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California Appellate Courts Have Yet To Address Caremark

Earlier this week, Professor Stephen Bainbridge wrote about another surviving Caremark claims.  These are claims brought against directors alleging a failure of oversight on the part of directors.  Chancellor Allen famously characterized this theory as "possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment".  In re Caremark Int'l, 698 A.2d 959, 967 (Del. Ch. 1996).  Despite these discouraging words, plaintiffs have continued to bring Caremark and some of those claims have survived.

Although Caremark was decided more than a decade ago, no California appellate court has adopted it in a published decision.  The Court of Appeal cites Caremark in Leyte-Vidal v. Semel, 220 Cal. App. 4th 1001 (2013).  Caremark also makes an appearance in Robbins v. Alibrandi, 127 Cal. App. 4th 438 (2005) but the court cites it with respect to the standard of review to be applied to settlements.  Superior Court Judge Peter H. Kirwan did sustain a demurrer to Caremark claims in In re Apple E-Book Deriv. LItig., 2015 Cal. Super. LEXIS 2655.  Apple is a California corporation and Judge Kirwan did not explain why he believed that a claim fashioned by a trial court in another state was the law in California.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...