Marchand v. Barnhill's Impact on the Duty of Oversight: New Factors to Assess Directors' Liability for Breaching the Duty of Oversight

Abstract

In 2019, in Marchand v. Barnhill, the Delaware Supreme Court reversed the dismissal of a complaint alleging that the defendants, Blue Bell directors, breached their duty of oversight. In doing so, the court invoked two new factors—whether the corporation is monoline and whether it is heavily regulated—to consider when evaluating claims against directors for an oversight failure. These factors inform whether a court can identify an essential compliance concern, such that a court can infer the directors violated their obligation to act in good faith by consciously disregarding a known duty. This inference allows a court to find that a plaintiff alleged sufficient facts to state a claim for a breach of the duty of oversight. This Note examines the upper and lower boundaries of the monoline as well as heavily regulated factors established in Marchand via a derivative complaint against The Boeing Company’s directors. Ultimately, this Note isolates factors most important for a plaintiff to consider when evaluating the strength of their breach of the duty of oversight claim, including (1) whether the company makes only one product or has one product that is particularly significant to the company’s success and (2) whether one, primary, external regulator governs the company’s business.