Washington Law Review


Nicole M. Kim


In Malone v. Brincat, the Supreme Court of Delaware significantly broadened the fiduciary disclosure duty of corporate directors under Delaware law. Malone allows shareholders to bring either a direct or a derivative action against directors for the public release of misleading financial statements reported to the Securities Exchange Commission, regardless of whether the alleged misstatements were made in connection with a request for shareholder action. The court also held that a federal preemption statute, the Securities Litigation Uniform Standards Act of 1998, did not preempt the shareholders' action in Delaware state court. This Note argues that the Supreme Court of Delaware failed to provide precise limits to its new disclosure rule and thereby rendered unclear the elements of the cause of action by which directors may now be accountable for a breach of the disclosure duty. In addition, the court's erroneous grant of a direct cause of action creates problematic overlaps between state and federal causes of action regarding corporate disclosures, particularly in light of the new federal preemption statute. In conclusion, this Note argues that Malone ultimately contributes little to the understanding of the fiduciary disclosure duty and unnecessarily disrupts the balance between state and federal regulation of corporate disclosures.

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