Delaware’s Court of Chancery recently refused to dismiss a fiduciary duty lawsuit against former directors and officers of a company that had allegedly allowed its regulatory compliance deficiencies to lead to its financial distress and chapter 11 bankruptcy.  The case is Giuliano v. Grenfell-Gardner (the Teligent decision).

Why does this matter?  The lawsuit claimed that the board and executives didn’t do enough to oversee the company’s compliance with key FDA rules that led to corporate trauma and eventual bankruptcy.  This type of lawsuit is called a “Caremark” claim, named after a famous Delaware case.  In plain English, it means a plaintiff can maintain a lawsuit against directors and officers by alleging that those individuals did not pay close enough attention to the company’s most important legal risks—even years after they’ve left and the company has supposedly moved on.

Although the court stressed the “egregious” factual backdrop, the real headline of Teligent is this: Directors and officers of Delaware companies can face personal lawsuits for corporate traumas, including following a bankruptcy filing by the company, if someone alleges they didn’t do enough to oversee compliance or other risks. 

The decision has immediate implications for directors, officers, insurers, private-equity sponsors, venture capital, and other investors of Delaware corporations. It also underscores why Texas and Nevada—two jurisdictions that still require directors and officers to meet strict fiduciary duties, but have never adopted a Caremark-style oversight doctrine—continue to look attractive for companies aiming to reduce litigation risk and uncertainty.

What is Significant About the Teligent Case?

1. You May Be Personally Sued for Caremark Claims by the Company and its Fiduciaries, Not Just Stockholders

• Here, the person suing wasn’t a shareholder but, instead, the company’s chapter 11 plan administrator. Because the case was “direct” (i.e. the plan administrator caused the company itself to be the plaintiff), rather than derivative, the usual demand-futility screening mechanism was unavailable as a defense for the company’s directors and officers. In other words, some of the usual legal hurdles to suing directors and officers didn’t apply. 
• As is typical, the chapter 11 plan administrator—being in control of the company’s chapter 11 estate—had access to all of the company’s internal books, records, and emails, making it much easier to allege sufficient detailed facts to plead a facial claim against the directors and officers. The administrator’s allegations of an absence of detailed board minutes documenting regular board-level review of material risks in advance of the corporate trauma may be sufficient to plead a Caremark claim, as it was here, permitting the case to proceed past the motion to dismiss stage and to full discovery.

2. You May Be Personally Sued for Caremark Claims When the Company Is in Bankruptcy, Or Even After Bankruptcy

• The lawsuit moved forward almost four years after the events at issue occurred and well after the chapter 11 plan’s confirmation, a stark reminder that claims against directors and officers can be preserved in a company’s bankruptcy, are not discharged, and are not always released.

3. It May Now Be Easier for a Lawsuit to Survive Dismissal

• Delaware’s standard for a Caremark claim to survive a motion to dismiss is whether, based on the plaintiff’s allegations, it is “reasonably conceivable” that the board failed to set up a system to monitor a risk or consciously ignored red flags.  Here, the court found it was “reasonably conceivable” there was no board-level monitoring system for FDA compliance—even though the company had consultants, reports, and an audit committee.  There simply wasn’t enough documentation of their efforts and discussions (though we note that the court characterized the facts alleged in the complaint as “egregious”).
• • In other words, even if you think you’re doing enough, a court might allow a plaintiff to pursue claims otherwise after the fact—especially if things go wrong. And now, the company itself (or whomever runs it after your departure, whether new management, creditors, or a fiduciary acting to maximize creditors’ recoveries) can second-guess your judgment.
• Early dismissal matters. Consider this: the Caremark case against directors and officers of Blue Bell Creameries USA Inc. for its early 2015 listeria outbreak (which the court discusses in the Teligent decision) is still in litigation as of the date of this alert, more than a decade later.

4. Caremark Claims Are Not Just a Director Risk—Executives Are at Risk, Too

• The court allowed the same kind of claims to proceed against the CEO and Chief Scientific Officer, not just the board. That means executives can also be personally  targeted and required defend against Caremark claims following corporate traumas.

What Does This Mean for Delaware Companies, Directors, and Officers?

• Bankruptcy Is Powerful but Has Limitations. Although a chapter 11 filing can provide a wealth of tools to maximize a company’s value and implement transactions that may not otherwise be achievable, the benefits of a company’s chapter 11 filing typically do not fully extend to its directors and officers.  Claims belonging to the company are often analyzed and addressed in the context of a company’s chapter 11 restructuring.  And, importantly, in some contexts, an indemnity by an insolvent company may become practically unavailable to the company’s directors or officers.
• Harder to Attract Talent.  As the Caremark doctrine continues to expand, all else being equal, the increased personal risk to directors and officers of Delaware companies may lead talent to prefer companies organized in jurisdictions without heightened personal risk.
• More Paperwork, Less Focus. Directors may feel compelled to over-document every compliance discussion just to protect themselves, which can drive up costs, slow action and decision-making, distract from running the business, and produce documentary fodder to fuel other forms of speculative litigation. 
• Insurance May Get More Expensive for Delaware Companies. Carriers are already scrutinizing Delaware risk portfolios. Higher retentions, narrower Side B/C coverage, and steeper premiums are increasingly likely—especially for energy, life-sciences, fintech, and other highly regulated Delaware companies.

Should You “DEXIT” and Reincorporate Your Company in Texas or Nevada?

Moving a corporate charter is neither trivial nor one-size-fits-all. Delaware’s flexibility, case law, and Court of Chancery remain valuable. Delaware is still the overwhelming default jurisdiction for corporations, LLCs, and partnerships, whether public or private.

But for many companies—especially those in industries faced with heightened regulation or other risks—the benefits of moving to Texas or Nevada are growing, including:

• Greater Certainty. Decreased reliance on judicial interpretation promotes stability and certainty for corporate decision-making, meaning boards and executives can focus on running their business instead of covering themselves with paperwork to avoid second guessing by plaintiffs. Neither Texas nor Nevada has adopted the Caremark doctrine, and corporations formed in either state enjoy robust statutory business judgment rules. 
• Save Money. The potential for lower D&O insurance premiums may quickly offset one-time reincorporation expenses. Companies without significant Delaware operations may also eliminate Delaware franchise tax costs. And Texas and Nevada continue to offer potential financial incentives for companies relocating their operations.
• Equivalent Capital Access. There is no current valuation discount for companies incorporated in Texas or Nevada, and many investors are encouraging the move.¹

What Should You Do Next?

The Teligent decision is a reminder that Caremark liability in Delaware is alive and well, including in the bankruptcy context. After a corporate trauma, Delaware directors and officers may face continued exposure to the costs and distractions of Caremark litigation. Teligent lights a new path for Caremark plaintiffs: even after confirming a chapter 11 plan, a fiduciary of the company’s bankruptcy estate can use the company’s internal documents and communications to try to survive a motion to dismiss and proceed to costly and time-consuming discovery in an effort to extract value from directors, officers, their indemnifiers, and their insurers. 

Companies, directors, officers, and investors that prefer a different risk profile—or carriers looking to differentiate premium structures—should consider whether Texas or Nevada might offer a compelling alternative.

If you would like to explore:

• A comparative analysis of Delaware, Texas, and Nevada business organization statutes;
• A step-by-step roadmap for reincorporation; or
• The implications of a jurisdictional move,

please contact the authors of this alert. A decision to reincorporate is significant and nuanced. Our team stands ready to guide you through the decision-making process and, if appropriate, execute a seamless transition to a jurisdiction that aligns with your risk tolerance and business goals.

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¹See, e.g., Jai Ramaswamy, Andy Hill & Kevin McKinley, We’re Leaving Delaware, and We Think You Should Consider Leaving Too, Andreessen Horowitz (July 9, 2025), https://a16z.com/were-leaving-delaware-and-we-think-you-should-consider-leaving-too/ (“We considered both Nevada and Texas, which have similar business-friendly statutes and have not adopted Delaware’s Caremark doctrine. We ultimately chose Nevada, but Texas is also a strong option for many companies.”).

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