Duty of Loyalty

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Sexual harassment allegations can of course support an employment practices claim. But if the conduct results in harm to the company through an adverse judgment, can the same misconduct allegations also support a claim under Delaware law for breach of fiduciary duty? At least one past Delaware court said, in the context of that case, that the answer is “yes.” However, a recent Delaware Chancery Court decision took a different view, holding that “interpersonal” conduct alleged was “not a matter of corporate internal affairs.” A copy of the December 1, 2025, decision can be found here.Continue Reading Del. Court: Harassment Charges Do Not Establish Fiduciary Duty Breach         

Just a few years ago, ESG was one of the most important themes in the corporate and securities world. Companies were under pressure to demonstrate their sustainability qualifications and otherwise establish their ESG credentials. But then came the ESG backlash, and many companies found (and, indeed, continue to find) themselves attacked for their ESG efforts. The backlash has taken the form both of legislation and litigation. And while the ESG backlash litigation claimants have not always done well, there have also been some notable recent successes.

The most recent ESG backlash litigation success is in the ERISA liability action that an American Airlines pilot filed against American Airlines and its Employee Benefits Committee. In a January 10, 2025, post-trial decision (here), the court ruled, following a four-day evidentiary hearing, that the defendants had violated their duties of loyalty by encouraging employee 401(k) investment in BlackRock ESG funds. The court’s opinion is harsh in its criticism of the airline for advancing its corporate interest in ESG over the interests of the plan participants and for failing to examine and address the company’s conflicted relationship with BlackRock.  Continue Reading Plan Fiduciaries’ ESG Efforts Breached ERISA Duty of Loyalty, Court Holds

I have noted in prior posts on this site the phenomenon of ESG backlash, which has not only taken the form of legislative and other overtly pollical action, but has also taken the form of litigation as well. Though the ESG backlash lawsuits generally have not fared well in the courts, one of these suits recently survived a motion to dismiss.

In a February 21, 2024, ruling, the Northern District of Texas denied the motion to dismiss in a lawsuit filed by an American Airlines pilot alleging that the airline and its employee benefits committee violated their fiduciary duties under ERISA to the company’s 401(k) plan participants in connection with selection and retention of funds whose managers allegedly pursue non-economic ESG objectives rather than maximizing plan participants’ financial benefits. As discussed below, the ruling underscores just how fraught the ESG-related litigation picture has become. A copy of the court’s ruling can be found here.Continue Reading ESG Backlash ERISA Lawsuit Survives Dismissal Motion

Every now and then it is worthwhile to go back to the basics. In the following guest post, Greg Markel, Gina Ferrari, and Sarah Fedner, all of the Seyfarth Shaw law firm, review the basic building blocks of corporate governance duties and discuss ways for directors and boards to avoid violating the duties. I would like to thank the authors 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: Essential Corporate Governance Duties and How To Avoid Violating Them

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

In a recent post in which I reviewed recent legal developments in Australia, I discussed the growing possibilities for future climate change-related D&O claims. A recent paper highlights the extent of these D&O claim risks in the United States. The October 2021 paper, published by the Commonwealth Climate and Law Initiative and entitled “Fiduciary Duties and Climate and entitled “Fiduciary Duties and Climate Change in the United States,” discusses how evolving understandings of climate change has “changed the relevance of climate change to the governance of corporations,” with important implications for the fiduciary duties of directors and officers. The paper discusses how in the current legal environment in the U.S. a board’s failure to adequately regard climate change-related issues could lead to potential litigation and liability. A copy of the full paper can be found here, and an executive summary of the paper can be found here.
Continue Reading Climate Change-Related Breach of Fiduciary Duty Lawsuits?

Under the Delaware Chancery Court decision in the Caremark case, directors can be liable for failures in their oversight duties – that is, their duties to monitor the company and its functions. Lawsuits alleging a violation of the duty of oversight are notoriously challenging for plaintiffs. However, in the recent Marchand v. Barnhill case, the Delaware Supreme Court reversed the Chancery Court’s dismissal of a Caremark liability case and allowed the case to proceed against the board of an ice cream manufacturer that experienced a deadly listeria outbreak. Caremark liability cases remain difficult to plead and prove, but the Marchand decision nevertheless has important implications for director liability for breaches of their duty of oversight.
Continue Reading Recent Delaware Caremark Duty Decision Underscores Board Cyber and Privacy Liability Risks

In the current global economy, many companies have operations and assets in far-flung corners of the world. These geographically dispersed arrangements have a number of implications for the concerned companies. According to a recent decision from the Delaware Court of Chancery, the arrangements may also have important implications of these companies’ outside directors, at least…