In Re Oracle Corporation Derivative Litigation: Has a New Species of Director Independence Been Uncovered?
Delaware Journal of Corporate Law, Vol. 29, No. 3, p. 849-882, 2004
33 Pages Posted: 27 Mar 2006
This comment analyzes the Delaware Court of Chancery's decision in In re Oracle Corporation Derivative Litigation. In particular, the court's analysis of the independence of directors in the special litigation committee context is examined to determine whether the court is adopting a new standard of director independence or merely taking a fresh look at the existing rule under Zapata Corp. v. Maldonado. The role of stockholder derivative actions and special litigation committees in corporate governance is reviewed and evaluated, as well as the Delaware Supreme Court's test for the independence of directors, and the Delaware Court of Chancery's role in reviewing the decisions of special litigation committees to dismiss stockholder derivative suits. Noting that the court's decision in Oracle purportedly does not adopt a new rule of director independence, it is concluded that in actuality In re Oracle broadens the determination of director independence to include additional and original factors. Additionally, the court clearly avoids prior case law in looking beyond domination and control as the central question of independence and focuses on the contextual nature of the inquiry. As a result, the court has ensured that Delaware corporations will at a minimum look beyond pecuniary interests in making independence determinations, perhaps a necessary step toward rebuilding stockholder confidence and trust, while at the same time sustaining the robustness of Delaware corporate law.
Keywords: Delaware, Journal, Corporate, Law, derivative litigation, director independence
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