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E-MailSharon L. Nelles, Leonid Traps, and Oliver W. Engebretson-Schooley are Partners at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Ms. Nelles, Mr. Traps, Mr. Engebretson-Schooley, David M.J. Rein, William S.L. Weinberg, and Samuel J. Winick, all at Sullivan & Cromwell LLP; and and is part of the Delaware Law Series; links to other posts in the series are available here.
On August 13, 2026, in In re The Boeing Co. Derivative Litigation, Justice Morgan T. Zurn, recently appointed to the Delaware Supreme Court and sitting by designation in the Delaware Court of Chancery, dismissed Caremark failure of oversight claims asserted against current and former directors and employees of The Boeing Company.[1] Granting defendants’ motion to dismiss in full and with prejudice, the Court emphasized the deference accorded to directors of Delaware corporations under the business judgment rule and held that liability under Caremark does not arise where directors reasonably believe they are fulfilling their oversight duties.[2] S&C represents Boeing and the director and employee defendants in the litigation.
Stockholder plaintiffs alleged that Boeing’s board ignored purported red flags concerning airplane manufacturing and safety leading up to a January 2024 door plug accident on an Alaska Airlines flight and that the board approved production targets that could not be met safely or lawfully. This allegedly rendered a pre-suit litigation demand on the board futile because the directors supposedly faced a substantial likelihood of liability.[3] Defendants moved to dismiss for failure to plead particularized facts establishing demand futility.
The opinion reinforces that oversight claims require particularized allegations of bad faith—demonstrated through intent—to survive a dismissal motion, and that courts may not second-guess good-faith oversight judgments. Directors of Delaware corporations are presumed to act loyally and in good faith, and plaintiffs must plead an “intentional dereliction of duty” or “conscious disregard” of known responsibilities.[4] Fiduciaries who make a good-faith effort to implement and attend to a reasonable board-level reporting system satisfy their baseline oversight duty, and Delaware law “does not demand omniscience.”[5] That standard was dispositive because, as the Court stressed, the complaint itself, and the voluminous books-and-records provided to plaintiffs, described detailed board and committee reporting on safety, manufacturing, and compliance risks, together with management’s responsive actions. The Court rejected the premise that extensive reporting on those issues and management’s responses to them could itself become evidence of oversight violations, stating that plaintiffs’ theory risked “recasting the volume and depth of Boeing’s reporting from a best practice into evidence of disloyalty.”[6] Plaintiffs alleged that the numerous board updates regarding manufacturing risks constituted a “red flag,” but the Court agreed with Boeing that “if everything is a red flag, then nothing is.”[7] Characterizing the alleged warnings as, at most, “yellow flags” concerning operational risks, management responses, or matters insufficiently connected to the door plug incident, the Court emphasized that reports about general operational risks, or matters under active investigation and remediation, may instead show that an oversight system is working.[8]
The opinion also reiterates the distinction between oversight of legal compliance and board judgments about business risk, making clear that absent particularized allegations that directors knowingly caused the corporation to violate positive law, or consciously disregarded clear warnings that the corporation was headed for serious corporate trauma, a later corporate trauma does not support an inference that the board acted in bad faith. Rejecting plaintiffs’ theory that Boeing’s production targets implied bad faith because the Company allegedly could not safely meet them, the Court held that the complaint’s own allegations—that Boeing adjusted or delayed production targets in response to changing conditions—supported, rather than displaced, the presumption of good faith.[9]
The decision has significance well beyond this particular case. It underscores that Delaware courts will not second-guess good-faith business judgments about risk management or transform recurring reports about operational risks and responsive mitigation measures into red flags of impending corporate trauma. It also highlights the value of board-level systems tailored to mission-critical legal and compliance risks, clear committee mandates and escalation channels, contemporaneous records of investigation and follow-up, and the use of detailed books-and-records reflecting an engaged board to defend against oversight claims. Those features can be critical at the demand-futility stage because the Court assesses what the board was told, whether the information signaled an obvious legal violation or specific corporate trauma, and how the board and management responded.
1In re Boeing Co. Deriv. Litig., Consol. C.A. No. 2024-1210-MTZ, slip op. at 1-2, 21-22, 40, 43-44 (Del. Ch. Aug. 13, 2026).(go back)
2Id. at 20-22, 43-44.(go back)
3See United Food & Commercial Workers Union & Participating Food Indus. Employers Tri-State Pension Fund v. Zuckerberg, 262 A.3d 1034, 1059 (Del. 2021).(go back)
4Boeing, C.A. No. 2024-1210-MTZ, at 23.(go back)
5Id. at 24 (quoting In re Clovis Oncology, Inc. Deriv. Litig., 2019 WL 4850188, at *13 (Del. Ch. Oct. 1, 2019)).(go back)
6Id. at 29.(go back)
7Id. at 30.(go back)
8Id. at 36.(go back)
9Id. at 36-39.(go back)
