Opinion ID: 1541285
Heading Depth: 1
Heading Rank: 6

Heading: Disclosures Concerning the Special Litigation Committee

Text: Plaintiff next contends that the Proxy Statement omitted material facts concerning the ADM Special Litigation Committee established in response to the then recent allegations of corporate wrongdoing. The complaint asserts that the Proxy Statement failed to disclose: (1) the selection process for members of the Committee; (2) the activities and goals of the Committee; (3) the mandate of the Committee and its plans, if any, to retain outside counsel; and (4) the Committee's intended response to pending derivative litigation. The trial court correctly found that plaintiff failed to identify any specific fact that should have been disclosed. There is no support for the view that the particular details of a special litigation committee's activities must be disclosed. Moreover, the complaint fails to identify any material fact that the Board failed to disclose. The details of a corporation's inner workings and its day-to-day functioning are not the proper subject of disclosure. The allegations of the complaint amount to no more than conclusory statements that lack factual or inferential support sufficient for a court to determine materiality. [37] The trial court was correct in dismissing this claim. On appeal, plaintiff attempts to cast his claim as one of material misstatement rather than omission. [38] Plaintiff alleges that the Proxy Statement indicated that the Special Litigation Committee was appointed to oversee the Company's response to the investigation and related civil antitrust and securities litigation. This contention argues that this statement is materially misleading in light of the subsequent comment by ADM director and Committee member Brian Mulroney that the Committee is not charged with the conduct of an independent investigation.... Plaintiff argues that ADM stockholders were left with the erroneous impression that the Committee was taking a proactive stance and actively investigating the alleged wrongdoing. This contention fails, however, in light of the clear language of the Proxy Statement, which did not state that the Committee would investigate. On the contrary, it indicated that the Committee was charged with oversight of ADM's response to the investigation conducted by the FBI. Further, subsequent comments made by ADM director Johnson bolster the view that, at the time the Proxy Statement was issued, ADM was adopting a wait-and-see posture. [39] Since ADM had professed its belief that the FBI investigation and various civil actions were without merit, the failure to disclose further the mandate of the Committee cannot be deemed materially misleading. In a related claim, plaintiff takes issue with the Committee's decision to seek dismissal of the various derivative actions on the basis that a pre-suit demand was not made. In light of the Committee's decision to seek dismissal, the argument goes, the fact that the Committee is not charged with conducting an investigation becomes material. Defendants correctly argue that it is the Committee's right to seek dismissal for failure to serve a pre-suit demand on the Board. [40] The absence of any intention to conduct an independent investigation at this time does not vitiate this right. Such a disclosure requirement would oblige the Committee to speculate about its future plans. Speculation is not an appropriate subject for a proxy disclosure.