McCall v. Scott
U.S. Court of Appeals, 6th cir. 239 F.3d 808 (2001)
---
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
U.S. Court of Appeals, 6th cir. 239 F.3d 808 (2001)
Facts
|
-McCall (Columbia/HCA healthcare corporation) is a Delaware health
care corporation that sustained significant losses due to health care
fraud, and was subject to a shareholder derivative suit against officers and
directors alleging breach of the duty of care.
-The plaintiffs alleged that Columbia’s senior management, with Board knowledge, devised schemes to improperly increase revenue and profits. Management set growth targets at 15-20% which were 3-4 times the industry average, which could not be attained without violating Medicare and Medicaid laws/regulations.
-Damages included:
consequences of federal and state investigations, stockholder and
whistle-blower lawsuits, loss of good will, falls in the value of Columbia
stock.
|
Procedural History
|
The district court dismissed the suit for failure to comply with the requirements for a shareholder derivative suit. (i.e. shareholder derivative suits require the “particularized allegations in the complaint must present a substantial likelihood of liability on part of the directors.) |
Issue
|
1. Did the Plaintiff’s claim have a substantial
likelihood of liability for the Director’s intentional or reckless breach of the
fiduciary duty of care?
2. Did Columbia’s certificate of incorporation provision of “waiver of liability,” require the directors to have acted intentionally? |
Holding
|
1. Yes, the alleged particularized facts are sufficient
to present a substantial likelihood of director liability for intentional or
reckless breach of the duty of care.
2. No, the district court erred in concluding that only intentional conduct would escape the protection of the “waiver of liability,” provision. |
Rules
|
Caremark Rule: When director liability is predicated upon
ignorance of liability creating activities “only a sustained or systematic
failure of the board to exercise oversight-such as an utter failure to
attempt to assure a reasonable information and reporting system exists- will
establish the lack of good faith that is a necessary condition to liability.”
|
Analysis
|
|
Notes
|
|
---
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
No comments:
Post a Comment