Logourl black

In re Caremark International Inc. Derivative Litigation

Delaware Court of Chancery
698 A.2d 959 (1996)


Facts

Caremark International, Inc., a health services company, was the subject of a major federal criminal investigation. The company allegedly violated laws that prohibit health care companies from paying doctors to refer Medicare or Medicaid patients to their services. Prior to 1991, Caremark had a regular practice of entering into financial arrangements with referring doctors which were not clearly prohibited but which raised legal questions. However, Caremark’s board issued guidelines that attempted to clarify what sort of arrangements were acceptable. After they were notified of the federal investigation, the board announced that it would no longer pay certain types of fees to Medicare and Medicaid doctors. The board also employed an outside auditor to review its practices for business and ethical concerns. The federal investigation resulted in indictments of junior officers in 1994. The officials took plea deals to lesser charges and Caremark paid roughly $250 million in civil and criminal penalties. A group of Caremark shareholders (plaintiffs) promptly brought derivative suits, alleging that Caremark’s directors (defendants) breached their duty of care by failing to adequately oversee the conduct of Caremark’s employees and thereby exposing the company to enormous civil and criminal penalties. The parties negotiated a settlement.. In the settlement, the board did not agree to any monetary penalties; it simply agreed to implement a number of more cautious policies moving forward, such as the creation of a compliance and ethics committee.

Rule of Law

The rule of law is the black letter law upon which the court rested its decision. To access this section, start your 7-day free trial of Quimbee for Law Students.

Issue

The issue section includes the dispositive legal issue in the case phrased as a question. To access this section, start your 7-day free trial of Quimbee for Law Students.

Holding and Reasoning (Allen, J.)

The holding and reasoning section includes:

  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

To access this section, start your 7-day free trial of Quimbee for Law Students.

Here's why 86,000 law students rely on our case briefs:

  • Reliable - written by law professors and practitioners not other law students.
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your class - works on your mobile and tablet.
  • 12,053 briefs - keyed to 161 casebooks.
  • Uniform format for every case brief.
  • Written in plain English - not in legalese and not just repeating the court's language.
  • Massive library of related video lessons - and practice questions.
  • Ability to tag case briefs in an outlining tool.
  • Top-notch customer support.
Start Your Free Trial Now