Sunday, November 24, 2013

Zapata Corp. v. Maldonado case brief

Zapata Corp. v. Maldonado case brief summary
430 A.2d 779 (1981)

Appellant corporation brought an interlocutory appeal from an order entered by the Court of Chancery (Delaware) denying the corporation's motions to dismiss or for summary judgment in appellee stockholder's derivative action.

The stockholder brought derivative actions in state and federal court, alleging that the corporation's officers and directors had breached their fiduciary duty. The stockholder did not first demand that the board members bring the action, alleging that such a demand would have been futile as all of the directors were defendants. After replacement of some board members, the new board created an investigation committee. The committee determined that each action against the corporation should be dismissed. The chancery court denied the corporation's motion for summary judgment or dismissal, holding that the "business judgment" rule was not appropriate for dismissal of a stockholder's derivative suit.


  • On an interlocutory appeal, the court reversed and remanded, holding that a court should inquire into the independence and good faith of an independent committee and the bases supporting its conclusions. 
  • The chancery court was then directed to determine, applying its own independent business judgment, whether the motion should be granted.

The chancery court's judgment denying the motions was reversed and the case was remanded for the chancery court's reconsideration of the motions.

Recommended Supplements for Corporations and Business Associations Law

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