Shareholder Derivative Claims: What Is A Special Litigation Committee (SLC)?
There are two main types of shareholder lawsuits: Direct action and a derivative claim. The Cornell Legal Information Institute defines a shareholder derivative action as “lawsuit brought by a shareholder on behalf of a corporation.” A minority shareholder may pursue derivative litigation when they believe that the company itself has a valid claim, but the officers/directors are refusing to act.
When a shareholder derivative action is initiated in Florida, the corporate board has a right to investigate the matter to determine how they wish to proceed. This may involve the creation or appointment of a Special Litigation Committee (SLC). Here, our West Palm Beach shareholder disputes attorneys explain the most important things to know about SLCs.
Shareholder Derivative Lawsuit: Special Litigation Committee (SLC)
Shareholder derivative litigation arises when one or more minority shareholders believe that the corporate decision-makers are failing to pursue legal action that would be in the best interests of the company. In many cases, this occurs because the minority shareholder alleges wrongdoing by a key corporate officer, corporate director, or by the Board itself.
A Special Litigation Committee (SLC) is a tool that corporations can use to address derivative litigation. Simply described, an SLC is a group of impartial individuals who are being tasked with investigating, reviewing, and evaluating the matter at the heart of the derivative claim. Most often, the SLC will draft a written document advising corporate leaders on how to move forward with the case.
Florida Courts Give Considerable Deference to a Truly Impartial SLC
In order to bring a successful shareholder derivative claim in Florida, a plaintiff generally needs to establish that it is unreasonable for the corporation to pass up taking legal action in regards to the matter at stake. In other words, the plaintiff in a derivative lawsuit is arguing some form of corruption, negligence, or misconduct.
When a truly impartial and independent SLC has been created/appointed by a corporate board, Florida courts tend to give considerable deference to their recommendation. If a fair and independent SLC advises that a shareholder derivative suit should be dismissed outright, a Florida court is likely to ratify that decision.
Of course, every case is unique. There may also be questions raised about whether or not a particular Special Litigation Committee is truly independent and fair-minded. If you have any specific questions or concerns about the use of SLCs in shareholder derivative litigation, our South Florida shareholder disputes lawyers can help.
Schedule a Confidential Case Review With a Shareholder Dispute Lawyer in Florida
At Pike & Lustig, LLP, we handle shareholder derivative litigation and related legal matters. If you have any questions about Special Litigation Committees (SLCs) or any related matters, we are here to help. Give us a call now for your confidential case review. We serve clients in shareholder litigation all over Southeastern Florida, including in West Palm Beach, Lake Worth, Delray Beach, Pompano Beach, Hialeah, Miami, Miami Beach, and Boca Raton.
Resource:
law.cornell.edu/wex/shareholder_derivative_suit
