Curtis v. Nevens

Summary

The Colorado Supreme Court addresses the trial court's authority to review a special litigation committee before the committee begins its investigation in a shareholder derivative action. The court holds that pre-investigation review is limited to determining whether the committee is independent and disinterested, and that the reasonableness of its procedures generally may not be reviewed until the investigation is complete. The court also directs the trial court to approve the committee and stay the derivative action for a limited, reasonable period.

Holdings

1. When a special litigation committee has not yet begun its investigation, the trial court's review is limited to determining whether the committee is independent and disinterested. The court may not review the reasonableness of the committee's proposed procedures before the investigation is completed, absent exceptional or extraordinary circumstances.
2. A special litigation committee may appropriately use the business judgment standard to guide its analysis, and a trial court may not reject the committee's appointment based on the court's own assumptions about the factors the committee will consider or the cost of the committee's investigation.
3. Once an independent and disinterested special litigation committee is approved, the trial court should stay the derivative action for a limited and reasonable period to allow the committee to investigate and report, unless extraordinary circumstances justify permitting plaintiff discovery to continue.

Questions Presented

1. Whether a trial court may review the reasonableness of a special litigation committee's proposed investigative procedures before the committee begins its investigation.
2. Whether the trial court erred by refusing to approve an independent and disinterested special litigation committee based on the court's concerns about the committee's proposed use of the business judgment standard and the expense of the investigation.
3. Whether a trial court should stay a shareholder derivative action for a limited and reasonable period after approving a special litigation committee, absent extraordinary circumstances requiring continued plaintiff discovery.

Disposition

writ_granted