Espinoza v. Dimon: Helping the Hapless Second Circuit

The Second Circuit certified the following question to the Delaware Supreme Court: 

  • If a shareholder demands that a board of directors investigate both an underlying wrongdoing and subsequent misstatements by corporate officers about that wrongdoing, what factors should a court consider in deciding whether the board acted in a grossly negligent fashion by focusing its investigation solely on the underlying wrongdoing? 

The Delaware Supreme Court was more than happy to help the hapless Second Circuit deal with such a basic question. 

  • We appreciate our colleagues‘ concern about applying principles of Delaware law with fidelity and their willingness to ask for our input.6 In fact, we were honored to answer two prior requests from our colleagues on the Second Circuit within the past year. In that same spirit, we accept our colleagues‘ current request for certification and we will try to be as helpful as we can, consistent with the careful and precise manner in which the tool of answering certified questions of law should be employed.

Ultimately, the Court rejected the certified question. Id. ("in providing an answer, we feel obliged to decline to answer the question as formulated or to try to reformulate the question more narrowly.").  Nonetheless, the Court was kind enough to provide four or so additional pages providing some "thoughts" on the decision "and an explanation of why we do not go further."  Perhaps with this helpful guidance, the Second Circuit will be able to get the question right the next time around. 

J Robert Brown Jr.