the Government of Delaware

“ In any business decision that turns out poorly there will likely be signs that one could point to and argue are evidence that the decision was wrong. Indeed, it is tempting in a case with such staggering losses for one to think that they could have made the "right" decision if they had been in the directors' position. This temptation, however, is one of the reasons for the presumption against an objective review of business decisions by judges, a presumption that is no less applicable when the losses to the Company are large. ”

“ Caremark itself encouraged directors to act with reasonable diligence, but plainly held that director liability for failure to monitor required a finding that the directors acted with the state of mind traditionally used to define the mindset of a disloyal director--bad faith--because their indolence was so persistent that it could not be ascribed to anything other than a knowing decision not to even try to make sure the corporation's officers had developed and were implementing a prudent approach to ensuring law compliance. ”

“ What should be understood, but may not widely be understood by courts or commentators who are not often required to face such questions, is that compliance with a director's duty of care can never appropriately be judicially determined by reference to the content of the board decision that leads to a corporate loss, apart from consideration of the good faith or rationality of the process employed. ”

“ Here, plaintiffs have not alleged that the directors were interested in the transaction and instead root their theory of director personal liability in bad faith.
The Delaware Supreme Court has stated that bad faith conduct may be found where a director "intentionally acts with a purpose other than that of advancing the best interests of the corporation, . . . acts with the intent to violate applicable positive law, or . . . intentionally fails to act in the face of a known duty to act, demonstrating a conscious disregard for his duties." ”

“ IV. CONCLUSION Citigroup has suffered staggering losses, in part, as a result of the recent problems in the United States economy, particularly those in the subprime mortgage market. It is understandable that investors, and others, want to find someone to hold responsible for these losses, and it is often difficult to distinguish between a desire to blame someone and a desire to force those responsible to account for their wrongdoing. ”

“ Although these claims are framed by plaintiffs as Caremark claims, plaintiffs' theory essentially amounts to a claim that the director defendants should be personally liable to the Company because they failed to fully recognize the risk posed by subprime securities. When one looks past the lofty allegations of duties of oversight and red flags used to dress up these claims, what is left appears to be plaintiff shareholders attempting to hold the director defendants personally liable for making (or allowing to be made) business decisions that, in hindsight, turned out poorly for the Company. ”

“ Directors should, indeed must under Delaware law, ensure that reasonable information and reporting systems exist that would put them on notice of fraudulent or criminal conduct within the company. Such oversight programs allow directors to intervene and prevent frauds or other wrongdoing that could expose the company to risk of loss as a result of such conduct. While it may be tempting to say that directors have the same duties to monitor and oversee business risk, imposing Caremark-type duties on directors to monitor business risk is fundamentally different. ”

“ Directors of a committee charged with oversight of a company's risk have additional responsibilities to monitor such risk; however, such responsibility does not change the standard of director liability under Caremark and its progeny, which requires a showing of bad faith. Evaluating director action under the bad faith standard is a contextual and fact specific inquiry and what a director knows and understands is, of course, relevant to such an inquiry. ”

“ Businesses--and particularly financial institutions--make returns by taking on risk; a company or investor that is willing to take on more risk can earn a higher return. Thus, in almost any business transaction, the parties go into the deal with the knowledge that, even if they have evaluated the situation correctly, the return could be different than they expected. ”

“ Plaintiffs seem to completely ignore the standard governing corporate waste under Delaware law--a standard that requires that plaintiffs plead facts overcoming the presumption of good faith by showing "an exchange that is so one sided that no business person of ordinary, sound judgment could conclude that the corporation has received adequate consideration." [103] Plaintiffs attempted to meet this standard by alleging that the director defendants approved a repurchase of Citigroup stock at the market price. ”

“ When there is no request for shareholder action, a shareholder plaintiff can demonstrate a breach of fiduciary duty by showing that the directors "deliberately misinform [ed] shareholders about the business of the corporation, either directly or by a public statement." [84] Citigroup 's certificate of incorporation exculpates the director defendants from personal liability for violations of fiduciary duty except for, among other things, breaches of the duty of loyalty and acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law. ”

“ The directors of a Delaware corporation have the authority and broad discretion to make executive compensation decisions. The standard under which the Court evaluates a waste claim is whether there was "an exchange of corporate assets for consideration so disproportionately small as to lie beyond the range at which any reasonable person might be willing to trade." ”

“ According to plaintiffs, the director defendants face a substantial threat of personal liability because their conscious disregard of their duties and lack of proper supervision and oversight caused the Company to be overexposed to risk in the subprime mortgage market.
Demand is not excused solely because the directors would be deciding to sue themselves. ”

“ In the former class of cases, director action is analyzed under the business judgment rule, which prevents judicial second guessing of the decision if the directors employed a rational process and considered all material information reasonably available--a standard measured by concepts of gross negligence. ”

“ A party is not entitled to a stay as a matter of right; rather, the granting of a motion to stay rests with the sound discretion of the Court. This Court is rightfully hesitant to grant motions to stay based on forum non conveniens, and the doctrine is not a vehicle by which the Court should determine which forum would be most convenient for the parties. ”

“ Plaintiffs also allege that Citigroup was exposed to the subprime mortgage market through its use of SIVs. Banks can create SIVs by borrowing cash (by selling commercial paper) and using the proceeds to purchase loans; in other words, the SIVs sell short term debt and buy longer-term, higher yielding assets. According to plaintiffs, Citigroup 's SIVs invested in riskier assets, such as home equity loans, rather than the low-risk assets traditionally used by SIVs. ”

“ Plaintiffs fail in their attempt to impose some sort of higher standard of liability on the director defendants that were on Citigroup 's board at the time of its involvement with Enron. They have utterly failed to show how Citigroup 's involvement with the financial scandals at Enron has any relevance to Citigroup 's investments in subprime securities. Plaintiffs cite McCall v. Scott [68] to support the proposition that directors who were on the board during previous misconduct should be sensitive to similar circumstances which had previously prompted investigations. ”

“ Huang, 823 A.2d 492, 506 (Del. Ch. 2003) (" [T] he [Caremark] opinion articulates a standard for liability for failures of oversight that requires a showing that the directors breached their duty of loyalty by failing to attend to their duties in good faith. Put otherwise, the decision premises liability on a showing that the directors were conscious of the fact that they were not doing their jobs.") ”

“ Plaintiffs' Caremark Allegations Plaintiffs' theory of how the director defendants will face personal liability is a bit of a twist on the traditional Caremark claim. In a typical Caremark case, plaintiffs argue that the defendants are liable for damages that arise from a failure to properly monitor or oversee employee misconduct or violations of law. ”

“ Demand futility is analyzed under Aronson when plaintiffs have challenged board action or approval of a transaction. With regard to the claims based on the approval of the Letter Agreement and the repurchase of Citigroup stock, plaintiffs do not argue that a majority of the director defendants were not disinterested and independent. ”

“ Scrushy, 820 A.2d 1148, 1159 & n.22 (Del. Ch. 2003) ("Where one person seeking to act in a representative capacity chooses to litigate in Delaware and another in a different forum, there is little reason to accord decisive weight to the priority of filing, at least where no prejudicial delay has occurred. Other factors bearing on the convenience of the parties and the interests of Delaware in resolving the dispute will be more important.") ”

“ While the authority of one Court to grant complete relief may be a relevant consideration under the pendency of similar actions prong of the forum non conveniens analysis, it is not outcome determinative. In this case, it does not even approach the required showing of hardship defendants would have to make in order to warrant a stay of the proceedings, and I need not further scrutinize the arguments on this prong of the test. ”

“ Rubin is beholden to defendants Belda, Derr, and Parsons due to the extraordinary monetary compensation and other benefits they approved for him while he was a director and despite his lack of operational responsibility ”

“ Ch. Mar. 22, 1994) ) .↑ Bear Stearns, 2008 Del. Ch. LEXIS 46, 2008 WL 959992, at *5 (treating actions filed three days apart as contemporaneous) . The parties agree that the New York Action was first commenced on November 6, 2007. Plaintiffs assert that this action was first commenced on November 7, 2007--meaning it was filed the day after the New York Action. The Court's records, however, indicate that this action was first commenced on November 9, 2007. ”