Step-by-Step, Inch-by-Inch: Trouble for Wal-Mart in Delaware


Scher3Niagara Falls, slowly I turn, step-by-step, inch-by-inch. In a creative epiphany, I have found a way to link together one of my favorite Three Stooges (Curly was my hero) scenes and Wal-Mart’s current situation in Delaware relating to discovery of materials in an ongoing shareholder lawsuit.  Watch the video here.

Michael Scher, a leading commentator on FCPA issues on the FCPA Blog, has pointed out the importance of this ongoing litigation. (Here, and Here )  The FCPA Professor (another one of my favorite and reliable blog sites) has diminished the importance of the recent decision by the Delaware Chancery Supreme Court concerning the Wal-Mart litigation. (Here)

In true Solomonesque fashion, and given the talents of both sources, I have to say they are both right. The Wal-Mart litigation in Delaware is winding its way – step-by-step, through the Delaware court system. The recent decision upholding the lower court’s discovery order was important because of its implicit recognition that this litigation is very important to corporate governance principles. (Decision is Here)

At the same time, the FCPA Professor’s point about the importance of the decision itself as a game-changer is also correct – this is just one step in the long march of litigation.

Not that this litigation is comparable to the NAACP’s historic use of courts that ultimately led to school desegregation in Brown v. Board of Education and other important civil rights victories, the Wal-Mart case is on a long-haul litigation path. It will take years but the shareholders will eventually shine light on Wal-Mart’s Board and its failure to act, and possibly even complicity in a cover up of a major bribery scandal within the company.scher

Michael Scher recognized that this decision and the case is part of an important journey that will have a lasting impact. Michael identified this case, followed it and publicized the importance of it – it is a case that has the potential to expand and modify the Caremark standard for assessing corporate board performance and obligations to secure information and then act on such information when red flags are present.

Many are hoping that the Wal-Mart litigation will lead to important changes in corporate governance principles. From my vantage point, it is about time that the Delaware Court reexamine Caremark and bring the standard into conformity with the new and fast-changing realities of ethics and compliance developments.

Wal-Mart is on auto-pilot in this litigation. It is arguing all the same tired principles to try to delay what ultimately is going to occur – Wal-Mart’s Board will bear responsibility for the debacle in Mexico and its handling of the misconduct.

scher2From Wal-Mart’s perspective, it has become the sacrificial lamb here for a greater cause – increased accountability for corporate directors. Just like many who withstood the forces o inevitable change in our history, Wal-Mart’s conduct and behavior will go down in history as the catalyst to important corporate governance changes.

To Michael Scher and other bloggers who have focused on this issue, their contribution to this series of events will be just as lasting as the ultimate decision itself.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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