Former board member obtains dismissal of fiduciary duty claims; upheld on appeal

Client(s) Estate representative

Jones Day achieved the dismissal of breach of fiduciary duty claims asserted first against a former board member and then against that board member’s estate in the Northern District of California. The case involved claims brought by the court-appointed liquidators of a Cayman Islands-incorporated solar company in litigation alleging that certain members of the company’s board breached their fiduciary duties in connection with the company’s participation in an investment transaction in which it was defrauded, which in turn was followed by the company’s financial collapse and insolvency. The district court held that the claims were barred by an exculpation clause in the Company’s Articles of Association. Jones Day persuaded the court that literally interpreting the plain language of the exculpation clause—which carved out claims based on any “default”—would result in absurdity, and that the clause therefore should be construed to exculpate directors from all but willful default, i.e., willful conduct. On appeal, the Ninth Circuit also sided with Jones Day and affirmed the dismissal.