Plaintiffs and defendants alike may have thought they felt tremors ripple through the legal system last month when, for the first time, the Delaware Supreme Court reversed dismissal of derivative claims based on an alleged failure to monitor in Marchand v. Barnhill, Case No. 533, 2018, 2019 Del. LEXIS 310 (June 18, 2019), or “Blue Bell.” Prior to the Blue Bell decision, the court has repeatedly recognized that claims asserting that directors are liable for allegedly failing to monitor or oversee a corporation—often referred to as Caremark claims—rest upon what is “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment,” as in Stone v. Ritter, 911 A.2d 362, 372 (Del. 2006) (quoting In re Caremark International Derivative Litigation, 698 A.2d 959, 967 (Del. Ch. 1996)). Now, in a unanimous decision authored by Chief Justice Leo E. Strine Jr. just days before he announced his retirement, the court has confirmed that such claims are viable when a board fails to implement any system to monitor a company’s central compliance risks, see Blue Bell, 2019 Del. LEXIS 310, at *36-37. It can be expected that plaintiffs will prominently feature Blue Bell in virtually all briefs opposing dismissal of Caremark claims for years to come. A careful review of the Blue Bell decision, however, reveals that it contains nothing seismic.

Properly understood, Blue Bell does not lower the high bar for pleading oversight liability. In reversing dismissal, the court held, first, that the plaintiff had pleaded demand futility by alleging that a majority of the company’s directors lacked independence, and, second, that the plaintiff had stated a claim for oversight liability under Caremark. It has been settled Delaware law for decades that “the necessary conditions predicate for oversight liability are the directors utterly failed to implement any reporting or information system or controls; or having implemented such a system or controls, consciously failed to monitor or oversee its operations thus disabling themselves from being informed of the risks or problems requiring their attention,” see Stone, 911 A.2d at 370 (applying Caremark). Blue Bell is a straightforward application of the first prong of this test. Its holding will have little impact on most motions to dismiss Caremark claims for at least two reasons.