Delaware courts have long described claims against a board of directors of a Delaware corporation for breach of its duty of oversight (Caremark claims) as involving the most difficult theories in corporate law upon which a plaintiff can prevail—requiring a plaintiff to demonstrate that the board “utterly failed” to adopt controls and systems for reporting “mission critical” legal and business risks to the board or, having established such a system, failed to effectively monitor it. Nonetheless, in Marchand v. Barnhill, (Del. June 18, 2019), the Delaware Supreme Court, reversing the Delaware Court of Chancery’s dismissal of Caremark claims, found that the board of directors of Blue Bell Creameries USA, a “monoline” company that produced and sold only ice cream, failed to establish systems and controls for reporting on food safety, which the court viewed as a “mission critical” risk for that business. Marchand seemingly breathed new life into the viability of Caremark claims in Delaware. Not long thereafter, the Court of Chancery, in In re Clovis Oncology Derivative Litigation, (Del. Ch. Oct. 1, 2019), declined to dismiss Caremark claims, finding plaintiffs adequately alleged that Clovis Oncology’s board failed to act upon certain “red flags” raised during the company’s clinical trial for FDA approval of its key developmental-stage drug. These opinions have reinvigorated the discussion surrounding the nature and scope of directors’ duty of oversight.

The most recent entry in the Caremark line of cases, In re LendingClub Derivative Litigation, (Del. Ch. Oct. 31, 2019), provides additional gloss on the continuing discussion. In LendingClub, the court dismissed allegations that the board of directors of LendingClub, a company that operates an online platform that facilitates loans, breached its fiduciary duties by failing to implement internal controls to prevent the issuance of false and misleading statements; investing in a company in which Renauld Laplanche, LendingClub’s CEO and chairman of the board, and John Mack, a member of the board, were heavily invested; permitting LendingClub to sell nonconforming near-prime loans to an institutional investor; and failing to monitor LendingClub’s wholly owned subsidiary, LC Advisors, risk management and compliance with federal laws.