Opinion ID: 145387
Heading Depth: 3
Heading Rank: 2

Heading: The Duty of Care

Text: “The fiduciary duty of care requires that directors of a Delaware corporation use that amount of care which ordinarily careful and prudent men would use in similar circumstances, and consider all material information reasonably available in making business decisions.” In re Walt Disney Co., 907 A.2d 693, 749 (Del. Ch. 2005) (internal quotation and citation omitted). A deficiency in the process employed by the directors is only actionable as a breach 26 of the duty of care if the director’s actions are “grossly negligent.” Id. Gross negligence includes a director’s failure to inform him or herself of available material facts when making a decision on behalf of the corporation. See In re Walt Disney Co., 906 A.2d 27, 64-64 (Del. Super. Ct. 2006); Smith v. Van Gorkhom, 488 A.2d 858, 874 (Del. 1985) (holding that board members who voted to approve a merger without reviewing any documentation regarding the adequacy of the proposed purchase price violated the duty of care), overruled on other grounds by Gantler v. Stephens, 965 A.2d 695, 713 n.45 (Del. 2009); Cede & Co. v. Technicolor, 634 A.2d 345, 367-68 (Del. 1993) (holding that the duty of care requires directors to act on an informed basis). Simply put, the standard is procedural, rather than substantive. In fact, Delaware law allows a company’s board to even make an “irrational” decision, so long as the decision-making process employed by the board “was either rational or employed in a good faith effort to advance corporate interests.” In re Caremark Int’l Derivative Litig., 698 A.2d 959, 967 (Del. Ch. 1996) (emphasis in original). Thus, directors who make a decision after employing a rational decision-making process and considering the pertinent information will not be liable for a breach of the fiduciary duty of care. In re Caremark, 698 A.3d at 967; Cede & Co., 634 A.2d at 367-68. Moreover, 27 even upon insolvency, the duty of care to the corporation remains the same. Gheewalla, 930 A.2d at 101. The Amended Complaint fails to allege that the Individual Defendants did not employ a rational decision-making process or did not consider material information when making the decision to obtain additional loans and continue operating Far & Wide rather than proceed into bankruptcy. The Amended Complaint alleges only that the Individual Defendants “refused or failed to follow [the] advice” of the two independent consultants hired by Far & Wide’s management. To state a claim for breach of the duty of care under Delaware law, a plaintiff must allege more than that the directors and officers of a corporation received information from outside consultants, but decided not follow this advice. Cede & Co., 634 A.2d at 367-68. Here, the Individual Defendants discharged their obligations under the duty of care by hiring consultants and by considering the consultants’ advice, even if they did not follow the advice. Id. Accordingly, the district court properly dismissed Counts VI and XI of the Amended Complaint. E. The Amended Complaint Failed To State A Claim for Aiding and Abetting a Breach of Fiduciary Duty. 28 In order to state a claim for aiding and abetting a breach of fiduciary duty under Delaware law, a plaintiff must allege: (1) the existence of a fiduciary relationship, (2) that the fiduciary breached its duty, (3) that a defendant, who is not a fiduciary, knowingly participated in the breach, and (4) that damages to the plaintiff resulted from the concerted action of the fiduciary and the non-fiduciary. Gotham Partners L.P. v. Hallwood Realty Partners, et al., 817 A.2d 160, 172 (Del. 2002) (quoting Wallace v. Wood, 752 A.2d 1175, 1180 (Del. Ch. 1999)). The Amended Complaint alleges that the Individual Defendants and the Wellspring Defendants aided and abetted each others’ breaches of fiduciary duties. The underlying breaches of fiduciary duty that form the basis for the Debtors’ claims for aiding and abetting are the same breaches of fiduciary duty that the Court finds fail as a matter of law. See supra Part IV.D.1-2. Because the underlying breach of fiduciary duty claims fail, the claims that Wellspring and the Individual Defendants aided and abetted those breaches must follow suit. See Gotham Partners, 817 A.2d at 172 (a claim for aiding and abetting a breach of fiduciary duty requires that the fiduciary breach its duty). The district court correctly dismissed the aiding and abetting claims, and this Court affirms the district court’s dismissal of Counts IV, VII, IX, and XII.