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

Heading: Whalen II The present dispute.

Text: The events giving rise to the present dispute, which we will refer to as Whalen II, were initiated on November 18, 1994. On that date, Whalen filed his notice of appeal concerning the district court's decision that certain of his claims were derivative, and Whalen also sent a written demand to the board of PRC-Iowa, the general partner of TCG, asking that it pursue various claims regarding diversion of assets and breach of fiduciary duties by TCG's officers and directors. [2] At that time, the board of directors of PRC-Iowa consisted of Connelly and Ellers. On November 30, 1994, PRC-Iowa, through its attorney, informed Whalen that it intended to appoint a special committee to investigate the claims asserted in the demand letter. Later, Whalen was informed by letter that a special committee, consisting of Floyd R. Ganassi and William C. Nelson, had been appointed to review the claims asserted in the demand letter. The letter explained that Ganassi and Nelson are directors, but not officers or employees of PCI, the parent company of PRC-Iowa and that the special committee had retained outside counsel to assist with the investigation. [3] Before the special committee completed its investigation, and while Whalen I was pending before our court, Whalen filed a petition in equity in district court on May 9, 1995, asserting a derivative claim on behalf of the partnership. On June 6, 1995, the attorneys for the special committee submitted their report to the special committee. The report stated that upon completion of their investigation, the attorneys recommended that PRC-Iowa not pursue litigation. A memorandum from the special committee concerning the report then was addressed to the Board of Directors President Riverboat Casinos-Iowa, Inc., stating the committee had concluded there is no legal basis for the company to institute any proceeding against the various entities, officers and directors suggested as possible defendants in Mr. Whalen's demand letter. On June 21, the board of directors of PRC-Iowa voted to adopt the findings and recommendations of the special committee and decided not to pursue litigation concerning the claims asserted by Whalen in the demand letter. On June 26, Whalen's counsel received a letter from Ganassi indicating that the special committee had completed its investigation and that the board of directors of PRC-Iowa, Inc. had accepted the committee's conclusion that PRC-Iowa should take no action concerning the claims raised in the demand letter. On March 20, 1996, we issued our decision in Whalen I. See 545 N.W.2d 284. We affirmed the district court's decision that Whalen's claims were derivative in nature because Whalen was not injured `directly or independently' of the partnership. Id. at 292 (quoting Litman v. Prudential-Bache Properties, 611 A.2d 12, 15-16 (Del.Ch.1992)). We stated that by failing to make a demand and by failing to plead his failure to do so, Whalen did not comply with the requirements of Delaware law and thus lacked standing to bring his claims. Whalen I, 545 N.W.2d at 293. After our decision in Whalen I, the district court lifted a prior stay and matters concerning Whalen's derivative claim proceeded in district court. Defendants and Whalen eventually filed cross-motions for summary judgment. After hearing, the district court entered two rulings; one overruling Whalen's motion for summary judgment and one granting defendants' motions for summary judgment. With respect to plaintiff's motion, the court concluded that Whalen was not entitled to summary judgment on his contention that a pre-suit demand would be futile. The district court concluded that pursuant to Delaware law, Whalen conceded the independence and disinterest of the general partner PRC-Iowa by making the demand on PRC-Iowa on November 18, 1994. With respect to defendants' motions, the court concluded that there was no genuine issue of material fact concerning whether the special committee reasonably investigated the allegations made in Whalen's demand letter and whether the PRC-Iowa board acted in good faith upon the recommendation of the special committee. The court concluded that Delaware law allows appointment of a special committee and that the limited partnership agreement impliedly gave PRC-Iowa the authority to appoint a special committee. Whalen appeals, asserting that the district court erred in applying the applicable Delaware law.