Blue Bell Meltdown Serves Up a Double Dip of Danger for Directors

• Published in: Insights; the Corporate & Securities Law Advisor 2024-01, Vol.38 (1), p.15-21
• Main Author: Deeken, James A
• Format: Article
• Language: English
• Subjects: Bad faith; Decision making; Directors; Duty of care; Fiduciary responsibility; Liability; Listeria; State laws; Stockholders
• ISSN: 0894-3524

Basic Director Delaware Law Duties4 The following is a brief overview of some of the elements of Delaware fiduciary law as applied to members of a Delaware corporation's board of directors to help frame the issues presented by the Blue Bell scenario. Under the business judgment rule, a court generally will give deference to the board and will not substitute its own judgment for that of the board, even if a decision turned out to be unwise, so long as the directors acted on an informed basis, in good faith, and in the rational belief that the decision made was in the best interests of the corporation and its stockholders.10 Delaware law presumes that "in making a business the directors of a corporation acted on an informed basis, in good faith, and in the honest belief that the action was in the best interests of the company. A failure to act in good faith may be shown, for instance, where the fiduciary intentionally acts with a purpose other than that of advancing the best interests of the corporation, where the fiduciary acts with the intent to violate applicable positive law, or where the fiduciary intentionally fails to act in the face of a known duty to act, demonstrating a conscious disregard for his duties. Blue Bell's First Dip In Marchand, the Delaware Supreme Court noted the Court of Chancery originally had dismissed plaintiff's claims on the grounds, that among other things, that it viewed the plaintiff complaint as having alleged not the absence of monitoring and reporting controls but instead