In London v. Tyrrell et al.,
C.A. No. 3321-CC (March 11, 2010), read opinion here, the
Court of Chancery denied a special litigation committee's ("SLC") motion to
dismiss a shareholder's lawsuit under Zapata Corp. v. Maldonado, 430
A.2d 779 (Del. 1981) because there were material questions of fact regarding:
(1) the SLC's independence, (2) the good faith of its investigation, and (3)
the reasonableness of the grounds upon which the SLC recommended dismissal of
the lawsuit. A prior Chancery ruling in this case was highlighted on
this blog here.
Kevin Brady, a highly regarded
Delaware litigator, prepared this synopsis.
In 1996, plaintiffs Craig London and
James Hunt and defendants Patrick Neven and Walter Hupalo, and others founded
iGov, a government contracting firm. In 2005, after changing its focus, iGov
won a 5-year $300 million contract with the United States Special Operations
Command (the "TACLAN" contract). Because of the expenses it incurred in
reinventing itself, iGov's CEO, Neven, hired Michael Tyrrell as a consultant
(he later replaced London as CFO of iGov) to help iGov find a lender to supply
it with an operating line of credit. Textron Financial surfaced as a possible
candidate. Around the same time, defendants decided that it would be advisable
to implement an equity incentive plan (the "2007 Plan") for the benefit of key
members of management. Chessiecap Securities, Inc. was retained to value iGov
stock for purposes of setting the exercise price of options for the 2007 Plan.
Court of Chancery Questions Special Litigation Committee's Independence and
Investigation; Denies Motion to Dismiss Litigation in its entirety on Delaware
Corporate and Commercial Litigation Blog.