In re Citigroup Inc. Shareholder Derivative Litigation
Delaware Court of Chancery
964 A.2d 106 (2009)
As the housing bubble burst, Citigroup's (defendant) subprime-lending exposure ballooned to a claimed $55 billion, forcing it to extend $7.6 billion in emergency financing to its structured investment vehicles and then absorb $49 billion in their assets. Several directors sat on Citigroup's Audit and Risk Management Committee, which met frequently to discuss risk, and Citigroup's charter exculpated directors from liability for fiduciary breaches except for bad faith, intentional misconduct, illegality, or disloyalty. Shareholders (plaintiffs) nonetheless sued directors and officers (defendants), claiming they ignored red flags about the impending housing collapse and failed to oversee, manage, or disclose Citigroup's subprime exposure.
Whether corporate directors may be held personally liable for failing to manage the company's business risk if their conduct does not rise to the level of gross negligence.