Bach v. National Western Life Insurance Co.
United States Court of Appeals for the Fifth Circuit
810 F.2d 509 (1987)
- Written by Sean Carroll, JD
Facts
Kent Bach (plaintiff), a shareholder of National Western Life Insurance Company (NWL) (defendant) brought a shareholder derivative action against NWL. NWL appointed two members of its board of directors to a special litigation committee (SLC) to investigate the allegations in the lawsuit. Following the SLC’s recommendation, the NWL board of directors determined that pursuing the lawsuit was not in NWL’s best interests. Bach challenged the decision, claiming that the SLC was not independent for three reasons. First, the SLC members were two executives of other insurance companies that had certain reinsurance agreements with NWL. Second, prior to the establishment of the SLC, the SLC members had voted to approve reimbursement of the board’s litigation expenses. Bach argued that this availability of reimbursement created an incentive not to pursue the lawsuit. Third, Bach pointed out that the SLC members met at a resort with other members of the board. The district court granted NWL summary judgment. Bach appealed, arguing that there were questions of fact about the SLC’s independence.
Rule of Law
Issue
Holding and Reasoning (Higginbotham, J.)
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