Also known as: independent investigation committees · IIC · special litigation committee
Written by attorneys · grounded in primary & secondary sources — see below
A committee of independent and disinterested directors or members appointed by a business entity to investigate claims asserted in a derivative proceeding and determine whether pursuing the action serves the entity's best interests.
Ideal Solutions faces a derivative suit alleging mismanagement by its members. The LLC appoints two outside consultants with no financial stake in the outcome to the independent investigation committee. The consultants review records and interview witnesses before recommending dismissal. The court later evaluates whether those individuals satisfied the disinterested and independent standard.
Ironwood Capital is named in a derivative action over alleged partnership mismanagement. The partnership appoints an independent investigation committee of outside advisors. The committee moves to stay discovery while it examines the claims. The court grants the stay for the time needed to complete the review.
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Infinity Bank serves as general partner in a limited partnership sued derivatively. The partnership selects two limited partners with no involvement in the disputed transactions for its independent investigation committee. The committee conducts interviews and issues a report recommending termination of the suit.
Innovate Pharmaceuticals board members face a derivative claim for self-dealing. The board creates an independent investigation committee of two newly elected outside directors. The committee investigates and concludes continued litigation would damage upcoming financing. The court assesses the directors' independence before enforcing the recommendation.
Idris Ives brings a derivative suit against Citytrust officers. The bank appoints an independent investigation committee that produces a sealed report recommending dismissal. The district court grants summary judgment on that basis. The appellate court reverses after examining the report's adequacy and the committee's process.
Ibrahim Iqbal files a derivative action against a mutual fund's directors. The fund forms an independent investigation committee to evaluate the claims. The committee's determination that suit is not in the fund's interest becomes the basis for a dismissal motion. The Supreme Court addresses how state law on demand futility interacts with the committee's authority.
The committee must consist of one or more disinterested and independent individuals. Those individuals may be members or partners of the entity.
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The committee may investigate the claims in the derivative proceeding and decide whether continuing the action is in the entity's best interests. Its determination can include continuing, settling, or dismissing the suit.
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The committee files its determination and supporting report with the court and serves the parties. The court then reviews whether the members were disinterested and independent and whether the committee acted in good faith, independently, and with reasonable care.
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No. Appointment stays discovery for a reasonable period to allow investigation. Dismissal occurs only after the court finds the committee met the statutory standards of independence, good faith, and reasonable care.
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Yes. The committee's authority extends to every claim asserted in the derivative proceeding, including statutory claims to enforce a partner's or member's right to records.
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…v. Flynn , Del.Ch., 413 A.2d 1251 (1980). By way of background, this Court’s review in Zapata was limited to whether an independent investigation committee of disinterested directors had the power to cause the derivative action to be dismissed. Preliminarily, it was noted in Zapata that “[d]irectors of Delaware corporations derive their…