Opinion ID: 2210245
Heading Depth: 2
Heading Rank: 3

Heading: Was the investigation reasonable and did the PRC-Iowa board act in good faith?

Text: Whalen also challenges the district court's conclusion that the PRC-Iowa board acted in good faith and conducted a reasonable investigation concerning the claims made in Whalen's demand letter. Upon our review, we conclude that the district court properly determined that the PRC-Iowa board, based on the special committee's report, conducted a reasonable investigation of the claims made in Whalen's demand letter and acted in good faith in deciding not to pursue those claims. In concluding that no genuine issue of material fact existed regarding whether the PRC-Iowa board conducted a reasonable investigation and acted in good faith concerning the allegations in Whalen's demand letter, the district court stated: The Plaintiff here has not shown particularized facts creating a reasonable doubt that the investigation was not conducted reasonably. All of the evidence presented, including the report of the Special Committee and the documents attached to that report, show that the investigation was conducted reasonably and in good faith. The Special Committee members had not been members of the board of directors of PRC-Iowa, Inc., nor involved with any of the other corporations until after the IPO [initial public offering of PCI stock]. This Special Committee hired separate, unrelated outside counsel to aid in the investigation. The recommendation of the Special Committee shows that it was made after an informed consideration of all pertinent facts. That recommendation, accepted and followed by the board of PRC-Iowa, Inc., is a business judgment which is approved by the Court. There are no facts shown nor any inference raised which will prevent a trier of fact from being firmly convinced that the investigation was conducted reasonably, in good faith, and that the refusal of the demand was made after an informed consideration, in good faith. We believe that the district court's statements appropriately confirm that the special committee acted in good faith and conducted a reasonable investigation in refusing to act on Whalen's demand and we adopt them as our own. We affirm the judgment of the district court on this issue.