Regular readers will recall that my latest law review article is Don’t Compound the Caremark Mistake by Extending it to ESG Oversight (September 2021), which is available at SSRN: https://ssrn.com/abstract=3899528. They will also recall my PB.com post After Boeing, Caremark is no longer "the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment", in which I argued that:
“It has become among the hoariest of Chancery clichés for an opinion to note that a derivative claim against a company’s directors, on the grounds that they have failed to comply with oversight duties under Caremark, is among the most difficult of claims in this Court to plead successfully.” Teamsters Local 443 Health Servs. & Ins. Plan v. Chou, 2020 WL 5028065, at *1 (Del. Ch. Aug. 24, 2020).
As I explained in my post, Is Caremark still the hardest claim for plaintiffs to win in corporate law?, there has been a steady erosion of that principle in the Delaware courts. Indeed, it is getting easier and easier for a plaintiff to at the very least get past the motion to dismiss stage of the litigation (at which point the pressure on defendants to settle becomes almost unbearable).
Yesterday's opinion in In re The Boeing Company Derivative Litigation by Delaware Vice Chancellor Zurn is the latest nail in that cliche's coffin.
In today's WSJ, it was reported that:
Current and former Boeing Co. directors have reached an approximately $225 million agreement to settle a shareholder lawsuit that claimed the plane maker’s board failed to properly oversee safety matters related to the 737 MAX, according to people familiar with the matter.
As part of the proposed settlement, Boeing has agreed to hire an ombudsman to handle internal issues and appoint a board member with experience in aviation safety, some of these people said.
The article does not indicate how big of a chunk of that settlement will go to the plaintiff class' lawyers.
The erosion of Caremark coupled with a huge payout for the lawyers will make it more likely that suits like this will be filed, less likely that directors will be able to get Caremark claims dismissed at the motion to dismiss stage, and thereby drive up the settlement value of such claims. It'll be a vicious circle.