In re Caremark Intl. Inc. Derivative Litig
In In re Caremark Intl. Inc. Derivative Litig. (698 A2d 959 [Del.Ch. 1996]), where the board approved a settlement of a shareholders' derivative suit that involved a series of disclosure and oversight promises but no payment of damages, the court examined the question of whether there was any potential liability in the underlying derivative suit based upon the futility of demand on the board issue.
In approving the settlement, which essentially called for the creation of a new compliance committee, the Delaware Chancery Court found that the derivative claims were likely to have been dismissed because there was no evidence that the board knowingly caused the corporation to violate a criminal statute, or that the director defendants were guilty of a sustained failure to exercise their oversight function.
The court stated that
"[t]he liability that eventuated in this instance was huge. But the fact that it resulted from a violation of criminal law alone does not create a breach of fiduciary duty by directors. The record . . . does not support the conclusion that the defendants either lacked good faith in the exercise of their monitoring responsibilities or conscientiously permitted a known violation of law by the corporation to occur." (Id. at 972.)