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Pitfalls To Avoid In Appointing And Acting As A Special Litigation Committee

October 10, 2013
Attorney at Law Magazine - Twin Cities Edition
Author: Janel Dressen

The appointment of a special litigation committee (SLC) is a highly effective response by a company when a derivative demand is made by an owner. Minn. Stat. § 302A.241, subd. 1.

An SLC enables a company to take control of claims even when a majority of the board is in a conflict of interest position.  In re UnitedHealth Grp. Inc. Derivative Litig., 754 N.W.2d 544, 550 (Minn. 2008). There are some important rules, however, that a company must follow to properly appoint an SLC and for an SLC to follow before the process may have its intended effect.  

First, an SLC must be independent. Minn. Stat. § 302A.241, subds. 1, 2. Independence is based upon the totality of the circumstances, including whether the members were involved in the alleged wrongdoing or approved the alleged wrongdoing and whether the members had business or social relationships with the alleged wrongdoers, among other factors. In re. UnitedHealth Grp., 754 N.W.2d at 560, n.11.  Read More