The derivative lawsuit itself undoubtedly will also face a serious motion to dismiss. In that regard, readers may want to consider that the Delaware Vice Chancellor Travis Laster, to whom the Fox derivative lawsuit has been assigned, recently granted the motion to dismiss in the Caremark claim lawsuit pending against the McDonald’s board. On the other hand, the Laster denied the motion to dismiss in the same proceeding with respect to a McDonald’s officer. The one thing I know is that, regardless of how all of this plays out, it will be interesting to watch.
The derivative suit presents some very thorny legal issues, as Tulane Law Professor Ann Lipton notes in an April 15, 2023, post on the Business Law Prof Blog (here). Professor Lipton’s discussion of the lawsuit centers on the fact that the complaint alleges that the defendants were aware of the falsehood of the stolen election claims but acquiesced in the continued reporting to preserve Fox News’s viewership. As Professor Lipton puts it, “the actual allegation is that the board was trying to maximize shareholder wealth – not that it neglected its duties, and not even that false political claims benefitted board members personally.”
The theoretical problem for Lipton is “where we draw the line on the hard limits of authorized corporate activity.” That is, how far can corporate executives go in giving primacy to maximizing shareholder wealth? Under existing Delaware case law, intentional lawbreaking crosses over that line. Other Caremark cases have stated that “intentional violation of positive law” also crosses the line. But where does defamation fall with respect to that line? Does conduct such as defamation, which can give rise to civil tort liability, rise to the level of “intentional violation of positive law”? Does it matter that defamation is in fact criminal in 24 U.S. states?
