In its June 2019 Marchand v. Barnhill opinion, the Delaware Supreme Court provided guidance for directors (and their advisors) in two key areas—compliance and independence. We use cookies on this website to enhance your user experience and to improve the quality of our site. By RANDALL CHASE June 19, 2019 GMT. On behalf of Jackson Law Firm | Jul 31, 2019 | Partnership/shareholder Disputes. Del. These cookies will be stored in your browser only with your consent. Blue Bell Creameries, Inc. on CaseMine. The Chancery Court had previously dismissed the complaint for failure to plead demand futility, that is, for failure to make a pre-litigation demand on the board of directors. To “satisfy their duty of loyalty,” the Supreme Court held, “directors must make a good faith effort to put in place a reasonable system of monitoring and reporting about the corporation’s central compliance risks.” Without more, the existence of management-level compliance programs is not enough for the directors to avoid Caremark exposure in a monoline company that makes a single food product—ice cream—and in which the company’s “mission critical” compliance issue is food safety. In this derivative action, the Court of Appeals denied a motion to stay claims brought by Blue Bell Creameries, LLP (the Partnership) against Blue Bell Creameries, Inc. (BBGP), holding that the motion was not proper because it was brought by a special litigation committee with no authority to bring it. with its . This website uses cookies to improve user experience. Barnhill et al ., No. Last year, the Delaware Supreme Court allowed a derivative lawsuit against directors of Blue Bell Creameries USA, Inc., to proceed based on allegations that the directors failed to implement and monitor – at the board level – a reasonable system to oversee whether the company’s ice cream was safe for consumers. In the Blue Bell Creameries case, Marchand v. Barnhill, the Delaware Supreme Court rejected a motion to dismiss where Blue Bell suffered a listeria outbreak that killed three consumers and multiple cases of illness. Thus, the complaint alleges specific facts that create a reasonable inference that the directors consciously failed ‘to attempt to assure a reasonable information and reporting system exist[ed]’”. Delaware Supreme Court reversed the dismissal of a stockholder derivative lawsuit against the members of the board of directors and two officers of Blue Bell Creameries USA, Inc., a leading manufacturer of ice cream products. Barnhill, the Supreme Court considered de novo an order by the Court of Chancery dismissing a claim that the members of the board of directors of Blue Bell Creameries USA, Inc., an ice cream and frozen yogurt manufacturer, should face legal liability for a listeria outbreak that spread to the company’s products, resulting in the deaths of three consumers. This category only includes cookies that ensures basic functionalities and security features of the website. The lawsuit arose out of a serious food contamination incident in 2015 that resulted in However, such claims rarely get past the motion to dismiss stage. 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That’s why some folks say, “Blue Bell … Delaware Supreme Court Reverses Dismissal of a Fiduciary “Caremark” Suit After Finding the Board Did Nothing to Assure Board-Level Oversight of Regulatory Compliance—Marchand v. Barnhill (“Blue Bell”) June 24, 2019 Delaware Supreme Court Holds Directors’ Fiduciary Duties Require Monitoring Mission-Critical Risks. We offer a complete line-up of products including more than 40 flavors of ice cream, Light and No Sugar Added selections, sherbet and frozen snacks. The Delaware Supreme Court’s Blue Bell Creameries Decision: We use cookies on this website to enhance your user experience and to improve the quality of our site. June 19, 2019), in which the Delaware Supreme Court reversed a lower court’s dismissal of a stockholder lawsuit against the members of the board of directors and two officers of Blue Bell Creameries, the court’s Chief Justice Strine wrote the court’s unanimous opinion that the justices hold the board of directors “failed to implement any system to monitor Blue Bell’s food safety … In Marchand, the Delaware Supreme Court reversed the Chancery Court’s dismissal of a stockholder derivative complaint. [2] Delaware's Supreme Court has overturned the dismissal of a shareholder lawsuit against one the country's largest ice cream makers after a 2015 listeria outbreak that killed three people. 1996), and noting the very high hurdle to claims under it, nonetheless ruled that the plaintiff had adequately alleged the requisite bad faith by the members of the Blue Bell board. Delaware court revives Blue Bell Creameries shareholder suit. Blue Bell Creameries Inc., makers of the iconic Texas Blue Bell ice cream, has agreed to a $60 million settlement with investors who had claimed their interest was dramatically devalued by a … PDF . Derivative Litigation, case number 301,2020, in the Supreme Court of the State of Delaware. Marchand v. Barnhill, No. Blue Bell Creameries, LP (“Taxpayer”) is a Delaware limited partnership with its principal place of business in Texas. Blue Bell Creameries, LP ("Taxpayer") is a Delaware limited partnership with its principal place of business in Texas. We proudly make Blue Bell Ice Cream the old-fashioned way, with the freshest and finest ingredients. Caremark. In 2015, a listeria outbreak impacted Blue Bell Creameries USA, Inc., a Delaware corporation. 533, 2018 (Del. Delaware court revives Blue Bell Creameries shareholder suit. a shareholder derivative action against the directors and officers of Blue Bell Creameries USA, Inc., a large ice cream manufacturer. Marchand v. Barnhill, No. The Delaware Supreme Court’s June 19, 2019 ruling can be found here. In 2018, he published the second edition of EGAN ON ENTITIES: Corporations, Partnerships and Limited Liability Companies in Texas, a treatise on the Texas Business Organizations Code. A significant June 2019 decision by the Delaware Supreme Court interpreting the Caremarkdoctrine that limits director liability for an oversight failure to “utter failure to attempt to assure a reasonable information and reporting system exists” prompts this update. 533, 2018 (Del. Plaintiffs then sued the Blue Bell’s board of directors in a derivative action to recoup their investment losses, alleging that the directors breached their fiduciary duty of loyalty under Delaware’s Caremark doctrine by not establishing and monitoring a system to monitor Blue Bell’s food safety performance or compliance with FDA and state  regulatory requirements. Ch. July 6, 2018) (“Whether conduct is right or wrong in the eyes of the law, actionable or not actionable, depends in large part upon the standard by which the conduct is measured.”). The Delaware Supreme Court returned to this issue in a recent case – Marchand v. Barnhill et al, HERE, a case involving Blue Bell Creameries and a listeria outbreak. The facts, while compelling, involve a serious health and safety issue but nonetheless has significant implications for … By continuing to use this website, you are demonstrating your consent to the placement and use of cookies as described in our, Click here to read the full article in the. Delaware Supreme Court reversed the dismissal of a stockholder derivative lawsuit against the members of the board of directors and two officers of Blue Bell Creameries USA, Inc., a leading manufacturer of ice cream products. The Delaware Supreme Court recently reversed the Chancery Court's dismissal of a breach of the duty of loyalty claim against the directors of Blue Bell, a monoline ice-cream company. Background. As this decision illustrates, while Delaware law imposes a high bar for pleading demand futility and fiduciary oversight claims under what is known as a Caremark theory, the standards are not insurmountable. A. Delaware Supreme Court Holds Directors’ Fiduciary Duties Require Monitoring Mission-Critical Risks. These shortcomings convinced the Delaware Supreme Court that the plaintiff had pleaded sufficient allegations that Blue Bell’s “board ha[d] undertaken no efforts to make sure it [wa]s informed of a compliance issue intrinsically critical to the company’s business operation.” Id. You also have the option to opt-out of these cookies. Delaware Law Updates. The key Delaware Supreme Court determinations, both fact-driven, were: 1. In 2015, Blue Bell Creameries USA, Inc., a Delaware subchapter S corporation headquartered in Brenham, Texas (Blue Bell), through subsidiaries made and distributed ice cream tainted with listeria bacteria. The Delaware Supreme Court’s decision in Marchand potentially alters the landscape for Caremark claims2 and serves as a cautionary tale for boards seeking to monitor key risks facing the company. 06-414-III Ellen H. Lyle, Chancellor No. That’s why some folks say, “Blue Bell … The Supreme Court also found that plaintiff had pled facts adequate to create a reasonable doubt that a demand on  the board to bring the claim itself would have been futile as a majority of the directors were not sufficiently independent that they could impartially decide whether to bring the suit. Delaware's Supreme Court has overturned the dismissal of a shareholder lawsuit against one the country's largest ice cream makers after a 2015 listeria outbreak that killed three people. Shareholder plaintiffs brought a derivative suit against the Blue Bell board and certain officers, alleging that they had breached their fiduciary duties. The Supreme Court held that the complaint adequately pleaded that he could not impartially decide whether to sue members of the Kruse family — who founded Blue Bell — because they had been instrumental in this director’s career success, which included 28 years at the company, becoming chief financial officer and being elected a director. Download this image for free in High-Definition resolution the choice "download button" below. As a consequence, eight people were sickened (three of whom died), Blue Bell had to recall its products, suspend operations and lay off over a third of its workforce. The lawsuit arose out of a serious food contamination incident in 2015 that resulted in widespread product recalls … T Not Independent Directors One of the directors examined in Marchand is Blue Bell’s retired former CFO, W. J. Rankin. Originally filed in 2017, the complaint by shareholders alleged mismanagement by executives after the 2015 listeria outbreak linked to Blue Bell ice cream led to a financial crisis at the … On appeal, the Delaware Supreme Court reversed. Thus, this recent Delaware Supreme Court decision in the aftermath of the listeria outbreak at Blue Bell Creameries is interesting in that the Delaware Supreme Court reversed a trial court’s dismissal of a Caremark claim and allowed the claim to proceed. Wenske v. Blue Bell Creameries, Inc., C.A. court revives Blue Bell Creameries suit Delaware's Supreme Court has overturned the dismissal of a shareholder lawsuit. (A0012, A0020-21). In . In Marchand, the Delaware Supreme Court reversed the Chancery Court’s dismissal of a stockholder derivative complaint. STRINE, Chief Justice: Blue Bell Creameries USA, Inc., one of the country’s largest ice cream manufacturers, suffered a listeria outbreak in early 2015, causing the company to recall all of its products, shut down production at all of its plants, and lay off over a third of its workforce. Partner, Dallas. In 2015, ice cream manufactured by Blue Bell Creameries caused an outbreak of listeria that resulted in the deaths of three people and in many others becoming ill. No. We break down the Delaware Supreme Court’s analysis and offer insights into best board practices in a post-Marchand world. That, the court concluded, was not a valid Caremark theory. To avoid bankruptcy, it entered into a highly dilutive transaction with a private equity investor. Delaware Supreme Court Reverses Dismissal of a Fiduciary “Caremark” Suit After Finding the Board Did Nothing to Assure Board-Level Oversight of Regulatory Compliance—Marchand v. Barnhill (“Blue Bell… decision in . Click here to read the full article in the Corporate Governance Advisor. Blue Bell Creameries, Inc., 2018 WL 3337531, at *1 (Del. Background We also use third-party cookies that help us analyze and understand how you use this website. — Delaware’s Supreme Court has overturned the dismissal of a shareholder lawsuit against Blue Bell Creameries after a 2015 listeria … June 19, 2019). Log In. If you do not find the exact resolution you are looking for, then go for a native or higher resolution. Supreme Court of Tennessee, at Nashville. The Delaware Supreme Court reversed the Delaware Court of Chancery’s dismissal of a Caremark claim that arose out of the Blue Bell Creameries’ (“Blue Bell”) ice cream listeria outbreak where there was an alleged pattern of disregarded food-safety w… Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. Reversing in a unanimous opinion by Chief Justice Leo Strine, the Delaware Supreme Court in Marchand v. Barnhill, No. The court ruled Tuesday that a judge erred because the plaintiff had not demanded that the board of Blue Bell Creameries take action itself […] at 33. 2. The core issue for any food manufacturing company. June 19, 2019), the Delaware Supreme Court reversed the dismissal of a stockholder derivative lawsuit against the members of the board of directors and two officers of Blue Bell Creameries USA, Inc., a leading manufacturer of ice cream products. A July 12, 2019 post on the Cooley law firm’s PubCo blog about the ruling can be found here. The Delaware Supreme Court has revived a stockholder lawsuit that seeks to hold members of Blue Bell Creameries personally liable for losses the company suffered following a deadly listeria outbreak that caused the company to recall all of its products. Blue Bell Creameries, L.P. (“Blue Bell” or the “Company”), a Delaware limited partnership in the business of manufacturing ice cream products. DOVER, Del. This website uses cookies to improve your experience while you navigate through the website. Blue Bell is managed by its general partner, Blue Bell Creameries, Inc. (“BB GP”), a wholly-owned subsidiary of Blue Bell Creameries USA, Inc. (“BB USA”). Delaware Supreme Court reversed the dismissal of a claim that the directors of Blue Bell Creameries USA, Inc. (“Blue Bell”) had breached their duty of loyalty under Caremark2 and Stone3 through a lack of oversight.4 In reversing the Chancery Court’s decision on the Caremark claim, the Supreme Court … 2017-0699-JRS (Aug. 28, 2019) (Slights, V.C.) The lawsuit arose out of a serious food contamination incident in 2015 that resulted in widespread product recalls and was linked to three deaths. IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE June 3, 2010 Session BLUE BELL CREAMERIES, LP v. RICHARD ROBERTS, COMMISSIONER, DEPARTMENT OF REVENUE, STATE OF TENNESSEE Appeal by Permission from the Court of Appeals, Middle Section Chancery Court for Davidson County No. 08.28.2019. In early 2015, Wenske v. Blue Bell Creameries, Inc. Limited partners stated a claim for breach of the partnership agreement by the entity that was responsible for … June 28, 2019 | Insights. Oversight. Barnhill, the Supreme Court considered de novo an order by the Court of Chancery dismissing a claim that the members of the board of directors of Blue Bell Creameries USA, Inc., an ice cream and frozen yogurt manufacturer, should face legal liability for a listeria outbreak that spread to the company’s products, resulting in the deaths of three consumers. June 19, 2019). It produces, sells, and distributes Blue Bell ice cream in Tennessee and elsewhere. No. Ch. In 2015, Blue Bell Creameries USA, Inc., a Delaware subchapter S corporation headquartered in Brenham, Texas (Blue Bell), through subsidiaries made and distributed ice cream tainted with listeria bacteria. 333 S.W.3d 59 (2011) BLUE BELL CREAMERIES, LP v. Richard ROBERTS, Commissioner, Department of Revenue, State of Tennessee. After Blue Bell Creameries faced a deadly listeria outbreak, recall, and temporary shutdown a few years ago, a stockholder plaintiff sued in the Delaware … The Delaware Supreme Court has revived a stockholder lawsuit that seeks to hold members of Blue Bell Creameries personally liable for losses the company suffered following a deadly listeria outbreak that caused the company to recall all of its products. June 19, 2019) held that, while Blue Bell had certain food safety programs in place and “nominally complied with FDA regulations,” “the complaint alleges that Blue Bell’s board had no committee overseeing food safety, no full board-level process to address food safety issues, and no process by which the board was expected to be advised of food safety reports and developments…. Independence.The Supreme Court held that one director, viewed by the Court of Chancery as independent, was not independent based on the allegations in the complaint. Marchand v. Barnhill, a Supreme Court of Delaware case involved board conduct (or lack of “any conduct”) related to monitoring food safety oversight at the company. The Delaware Supreme Court has revived a shareholder derivative suit that targeted the directors of Blue Bell Creameries USA Inc. in the wake of a …

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