Although Delaware’s courts recognized a cause of action for directors’ breach of the duty of oversight in the 1996 Caremark decision, claims against directors based on alleged oversight duty breaches have long been seen as difficult to plead and prove. However, in two 2019 rulings – the Marchand v. Barnhill decision (discussed here) and the Clovis Oncology decision (discussed here) – Delaware courts allowed breach of the duty of oversight claims to proceed. Now in a more recent ruling, the Delaware Court of Chancery has allowed yet another duty of oversight claim to proceed.
As noted in a May 1, 2020 post on the Duane Morris Delaware Business Law Blog (here), the most recent Delaware duty of oversight ruling reinforces the view that “directors and officers who neglect their oversight responsibilities may be personally liable for resulting harm to the company and its stockholders.” The Delaware Court of Chancery’s April 27, 2020 decision in Hughes v. Hu can be found here.
Continue Reading Another Delaware Breach of the Duty of Oversight Case Survives Dismissal Motion
Many readers may have seen the news this past week that the estate of a deceased Walmart employee who had died of complications from COVID-19 has filed a Wrongful Death lawsuit against the company. According to the lawyer who filed the complaint, the lawsuit is the “first known COVID-19 wrongful death lawsuit.” Even though a Wrongful Death lawsuit is far outside this blog’s usual remit, I tracked the complaint down and read it carefully, in order to think more about possible future coronavirus blame casting that could arise in the D&O claims arena. While the wrongful death lawsuit may be the first of its type, it surely will not be the last, and its filing may foreshadow other possible claims. 
In the following guest post, Dan Gold, Thad Behrens, Kit Addleman, Emily Westridge Black, Carrie L. Huff, Timothy Newman, Matt McGee, and Odean L. Volker of the Haynes and Boone, LLP law firm review the key developments during 2019 in securities litigation and enforcement, including significant securities related decisions by the Supreme Court and federal appellate courts, key developments in SEC enforcement, and significant rulings in state law fiduciary litigation against directors and officers of public companies. A version of this article previously was published as a Haynes and Boone client alert. I would like to thank the authors for their willingness to allow me to publish their article as a guest post 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.
The liability environment for directors and officers is always in a state of change, but 2019 was a particularly eventful year in the D&O liability arena, with important consequences for the D&O insurance marketplace. The past year’s many developments have significant implications for what may lie ahead in 2020 – and possibly for years to come, as well. I have set out below the Top Ten D&O Stories of 2019, with a focus on the future implications.
Earlier this year, in Marchand v. Barnhill, the Delaware Supreme Court underscored that boards that fail to establish oversight procedures for their company’s mission critical functions can be held liable for breach of their Caremark duties. In an October 1, 2019 decision in the Clovis Oncology Derivative Litigation, the Delaware Chancery Court provided further perspective on directors’ potential liability for breaches of the duty of oversight. The Chancery court held, citing Marchand, that boards not only must be able to show that they have made good faith efforts to implement an oversight system, but that also that they monitor the system – particularly when a company operates in a highly regulated industry. The Chancery Court’s October 1, 2019 decision in the Clovis Oncology Derivative Litigation can be found 
Under the Delaware Chancery Court