Opinion ID: 213943
Heading Depth: 3
Heading Rank: 1

Heading: Zapata Independence

Text: Under Delaware law, [t]he question of independence `turns on whether a director is, for any substantial reason, incapable of making a decision with only the best interests of the corporation in mind.' That is, the independence test ultimately `focus[es] on impartiality and objectivity.' In re Oracle Corp. Deriv. Litig., 824 A.2d 917, 920 (Del.Ch.2003) (quoting Parfi Holding AB v. Mirror Image Internet, Inc., 794 A.2d 1211, 1232 (Del.Ch. 2001)). The special litigation committee bears the burden of proving that there is no material issue of fact as to its independence. Id. If the facts combine to give rise to a perception of an inability to proceed independently, the shareholder need not show that the committee was in fact not independent. Lewis v. Fuqua, 502 A.2d 962, 967 (Del.Ch.1985) ([P]otential conflicts of interest or divided loyalties, when considered as a whole, raise a question of fact as to whether [the special litigation committee] could act independently.). We need not conclude that any committee member actually acted improperly in order to conclude that the moving party failed to meet its burden of showing the absence of any possible issue of material fact regarding the special litigation committee's independence. See id. Thus, a finding of lack of independence in the special litigation committee context is not a finding that its members are not persons of good faith and moral probity, it is solely to conclude that they were not situated to act with the required degree of impartiality. Oracle, 824 A.2d at 947. Concluding that a committee member is not independent merely recognizes that his or her connection to the alleged wrongdoers or the alleged wrongdoing would be on the mind of the [special litigation committee] member[ ] in a way that generates an unacceptable risk of bias. Id. In considering the makeup of a special litigation committee, we look to see if the facts create a reasonable doubt as to the committee's impartiality. E.g., id. If a reasonable doubt exists as to the special litigation committee's independence, the special litigation committee's conclusions are rejected then and there; no further resolution is required on the independence question. [3] The case then proceeds to the merits of the claims against the defendants. A corporation forms a special litigation committee after being presented with either a demand from shareholders, or, in cases where demand may be excused, a lawsuit. In either case, the corporation is fully aware of the charges that the special litigation committee will be tasked with investigating before it forms the committee. Delaware law does not impose any restrictions on the number of members a special litigation committee must have or which board members must be on the committee. See, e.g., Sutherland v. Sutherland, 958 A.2d 235, 240 (Del.Ch. 2008) (finding one-person committee was independent). Consequently, in a special litigation committee case, there is no presumption of independence and the special litigation committee bears the burden of establishing its own independence by a yardstick that must be `like Caesar's wife''above reproach.' Beam v. Stewart, 845 A.2d 1040, 1055 (Del.2004) (quoting Lewis, 502 A.2d at 967). Because the corporation has every opportunity to form a perfectly independent special litigation committee, we require that it do so.