In the recent decision of Melbourne Municipal Firefighters’ Pension Trust Fund v. Jacobs, C.A. No. 10872-VCMR (Del. Ch. Aug. 1, 2016), Vice Chancellor Montgomery-Reeves dismissed Caremark claims brought against certain directors (“Directors”) of Qualcomm, Incorporated (“Qualcomm” or “Company”). Plaintiffs alleged that the Directors failed to take action to prevent antitrust violations from occurring, despite being aware of U.S. antitrust violations of the Company.
By way of background, it is worth noting that Caremark claims are notoriously difficult to prove. In the decision, the Court of Chancery explained that a “Caremark claim is possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment, and bad faith on the part of the corporation’s directors is a necessary condition to liability.”
In granting the motion to dismiss Plaintiffs’ claim, the Court found that the complaint did not adequately plead facts giving rise to bad faith on the part of the board. The Court made clear that simply alleging that the board made a “wrong” decision in response to red flags was insufficient to plead bad faith.