DOVER, Del. (Legal Newsline) - Delaware’s highest court revived a derivative lawsuit against the officers and directors of AmerisourceBergen, saying there was plenty of evidence to support a claim they either fostered “a culture of non-compliance” or ignored “a tidal wave of red flags” suggesting it was distributing millions of suspicious orders for opioid pills.
The decision by the Delaware Supreme Court allows shareholders to sue in the name of the corporation itself over the failure of management to address mounting concerns AmerisourceBergen was contributing to the opioid crisis. Under Delaware’s so-called Caremark doctrine, officers and directors can be liable for violating their fiduciary duties if they allow companies to engage in illegal behavior or fail to require and monitor systems to detect it.
A Delaware chancery court judge previously dismissed the suit, citing a ruling by a federal judge in West Virginia that dismissed similar claims and “knocked the stuffing” out of the plaintiffs’ case. A week later, the U.S. Justice Department filed a civil complaint against AmerisourceBergen and plaintiff lawyers sought to reverse the dismissal based on “new evidence.” But the judge refused, even though his original decision found the plaintiff claims otherwise plausible.
The Delaware Supreme Court reversed that ruling, saying it was a mistake to use facts from a different case, with different plaintiffs, to support a judgment in Delaware. It said there was more than enough evidence to support claims the AmerisourceBergen board failed to investigate unreasonably low numbers of suspicious orders the company reported to the Drug Enforcement Agency, just 176 out of 24 million orders in 2017.
“In the midst of the opioid epidemic and in the face of increasing public scrutiny, the board did not take action to address the microscopic number of reported suspicious orders,” the court said.
Under the court’s Caremark doctrine, directors can be liable if they consciously fail to monitor internal compliance systems, “thus disabling themselves from being informed of risks,” the court said.
“We are not moved by the defendants’ handwringing claim” that allowing such a case to proceed will chill companies’ ability to defend lawsuits and attract directors, the court concluded. “We see no reason why companies with meritorious defenses to lawsuits will not raise them with vigor and directors who heed their fiduciary duties will not continue to serve on the boards of Delaware corporations.”