December 10, 2019 Articles

“I Got a Bad Feeling About This”: Are Caremark’s Walls Closing In on Directors?

Two recent decisions holding that “mission critical” aspects of a corporation’s business require more rigorous board oversight might signal an emerging trend in Delaware that will make it easier for shareholder plaintiffs to plead and prove Caremark claims.

By Gregory L. Watts

In Star Wars: A New Hope, the original movie in the nine-film saga, heroes Princess Leia, Luke Skywalker, Han Solo, and Chewbacca, hemmed in by Stormtroopers, blast a hole in a grate and slide down a Death Star garbage chute to escape. The chute dumps them into a large metal room filled waist-high with water and garbage. After some bickering and splashing around, the room becomes quiet until a deep metallic clank is heard, as if releasing a giant latch. Han Solo, looking at the walls around him, worriedly says, “I got a bad feeling about this.” No sooner than these words cross his lips, two opposing walls start closing in on our heroes, and they realize they are in a giant trash compactor about to crush them. Based on an emerging trend in two recent Delaware opinions concerning director fiduciary duties, individuals serving on boards of directors may soon relate all too well to this iconic scene.

Premium Content For:
  • Litigation Section
Join - Now