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5.

6.

purposes of determining whether the claims were precluded by the

Section 102(b)(7) provision:

Here, [p]laintiffs accuse the directors not merely of ‘sustained inattention’ . . . but rather of ‘intentional ignorance of’ and ‘willful blindness to’ ‘red flags’ signaling fraudulent conduct throughout [the company]. Accordingly, regardless of how plaintiffs style their duty of care claims, we find that

they have

alleged

a

conscious

disregard

of

known

risks, which conduct, if proven, undertaken in good faith.

cannot

have

been

Id. at 1001.

In In re Abbott Laboratories Derivative Shareholders Litigation, 325 F.3d

795, the Seventh Circuit, under Illinois law, but explicitly purporting to

apply Delaware standards, held that a director exculpation provision did

not protect directors from monetary liability for fines arising out of a

consent decree relating to sustained inattention over a six-year period to

regulatory violations -- even though the board’s inattention did not involve

criminal activity or fraud -- with the result that defendants’ motion to

dismiss plaintiffs’ derivative suit for failure to make demand was denied.

At least one commentator noted that Abbott was “probably a sign of

increasing judicial activism regarding directors’ decisions.” 28 Bank and

Corporate Governance Law Reporter 1104 (August 2002).

Although, unlike in McCall, there was no criminal or fraudulent activity in

Abbott, the court’s focus remained on the conscious decisions of the

directors and whether the decision to not act could have been made in

good faith and in the best interests of the corporation.

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