Court Of Chancery Rejects SLC Report
When should the recommendations of a SLC to not pursue a derivative suit be accepted? As this opinion points out, certainly not when the defendants appoint their relative to the SCL and those that are indebted to them. Nor will the SCL be respected when its members approach their investigation with views fixed before their investigation was performed and when their non-Delaware counsel does not understand Delaware law.
This decision summarizes the Zapata principles for examining the report of a SLC, including a good summary of prior case law. Apart from the basic rules it sets down on burden of proof, independence and the scope of any SLC investigation [all of which alone are worth reading], the decision's analysis of the internal logic of the SLC report is critical. Put simply, the Court wants the report to make sense under an objective review and when it does not, trouble will follow.