A new decision of the Delaware Court of
Chancery provides what a leading legal commentator
described as an “exemplary” explanation of the
Caremark standard, and of the requirements that must be
satisfied before directors can be held to have violated their duty
to exercise oversight of corporate compliance programs.
The decision arose from a claim that the directors of a
financial services organization breached their oversight duties by
their alleged failure to appropriately monitor the company’s
check cashing services (and, in particular, compliance with
applicable federal money laundering laws). The Court of Chancery
concluded that the plaintiffs failed to meet the Caremark
“bad faith” pleading standards. Of particular interest
to the health system general counsel is the opinion’s
discussion of the elements of board inaction that must be present
in order to demonstrate a violation of the oversight duty.
According to the court, the plaintiff’s core
