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Zapata Corp. v. Maldonado
6/16/2025 pdw
In this case, a shareholder brought a derivative suit against the board. Demand was excused. Then the board replaced a few members and assigned the new members to form a special litigation committee. That committee decided the suit wasn't in the best interests of the company and moved for the court to dismiss the shareholder's suit.
Should they be allowed to dismiss someone elses lawsuit? That's weird. But the shareholder is suing on behalf of the corporation, which is also kind of weird. If the committee represents the board, the board controls the company, and the committee is independent, should they be allowed to dismiss a shareholder's derivative suit?
A few things to look out for. First, notice the two part test the court creates. One part focuses on the committee, while the other looks for general ickiness. Next, look at the burden of proof. Why would the court allocate the burden of proof this way?
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