A few weeks ago, the Delaware Chancery Court dismissed a lawsuit against a company’s directors and officers – alleging oversight claims premised on Caremark – after that company entered into a $237 million derivative settlement a few years ago. That settlement was the largest derivative ever in Delaware of a Caremark duty of oversight case.
This dismissal highlights that a board that makes a good-faith effort to establish, use and monitor an appropriate oversight system – including documents that support this sound process – is a powerful defense against Caremark claims. Strong records can help not only at the motion-to-dismiss stage, but even earlier as materials produced in a books & records investigation under Section 220 may convince plaintiffs’ counsel that there simply isn’t a viable Caremark case to bring.
Authored by
Broc Romanek