Executive Summary
- What’s new: The Delaware Court of Chancery issued a new opinion describing directors’ duties of oversight and monitoring of Delaware corporations.
- Why it matters: Plaintiffs continue to pursue Caremark claims that they support with companies’ books and records obtained under Section 220. Nevertheless, the court reaffirmed that pleading a bad faith claim remains difficult, even in the aftermath of headline-grabbing events.
- What to do next: Directors should consider reviewing their monitoring and reporting functions to ensure they provide meaningful oversight.
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Court Decision
On August 13, 2026, in In re The Boeing Co. Derivative Litigation, the Delaware Court of Chancery dismissed shareholders’ claims against the directors and officers of Boeing relating to the January 5, 2024, blowout of the door plug on a Boeing plane above Portland, Oregon.
The stockholders alleged that the directors and officers had failed to take action on “dozens of alleged red flags” and thereby violated their duty of loyalty to the corporation and its shareholders. The court disagreed, holding that the board implemented robust reporting mechanisms and exercised business judgment as to how to address those risks.
Caremark Claim
The court articulated the traditional view of bad faith claims identified in Caremark. Delaware law presumes that directors perform their fiduciary duties, in good faith and with reasonable care.
Directors only act in bad faith if they engage in a “sustained” or “systematic” failure to oversee the operations of the corporation. Directors act in good faith if they “believe they are reasonably performing their duties in stockholders’ best interests.”
The court emphasized that Caremark claims are exceptional because “the red flags must inspire a need to act so clear that to ignore it implies a conscious disregard of duty.”
The court also acknowledged that directors make informed judgments to manage business risks in exercising their oversight. By contrast, directors have no discretion to disobey black-and-white legal obligations imposed by law or regulation.
Case Background
After two of its planes crashed in 2018 and 2019, Boeing undertook substantial and sustained corporate governance reforms to address future safety risks. These changes were the result of agreements with the Department of Justice and the Federal Aviation Administration, private settlements with Boeing shareholders and internal initiatives. Boeing created programs to establish a “culture of ethics and compliance,” improve quality and safety controls in manufacturing, and expand reporting to the board.
In January 2024, a Boeing 737-9 MAX flying over Portland, Oregon, suffered a door plug blowout while flying at about 15,000 feet, forcing an emergency landing and causing several injuries. An investigation by the National Transportation Safety Board revealed that the door plug blew out because it was missing bolts. These bolts had been removed to fix earlier defects in the doors and were not reinserted in the repair process. Workers also did not create a record of removing the bolts.
Plaintiffs brought Caremark claims against Boeing’s directors and officers, alleging that the January 2024 incident reflected the ineffectiveness of Boeing’s reporting and oversight mechanisms as well as the board’s inattention to warnings in reports to the board about supplier issues, workforce inexperience and ineffective quality control measures.
The Court’s Conclusions and Analysis
Justice Morgan Zurn, sitting by designation as Vice Chancellor in the Delaware Court of Chancery, dismissed the plaintiffs’ claims. The court observed that the complaint detailed “ninety-five pages of allegations reciting routine board and committee reports, presentations, and updates delivered over a three-year period.”
It held that “the breadth of Plaintiffs’ theory risks recasting the volume and depth of Boeing’s reporting from a best practice into evidence of disloyalty.” And the court reasoned that the board-level reporting identified in the complaint reflects directors complying with their duties to monitor and oversee the corporation, not their violation of those duties.
The court also reasoned that some of the “red flags” identified in the reporting had nothing to do with the door plug incident. And, contrary to the plaintiffs’ suggestion that Boeing’s production schedule was irresponsibly aggressive, the court pointed out that the board had actually agreed to slow production in the name of quality control and safety.
The court’s opinion reaffirms that pleading a bad faith claim remains difficult, even in the aftermath of significant events. Delaware courts do not assume that every headline-generating “corporate trauma” is the result of an error by the board. Rather, they examine the conduct of the board in detail.
In this case, the corporation’s records reflected a board of directors engaged in dedicated monitoring and oversight related to the essential operations of the corporation. The fact that a business risk materialized did not, in the court’s view, call into question the board’s fiduciary duties.
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