Chancery Dismisses Loyalty Claim, Reasons Alleged Employment-Related Misconduct was not in a Fiduciary Capacity

Brola v. Lundgren, C.A. No. 2024-1108-LWW (Del. Ch. Dec. 1, 2025)

A corporation’s Vice President and Secretary, who also was a member of its board of directors, engaged in alleged sexual harassment, leading to lawsuits against him and the corporation based on employment law doctrines.  The plaintiff in this action sought to frame the alleged misconduct as a breach of the fiduciary duty of loyalty.  Recognizing the “boundary between employment law and corporate governance[,]” the Court reasoned that Delaware corporate law does not govern “interpersonal workplace disputes.”  Rather, the Court reasoned, Delaware corporate law “governs internal affairs—the discretionary management of business assets, oversight of enterprise level risks, and fulfillment of the fiduciary promise.”  By contrast, relationships between or among employees and managers are typically governed by the laws of other jurisdictions and applicable statutes.  The Court further reasoned that nothing in the facts alleged showed a connection between his conduct as a fiduciary and the alleged misconduct at issue.  That is, “[a]ny midlevel manager could commit the same wrongs by the same means.”  The Court accordingly granted the defendant’s motion to dismiss.