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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

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?

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

As readers of this blog know, there have been important case law developments in Delaware concerning boards’ duty of oversight. In the following guest post, the authors review the key recent developments and consider the practical implications for boards. The authors of this paper are: Sebastian M. Alia, Deputy General Counsel, Hudson Insurance Group; H. Stephen Grace, Ph.D., President, H.S. Grace & Company, Inc.: Alvin H. Fenichel, CPA, Senior Advisor, H.S. Grace & Company, Inc.; and Joseph P. Monteleone, Esq., Partner, Weber Gallagher. A version of this article previously was published in the ACC Docket. I would like to thank the authors for allowing me to publish their articles 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: How To Structure a Board to Oversee Mission-Critical Activities

In the latest example of claimants seeking to assert the newly revitalized type of claim for breach of the duty of oversight against corporate boards, plaintiff shareholders have filed a derivative lawsuit in Delaware Chancery Court against certain past and current directors of technology company SolarWinds, based on the massive cybersecurity incident involving the company’s software and systems discovered in December 2020. As discussed below, there are several interesting features of this lawsuit in light of recent developments involving claims for alleged breaches of the duty of oversight. A copy of the heavily redacted publicly available version of the plaintiffs’ complaint against the SolarWinds board can be found here.
Continue Reading Cybersecurity-Related Breach of the Duty of Oversight Claim Filed Against SolarWinds Board

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?

Brent Ashley

In a recent post (here), I reviewed the steps that well-advised companies can take in light of the current coronavirus outbreak to try to mitigate their risk of management liability claims arising out of the pandemic. In the following guest post, Brent Ashley of the Hirschler law firm takes a look at the steps corporate boards can take in light of the COVID-19 pandemic to try to insulate themselves against claims based on alleged breaches of the duty of oversight. I would like to thank Brent for allowing me to publish his 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 Brent’s article.
Continue Reading Guest Post: 7 Steps for Ensuring Director Oversight During COVID-19