Wednesday, January 1, 2014

In re Caremark International Inc. Derivative Litigation case brief

In re Caremark International Inc. Derivative Litigation case brief summary
698 A.2d 959 (1996)

CASE SYNOPSIS
A motion pursuant to Del. Ch. Ct. R. 23.1 was before the court to approve as fair and reasonable a proposed settlement of a consolidated derivative action on behalf of corporation in a suit involving claims that board members breached their fiduciary duty of care to corporation.

CASE FACTS
The derivative action alleged that members of the corporation's board of directors breached their fiduciary duty of care to the corporation in connection with alleged violations by the corporation's employees of federal and state laws and regulations applicable to health care providers. The suit purported to seek recovery of losses from individual defendants who constituted the board of directors of the corporation. The parties proposed that the suit be settled.

DISCUSSION

  • The court stated that the record did not support the conclusion that defendants either lacked good faith in the exercise of their monitoring responsibilities or conscientiously permitted a known violation of law by the corporation to occur, and that the claims asserted against them had to be viewed as very weak. 
  • Despite the weakness of plaintiffs' claims, the court concluded that the proposed settlement appeared to be an adequate, reasonable, and had a beneficial outcome for all parties, and thus approved the settlement.

CONCLUSION
The settlement agreement was approved on the ground that, despite the weakness of plaintiffs' claims against defendants, individual members of the corporation's board of directors, the settlement was an adequate, reasonable, and had a beneficial outcome for all parties.


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