In mid-2019 the Delaware courts issued two opinions denying defendant directors’ motions to dismiss in shareholder derivative actions alleging that corporate boards had breached their fiduciary duty of oversight under the Caremark standard. Some commentators wondered whether these decisions indicated new judicial willingness to let Caremark claims advance past the pleading stage, at least where the company’s business hinges on the success of a “mission-critical” product in a regulated industry.
In late 2019 the Delaware Court of Chancery issued its opinion in In re LendingClub Corp. Deriv. Litig. That opinion reassures boards that Caremark should continue to shield diligent directors from personal liability, and offers guidance on the type of board behavior that evidences fulfilment of the duty of oversight. In this client alert, RK&O partners Scott Budlong, David Massey, Margaret Meyers, Lee Richards and Daniel Zinman discuss the LendingClub decision and its takeaways for directors of Delaware corporations.