On June 18, 2019, Delaware’s Supreme Court issued a decision in Marchand v. Barnhill, 2019 WL 2509617, reversing a Delaware Court of Chancery’s dismissal of a shareholder derivative suit bringing claims under In re Caremark, 698 A.2d 959 (Del. Ch. 1996) stemming from a listeria outbreak that resulted in the deaths of three people who consumed Blue Bell ice cream and necessitated a disastrous total product recall.

Marchand seems a relatively straightforward interpretation of Caremark, underscoring a board’s “bottom-line” requirement that it make a good faith effort to implement board-level compliance and monitoring systems. See Marchand at 12. The court found that even though board minutes reflected that the board was generally aware of the listeria issue, it failed to establish its own monitoring system. Id. at 14. The board should have instituted monitoring even though the company itself “nominally complied with [food safety] regulations,” because Caremark “require[s] that a board attempt to formulate a reasonable system of monitoring and reporting about the corporation’s central compliance risks.” Id.

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