No Exculpation for Those Who Aid & Abet a Breach of the Duty of Care

No Exculpation for Those Who Aid & Abet a Breach of the Duty of Care

 

            A recent decision from the Delaware Court of Chancery has highlighted a curious consequence of a 102(b)(7) exculpation of director liability for breach of the duty of care, namely that there can still be aiding and abetting liability.  In re Nine Systems Corporation Shareholders Litigation, C.A. No. 3940-VCN (Del. Ch. Sept. 4, 2014).

 

            In the course of the opinion the court noted that directors may be held liable for breach of the duty of loyalty, but:

 

Directors whose unfair conduct implicated solely the duty of care may be exculpated from liability for monetary damages if the corporation’s certificate of incorporative includes an exculpatory provision pursuant to 8 De. C. § 102(b)(7).

 

Exculpation under 102(b)(7) is not the same as there was no violation of the duty of care; it is only a statement that the directors involved are not personally liable for the breach.

 

For that reason, persons who may be charged with having aided and abetted the director’s breach of duty may still be held liable for the consequences thereof.

 

That statute [102(b)(7)] does not exculpate those who aided and abetted a breach of fiduciary duty, even if the underlying breach is of solely the duty of care.

 

            And there stands the dichotomy: the director who violated the duty of care is not responsible for having done so, but the advisor who aided and abetted that failure may be held liable.