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Does Caremark Apply To California Corporations?

Chancellor William T. Allen famously observed that a derivative claim based on a board's failure of oversight "is possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment." In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996).  These cautionary words, however, have not sufficed to dissuade plaintiffs' attorneys who have continued  to bring failure of oversight claims with an apparent sprezzatura.  According to Liz Dunshee, moreover, they may be meeting with more success in Delaware.  In this post, she noted that a case decided last week, In re Clovis Oncology, Inc. Derivative Litig., 2019 Del. Ch. LEXIS 1293, is the third Delaware decision in the last two years that has found Caremark  claims to be viable.

Whatever is happening in Delaware with respect to Caremark has not yet reached California.  There are only two reported appellate decisions that mention the case.  One, Leyte-Vidal v. Semel, 220 Cal. App. 4th 1001 (2013), applies Delaware law.  The other, Robbins v. Alibrandi, 127 Cal. App. 4th 438 (2005), cites Caremark only as to the standard of review applicable to settlements. 

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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...