S&C represented seven independent directors of LendingClub in successfully obtaining the dismissal of a derivative suit filed in Delaware in 2016 following a restatement of earnings and decline in share price. The court’s opinion dismissed plaintiffs’ claims that the board acted in bad faith by failing to have adequate internal controls in place. In her ruling, Delaware Vice-Chancellor Kathaleen McCormick called the derivative plaintiffs’ claims “exceptionally weak.”
This ruling provides additional guidance in the wake of the Delaware Supreme Court’s ruling earlier this year in Marchand v. Barnhill, in which the court identified a rare instance of plaintiffs meeting the “Caremark” standard by pleading facts that supported an inference of bad faith by the board. Here, although the vice-chancellor considered the facts under Marchand, she found no indication in the complaint that a majority of directors acted in bad faith.
The S&C team was led by litigation partner Adam Paris and associate Natalie Muscatello.