Could Weinstein Accusations Lead to Delaware Derivative Litigation?

Harvey Weinstein.

Delaware legal observers this week acknowledged the possibility that derivative litigation stemming from damning allegations of sexual misconduct against Hollywood producer Harvey Weinstein could spill into the Delaware Court of Chancery, which would have jurisdiction over suits involving the Delaware-incorporated company Weinstein helped to found.

However, critical questions remained regarding Weinstein Co.'s corporate governance structure and the veracity of a yet-uncorroborated media report indicating that the company's board may have known about Weinstein's alleged history of sexual harassment but still worked contractual protections into his 2015 employment agreement.

Multiple attorneys, though, confirmed in interviews that Weinstein Co. board members could potentially be vulnerable to shareholder litigation under the Caremark theory, which exposes directors to liability for corporate harm if they were aware of a systemic problem but failed to act.