What Is Oversight? Del. Courts Continue to Provide Clarification Post-“Marchand”
December 11, 2019
Delaware courts have long described claims against a board of directors of a Delaware corporation for breach of its duty of oversight (Caremark claims) as involving the most difficult theories in corporate law upon which a plaintiff can prevail—requiring a plaintiff to demonstrate that the board “utterly failed” to adopt controls and systems for reporting “mission critical” legal and business risks to the board or, having established such a system, failed to effectively monitor it. Nonetheless, in Marchand v. Barnhill, (Del. June 18, 2019), the Delaware Supreme Court, reversing the Delaware Court of Chancery’s dismissal of Caremark claims, found that the board of directors of Blue Bell Creameries USA, a “monoline” company that produced and sold only ice cream, failed to establish systems and controls for reporting on food safety, which the court viewed as a “mission critical” risk for that business. Marchand seemingly breathed new life into the viability of Caremark claims in Delaware.