Also known as: discretionary authorities · administrative discretion
Written by attorneys — see sources below.
Authority vested in an official or body that permits individualized determinations or exemptions from uniform rules rather than mandatory application across all cases.
A city ordinance bars foster agencies from declining to certify same-sex couples. City officials retain power to grant case-by-case waivers for agencies citing religious objections. When a religious agency refuses certification, the city enforces the rule against it. Because the officials hold discretionary authority to excuse compliance, the policy is not generally applicable and must satisfy strict scrutiny.
An investment adviser holds client shares under an agreement granting it power to decide whether to tender those shares in a takeover bid. When a bidder launches a consent solicitation, the adviser uses its power to direct clients to execute consents favoring the bidder. The adviser's exercise of that power binds the clients because the agreement conferred discretionary authority over the voting decision.
Chesapeake Corporation, a Virginia corporation, and Shorewood Packaging Corporation, a Delaware corporation, both operated in the specialty packaging industry. As of early 1999 each company had identified the other as an acquisition candidate. On October 26, 1999, Shorewood's board approved an all-cash $40 per share offer for Chesapeake representing a 41% premium to the then-depressed market price. Chesapeake's board rejected the offer as inadequate after a November 3 meeting. On November 10, 1999, Chesapeake proposed to acquire all of Shorewood for $16.50 per share, a 40% premium. After telephone meetings on November 16 and 18, 1999, at which no written financial materials were provided, the Shorewood board rejected the offer. At the November 18 meeting the board adopted a package of defensive bylaws that eliminated stockholders' ability to call special meetings, removed directors without cause, and imposed a 66 2/3% supermajority requirement to amend the bylaws. The supermajority threshold was later lowered to 60% on January 5, 2000. Shorewood already had a poison pill in place and a classified board. On November 26, 1999, Chesapeake entered into an agreement with Ariel Capital Management to purchase 14.9% of Shorewood's shares at $17.25 per share together with upside protection in any future majority transaction. On December 3, 1999, Chesapeake commenced a $17.25 all-cash tender offer, a consent solicitation to eliminate the classified board, remove the sitting directors, and elect a new board, and this lawsuit challenging the supermajority bylaw. Shorewood's board rejected the tender offer at December meetings and mounted a counter-solicitation. Shorewood's nine-member board included six directors with substantial financial or personal ties to CEO Marc Shore that rendered them non-independent. The board invoked attorney-client and business-strategy privileges throughout the litigation and declined to have Marc Shore or other key insiders testify at the mid-January 2000 trial. Management insiders controlled nearly 24% of Shorewood's stock at all relevant times.
View caseA policy is not generally applicable if it allows officials to grant individualized exemptions. The existence of that power means the rule must satisfy strict scrutiny even if the government rarely exercises the power.
A person who receives discretionary authority over property holds possession. Misappropriation by that person therefore does not constitute larceny because the owner has surrendered possession rather than mere custody.
An association board must exercise discretionary rulemaking and design powers in a reasonable manner. Courts review whether the board acted within its authority and whether the substance and process of the decision are reasonable given community purposes and member interests.
In a closely held corporation a unanimous written shareholder agreement made known to the corporation may restrict or eliminate the board's discretionary authority and reallocate decision-making power to the shareholders themselves.
…or exceeds [$17.25] per [Purchased] Share, then Ariel agrees to use its best efforts as investment adviser to exercise its discretionary authority to cause Ariel’s Clients to: (i) tender the Purchased Shares in such tender offer; and (ii) execute the proxies or written consents in the form solicited by [Chesapeake] or any of its…