Chief Justice Leo E. Strine.

The Delaware Supreme Court has revived a shareholder derivative suit that targeted the directors of Blue Bell Creameries USA Inc. in the wake of a deadly listeria outbreak in 2015 for allegedly failing to enact measures to safeguard its ice cream products from contamination.

A unanimous panel of the high court said Tuesday that plaintiff Jack L. Marchand II had supported claims that two Blue Bell executives, and the company's board, had failed to implement any system to monitor the safety of the Texas-based company's product and its compliance with state and federal regulations.

The ruling, outlined in a 37-page opinion, reversed a Chancery Court decision last year that dismissed the suit on demand futility grounds and gave new life to Marchand's Caremark claim against the board, commonly seen as the most difficult theory to prove under Delaware corporate law.

Chief Justice Leo E. Strine said that Marchand's complaint supported a “reasonable inference” that Blue Bell's directors had even tried to put adequate systems in place to prevent the outbreak, which killed three people and sickened nearly half a dozen others in two states. Listeria, a foodborne bacterial illness, can cause infections of the bloodstream and is most commonly contracted by eating improperly processed deli meats and unpasteurized milk products.

The complaint, Strine said, had alleged that Blue Bell's board was not informed of “red and yellow flags” concerning growing food-safety issues at its plants in Texas, Oklahoma and Alabama and had no mechanisms in place to identify and respond to the threat.

“At this stage of the case, we are bound to draw all fair inferences in the plaintiff's favor from the well-pled facts,” Strine wrote.

“In short, the complaint pleads that the Blue Bell board had made no effort at all to implement a board-level system of mandatory reporting of any kind.”

Attorneys for both sides did not return calls Wednesday seeking comment on the ruling.

Vice Chancellor Joseph R. Slights III last September dismissed the case, finding that the complaint came up one vote short of showing that a majority of the Blue Bell board was unable to impartially assess whether to initiate its own litigation over the order, which later forced the company into a liquidity crisis.

As to the Caremark claim, he said, there were no allegations that the board had acted in bad faith by not implementing monitoring and reporting systems.

“What plaintiff really attempts to challenge is not the existence of monitoring and reporting controls, but the effectiveness of monitoring and reporting controls in particular instances,” Slights said at the time.

Strine, however, said Slights' opinion overlooked one director, W.J. Rankin, who was independent of Paul Kruse, Blue Bell's president and CEO, giving Marchand the majority he needed to plead demand futility.

But Strine also said Slights' focus on the effectiveness of Blue Bell's systems was misguided. The “key issue” for the court, he said, instead was whether Marchand deserved an inference that the board did not “undertake good faith efforts to put a board-level system” in place.

“Although Caremark is a tough standard for plaintiffs to meet, the plaintiff has met it here,” Strine said. “When a plaintiff can plead an inference that a board has undertaken no efforts to make sure it is informed of a compliance issue intrinsically critical to the company's business operation, then that supports an inference that the board has not made the good faith effort that Caremark requires.”

Marchand is represented by Robert J. Kriner Jr. and Vera G. Belger of Chimicles Schwartz Kriner & Donaldson-Smith in Wilmington and Michael Hawash and Jourdain Poupore in Houston.

The Blue Bell directors are represented by Paul A. Fioravanti Jr. and John G. Day of Prickett, Jones & Elliott in Wilmington.

Kruse and Greg Bridges, Blue Bell's vice president of operations, are represented by Srinivas M. Raju and Kelly L. Freund of Richards, Layton & Finger in Wilmington.

The case is captioned Marchand v. Barnhill.