Stockholders of American International Group (AIG) brought a derivative suit to recover for damage done when it was revealed that intentional misconduct by top AIG managers caused the corporation’s financial statements to be materially misleading. Defendant Maurice Greenberg, former CEO of AIG, joined other defendant members of his core “inner circle” of executives in seeking dismissal of multiple breach of fiduciary duty claims based on the protections of the business judgment rule. The Chancery Court allowed the majority of claims presented to proceed, rejecting the defendants’ motions to dismiss because plaintiffs sufficiently pled facts supportive of non-exculpated breaches of fiduciary duty stemming from substantial financial fraud. The Court inferred scienter at this stage of the proceedings because the defendant directors were each directly responsible for business units whose conduct was critical to the misconduct alleged and the magnitude of the fraud made it difficult to miss. Plaintiffs also sufficiently pled facts supporting Defendants’ personal knowledge of the wrongdoing and awareness of internal control deficiencies.
