K. Tyler O'Connell of Morris James. Courtesy photo Court of Chancery Rejects 'Caremark' Liability for Imperfect Compliance With Legal Obligations
In dismissing for failure to plead demand futility, Vice Chancellor Lori W. Will explained that that allegations of independent directors' knowledge of "imperfect compliance" did not provide a reasonable inference of bad faith "intentional lawbreaking."
October 09, 2024 at 09:00 AM
5 minute read
Contributors
Delaware corporations are not permitted to pursue profits by violating the law. Under Caremark and its progeny, directors' fiduciary duties include the good faith obligation to oversee and monitor the corporation's compliance with laws and regulations that are material to its business. See In re Caremark International Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996). Recently, the Delaware Court of Chancery dismissed a derivative claim premised upon the notion that independent directors breached their fiduciary duties by failing to ensure compliance with a consent decree. See In re TransUnion Derivative Shareholder Litigation, 2024 WL 4355571 (Del. Ch. Oct. 1, 2024). In dismissing for failure to plead demand futility, Vice Chancellor Lori W. Will explained that that allegations of independent directors' knowledge of "imperfect compliance" did not provide a reasonable inference of bad faith "intentional lawbreaking."
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