In re McDonald's Corporation Stockholder Derivative LitigationAnnotate this Case
The Court of Chancery denied Defendant's motion to dismiss this action brought by stockholders of McDonald's Corporation (the Company) claiming breach of the duty of oversight and breach of the duty of loyalty, holding that Plaintiffs stated a claim sufficient to survive the motion to dismiss.
From 2015 until his termination in 2019, Defendant served as the Company's executive vice president and global people officer. Defendant was disciplined in 2018 for sexual harassment then terminated after he committed another act of sexual harassment. Plaintiffs sued Defendant derivatively on the Company's behalf, alleging (1) as human resources officer, Defendant breached his fiduciary duties by ignoring red flags regarding sexual harassment and misconduct at the Company; and (2) Defendant's own acts of sexual harassment constituted a breach of duty in themselves. Defendant filed a motion to dismiss under Rule 12(b)(6), arguing that Delaware law does not impose on officers a duty of oversight. The Court of Chancery denied the motion to dismiss, holding (1) corporate officers owe the same fiduciary duties as corporate directors, which includes a duty of oversight; (2) Plaintiffs stated a claim against Defendant for breach of his oversight duties; and (3) Plaintiffs' claim against Defendant for his acts of sexual harassment stated a claim upon which relief could be granted.