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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. Someone off their meds? C'mon John, it is called the politics of Empire. Get with the program, will ya? How can we build one world under secularist ideals without breaking a few eggs? Of course, once it is fully built, is the American public who will feel the deadly grip of the velvet glove. One cannot lay down with dogs without getting fleas. The cup of wrath is nearly full, John Smith, nearly full. Oops, there I go, almost sounding as alarmist as Smith. Guess he and I both need to listen to this again: https://www.youtube.com/watch?v=CRnQ65J02XA

  2. Charles Rice was one of the greatest of the so-called great generation in America. I was privileged to count him among my mentors. He stood firm for Christ and Christ's Church in the Spirit of Thomas More, always quick to be a good servant of the King, but always God's first. I had Rice come speak to 700 in Fort Wayne as Obama took office. Rice was concerned that this rise of aggressive secularism and militant Islam were dual threats to Christendom,er, please forgive, I meant to say "Western Civilization". RIP Charlie. You are safe at home.

  3. It's a big fat black mark against the US that they radicalized a lot of these Afghan jihadis in the 80s to fight the soviets and then when they predictably got around to biting the hand that fed them, the US had to invade their homelands, install a bunch of corrupt drug kingpins and kleptocrats, take these guys and torture the hell out of them. Why for example did the US have to sodomize them? Dubya said "they hate us for our freedoms!" Here, try some of that freedom whether you like it or not!!! Now they got even more reasons to hate us-- lets just keep bombing the crap out of their populations, installing more puppet regimes, arming one faction against another, etc etc etc.... the US is becoming a monster. No wonder they hate us. Here's my modest recommendation. How about we follow "Just War" theory in the future. St Augustine had it right. How about we treat these obvious prisoners of war according to the Geneva convention instead of torturing them in sadistic and perverted ways.

  4. As usual, John is "spot-on." The subtle but poignant points he makes are numerous and warrant reflection by mediators and users. Oh but were it so simple.

  5. ACLU. Way to step up against the police state. I see a lot of things from the ACLU I don't like but this one is a gold star in its column.... instead of fighting it the authorities should apologize and back off.

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