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Heavily redacted report cannot hide behind business-judgment rule

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Although a report produced by a special litigation committee contains privileged information, the plaintiffs must be allowed full access to the unredacted version in order to determine if the investigation was extensive and conduced in good faith.

The Indiana Court of Appeals affirmed the trial court’s order in TP Orthodontics, Inc., Christopher K. Kesling, DDS, MS, Adam Kesling, and Emily Kesling, Individually and derivatively on behalf of TP Orthodontics, Inc., v. Andrew C. Kesling, et. al., 46A03-1207-MI-324.

The trial court compelled TP Orthodontics to file a copy of the entire report produced by the special litigation committee.   

TPO’s board of directors established the special litigation committee after the three sibling shareholders filed a lawsuit against their brother, Andrew Kesling, on behalf of the family business TP Orthodontics.

The committee investigated and then issued a report recommending pursuing only a few of the siblings’ claims. In accordance with Indiana law, TPO filed a motion to dismiss the rejected claims and attached a heavily redacted copy of the committee’s report.

Subsequently, the siblings demanded access to the unredacted report. TPO refused, pointing to Indiana’s business-judgment rule.

This rule allows courts to inquire into a committee’s investigative procedures and methodologies but not into the substance of a committee’s decision. TPO argued that by requesting the unredacted report, the siblings sought to go beyond the bounds of permissible access under the business-judgment rule.

Indiana Code 23-1-32-4, which codifies the business judgment rule, sets forth the presumption that corporate directors act in an informed, good faith, and honest manner when managing corporate affairs.

Plaintiffs are allowed to challenge a special litigation committee’s findings only on the grounds that the committee was not disinterested or did not conduct its investigation in good faith.

The Court of Appeals agreed with the trial court, finding that access to the entire report is necessary for the siblings to make their statutorily allowed challenges, most notably their good-faith argument.  

“In closing, we acknowledge TPO’s concerns about potential implications of our holding on the business-judgment rule, but we do not share them,” Vaidik wrote for the court. “There is no reason to believe that simply allowing derivative plaintiffs access to committee reports will lead to trespass into the domain of business judgment. We are confident in the ability of our trial courts to interpret Indiana’s business-judgment rule and reject claims that threaten to emasculate that rule.”


 

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  1. I will be filing a lawsuit in Tippecanoe County for so many violations in a case we became involved in, including failure to contact through mail, Violation of 4th Amendment rights, Violation of Civil Rights, and so on. Even the Indiana Ombudsmen Bureau found violations and I have now received the report and they are demanding further training in Tippecanoe County. I am going to make sure they follow through!!!

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  3. I thought the purpose of the criminal justice center was to consolidate all the criminal services and get them out of downtown to clean up the place. Why in the HELL are the civil courts moving? What a burden to all the downtown law firms. Now we all get to work downtown, but then have to get in a car and COMMUTE to court? Who approved this idiocy?

  4. I drive through the neighborhood whenever I go to the City-County Building or the Federal Courthouse. The surrounding streets are all two way with only two lanes of traffic, and traffic is very slow during rush hour. I hope that enough money has been allocated to allow for improvement of the surrounding streets.

  5. I have had an ongoing custody case for 6 yrs. I should have been the sole legal custodial parent but was a victim of a vindictive ex and the system biasedly supported him. He is an alcoholic and doesn't even have a license for two yrs now after his 2nd DUI. Fast frwd 6 yrs later my kids are suffering poor nutritional health, psychological issues, failing in school, have NO MD and the GAL could care less, DCS doesn't care. The child isn't getting his ADHD med he needs and will not succeed in life living this way. NO one will HELP our family.I tried for over 6 yrs. The judge called me an idiot for not knowing how to enter evidence and the last hearing was 8 mths ago. That in itself is unjust! The kids want to be with their Mother! They are being alienated from her and fed lies by their Father! I was hit in a car accident 3 yrs ago and am declared handicapped myself. Poor poor way to treat the indigent in Indiana!

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