,
¶23, cites one commentator who summarizes the general view in
federal case law that "determination and application of the
business judgment rule requires a fact-intensive analysis that
is inappropriate at the motion-to-dismiss stage." Zachary H.
Starnes, The Business Judgment Rule After Twombly and Iqbal:
Must Plaintiffs Now Plead Around the Rule to Survive a 12(b)(6)
Motion To Dismiss?, 35 Am. J. Trial Advoc. 639, 655 (Spring
2012) (footnotes omitted).
49
See Defendants-Respondents-Petitioners' Brief at 26.
50
The court of appeals rejected an argument from the
director-defendants based on Delaware law, which relied heavily
on Mendel v. Carroll, 651 A.2d 297 (Del. Ch. 1994). The court
of appeals determined that the case was inapplicable, because of
the differences between Wisconsin and Delaware pleading
requirements. Data Key Partners, 350 Wis. 2d 347, ¶¶30-33.

25
 No. 2012AP1967.ssa

pleading requirements exist. These cases under federal notice

pleading do not rely on the business judgment rule at the motion

to dismiss phase.51 These federal decisions construing the

federal counterpart to Wis. Stat. § 802.02(1) of the Wisconsin

Rules of Civil Procedure are persuasive in interpreting

§ 802.02(1), but are not controlling.52

¶141 Perhaps the paradigmatic post-Tower Air case is

Shamrock Holdings, Inc. v. Arenson, 456 F. Supp. 2d 599 (D. Del.

2006). In Shamrock, plaintiff corporate directors and

shareholders sought a judgment declaring that they did not

breach their fiduciary duty during the sale of the corporation.

The defendant minority shareholders filed a counterclaim

alleging that the directors and shareholders breached their

fiduciary duty by acting in bad faith, by being grossly

negligent, and by self-dealing. The plaintiff corporate

directors and shareholders filed a motion to dismiss the

counterclaim, alleging that the minority shareholders implicitly

raised the business judgment rule by the nature of their
allegations and were required to plead around the business

judgment rule.

51
1 Stephen A. Radin, The Business Judgment Rule 60-61 &
n.247 (6th ed. 2009). See also FDIC v. Baldini, 983 F. Supp. 2d
772, 783, (S.D. W. Va. 2013), listing "overwhelming [federal]
authority to support . . . [the position] that the business
judgment rule is highly fact dependent and, therefore,
inappropriate for consideration on a motion to dismiss."
52
Wilson v. Cont'l Ins. Cos., 87 Wis. 2d 310, 316, 274
N.W.2d 679 (1979).

26
 No. 2012AP1967.ssa

¶142 The Shamrock court denied the motion to dismiss.

Citing Tower Air, the court declared that as a general rule the

court will not rely on the business judgment rule to trigger

dismissal of a complaint at the motion-to-dismiss stage.

Shamrock, 456 F. Supp. 2d at 609.53

¶143 The director-defendants, by urging that the plaintiff

be required to plead particular facts to overcome the business

judgment rule at the motion-to-dismiss phase, are essentially

asking that this court adopt specific fact pleading rules in

Wisconsin. I would adhere to the Third Circuit's decision in

Tower Air and subsequent decisions of other courts that have

refused to change notice pleading rules for a cause of action

against corporate directors for breach of fiduciary duty.

¶144 The defendants attempt to find support in older

Wisconsin cases, which required specific fact pleading regarding

a director's breach of fiduciary duty. They cite, for example,

Polacheck v. Michiwaukee Golf Club Land Co., 198 Wis. 78, 82,

223 N.W. 233 (1929), which sustained a demurrer based on the
complaint's failure to allege specific abuse of power by

corporate officers, and Thauer v. Gaebler, 202 Wis. 296, 232

N.W. 561 (1930), which held that a complaint against directors

was insufficient without allegations of abuse of power, bad

faith, willful abuse of discretion, or positive fraud.

¶145 These cases predate Wisconsin's notice pleading rules

adopted in 1976 and have limited applicability in current notice

53
See also Wolford, 554 F. Supp. 2d at 556-59 (a complaint
must meet the notice pleading requirements of the federal rules
and does not have to plead around the business judgment rule).

27
 No. 2012AP1967.ssa

pleading. The court explained the change in pleading

requirements as follows:

[T]he new rules of civil procedure provide for notice
pleading, and the resolution of the precise facts
which sustain the claim is left to discovery.

. . . .

Although under the prior demurrer provision,
complaints were to be construed liberally in favor of
stating a cause of action, under the new rules
complaints are to be construed even more liberally. A
complaint which might well have failed under the old
procedure for failure to state sufficient facts now
will be sustained if reasonable notice is given to the
defendant in respect to the nature of the claim.54
¶146 Like the court of appeals,55 I cannot locate any

Wisconsin case in which the business judgment rule was applied

at the motion-to-dismiss phase after our state's shift to notice

pleading.

¶147 After analyzing Wis. Stat. § 802.02(1) and the federal

decisions interpreting the Wisconsin counterpart to the federal

rules, I conclude that the complaint is sufficient to state a

claim for breach of fiduciary duty against the director-
defendants in alleging the following:

• The directors allowed the Pauls to run the sale

process exclusively;56

54
Anderson, 85 Wis. 2d at 683-84 (citing Clausen & Lowe,
supra note 21, at 38).
55
Data Key Partners, 350 Wis. 2d 347, ¶21.
56
Second Amended Complaint, ¶47.

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• The directors failed to independently investigate the

deadlines given by the Pauls for the end of the

bidding process;57

• The directors refused to investigate the higher bid

fairly, and accepted the lower bid;58

• The directors received particular payments and

benefits from their vesting stock options and would

not have received them absent the sales agreement with

Permira;59

• The directors received indemnification for breaches of

their fiduciary duties and would not have received

them absent the sales agreement with Permira;60

• The directors "engaged in willful misconduct by

willfully failing to deal fairly with the [plaintiffs

and other shareholders]."61

¶148 The allegations in the complaint, which this court

must accept as true, constitute a breach of loyalty upon which

relief can be granted. The complaint thus survives a motion to
dismiss.

¶149 On the third element, requiring an allegation that the

breach of duty caused injury to the plaintiff, the complaint

57
Id., ¶49.
58
Id., ¶57.
59
Id., ¶¶62-63.
60
Id.
61
Id., ¶27.

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alleges that the sale of the corporation to Permira resulted in

the minority shareholders' receiving less than the full value of

their shares and that the sale of the corporation led to a loss

of control of its shares.

¶150 The director-defendants argue that this is not a harm,

because the complaint does not allege that if the corporation

had not been sold, the stock would have been worth more than the

$16.60 per share it actually received.

¶151 Like the court of appeals, I am not persuaded by the

director-defendants' argument. As the court of appeals notes,

the plaintiff relies on the difference in the value of the two

offers: "[T]he Plato offers illustrate that the price that [the

plaintiff] actually received from [the buyer-defendant] was less

than the shares' value."62 The complaint details that the Plato

offer would have paid $18 per share; the buyer-defendant's offer

ended up paying $16.60 per share. This difference in price is,

for purposes of notice pleading and a motion to dismiss,

sufficient to allege an injury caused by an alleged breach of
fiduciary duty. The exact form of injury suffered need not be

spelled out in a complaint under the rules of notice pleading.63

¶152 I agree with the court of appeals that the complaint

in the present case alleges a sufficient harm and that the

62
Data Key Partners, 350 Wis. 2d 347, ¶45.
63
Liebovich v. Minn. Ins. Co., 2008 WI 75, ¶40 310
Wis. 2d 751, 751 N.W.2d 764 (holding that claimants' allegation
that the defendants "interfered with [their] interests" and that
they were "aggrieved by" the conduct is sufficient to allege
injury for purpose of triggering a duty to defend).

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motion to dismiss is not the appropriate procedure in which to

argue the proper method for assessing the value of the

corporation.64

¶153 Accordingly, I would hold that, under our notice

pleading requirements, the complaint sufficiently alleges a

claim for a breach of fiduciary duty by the director-defendants.

IV

¶154 I turn to the claims of the plaintiff minority

shareholder against the Pauls for breach of their fiduciary duty

as majority shareholders. The business judgment rule has no

application to this claim.65

¶155 Again, the elements for a claim of breach of fiduciary

duty are: (1) the defendant had a fiduciary duty; (2) the

defendant breached that duty; and (3) the breach of duty caused

injury to the plaintiff.66

¶156 On the first element, the plaintiff alleges that the

Pauls, as majority shareholders, have a fiduciary duty to

minority shareholders.67

64
Data Key Partners, 350 Wis. 2d 347, ¶46 ("To the extent
that there are legal standards that would limit the methods by
which [the plaintiff] may prove the value of its shares, the
defendants will be free to argue those standards as applied to
the evidence as the factual record develops.").
65
The statutory version of the business judgment rule, Wis.
Stat. § 180.0828, applies to directors, not controlling or
majority shareholders. An analysis of the business judgment
rule's application to the pleading stage is not relevant to the
issue of a majority shareholder's breach of fiduciary duty.
66
Reget, 242 Wis. 2d 278, ¶12.
67
Second Amended Complaint, ¶24.

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 No. 2012AP1967.ssa

¶157 The plaintiff's allegation of such a fiduciary duty is

in accord with our state's law. In Wisconsin it is a "well-

settled and often applied rule of corporation law and equity

that a majority stockholder occupies a fiduciary relationship

toward minority shareholders."68

¶158 Generally, when majority shareholders take control of

the corporation's actions, they stand in the same fiduciary

relation to other shareholders as does a director or officer:

A majority shareholder who actually dominates the
company, although not an officer, stands in the same
fiduciary relation to the other shareholders as does a
director or other officer. If a shareholder exercises
absolute de facto control over a corporation, such
actual dominion carries with it fiduciary
responsibility regardless of the presence or absence
of de jure titles. If a majority shareholder is also
a director and the president or other chief officer of
the corporation, that shareholder is generally
considered a fiduciary.

68
Prod. Credit Ass'n of Lancaster v. Croft, 143
Wis. 2d 746, 754, 423 N.W.2d 544 (Ct. App. 1988) (citing S. Pac.
Co. v. Bogert, 250 U.S. 483, 487-88 (1919)).

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12B William Meade Fletcher, Fletcher Cyclopedia of the Law of

Corporations § 5811 (West 2009).69

¶159 The complaint alleged the following relating to the

Pauls' control of the sale of the corporation:

• The director-defendants "essentially abdicated their

responsibilities as directors in conjunction with the

sale process——leaving it to be run almost exclusively

by the Pauls";70

• The Pauls used their own personal bank, Goldman Sachs,

to serve as financial advisor for the corporation's

sale, thus creating a conflict of interest;71

69
See 2 James Cox & Thomas Hazen, Treatise on the Law of
Corporations § 11:11 (3d ed. 2013) ("The basis for the
controlling stockholder's fiduciary obligation is the sound
policy that, just as directors are bound by certain fiduciary
obligations, one who has the potential to control the board's
actions should be subject to an obligation as rigorous as those
applied to the directors."); Yanow v. Teal Indus., Inc., 422
A.2d 311, 322, 178 Conn. 262, (1979) ("[T]he majority has the
right to control, but when it does so, it occupies a fiduciary
relationship toward the minority, as much as the corporation
itself or its officers and directors."); Knaebel v. Heiner, 663
P.2d 551, 552-53 (Alaska 1983) ("It is well established that
majority stockholders are considered fiduciaries with respect to
minority stockholders within the same corporation. This
fiduciary duty encompasses the obligation to act in good faith,
to enter into transactions that are fair, and to fully disclose
material facts."); Linge v. Ralston Purina Co., 293 N.W.2d 191,
193-94 (Iowa 1980) ("[M]ajority shareholders do owe a fiduciary
duty to minority shareholders.").
70
Second Amended Complaint, ¶47.
71
Second Amended Complaint, ¶¶47, 67.

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 No. 2012AP1967.ssa

• Mr. Paul was the primary contact for Goldman Sachs at

the corporation and served as the liaison between

Goldman Sachs and the corporation;72

• The Pauls "completely dictate[d] the timing of the

sale process from beginning to end."73

¶160 Viewing these allegations as admitted by the

defendants under our standard of review for a motion to dismiss,

I would hold that they sufficiently allege the first element,

namely that the Pauls as majority shareholders directly

controlled the behavior of the company, triggering their

fiduciary duty to the minority shareholders.

¶161 On the second element, the nature of this fiduciary

duty, the duty is one of good faith, fair dealing, and loyalty.74

The majority shareholders "may not use their position of trust

to further their private interests."75

72
Second Amended Complaint, ¶48.
73
Second Amended Complaint, ¶49.
74
See Zastrow, 291 Wis. 2d 426, ¶¶28-29 (holding that
fiduciary duty includes duty of loyalty and duty to refrain from
acting in self-interest); Modern Materials, 206 Wis. 2d at 442
("It is well established that a corporate officer or director is
under a fiduciary duty of loyalty, good faith and fair dealing
in the conduct of corporate business.").
75
Notz v. Everett Smith Group, Ltd., 2009 WI 30, ¶20, 316
Wis. 2d 640, 764 N.W.2d 904 (quoting Rose, 56 Wis. 2d at 228-
29).

"A consistent facet of a fiduciary duty is the constraint
on the fiduciary's discretion to act in his own self-interest
because by accepting the obligation of a fiduciary he
consciously sets another's interests before his own." Zastrow,
291 Wis. 2d 426, ¶28.

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¶162 The complaint alleges that the Pauls breached their

majority shareholders' fiduciary duty of fair dealing and

loyalty through self-dealing and by exerting undue influence

over the board to cause a sale of the entire company in a manner

that benefited the Pauls at the expense of minority

shareholders.

¶163 The allegations of self-dealing in the complaint,

which this court must accept as true, can constitute a claim for

breach of fiduciary duty upon which relief can be granted.

¶164 The complaint alleges that the Pauls would have

received a tangible personal benefit from one offer and not the

other. The plaintiff alleges that the Pauls rejected the higher

Plato bid and accepted the Permira bid for several reasons, but

alleges that at least one reason was that the higher Plato bid

did not include a favorable licensing agreement for the Pauls:

[U]nlike the Sale Agreement with Permira, the Plato
Proposal apparently did not include the grant to Base
Camp Learning Services, Inc. . . . , a company
controlled by the Pauls, of a non-exclusive, non-
transferable license to use certain of Renaissance's
software products and services for the internal
educational use of the family and descendants of the
Pauls . . . .76
¶165 The courts do not use the motion to dismiss as an

opportunity to weigh the facts.77 Rather, a court gauges the

motion to dismiss by viewing the facts alleged as true. The

76
Second Amended Complaint, ¶54.
77
Cf. In re A.S., 2001 WI 48, ¶35, 243 Wis. 2d 173, 626
N.W.2d 712 (noting, in another civil context, that "in reviewing
a motion to dismiss, we do not weigh the facts . . . .").

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allegations of the complaint, taken as true, claim that the

Pauls got a personal benefit in the Permira deal but not in the

Plato deal. This assertion is sufficient to support a

reasonable inference that the Pauls engaged in self-dealing and

violated their fiduciary duty of loyalty.78

¶166 Given the notice pleading standards of our state, I

would hold that the complaint in the instant case sufficiently

alleges that the Pauls in their capacity as majority

shareholders breached their fiduciary duty of loyalty to the

minority shareholders. This allegation states a claim upon

which relief can be granted.

¶167 On the third element, requiring an allegation that the

breach of fiduciary duty caused injury to the plaintiff, the

complaint alleges that the sale of the corporation to Permira

resulted in the minority shareholders' receiving less than the

full value of their shares.79

¶168 As I have explained previously,80 the difference in

prices between the two offers sufficiently alleges an injury

78
When a controlling shareholder sits on both sides of a
transaction, the burden is on that controlling shareholder to
demonstrate that the transaction was fair. 12B William Meade
Fletcher, Fletcher Cyclopedia of the Law of Corporations,
§ 5811.10 (West 2009) ("When a majority, dominant or controlling
shareholder deemed to be a fiduciary is challenged for having
engaged in self-dealing in property or services of the
corporation, that shareholder has the burden of coming forward
with evidence and the burden of persuasion to show that the
transaction was scrupulously fair.").
79
Second Amended Complaint, ¶4.
80
See ¶¶83-85, supra.

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caused by the Pauls' alleged breach of fiduciary duty for

purposes of notice pleading and a motion to dismiss.

¶169 For the reasons set forth, I would agree with the

court of appeals that the complaint satisfies the requirements

of notice pleading. Our pleading rules require only that a

complaint plead a "short and plain statement of the claim,

identifying the transaction or occurrence or series of

transactions or occurrences out of which the claim arises and

showing that the pleader is entitled to relief." Wis. Stat.

§ 802.02(1).

¶170 The complaint in the instant case gives fair notice to

the defendants of the claims upon which relief can be granted.

I am not presented with sufficient reason to create an exception

to our notice pleading requirements in the present case.

¶171 Accordingly, I would affirm the decision of the court

of appeals that the circuit court erred in granting the motions

to dismiss the two claims discussed above, and I would remand

the matter to the circuit court for further proceedings
consistent with this opinion.

* * * *

¶172 For the reasons set forth, I dissent.

¶173 I am authorized to state that Justices ANN WALSH

BRADLEY and N. PATRICK CROOKS join this dissent.

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