Deborah DeMott is David F. Cavers Professor of Law at Duke Law School. This post is based on a forthcoming article by Professor DeMott. This post is part of the Delaware law series; links to other posts in the series are available here.
To instigate a fiduciary’s breach of duty or otherwise participate in that breach constitutes a tort when the action is done purposefully or knowingly and causes injury to the beneficiary of the fiduciary duty. This proposition of accessory liability is well settled in tort doctrine but not prominent in prior scholarship in the United States. To some observers, it was jarring when this component of tort doctrine was applied in recent years to investment bankers who serve as advisors to target boards in M&A transactions. In particular, the tort became newly prominent when the Delaware Supreme Court underlined its potential impact in late 2015 by affirming a $76 million judgment against an M&A advisor in RBC Capital Markets v. Jervis, an action brought by the target’s former shareholders. In my article I explicate the elements of the tort and situate it within the broader landscape of contemporary tort law. From this perspective, the outcome in RBC Capital Markets stems from the application of settled law, not doctrinal innovation. Nor is it novel that the culpability of a target’s directors, premised on gross negligence, is not identical to the advisor’s stance as an intentional tortfeasor. Likewise, it is not novel that an accessory’s liability does not depend on whether the primary wrongdoer will be liable for money damages, as corporate directors typically are not when their conduct amounts to no more than gross negligence.
