December 15, 2023
Segway Inc., known for its personal transportation devices, brought a claim for breach of fiduciary duty against its former President. On December 14, 2023, the Delaware Chancery Court dismissed the action. According to the 12-page decision, Segway experienced declining sales of its personal transportation devices and an allegedly inordinate increase in accounts receivable. According to Segway, accounting irregularities were concealed.
In light of exculpation provisions in the corporate charter, Segway disavowed the duty of care as a basis for its claim, instead opting to rely on the duty of oversight, known as a Caremark claim. The decision labeled Segway’s position “distressing,” and explained the law on Caremark claims: “Liability can only attach in the rare case where fiduciaries knowingly disregard this oversight obligation and trauma ensues.” The court further stated, “Despite a proliferation of modern jurisprudence, bad faith remains a necessary predicate to any Caremark claim” and “Segway’s attempt to hold a corporate officer accountable for unexceptional financial struggles flouts these enduring principles.”