## Facts

- World Health Alternatives, Inc. and affiliates operated a nationwide health-care staffing business and later entered bankruptcy.
- The debtors filed for Chapter 11 relief in February 2006; the case converted to Chapter 7 in October 2006, and a Chapter 7 trustee was appointed.
- The trustee brought an adversary proceeding against multiple former officers and directors alleging misconduct tied to accounting and disclosure failures that harmed the company.
- The opinion addressed a motion to dismiss filed by Brian T. Licastro, a corporate officer and the company’s general counsel.
- The trustee’s amended complaint asserted numerous counts and alleged, among other things, that Licastro failed to implement or oversee adequate compliance and internal controls within his area of responsibility and failed to act on warning signs of irregularities.

## Issues

1. Whether the amended complaint stated plausible fiduciary-duty and related claims against a corporate officer under Delaware law sufficient to survive dismissal under Rule 12(b)(6).
2. Whether claims sounding in fraud (or relying on fraud-like allegations) were pleaded with the particularity required by Rule 9(b).
3. Whether Delaware “Caremark-type” oversight liability may apply to corporate officers (not only directors) and, if so, whether the complaint adequately alleged an officer-level oversight breach by Licastro.

## Decision

- The court granted Licastro’s motion to dismiss in part and denied it in part.
- The motion was denied as to Counts I, II, III, IV, V, VII, and XIII, permitting those claims to proceed past the pleading stage.
- The motion was granted as to Counts IX, X, XI, and XII, dismissing those claims for pleading or legal deficiencies.
- The court accepted well-pleaded allegations as true for Rule 12(b)(6) purposes and drew reasonable inferences in the trustee’s favor.
- For fraud-based theories, the court applied Rule 9(b) and dismissed counts that failed to allege the necessary details attributing specific misconduct to Licastro.

## Legal Principles

- On a Rule 12(b)(6) motion, a complaint survives if it alleges sufficient factual matter to state a plausible claim for relief; the court does not resolve factual disputes at the pleading stage.
- When a claim sounds in fraud, Rule 9(b) requires pleading the circumstances of the alleged fraud with particularity; mental states may be pleaded generally.
- Under Delaware law, corporate officers owe fiduciary duties to the corporation, including duties of care and loyalty.
- A “Caremark-type” duty of oversight may apply to corporate officers within their areas of responsibility; failure to maintain reasonable oversight, including responding to warning signs, can support a fiduciary-duty claim at the pleading stage.

## Conclusion

The court held that a Chapter 7 trustee plausibly alleged officer-level fiduciary and oversight breaches against the debtor’s general counsel sufficient to proceed on several counts, while dismissing certain fraud-based or otherwise deficient counts for failure to meet applicable pleading and legal requirements.


In re World Health Alternatives, Inc. (Miller v. McDonald), 385 B.R. 576 (Bankr. D. Del. 2008)