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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. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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