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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

In the latest development in the Delaware courts’ evolving elucidation of the standards surrounding claims for breach of the duty of oversight – sometimes referred to as Caremark claims — a Delaware Court has held that the board of McDonald’s cannot be held liable for an alleged oversight duty breach in connection with the alleged scandals at the company involving sexual harassment allegations. This ruling in the directors’ favor follows closely after the same court’s recent ruling in the same case that the plaintiffs had stated a claim against an officer defendant for breach of the duty of oversight. The court’s recent rulings in the case provide extensive additional insights with respect to what must be alleged to establish a Caremark claim. Vice Chancellor Laster’s March 1, 2023, opinion in the case, dismissing the claims against the McDonald’s directors, can be found here.…

Continue Reading Breach of Duty of Oversight Claims Against McDonald’s Directors Dismissed

In yet another Delaware court D&O insurance coverage decision that is sure to set the D&O insurance industry spinning, a Delaware Superior Court Judge has held that a SPAC’s post-merger runoff policy provides coverage for the defense fees of former directors of the pre-Merger target company for alleged Wrongful Acts that the occurred prior to the merger – even though the former directors were not directors or officers of the SPAC at the time they allegedly committed the alleged Wrongful Acts. The court’s ruling could even further complicate the already fraught process of placing and structuring D&O insurance in the De-SPAC context. A copy of the Court’s February 6, 2023 opinion can be found here. (Please note that I have linked to the copy of the opinion on the Court’s website; the website copy to which I linked says that the opinion was filed under seal, but the seal reportedly was lifted by the court on February 16, 2023.)…

Continue Reading Delaware Court: Pre-Merger Target Company Execs Are Insured Persons Under SPAC’S Post-Merger Tail Policy

In a shareholder claim against the former global head of HR at McDonald’s, the Delaware Chancery Court has held that liability for breach of the duty of oversight, which Delaware courts had previously extended only to corporate directors, can also extend to corporate officers, as well. In addition, in a separate part of the opinion that may not gain as much attention as the duty of oversight ruling, the same court also held that a breach of fiduciary duty claim can be alleged against an officer based on sexual harassment allegations. The court’s January 25, 2023 opinion in this case, a copy of which can be found here, is likely to be the subject of scrutiny, commentary, and controversy.…

Continue Reading Breach of the Duty of Oversight Liability Extends to Officers as Well as Directors

One of the hotly contested issues in recent years has been whether or not there is D&O insurance coverage for shareholder appraisal actions. In a recent decision that was largely focused on choice of law issues, the Delaware Supreme Court affirmed the trial court’s dismissal of a policyholder’s action to try to obtain coverage for defense costs incurred in an underlying shareholder appraisal action. Though the insurers prevailed in this coverage dispute, the Court’s holding on the choice of law issues could have ominous implications for insurers’ prospects in future coverage disputes, as discussed below. The Delaware Supreme Court’s January 10, 2023, opinion in the Stillwater Mining Company coverage dispute can be found here.…

Continue Reading Delaware Supreme Court: No Coverage for Appraisal Action

Jeff Lubitz

Jarett Sena

Computer technology company Dell Technologies, Inc. recently announced that it had entered a $1 billion settlement in shareholder litigation relating to the company’s disputed 2018 stock swap transaction. In the following guest post Jeff Lubitz, Managing Director, ISS Securities Class Action Services, and Jarett Sena, Director of Litigation Analysis, ISS Securities Class Action Services, take a closer look at the Dell settlement and also put the massive settlement into context with other shareholder lawsuit settlements. A version of this article previously was published as an ISS Securities Class Action Services client alert. I would like to thank Jeff and Jarett for allowing 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.…
Continue Reading Guest Post: Dell Agrees to $1 Billion Shareholder Suit Settlement

In the latest development a long-running D&O insurance coverage dispute, a Delaware Court has held that Verizon’s D&O insurance program covers the company’s $95 million settlement of a bankruptcy Trustee’s fraudulent transfer claim. In reaching this conclusion, the Court held, among other things, that the fraudulent transfer claim was a “Securities Claim” within the meaning of Verizon’s primary D&O insurance policy. The specifics of the court’s analysis of this issue underscores how complicated the question of what constitutes a “Securities Claim” can be. A copy of Delaware Superior Court Judge Eric Davis’s October 20, 2022 opinion can be found here.
Continue Reading Delaware Court Holds D&O Insurance Covers Fraudulent Transfer Claim Settlement

Yet another Delaware court has issued a noteworthy management liability insurance coverage opinion. In a detailed September 12, 2022 opinion in a dispute between Godiva Chocolatier and its management liability insurers over coverage for underlying consumer protection claims against the company, Delaware Superior Court Judge Mary M. Johnston rejected many – but not all — of the insurers’ coverage defenses. A copy of Judge Johnston’s opinion can be found here.
Continue Reading Del. Court Narrows Godiva’s Insurers’ Defenses in Dispute Over Coverage for Consumer Protection Claims

A claim alleging a board’s breach of duty of oversight has long been regarded as one of the most difficult for a plaintiff to sustain. But after the Delaware Supreme Court’s 2019 opinion in Marchand v. Barnhill, breach of the duty of oversight claims (or Caremark claims, as they are sometimes called) have in recent years, as Vice Chancellor Sam Glasscock put in in his recent opinion in the SolarWinds case, “bloomed like dandelions after a warm spring rain.” Some commentators questioned whether oversight breach claims were in fact as difficult to sustain as is so often said. However, in his recent opinion, the Vice Chancellor emphasized the oversight breach claims remain “one of the most difficult claims” to sustain and granted the defendants’ motion to dismiss the cybersecurity-related oversight breach claims asserted against the board of Solar Winds.  A copy of Vice Chancellor Glasscock’s September 6, 2022 opinion in the SolarWinds case can be found here.
Continue Reading Del. Court Dismisses Cybersecurity-Related Oversight Claim Against SolarWinds Board

In the latest SPAC-related federal court securities class action lawsuit to be filed, a plaintiff shareholder has filed a securities suit against a building management technology company – which merged with a SPAC in 2021 — that recently restated its financial statements for the reporting periods after the company became publicly traded. The complaint in the new lawsuit filed against Latch, Inc. can be found here. As also noted below, in a separate development, a different plaintiff shareholder has filed a separate SPAC-related Delaware Chancery Court action against former directors and officers of a SPAC and the SPAC’s sponsor.
Continue Reading SPAC-Related Securities Suit Filed Against Building Technology Company