Carlton Investments v. TLC Beatrice International Holdings, Inc.
Delaware Court of Chancery
1997 WL 305829 (Del. Ch. May 30, 1997)
The board of directors of TLC Beatrice International Holdings, Inc. (Beatrice) approved a compensation package worth $19.5 million for its former chief executive officer, Reginald Lewis (defendant). A major shareholder in Beatrice, Carlton Investments (Carlton) (plaintiff), brought a shareholder’s derivative suit chiefly to challenge that deal. Specifically, Carlton accused existing and past board members and officers of Beatrice (defendants) of breaching fiduciary duties, as well as committing fraud, conspiracy, and corporate waste. The parties engaged in a significant amount of discovery and made numerous motions on the court. Beatrice’s board then voted to add two new directors to the board, who would serve as the Special Litigation Committee (SLC). The SLC was charged with investigating the claims and making recommendations to Beatrice regarding the litigation. The SLC spent approximately five months investigating the underlying claims and negotiated a settlement with Lewis’s estate, under which the estate would repay approximately $15 million to Beatrice. The SLC moved the Delaware Court of Chancery to approve the settlement and dismiss the lawsuit under Chancery Court Rule 23.1. Carlton opposes the settlement.
Rule of Law
Holding and Reasoning (Allen, J.)
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