Litigating D&O Claims in the Modern Age: What’s the Difference between a Breach of Fiduciary Duty and Doing Your Job Really, Really Badly?
The successful pursuit of claims against directors and officers of bankrupt companies is a complicated and multi-faceted challenge requiring a hybrid skill set possessed only by practicing trial attorneys with a solid understanding of bankruptcy and insurance law. As these experienced counsel can attest, even when dealing with a prima facie meritorious claim, thorough due diligence—both legal and factual—can make the difference between a favorable outcome and a satisfied client or, what legal scholars sometimes refer to technically as, a mess.
Before one even addresses the bankruptcy-specific issues, one must of course confront the general authorities around the duty of due care (which requires management to make decisions with reasonable diligence and prudence) and the duty of loyalty (i.e., acting in the best interests of the organization rather than oneself). A careful review of exculpation clauses and the legal authorities that may limit the scope of these duties is also essential. One must understand the entire universe of potential defendants in a D&O claim including sponsors, lenders, joint venture partners, and others whose nominees occupied board positions during the time periods preceding the bankruptcy.
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“Litigating D&O Claims in the Modern Age: What’s the Difference between a Breach of Fiduciary Duty and Doing Your Job Really, Really Badly?” by Brett M. Amron, Donald Kirk, Judge Laurie Selber Silverstein, and Stanley Tarr was published in ABA Business Law Section’s Business Law Today in October 2022.
This article is based on a CLE program that took place during the ABA Business Law Section’s 2022 Hybrid Spring Meeting. To learn more about this topic, view the program as on-demand CLE, free for ABA members.