![]() ![]() Failing to do so breaches the duty of loyalty and exposes a director to liability. Specifically, “by failing to implement any system to monitor the company’s food safety compliance programs,” Blue Bell’s board was unaware of any “red or yellow flags about the growing food safety issues” at Blue Bell’s plants until it was too late.ĭirector liability under Caremark Under Caremark, a director must make a good-faith effort to oversee the company’s operations. As for the board, the Marchand complaint alleged that the board members “utterly failed to adopt or implement any reporting and compliance systems” and therefore breached their duty of loyalty under In re Caremark International Inc. In Marchand, a Blue Bell shareholder sued Blue Bell’s management and board of directors derivatively. Not surprisingly, voluminous litigation followed, including Marchand. With its operations shuttered, Blue Bell also suffered a liquidity crisis that forced it to accept a dilutive private equity investment. The outbreak led to a recall of all Blue Bell products, a shutdown of production at all of its plants, and a layoff of over a third of its workforce. Ultimately, three people died, and the CDC formally recognized at least 10 related illnesses-although many more were suspected or alleged. The Blue Bell Listeria outbreak and fallout In early 2015, Blue Bell Creameries, one of the country’s largest ice cream manufacturers, suffered a listeria outbreak. We break down the Delaware Supreme Court’s analysis and offer insights into best board practices in a post-Marchand world. Barnhill-a shareholder derivative suit that catalogs the fallout from the 2015 Blue Bell listeria outbreak-serves as a reminder of the importance of food safety and reporting controls up to even the highest levels of corporate governance. ![]() Yet the Delaware Supreme Court’s decision in Marchand v. It may come off as a truism that food safety is the “most central consumer safety and legal compliance issue” facing a food and beverage company. Authors: Angela Spivey, Andrew Phillips, and Alan Pryor ![]()
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