In McPadden v. Sidhu, (Del. Ch., Aug. 29, 2008), read opinion here, the Delaware Chancery Court found that demand was excused under Chancery Court Rule 23.1 but barred claims–by granting a motion to dismiss under Rule 12(b)(6), against the directors despite their apparent apparent violation of their duty of due care, due to the exculpation provision in their charter pursuant to DGCL Section 102(b)(7).
This decision comes on the same day as the Chancery Court denied an interlocutory appeal in the Ryan v. Lyondell case in which summary judgment was denied due to factual issues raised based on the limited record in the very different procedural posture of that case, despite the arguments about exculpation under Section 102(b)(7). See my blurb about the most recent decision in that case (also decided on Aug. 29) here.
Among the many more important parts of this opinion are two points that especially interest me:
- DGCL Section 102(b)(7) protection is not for the benefit of officers–as compared to directors (n. 41); and
- The Court re-affirmed that the fiduciary duties of directors also apply to officers (n.40).
Of course, a discussion of the detailed facts in this 30-page decision are necessary for an analysis of it, but today I merely highlight a few of the key issues addressed so that you can download the whole opinion at the above link for your reading pleasure.