Zapata Corp. v. Maldonado

In Zapata Corp. v. Maldonado (Del. 1981) 430 A.2d 779 [22 A.L.R.4th 1190], the court simply recognized that Delaware law allows corporations to respond to a derivative suit by appointing independent directors to a special litigation committee, which will then investigate the merits of the suit and thereafter recommend pursuing the case as a plaintiff or seeking dismissal of the case. In this context, the court noted that it was mindful that the committee of directors would be passing judgment on fellow directors (at least where the fellow directors are defendants in the derivative action); and it questioned whether inquiry as to the independence, good faith and reasonable investigation of the committee directors was sufficient to safeguard against abuse or subconscious abuse. It then fashioned a rule that, when a corporation moves to dismiss a derivative suit based on the business judgment recommendation of a special litigation committee, the court (1) should inquire into the independence and good faith of the committee, and, if it finds independence and good faith, (2) may, in its discretion, apply its own business judgment before granting or denying the motion. ( Id. at pp. 788-789.)