Munger, Tolles & Olson’s Achyut Phadke and Brian Rivas Boessenecker Pen Article on How to Limit Director Liability as Delaware Caselaw Evolves
Munger, Tolles & Olson partner Achyut Phadke and litigation associate Brian Rivas Boessenecker co-authored an article titled “Lessons for directors as personal liability evolves in Delaware courts,” published by Governance Intelligence.
The article discusses how company boards and legal counsel can limit director liability following significant developments in Delaware caselaw, particularly after the 2019 landmark decision in Marchand v. Barnhill.
Marchand highlighted the importance of board-level monitoring and reporting systems for mission-critical risks. The case involved Blue Bell Creameries, an ice cream company that suffered a listeria outbreak at its production plants that caused fatalities and substantial financial losses for the corporation. Reversing a trial court’s decision to dismiss the case, the Delaware Supreme Court found that allegations that Blue Bell’s board lacked a system to monitor food safety issues formed an adequate basis on which to allege bad faith conduct in violation of directors’ oversight duty.
Post-Marchand cases have continued to show how adverse business, legal or environmental hazards facing corporations could result in personal liability for their officers and directors. They also contain lessons about practices that officers, directors and their legal advisers can use to minimize the risk of such liability.
As the authors explain, Delaware cases after the Marchand ruling highlight the increasing importance of robust compliance and risk management in corporations and align with a trend toward greater corporate accountability and governance.
Mr. Phadke and Mr. Boessenecker discuss various key cases shaping pleading standards for risk oversight liability claims, outline best practices to avoid stockholder litigation, and offer guidance on how to navigate the evolving legal landscape five years after the Marchand decision.