Delaware Court of Chancery Sustains Failure to Monitor Caremark Claim

22 October 2019
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Key takeaways:
  • The Delaware Court of Chancery refused to dismiss a shareholder derivative complaint alleging the board breached its fiduciary duties under Caremark by ignoring red flags that management was reporting inaccurate clinical trial testing results for one of the company’s drugs in development.
  • The decision marks a rare instance of a court sustaining a failure-to-monitor claim even where the company has a system of reporting and internal controls in place, through which the board receives regular updates on the company’s central compliance issues.