Read the fact pattern below, then answer the questions that follow. Case: In re S. Peru Copper Corp. Shareholder Derivative Litig^[1]Facts: Grupo Mexico was the controlling stockholder of Southern Peru Copper Corporation (SPC), an NYSE-listed mining company. Grupo also owned 99 percent of the stock of Minera Mexico, a Mexican mining company that was not publicly traded. Grupo offered to trade all its Minera stock for $3.1 billion of SPC shares. Because of Grupo's self-interest, SPC's board formed a special committee of disinterested SPC directors to evaluate the proposal. (The board knew that, in the event of litigation, the court would examine the underlying fairness of the transaction, but it hoped that approval by the special committee would influence the court's decision.) The committee's financial advisor, Goldman Sachs, used many scenarios to run the numbers, but could not find any way to value Minera's stock at more than $2.8 billion. Rather than tell Grupo to go mine itself, the special committee stretched to develop some plausible story about why Minera was indeed worth the price Grupo was asking. So, for example, it tried "optimizing" Minera's cash flows, but not SPC's, ignoring the fact that Minera was struggling, while SPC was thriving and nearly debt-free.In the end, SPC's committee approved Grupo's offer and then stuck with it, even as SPC's stock price climbed. In the end, SPC paid $3.75 billion for Minera. SPC's minority shareholders filed suit against its board of directors, alleging that the Minera purchase was entirely unfair. The court, however, dismissed the case against the members of the special committee because SPC's charter had an exculpatory clause that protected directors who had not received any improper personal benefit. The suit continued against the directors who were employed by Grupo.

1. What is the issue in this case? What question does the court need to answer to resolve this case?

2. What is the rule of law in this case? Remember, the rule of law is the legal principle the court relies upon to resolve the issue.

3. Which specific element of the rule is in question in this case?

Next, read the Holding of the case below, then complete the exercise that follows. Holding: The Special Committee members were competent, well-qualified individuals with business experience. Moreover, the Special Committee was given the resources to hire outside advisors, and it hired respected, top-tier of the market financial and legal counsel. [T]here is little question but that the members of the Special Committee met frequently. Their hands were on the oars. So why then did their boat go, if anywhere, backward? This is a story that is, I fear, not new. From the get-go, the Special Committee extracted a narrow mandate, to evaluate a transaction suggested by the majority stockholder. Thus, the Special Committee fell victim to a controlled mindset and allowed Grupo to dictate the terms and structure of the Merger. [T]his acceptance took off the table other options that would have generated a real market check and also deprived the Special Committee of negotiating leverage to extract better terms. Even if the practical reality is that the controlling stockholder has the power to reject any alternate proposal it does not support, the special committee still benefits from a full exploration of its options. What better way to "kick the tires of the deal proposed by the self-interested controller than to explore what would be available to the company if it were not constrained by the controller's demands? [Instead, throughout] the negotiation process, the Special Committee's and Goldman's focus was on finding a way to get the terms of the Merger structure proposed by Grupo to make sense, rather than aggressively testing the assumption that the Merger was a good idea in the first place. A reasonable third-party buyer free from a controlled mindset would not have ignored a fundamental economic fact that is not in dispute hereSPC stock could have been sold for the price at which it was trading on the New York Stock Exchange. What it did was to turn the gold that it held (market-tested SPC stock worth in cash its trading price) into silver (equating itself on a relative basis to a financially-strapped, non-market tested selling company), and thereby devalue its own acquisition currency. Goldman was not able to value Minera at more than $2.8 billion, no matter what valuation methodology it used, even when it based its analysis on Minera management's unadjusted projections. For all these reasons, I conclude that the Merger was unfair. Because the deal was unfair, the defendants breached their fiduciary duty of loyalty. [The defendants must pay $1.347 billion.]

1. Underline the text that illustrates the rule of law in this case.

2. Highlight the text that illustrates the court's analysis of the case in a color of your choice.

3. What was the court's conclusion in this case? Explain.