Duty of Oversight

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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

The rise of artificial intelligence (AI) presents just about every enterprise with both opportunities and risks. AI also represents a challenge for companies and their boards as the companies seek to incorporate AI Into operations, functions, and processes. Because of AI’s potentially disruptive impact in many industries and for individual companies, many boards may find themselves under scrutiny for the way they address the risks associated with AI. All of which raises the question of the appropriate ways for boards to address and manage the AI-associated risks, a topic discussed in a July 22, 2024, Harvard Law School Forum on Corporate Governance post by attorneys from Debevoise & Plimpton law firm entitled “AI: Are Boards Paying Attention?” (here).  Continue Reading Artificial Intelligence and Corporate Boards

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

As reflected in my recent post, last week I attended the PLUS D&O Symposium in New York. The sessions were great, but based on some comments of various panelists, there are some items for follow-up – for example, references that panelists made that need to be checked out, items that panelists suggested we should pursue, and so on. I have run down these various items, and I link to them below. I emphasize that these items will be of interest even if you didn’t attend the Symposium. I have also included below several other items from around the Internet as well.Continue Reading PLUS D&O Symposium Follow-Up and Other Notes

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?

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

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