The Lessons of In Re: Boeing for Healthcare and Life Sciences Companies

Nov 08, 2021

Posted by Sidley Austin

On September 7, the Delaware Chancery Court allowed a derivative action against Boeing Co. directors arising out of two crashes of the company’s 737 MAX aircraft to survive a motion to dismiss.1 This decision is the latest in a recent flurry of Delaware cases in which the courts have allowed so-called Caremark claims to proceed past the motion-to-dismiss stage.2  The common theme of these cases is that in each, the plaintiffs satisfactorily alleged that the company’s board had failed either to establish or satisfactorily oversee a compliance system focused on the company’s “mission critical” regulatory or safety-related risks. An important factor in several of these cases, including Boeing, was the board’s failure to assign such responsibility to a specific board committee. Though the Boeing case focused on the airline industry, most of the other cases in this line have arisen out of the healthcare or life sciences industry, where regulatory risk is high and patient safety a paramount concern. The Boeing case should thus resonate strongly with companies in those industries. Continue reading

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