Chancery Court Rejects GM Ignition-Switch Derivative Suit
A group of General Motors stockholders has been denied a chance to file a derivative lawsuit over the company's ignition-switch troubles, with the Court of Chancery rejecting arguments that the board of directors was conflicted by potential personal liability for the faulty switches.
July 01, 2015 at 07:59 AM
6 minute read
A group of General Motors stockholders has been denied a chance to file a derivative lawsuit over the company's ignition-switch troubles, with the Court of Chancery rejecting arguments that the board of directors was conflicted by potential personal liability for the faulty switches.
The plaintiffs in In re General Motors Derivative Litigation argued the board did not create proper systems to more quickly identify the risks posed by the ignition switches or the legal liability those risks raised.
“Pleadings, even specific pleadings, indicating that directors did a poor job of overseeing risk in a poorly managed corporation do not imply director bad faith,” Vice Chancellor Sam Glasscock III said. “This case presents a classic example of the difference between allegations of a breach of duty of care (involving gross negligence) as opposed to the duty of loyalty (involving allegations of a bad-faith conscious disregard of fiduciary duties).”
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