Tuesday, February 26, 2013

Auerbach v. Bennett case brief

Auerbach v. Bennett case brief summary
393 N.E.2d 994

SYNOPSIS: Defendant appealed from an order of the Appellate Division of the Supreme Court in the Second Judicial Department (New York), which reversed the trial court, denied defendant's motions for summary judgment and to dismiss the appeal, and granted executor's cross-motion for leave to intervene in plaintiff shareholders' derivative action.

OVERVIEW: A specially appointed committee of disinterested directors--acting on behalf of defendant, a board of directors of a corporation--made a decision to terminate a shareholders' derivative action. The plaintiff shareholders filed suit to challenge the decision, and defendant filed motions for summary judgment and to dismiss. The trial court granted defendant's motions, and the intermediate court reversed.

The court found that the decision of defendant's committee was beyond judicial inquiry under the business judgment doctrine.

The court acknowledged that it could inquire as to the disinterested independence of the members of that committee and as to the appropriateness and sufficiency of the investigative procedures chosen and pursued by the committee. However, the court concluded that there was no basis to warrant either inquiry.

OUTCOME: The court of appeals reversed the judgment of the intermediate court, awarded summary judgment for defendant and dismissed plaintiffs' appeal because the court applied the business judgment doctrine and found no basis to question either the disinterested nature of defendant's committee or its methods of investigation.

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