Best Practices for Minute-Taking: Three Lessons from Recent Caremark Decisions
As has been frequently noted on this page, the Delaware Supreme Court’s landmark 2019 decision, Marchand v. Barnhill, marked the beginning of a series of cases in which Delaware courts refused to dismiss shareholder derivative actions alleging oversight breaches—so-called Caremark claims, which are often quoted as “possibly the most difficult theory in corporat[e] law” on which to bring a successful lawsuit. Typically following a books and records demand, these cases shine a spotlight not only on the oversight that boards perform, but also on the manner in which that oversight is documented in a company’s formal records. This post reviews, from a corporate record-keeping perspective, themes drawn from a selection of recent cases in which Delaware courts permitted cases to proceed on Caremark theories and implications for best practices in light of these themes. (more…)
Caremark’s Comeback Includes Potential Director Liability in Connection With Data Breaches
A Caremark-based claim against a board of directors alleging a failure to monitor corporate operations has been said to be “the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment,” or at least to withstand a motion to dismiss. Yet, Caremark has taken on renewed importance following recent high-profile successes on duty-to-oversee claims, most notably in Marchand v. Barnhill in 2019 and In re Boeing in September 2021, and recent shareholder lawsuits alleging that data breach- and cybersecurity-related failures would have been preventable were it not for oversight failures by corporate officers and directors, are being plead asserting Caremark claims. (more…)
Increased Scrutiny Has Boards of Directors in the Hot Seat
Life is getting harder for boards of directors of public companies. Increased scrutiny of companies — particularly in heavily regulated industries — has led to greater risk of criminal and civil liability. And recent Delaware cases have ratcheted up the pressure, allowing lawsuits to proceed against boards for failure of oversight. What should directors know about their oversight responsibilities? And what can boards do to mitigate their risk? Our latest episode of The Sidley Podcast grapples with those questions and many others. Join host and Sidley partner, Sam Gandhi, as he speaks with two of the firm’s thought leaders on the subject — Holly Gregory and Dr. Paul Kalb.
