Sidley Discusses a Unique Caremark Twist Amidst Bankruptcy

Securities and Shareholder Litigation partner Alex J. Kaplan analyzes the Delaware Court of Chancery’s decision in Giuliano v. Grenfell-Gardner, which addresses Caremark oversight claims in the wake of a company’s bankruptcy. The court dismissed red flag claims against the directors but allowed allegations to proceed that the board failed to implement adequate reporting and compliance systems, while sustaining certain red flag claims against two officers based on internal communications. The decision highlights how Delaware courts continue to apply Caremark principles rigorously, even in post-bankruptcy litigation, and underscores the importance of proactive governance and clear documentation. Readers will gain practical insights into how courts evaluate oversight claims against directors and officers, as well as concrete steps companies can take to strengthen compliance and mitigate fiduciary risk.