In re American Intern. Group, Inc.

• Decision Date: 10 February 2009
• Docket Number: C.A. No. 769-VCS.
• Citation: 965 A.2d 763
• Court: Court of Chancery of Delaware
• Parties: AMERICAN INTERNATIONAL GROUP, INC., Consolidated Derivative Litigation. American International Group, Inc., Plaintiff, v. Maurice R. Greenberg and Howard I. Smith, Defendants.

965 A.2d 763

AMERICAN INTERNATIONAL GROUP, INC., Consolidated Derivative Litigation American International Group, Inc., Plaintiff, v. Maurice R. Greenberg and Howard I. Smith, Defendants.

C.A. No. 769-VCS.

Court of Chancery of Delaware.

Submitted: November 12, 2008.

Decided: February 10, 2009.

Stuart M. Grant, Esquire, Megan D. McIntyre, Esquire, John C. Kairis, Esquire, Christine M. Mackintosh, Esquire, Catherine Pratsinakis, Esquire, Grant & Eisenhofer P.A., Wilmington, Delaware, Counsel for Teachers' Retirement System of Louisiana and Co-Lead Counsel for the Plaintiffs.

Peter C. Harrar, Esquire, Stacey T. Kelly, Esquire, Wolf Haldenstein Adler Freeman & Herz LLP, New York, New York, Counsel for City of New Orleans Employees' Retirement System and Co-Lead Counsel for the Plaintiffs.

A. Gilchrist Sparks, III, Esquire, S. Mark Hurd, Esquire, Samuel T. Hirzel, Esquire, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware, Counsel for American International Group, Inc.

Daniel J. Kramer, Esquire, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York, Of Counsel for American International Group, Inc.

Stuart L. Shapiro, Esquire, Shapiro Formal Allen Sava & McPherson LLP,

New York, New York, Of Counsel for American International Group, Inc.

Kevin G. Abrams, Esquire, J. Travis Laster, Esquire, Eric D. Selden, Esquire, Abrams & Laster LLP, Wilmington, Delaware, Counsel for Defendant Maurice R. Greenberg.

Nicholas A. Gravante, Jr., Esquire, Robert J. Dwyer, Esquire, Amy L. Neuhardt, Esquire, Boies, Schiller & Flexner LLP, New York, New York; David Boies, Esquire, Boies, Schiller & Flexner LLP, Armonk, New York, Of Counsel for Defendant Maurice R. Greenberg.

Sean J. Bellew, Esquire, Cozen O'Connor, Wilmington, Delaware, Counsel for Defendants ACE Ltd., ACE USA, Inc., ACE INA Holdings, Inc. and Susan Rivera.

Stephen A. Cozen, Esquire, George M. Gowen, III, Esquire, Cozen O'Connor, Philadelphia, Pennsylvania; H. Lee Godfrey, Esquire, Neal S. Manne, Esquire, Johnny W. Carter, Esquire, Jeremy J. Brandon, Esquire, Susman Godfrey LLP, Houston, Texas, Of Counsel for Defendants ACE Ltd., ACE USA, Inc. and ACE INA Holdings, Inc.

Richard J.J. Scarola, Esquire, Alexander Zubatov, Esquire, Scarola Ellis LLP, New York, New York, Of Counsel for Defendant Susan Rivera.

Thad J. Bracegirdle, Esquire, Reed Smith LLP, Wilmington, Delaware, Counsel for Defendants Marsh & McLennan Companies, Inc., Marsh, Inc., Marsh USA Inc. and Marsh Placement Inc.

Gregory P. Joseph, Esquire, Douglas J. Pepe, Esquire, Sandra M. Lipsman, Esquire, Gregory P. Joseph Law Offices LLC, New York, New York, Of Counsel for Defendants Marsh & McLennan Companies, Inc., Marsh, Inc., Marsh USA Inc. and Marsh Placement Inc.

Henry E. Gallagher, Jr., Esquire, Ryan P. Newell, Esquire, Connolly Bove Lodge & Hutz LLP, Wilmington, Delaware, Counsel for Defendant Pricewaterhouse-Coopers LLP.

Thomas G. Rafferty, Esquire, Antony L. Ryan, Esquire, Samira Shah, Esquire, Cravath, Swaine & Moore LLP, New York, New York, Of Counsel for Defendant PricewaterhouseCoopers LLP.

David A. Jenkins, Esquire, Smith Katzenstein Furlow LLP, Wilmington, Delaware, Counsel for Defendants General Re Corporation and General Reinsurance Corporation.

George M. Garvey, Esquire, Fred A. Rowley, Jr., Esquire, Lika C. Miyake, Esquire, Munger, Tolles & Olson LLP, Los Angeles, California, Of Counsel for Defendants General Re Corporation and General Reinsurance Corporation.

Jeffrey M. Weiner, Esquire, Law Offices of Jeffrey M. Weiner, P.A., Wilmington, Delaware, Counsel for Defendant Robert D. Graham.

Alan Vinegrad, Esquire, Douglas B. Bloom, Esquire, Covington & Burling LLP, New York, New York, Of Counsel for Defendant Robert D. Graham.

Francis J. Trzuskowski, Esquire, John A. Elzufon, Esquire, Elzufon Austin Reardon Tarlov & Mondell, P.A., Bear, Delaware, Counsel for Defendant Richard Napier.

Frank J. Silvestri, Jr., Esquire, Janna D. Eastwood, Esquire, Levvett Rockwood, P.C., Westport, Connecticut, Of Counsel for Defendant Richard Napier.

Sean T. O'Kelly, Esquire, Cross & Simon LLC, Wilmington, Delaware, Counsel for Defendants Christopher P. Garand, William Gilman and Edward J. McNenney.

Richard L. Spinogatti, Esquire, William C. Komaroff, Esquire, John H. Snyder,

Esquire, Justin F. Heinrich, Esquire, Proskauer Rose LLP, New York, New York, Of Counsel for Defendants Christopher P. Garand and William Gilman.

Stephen C. Neal, Esquire, Scott D. Devereaux, Esquire, Kathleen H. Goodhart, Esquire, Cooley Godward LLP, Palo Alto, California, Of Counsel for Defendant Edward J. McNenney.

John C. Phillips, Jr., Esquire, David A. Bilson, Esquire, Phillips, Goldman & Spence, P.A., Wilmington, Delaware, Counsel for Defendant Elizabeth A. Monrad.

Scott M. Himes, Esquire, Edward J. Joyce, Esquire, Stillman, Friedman & Shechtman, P.C., New York, New York, Of Counsel for Defendant Elizabeth A. Monrad.

R. Montgomery Donaldson, Esquire, James G. McMillan, Esquire, Lisa Z. Brown, Esquire, Montgomery, McCracken, Walker & Rhoads, LLP, Wilmington, Delaware, Counsel for Defendant Ronald E. Ferguson.

Clifford H. Schoenberg, Esquire, Douglas I. Koff, Esquire, Joshua R. Weiss, Esquire, Joshua M. Bennett, Esquire, Cadwalader, Wickersham & Taft, LLP, New York, New York, Of Counsel for Defendant Ronald E. Ferguson.

Michael F. Bonkowski, Esquire, Cole Schotz Meisel Forman & Leonard, P.A., Wilmington, Delaware, Counsel for Defendant Patricia Abrams.

Marjorie E. Berman, Esquire, Krantz & Berman LLP, New York, New York, Of Counsel for Defendant Patricia Abrams.

Daniel B. Rath, Esquire, Rebecca L. Butcher, Esquire, James S. Green, Jr., Esquire, Landis Rath & Cobb LLP, Wilmington, Delaware, Counsel for Defendant Christian Milton.

Frederick P. Hafetz, Esquire, Tracy E. Sivitz, Esquire, Flora Tartakovsky, Esquire, Joshua R. Geller, Esquire, Hafetz & Necheles, New York, New York, Of Counsel for Defendant Christian Milton.

Daniel V. Folt, Esquire, Matt Neiderman, Esquire, Aimee M. Czachorowski, Esquire, Duane Morris LLP, Wilmington, Delaware, Counsel for Defendants Robert Stearns, Kathryn Winter, Todd Murphy, Regina Hatton, Nichole Michaels and Joshua Bewlay.

Nelson A. Boxer, Esquire, Kristin Ann Meister, Esquire, Robert Long, Esquire, Alston & Bird, LLP, Atlanta, Georgia, Of Counsel for Defendant Joshua Bewlay.

Ann McDonald, Esquire, Robinson & McDonald, LLP, New York, New York, Of Counsel for Defendant Robert Stearns.

David C. McBride, Esquire, Christian Douglas Wright, Esquire, Tammy L. Mercer, Esquire, Young Conaway Stargatt & Taylor, LLP, Wilmington, Delaware, Counsel for Defendants Karen Radke and Thomas R. Tizzio.

Michael S. Kim, Esquire, Steven W. Perlstein, Esquire, Jonathon D. Cogan, Esquire, Robert W. Henoch, Esquire, Kobre & Kim LLP, New York, New York, Of Counsel for Defendants Karen Radke and Thomas R. Tizzio.

Ian Connor Bifferato, Esquire, David W. deBruin, Esquire, Chad J. Toms, Esquire, Raj Srivatsan, Esquire, Bifferato Gentilotti LLC, Wilmington, Delaware, Counsel for Defendant Carlos Coello.

Nicholas M. De Feis, Esquire, Craig Trainor, Esquire, De Feis O'Connell & Rose, P.C., New York, New York, Of Counsel for Defendant Carlos Coello.

P. Clarkson Collins, Jr., Esquire, Thomas E. Hanson, Jr., Esquire, Katherine J. Neikirk, Esquire, Morris James LLP, Wilmington,

Delaware, Counsel for Defendant Michael Castelli.

Charles I. Poret, Esquire, David A. Kotler, Esquire, Dechert LLP, New York, New York, Of Counsel for Defendant Michael Castelli.

Edward P. Welch, Esquire, Edward B. Micheletti, Esquire, Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware, Counsel for Defendant Edward E. Matthews.

John L. Gardiner, Esquire, Lauren E. Aguiar, Esquire, Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, Of Counsel for Defendant Edward E. Matthews.

Kurt M. Heyman, Esquire, Patricia L. Enerio, Esquire, Proctor Heyman LLP, Wilmington, Delaware, Counsel for Defendant Howard I. Smith.

Vincent A. Sama, Esquire, Eric M. Robinson, Esquire, Jeffrey R. Burke, Esquire, Catherine B. Schumacher, Esquire, Winston & Strawn LLP, New York, New York, Of Counsel for Defendant Howard I. Smith.

Michael A. Weidinger, Esquire, Pinckney, Harris & Weidinger, LLC, Wilmington, Delaware, Counsel for Defendant L. Michael Murphy.

Craig D. Singer, Esquire, Stephen D. Andrews, Esquire, Mary Beth Albright, Esquire, Williams & Connolly LLP, Washington, District of Columbia, Of Counsel for Defendant L. Michael Murphy.

Elizabeth A. Sloan, Esquire, Blank Rome LLP, Wilmington, Delaware, Counsel for Defendant Joseph Peiser.

OPINION

STRINE, Vice Chancellor.

I. Introduction

In the derivative portion of this action, stockholder plaintiffs (the "Stockholder Plaintiffs") seek to recover funds to make American International Group, Inc. whole for harm it suffered when it was revealed that the corporation's financial statements were materially misleading and overstated the value of the corporation by billions of dollars. According to the Stockholder Plaintiffs, the false financial statements did not come about inadvertently, but were the consequence of intentional misconduct by AIG's top managers.

Indeed, it does not overstate things to say that the Stockholder Plaintiffs allege that AIG embarked on widespread illegal misconduct at the direction and under the control of the Chairman of its board of directors and Chief Executive Officer, defendant Maurice R. Greenberg. According to the Stockholder Plaintiffs, Greenberg and a core "Inner Circle" directly oversaw all aspects of AIG's business and kept a close watch on their subordinates. Greenberg's Inner Circle was comprised of a small group of long-time AIG executives who Greenberg rewarded with very lucrative compensation packages. These executives oversaw almost all of AIG, including the parts that are implicated in the misconduct alleged by the Stockholder Plaintiffs. Among this Inner Circle were three defendants who feature prominently in ...