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Chancery Confirms the Challenges in Pleading Caremark and Non-Shareholder Action Disclosure Claims


Fisher v. Sanborn, C.A. No. 2019-0631-AGB (Del. Ch. Mar. 30, 2021)

Under Court of Chancery Rule 23.1, a plaintiff attempting to bring a derivative action on behalf of a corporation faces a heightened “particularized” pleading standard. This pleading challenge is compounded when a plaintiff attempts to bring a Caremark failure of oversight claim – “possibly the most difficult theory in corporate law.” Similarly, a plaintiff alleging false or misleading disclosures not made in connection with soliciting shareholder action faces the additional pleading challenge of demonstrating that those disclosures were knowing or deliberate. More ›

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Plaintiff’s Failure to Plead Demand Futility Leads to Dismissal of Caremark Claims Against MoneyGram Directors

Richardson v. Clark, C.A. No. 2019-1015-SG (Del. Ch. Dec. 31, 2020)
Under Court of Chancery Rule 23.1, a derivative plaintiff’s must make a demand on the corporation’s board of directors unless the plaintiff can plead particular facts to establish that demand was excused. Although demand may be excused where a majority of the board faces a substantial likelihood of personal liability, merely alleging wrongdoing by the corporation’s directors will not suffice. More ›

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Chancery Dismisses Caremark Claims Against Metlife Board

Posted In Breach of Fiduciary Duty, Caremark, Chancery

In re Metlife Inc. Derivative Litigation, Consol. C.A. No. 2019-0452-SG (Del. Ch. Aug. 17, 2020)

Shareholders seeking relief for alleged harm to a Delaware corporation must comply with Delaware’s pre-suit demand requirement by either making a demand on the board of directors to take action respecting the potential claims, or initiating suit themselves and adequately pleading facts excusing pre-suit demand as futile. More ›

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Chancery Addresses Pleading Standards for Caremark Claims

Posted In Caremark, Chancery

In re LendingClub Corp., Consol. C.A. No. 12984-VCM (Del. Ch. Oct. 31, 2019).

Delaware law sets a high bar to sufficiently plead a Caremark claim for failure of board oversight, especially when the plaintiff must satisfy the heightened pleading requirements for establishing demand futility under Court of Chancery Rule 23.1.  To overcome those hurdles, a plaintiff must plead with particularity that the board of directors either (i) utterly failed to implement any reporting or information systems or controls to address the risk that ultimately manifested, or (ii) having implemented such safeguards, consciously failed to oversee their operation and thereby disabled themselves from being informed of the risk that ultimately manifested.  For either Caremark prong, the plaintiff must sufficiently plead bad faith, essentially that the directors knew they were not discharging their fiduciary duties. More ›

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