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Delaware Court Delivers Sharp Rebuke to Directors

Jaclyn Jaeger | November 15, 2011

Two recent Delaware Court of Chancery decisions serve as a reminder to board members to put their duty of loyalty first when making decisions on behalf of the company.

In the most recent case, New Jersey Carpenters Pension Fund v. Infogroup, the court found that “independent directors” lose that status if they allow themselves to be intimidated into a particular course of action by an executive director. The court denied the directors' motion to dismiss the lawsuit.

“Any decision that refuses to dismiss loyalty claims against outside directors deserves a lot of attention,” says Steven Haas, an associate of law firm Hunton & Williams and an adjunct professor at the University of Richmond School of Law.

“Traditionally, outside directors have had little reason to fear personal liability,” says Haas. “Generally, if a director goes about his duties...

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