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In what is one of the largest settlements in a breach of the duty of oversight lawsuit, the parties to the Walmart Opioid-Related Shareholder Derivative lawsuit have agreed to settle the case for $123 million. The settlement is also one of the largest-ever derivative lawsuit settlements. As discussed below, the Walmart settlement is the latest in a series of jumbo settlements in opioid-related breach of the duty of oversight claims. The settlement is subject to court approval. A copy of the parties’ October 13, 2024, Stipulation of Settlement can be found here.Continue Reading Walmart Opioid-Related Duty of Oversight Derivative Suit Settled for $123 Million

In last Thursday’s post, I noted recent case law developments in which federal court breach of the duty of oversight claims against the boards of Wells Fargo and Abbott Laboratories had survived motions to dismiss, at least in part. I also noted that these decisions have important implications for board governance processes and documentation. As I have continued to consider the implications of these recent decisions and other developments concerning the so-called Caremark duties relating to board members’ fiduciary duties of oversight, I developed further thoughts on the steps well-advised boards will want to take to put themselves in a better position to defend themselves against these kinds of claims. I have set out my thought below.Continue Reading Corporate Governance, Board Risk Management, and Duty to Monitor Case Law Developments

As I have noted in several recent posts (most recently here), over the last several months Delaware’s Chancery Court has appeared increasingly skeptical of breach of the duty over oversight claims, seemingly underscoring the oft-stated proposition that so-called Caremark claims are among the most difficult to sustain. However, a recent decision out of the Northern District of California, applying Delaware law but arguably ruling contrary to the recent Delaware Chancery Court trends, sustained at least some of the breach of the duty of oversight claims alleged against Wells Fargo board of director in connection with discriminatory lending allegations against the company. As discussed in detail below, the Wells Fargo decision could have interesting implications for the evolving body of duty of oversight case law.Continue Reading Breach of the Duty of Oversight Claims Against Wells Fargo’s Board Sustained in Part

For many years, Delaware’s courts emphasized that duty of oversight claims (often known as Caremark claims) are “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” However, in a line of cases beginning with the Delaware Supreme Court’s 2019 decision in Marchand v. Barnhill, Delaware courts have sustained various plaintiffs’ assertion of breaches of the duty of oversight. This in turn encouraged more claimants to file duty of oversight claims, a development that clearly has alarmed the Delaware courts. The more recent result has been a series of cases in which the Delaware Chancery Court has emphatically shot down would-be duty of oversight claims.

The latest of these decisions is a ruling in a case involving the directors of Centene Corporation, in which Vice Chancellor Morgan Zurn granted the defendants’ motion to dismiss the plaintiff’s breach of the duty of oversight claims against the Centene board, in an opinion that emphasizes the high bar for Caremark liability. A copy of the July 12, 2024, opinion in Bricklayers Pension Fund of Western Pennsylvania v. Brinkley can be found here. A July 15, 2024, Memo from the Fried Frank law firm about the court’s ruling can be found here.  Continue Reading Del. Chancery Court Rejects Oversight Breach Claims Against Centene’s Board

From time to time, I am asked to speak directly to corporate boards of directors. I find these opportunities endlessly fascinating. Among other things, I learn so much from the directors’ questions. One frequently recurring question I get is:  what can directors do to avoid litigation or to be in a position better defend themselves if they are sued. The first thing I always talk about when asked these kinds of question is the importance of board minutes. Because this is one of my go-to talking points when I meet with boards, I was particularly pleased to see the recent post on the Harvard Law School Forum on Corporate Governance blog written by Leo E. Strine, Jr., the former Delaware Supreme Court Chief Justice and Chancellor, in which Strine highlights the importance of board minutes in corporate litigation. Strine’s comments are essential reading for anyone concerned with the liabilities of corporate directors. Strine’s April 4, 2024 article can be found here.Continue Reading The Importance of Board Minutes

In a January 25, 2023, opinion in the McDonald’s case that has become known as McDonald’s I, Delaware Vice Chancellor Travis Laster held, as discussed in detail here, that liability for breach of the duty of oversight can extend to corporate officers as well as to directors. While there have been subsequent cases that have raised breach of the duty of oversight claims against officers, there have been no published decisions analyzing the duty of oversight as pertains to officers — that is, until now.

In a short December 14, 2023, opinion that emphasizes the high bar for oversight claims against officers, Vice Chancellor Lori Will dismissed claims that the personal transportation device company Segway brought against its former President. VC Will expressly rejected any suggestion that the standard to plead an oversight breach claim against a corporate officer is any lower than the high standards applicable to oversight claims against directors. A copy of VC Will’s opinion can be found here.Continue Reading Delaware Court: High Barrier for Oversight Claims Against Officers

By now, readers are well aware that ESG has become a politically divisive issue. In a series of variations on this theme, two conservative legal commentators, writing in a Wall Street Journal op-ed column, argue that ESG is a trojan horse for progressive political objectives that, if Delaware’s courts continue their current course, could cost the state its privileged position as the preferred jurisdiction for corporate organization. The November 25, 2023 Journal op-ed, which was written by former U.S. Attorney General William Barr and Washington Attorney and former Department of Labor official Jonathan Berry, and is entitled “Delaware is Trying Hard to Drive Away Corporations,” can be found here.Continue Reading Will Delaware’s Embrace of an “ESG Agenda” Cause Corporations to Flee?

There have recently been a number of Delaware court decisions relating to the Duty of Oversight. In the following guest post, Frederick M Zauderer, Esq., Senior Vice President, Head of Complex Claims – North American Liability at AXIS Capital Holdings, Ltd., Joseph P. Monteleone, Esq., Partner at Weber Gallagher, and Alvin H. Fenichel, CPA, Senior Advisor at H.S. Grace & Company, Inc., take a look at the recent Delaware Duty of Oversight decisions and consider their implications. A version of this article previously was published on the Association of Corporate Counsel (ACC) Docket site (here).   I would like to thank the authors for allowing me to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.Continue Reading Guest Post: Board Oversight Duties: Recent Adventures in the Delaware Chancery

If you own a device connected to the Internet, then you know that on Tuesday Dominion Voting Systems and Fox Corp. agreed to a $787.5 million settlement of Dominion’s defamation lawsuit against Fox relating to Fox News’s coverage of the 2020 Presidential election and its aftermath. The settlement doesn’t mean the end of related litigation, however; there is, for example, the separate lawsuit that voting-machine company Smartmatic brought against Fox Corp. in New York state court that remains pending. There are a host of other lawsuits that Dominion is pursuing related the 2020 Presidential election conspiracy theories, including, for example, lawsuits against Mike Lindell, the MyPillow executive, and news outlets such as Newsmax.

And then there is the derivative lawsuit that a Fox Corp. shareholder filed in Delaware Chancery Court last week against Fox Corp. Chairman Rupert Murdoch and four other Fox executives, in which the plaintiff alleges that the defendants breached their fiduciary duties by permitting the company’s news subsidiary to make false reports about the 2020 presidential election in order to avoid losing viewers. The shareholder suit, in and of itself, presents some interesting issues, but in light of Tuesday’s settlement in the Dominion lawsuit, and the threatening prospects of the additional litigation still pending against Fox Corp., the shareholder lawsuit may now be even more interesting.Continue Reading The Derivative Suit Against the Fox Board Just Got a Lot More Interesting

Delaware’s courts traditionally have said that breach of the duty of oversight claims (sometimes referred to as Caremark claims) are “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” However, in series of cases following the Delaware Supreme Court’s 2019 decision in Marchand v. Barnhill, Delaware courts have sustained a number of breach of the duty of oversight claims. More recently, Vice Chancellor Laster, in a pair of decisions in the McDonald’s case, elaborated significantly on the reach of duty of oversight. Among other things, Laster made it clear that the duty extends to corporate officers as well as to directors. Some commentators (including me) were concerned that Laster’s elaborations could lead to further lawsuits alleging breach of the duty of oversight.

Now, in what is the first high-profile post-McDonald’s Caremark claim of which I am aware, a group of four institutional investors has brought a breach of the duty of oversight claim against certain directors and officers of Meta, alleging that the executives failed to take sufficient action with respect to allegations that the company’s social media sites were being used for human trafficking. The new complaint appears to have been shaped to reflect many of the implications arising from Laster’s decisions in the McDonald’s case. A copy of the redacted public version of the plaintiffs’ March 20, 2023, complaint in the Meta case can be found here.Continue Reading Meta Board and Execs Hit with Oversight Duty Breach Claim Based on Trafficking Allegations