Court of Chancery Broadens Discovery of Single Member Special Committee
Sutherland v. Sutherland, C.A. No. 2399-VCL (July 2, 2007).
On several occasions, the Delaware courts have questioned why only a single member is appointed to a special committee. However, the practice continues.This decision illustrates the price to be paid by such a bad practice.
Normally, Zapata Corp. v. Maldonado, 430 A2d 779 (Del. 1981) limits discovery of a special committee to materials that reflect on the independence and diligence of the committee. Discovery into the merits of the committee's conclusions is limited. The theory behind this limitation is that to permit broad discovery into the allegations that lead to the committee's creation would effectively undermine the reasons the committee was appointed in the first place.
This decision permitted much broader discovery into the merits of the one person committee's conclusions because of the special circumstances involved in this battle between family members and the limited disclosures given about the reasons for selecting the single member of the committee. The rationale behind the decision still applies to increase discovery of other single member special committees.Share