Lowinger v. Oberhelman

Dist. Ct. did not err in granting defendants-former Caterpillar Bd. of Directors’ motion to dismiss plaintiffs’ derivative shareholder action, alleging that defendants breached their fiduciary duties by failing to conduct adequate investigation with respect to Caterpillar’s purchase of Chinese mining company that caused Caterpillar to incur $580 million goodwill impairment charge, and that current Bd. failed to file said action after relying on report from law firm recommending that no action be filed. Dist. Ct. could properly reject contention that law firm’s alleged conflicts of interest and flawed legal report actually support claim that Bd. acted irrationally in denying plaintiff’s demand to file underlying lawsuit, since: (1) Bd.’s decision to refuse plaintiffs’ requested litigation is protected under business judgment rule; (2) plaintiffs failed to present facts that created reasonable doubt about Bd.’s good faith and reasonableness of Bd.’s investigation; (3) plaintiff’s failed to present sufficient facts demonstrating that law firm had conflict of interest when evaluating merits of plaintiff’s proposed lawsuit; and (4) perceived faults with legal analysis contained in report will not support finding that Bd. was grossly negligent and otherwise fell within business judgment rule.