Caremark Is Alive And Well – Director Liability In Delaware

The last time I wrote about In Re Caremark International Inc. (“Caremark”), and its protections for a board of directors from breach of fiduciary duty claims, was in early 2021 following a year of cases that had eroded its historical strong defenses.  Now, almost two years later, boards have paid attention to the judicial opinions and added compliance practices, including implementing written oversight systems, resulting in a dramatic uptick in the dismissal of plaintiff’s attempts to satisfy Caremark claims.

Background

In Re Caremark International Inc. Derivative Litigation was a civil action in the Delaware Court of Chancery in 1996 which drilled down on a director’s duty of care in the oversight context.  A Caremark claim “seeks to hold directors accountable for the consequences of a corporate trauma.” To adequately allege such a claim, a plaintiff must allege that the board had some level of involvement in the trauma such that it knew or should have known about