In a recent feature published by the Washington Legal Foundation, UCLA Professor Stephen Bainbridge casts a jaundiced eye toward Vice Chancellor J. Travis Laster's recent ruling in In re McDonald's Corp. Stockholder Deriv. Litig., C.A. No. 2021-0324-JTL.  Readers may recall that I have questioned why this case is being tried in Delaware.  Professor Bainbridge looks at the merits:

Despite the length of VC Laster’s Caremark analysis, there is a potentially even more explosive aspect of the opinion. In his conclusion, VC Laster addressed the separate question of whether Fairhurst’s [the officer] own personal misconduct constituted a breach of his fiduciary duties. Laster concluded that:

When Fairhurst engaged in sexual harassment, he was not acting subjectively to further the best interests of the Company. He therefore was acting in bad faith. The allegations against Fairhurst accordingly support a claim for breach of the duty of loyalty.

VC Laster thereby transformed sexual harassment—and who knows how much more of employment and civil rights law—into cognizable corporate law claims.

Professor Bainbridge acknowledges that Vice Chancellor Laster anticipated this complaint by pointing out that such claims would be derivative and subject to the "protections" of Delaware Rule 23.1.  Professor Bainbridge's rejoinder:

But so what? Is Laster saying that if Fairhurst had moved to dismiss for failure to make a demand on the board per Rule 23.1 that Fairhurst would have won?

If Professor Bainbridge is correct, corporate management may soon be looking for the fastest route out of Delaware.