Opinion ID: 1288403
Heading Depth: 3
Heading Rank: 4

Heading: Expansion provision

Text: A court must consider the totality of the circumstances when evaluating an SLC's independence. See, e.g., Strougo v. Bassini, 112 F.Supp.2d 355, 362 (S.D.N.Y. 2000); Johnson v. Hui, 811 F.Supp. 479, 486 (N.D.Cal.1991); In re Oracle Corp. Derivative Litig., 824 A.2d 917, 941 (Del. Ch.2003). The board resolution creating the UnitedHealth SLC contains the following provision: FURTHER RESOLVED, that the number of members of the Special Litigation Committee can be expanded in the future through Board action if the Board deems appropriate. Because the parties' briefs did not address the presence of this expansion provision, we ordered supplemental briefing on whether the provision so undermined the UnitedHealth SLC's independence as to render inappropriate any judicial deference to the SLC's business judgment. Expansion of an SLC at a corporate board's discretion could have the effect of diluting the votes of the original members by the addition of new members who the board feels are more likely to make a favorable decision concerning the derivative litigation. Furthermore, although there is no indication that the expansion power was exercised by the board in this case, the mere retention of that power by a board could influence SLC members to alter their recommendations so as to avoid having their votes rendered meaningless. [10] We conclude that the existence of an expansion provision is one factor in a court's totality-of-the-circumstances evaluation of an SLC's independence. Because we have not been asked to apply the business judgment rule we set forth today, but only to delineate its boundaries, we leave the final analysis of the UnitedHealth SLC's independence to the discretion of the federal district court. [11]