Stone ex rel. AmSouth Bancorporation v. Ritter

In Stone ex rel. AmSouth Bancorporation v. Ritter (911 A2d 362 [2006]), the Delaware Supreme Court affirmed dismissal of a derivative suit that followed payment by the corporation of $40 million in fines and $10 million in civil penalties to resolve government and regulatory investigations as a result of the failure of the corporation's employees to file certain reports required by anti-money-laundering regulations. In reiterating the requirement of bad faith or intentional, knowing permission of continued violations, the court set forth the underlying principle giving rise to such stringent rules. It stated that "it it is a fundamental principle of the Delaware General Corporation Law that 'the business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors. . . .' Thus, 'by its very nature a derivative action impinges on the managerial freedom of directors' " (id. at 366 ).