Exploring the Outer Limits of a Corporate Officer's Fiduciary Duties - The Problem of Personal Misconduct Part 3

Wrapping Up

In a series of posts, I’ve been discussing Delaware Vice Chancellor Lori Will’s recent decision in Brola v. Lundgren,¹ which held that personal misconduct—in this instance, sexual harassment of subordinates—did not per se breach the fiduciary duty of loyalty of a corporate officer and director.

For the sake of brevity, I assume the reader is familiar with the prior posts.

Exploring the Outer Limits of a Corporate Officer's Fiduciary Duties - The Problem of Personal Misconduct Part 1

Exploring the Outer Limits of a Corporate Officer's Fiduciary Duties - The Problem of Personal Misconduct Part 1A

Exploring the Outer Limits of a Corporate Officer's Fiduciary Duties - The Problem of Personal Misconduct Part 2

Brola raises three questions worth addressing: (1) when an agent sexually harasses another employee is that a breach of the agent’s fiduciary duties to the principal?, (2) if so, whether the fiduciary of duties of corporate officers that can give rise to derivative litigation are coextensive with the duties of agents derivative suits are coextensive with the fiduciary duties of agents, and (3) is Brola consistent with prior Delaware precedent?, and (4) if so, are there policy reasons Delaware law should not recognize a derivative claim on these facts?

Note: I haven’t forgotten that I owe you three more posts on the debate over whether plaintiff lawyers’ fee awards in the Delaware Chancery Court. I’ll be getting back to that soon.