Delaware Judge Faces New Era of Politically Charged ESG Cases

Lori Will is one of the newest members of Delaware’s Court of Chancery, joining the venue known for adjudicating high-profile business spats just two years ago. But she’s already pioneering how judges navigate a growing cache of politically-charged corporate disputes tied to environmental, social and governance, or ESG, issues.

The first-generation college graduate and mother of two children (and two dogs) made headlines in June when she ruled that Walt Disney Co. had every right to listen to employees’ concerns in its response to a Florida law limiting classroom discussion of sexual orientation. Will decided shareholders weren’t entitled to internal company documents shedding light on the entertainment company’s decision to oppose the so-called “Don’t Say Gay” law, which led to a public feud with presidential hopeful and Florida Gov. Ron DeSantis (R).

“Perhaps the board could have avoided political blowback by remaining silent,” Will said in her ruling. But “doing so could have damaged the company’s corporate culture and employee morale.”

The Disney case is a good example of how “supercharged” politics is swirling around boardrooms, Will said. She said she expects to see more suits like this that involve companies’ ESG policies, leaving companies and judges alike to grapple with how best to navigate politically fraught cases.

A ‘Clearheaded’ Approach

When Will was a law clerk for vice chancellor Leo Strine at the Chancery Court almost 15 years ago, she was the only female clerk and the five judges were all men. Now, she’s the fifth female judge to serve on the court.

Before her first foray into the Chancery Court as a clerk, Will, a Philadelphia 76ers season ticketholder who was raised in Pennsylvania’s Pocono mountains, graduated from the University of Pennsylvania Law School in 2009.

After that clerkship, she went on to private practice at Skadden Arps in Wilmington, Delaware for about seven years. Then she moved to Wilson Sonsini where she was a partner alongside former Chancellor William Chandler, focusing on corporate, commercial, and federal securities litigation. She left the firm in 2021 to take on the vice chancellor role.

While already extremely familiar with the kinds of corporate law cases she would find on her desk at the Chancery Court, navigating this new political variable is an emerging challenge.

In the Disney case, the company had weighed in on the “Don’t Say Gay” law publicly after employee walkouts—a move the investors bringing the suit said equated to mismanagement. Speaking about the case in an interview with Bloomberg Law, Vice Chancellor Will said the Disney board was right to consider how losing employees and customers could hurt investors in the long run.

“The goal of the board at the end of the day should be to create long-term value for the stockholders,” Will said in an interview. “And if you’re thinking about creating long-term value, you want to have happy employees, you want to have engaged customers, you want to have a sustainable business from an environmental standpoint, and so you need to be giving some weight to these different stakeholder interests, depending on your industry, in order to exercise your fiduciary duties anyway.”

The decision, however, drew some negative attention. Will said her clerks noticed a murmur of disgruntled comments online and in news articles from people who disagreed politically with the outcome of the Disney case—although they weren’t opining on the “very straightforward corporate law principles that were applied.”

“People were saying ‘Why is a Delaware judge weighing in on Florida politics?’ It was backlash like that,” she said. “But I think that judges and boards need to take a very clearheaded and careful approach to all of these issues because of how divided society is right now.”

“You can’t make everyone happy,” she added.

That sentiment is going to be especially true for boards dealing with politically charged issues in the current climate, she said, because in those instances, “no matter what the board does, it’s likely going to alienate 50% of its stockholders.”

New Wrinkles

The Chancery Court was recently criticized by former Trump administration US Attorney General William Barr, in a Wall Street Journal opinion piece in late November. Barr said the court’s “flirtation with ESG is jeopardizing its status as a preferred destination for corporate headquarters.” Delaware Chancellor Kathaleen McCormick and Delaware Vice Chancellor Travis Laster have publicly pushed back against Barr’s comments.

The court—which Will described as “extraordinarily busy"—is also poring over dozens of so-called Caremark claims, named after its 1996 ruling in In re Caremark International Inc. Derivative Litigation. The Caremark case laid out conditions for directors’ oversight liability if they either fail to implement controls or ignore red flags of risks that would jeopardize companies’ financial health.

More recently, the Chancery Court issued several significant decisions that extended oversight duties from board members to corporate executives, including one involving McDonald’s Corp. earlier this year.

“We’re just seeing more and more of those and it’s really putting some pressure on what types of risks boards in Delaware corporations need to be thinking about,” Will said. “I’ve combed over I’d say all of the Caremark cases that have come out that have dealt with these issues and when the board can potentially be liable. That said, like we saw in the Disney case, there’s always some new twist and iteration that can create a wrinkle.”

In a Caremark-related case last week, Will pushed back against a claim that corporate executives have greater oversight obligations than board members. She sided with the former chief executive of scooter-maker Segway, who was sued over the company’s past accounting problems.

“Officers’ management of day-to-day matters does not make them guarantors of negative outcomes from imperfect business decisions,” Will said in her decision in Segway Inc. v. Cai.

While she’s been a Caremark expert for years, Will said she’s been thinking more and more about the overlap between Caremark claims and ESG.

She said boards should identify their key ESG considerations and risks in their industry, and “think about ways to oversee the company’s strategic execution of those risks looking to long-term value, keeping an eye on any major issues that might arise that require their attention.”

“Caremark is so often focused on director liability when really bad things happen, but I think it gives a good roadmap for directors thinking about these issues in terms of good governance practices,” she said.