recent developments in delaware corporate law - Greenberg Traurig ...

200 Delaware Law Review Volume 7:2
life. The court rejected this claim, notwithstanding the fact that MSO “closely identified”
with Stewart. First, the court concluded that the MSO board did not have any reason to
monitor Stewart’s activities prior to the time the allegations regarding her divestment of
ImClone stock (of which the plaintiffs complain) became public. Second, the wrongdoing
allegedly conducted by Stewart was conducted by her personally, not by MSO. Finally,
the court noted that plaintiffs were unable to cite to “any case to support this new ‘duty’
to monitor personal affairs.” 111
The plaintiffs in Martha Stewart also alleged a Caremark claim in connection with
MSO’s payment of split-dollar insurance premiums for Stewart. The Court of Chancery
restated the elements necessary to prove a Caremark claim, including that “(1) the directors
knew or should have known that a violation of law was occurring and, (2) ‘the directors took
no steps in a good faith effort to prevent or remedy that situation.’” 112 Because the plaintiffs
did not allege that the payment of split-dollar insurance premiums by MSO were in fact
illegal or that the board of directors failed to take action once Sarbanes-Oxley arguably
made such premiums illegal, the Court of Chancery rejected this Caremark claim. 113
In Rattner v. Bidzos, 114 the plaintiff alleged that demand was excused with respect
to her Caremark claims against the members of the board of directors of VeriSign, Inc.
(“VeriSign”) on the grounds that all of the members of the board were “potentially liable
for failure to exercise proper supervision over VeriSign’s financial recording and reporting
systems.” 115 In analyzing the plaintiff’s Caremark claims in this context, the court noted
that “a claim for failure to exercise proper oversight is one of, if not the, most difficult
theories upon which to prevail.” 116 The plaintiff in Martha Stewart did not challenge the
Court of Chancery’s dismissal of her Caremark claims on appeal. 117
111. Martha Stewart, 833 A.2d at 971-72.
112. Id. at 976 (citing Caremark, 698 A.2d at 971).
113. Id. at 975.
114. C.A. No. 19700, 2003 WL 22284323 (Del. Ch. Sept. 30, 2003). The plaintiff’s
insider trading claims are not discussed herein.
115. Id. at *12.
116. Id.
117 . The Court of Chancery’s dismissal of the Caremark claims (Counts III and IV) under
Continued on page 201