Last year, Vice Chancellor J. Travis Laster famously held that officers could be subject to liability under the Caremark doctrine. In re McDonald’s Corp., 289 A.3d 343 (Del. Ch. Jan. 26, 2023). The Caremark doctrine originally held that directors could be liable if they failed to fulfill their oversight responsibilities. In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996). According to the authors of a recent law review article, however, the Vice Chancellor's ruling has opened up a number of questions:
A number of questions remain related to officer liability. Just how does Caremark doctrine apply to officers, who play a very different role in corporate governance than directors do? Why, even if they face a substantial chance of personal liability, can directors not be trusted to decide whether to sue officers for whom Caremark analysis should apply differently? Why do Delaware corporation law fiduciary duties apply to those officers rather than the agency law fiduciary duties of the state where they are employed? Or do both apply?
Pace, H. Justin and Trautman, Lawrence J., Financial Institution D&O Liability After Caremark and McDonald's (September 9, 2023). Rutgers Law Review, Vol. 76, No. 2, 2024,
Available at SSRN: https://ssrn.com/abstract=4566471 or http://dx.doi.org/10.2139/ssrn.4566471 (footnote omitted). The governing law question is one that I raised in this this post from February 2023 which is cited by the authors.
[View source.]
