Court of Chancery Explains Role of Special Committee
Louisiana Municipal Police Employees' Retirement System v. Fertitta, C.A. 4339-VCL (July 28, 2009).
This is a major decision with implications for all special committees. The Court denied a motion to dismiss, because the special committee did not stand up to the controlling stockholder. That much is not news. But the decision goes on to at least suggest that a special committee may have more than just the duty to say "no." In addition, a special committee needs to act affirmatively to make the controlling stockholder follow his fiduciary duties.
The decision is very fact specific, and the Court makes it clear that the context of a motion to dismiss strongly affected its analysis. However, it is also clear that those who predicted that Lyondell v. Chemical Co v. Ryan, 970 A2d 235 (Del. 2009) marked a lessening of scrutiny of board action may be wrong.
