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DE Courts Uphold Strict Limitations on Liability for Oversight Claims

In 2017, two cases illustrated that Delaware courts continue to impose exacting pleading burdens on Caremark claims, especially when plaintiffs say that they are excused from making a demand on the board before suing derivatively.

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It is an all-too-familiar accusation for many directors: If only you had done something more, the corporation could have avoided an injury or loss. Since the mid-1990s, Delaware courts have repeatedly recognized that attempting to pin personal liability on directors for their alleged inaction is “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” See In re Caremark International Derivative Litigation, 698 A.2d 959, 967 (Del. Ch. 1996).

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