The Delaware Supreme Court Does Not Scream for Ice Cream: Director Oversight Liability Following Marchand v. Barnhill

Author(s)

Meghan Roll

Details

Faculty editor: Roy Brooks
Publication: Law Review
Volume: 57
Issue: 3
Start Page: 809
Month: September
Year: 2020
Type: Law Notes
Instititional Repository (IR) location of full article: https://digital.sandiego.edu/sdlr/vol57/iss3/

Abstract

For nearly six years, Blue Bell Creameries’ management ignored food safety compliance concerns at all three of the ice cream maker’s manufacturing plants. These compliance issues eventually culminated in a listeria outbreak, a recall of all of the company’s products, and the death of three customers. Shareholders subsequently brought a derivative action seeking to hold the board of directors liable for failing to implement a system to oversee food safety. The Delaware Supreme Court’s decision in Blue Bell was the first to confront a Caremark claim and determine that the complaint had plead sufficient facts to support a claim that the directors were personally liable for breaching their oversight duty. This striking conclusion was a result of horrifying facts, carefully crafted reasoning, and an arguably expansive view of oversight liability. Part II of this Article will give an overview of director oversight liability beginning with Caremark, the Chancery Court decision whose name now represents the entire category of board oversight claims. Part III will discuss the Blue Bell case in detail. Part IV will analyze the court’s reasoning and propose some doctrinal and practical implications of the decision.