Carlton Investments v. TLC Beatrice International Holdings, Inc.
Delaware Court of Chancery
1997 WL 305829 (Del. Ch. May 30, 1997)
Shareholder Carlton Investments (Carlton) (plaintiff) brought a derivative suit challenging TLC Beatrice International Holdings' (Beatrice) $19.5 million compensation package for former CEO Reginald Lewis (defendant), alleging breach of fiduciary duty, fraud, conspiracy, and corporate waste by Beatrice's board and officers (defendants). Beatrice's board formed a two-member Special Litigation Committee (SLC), which spent roughly five months investigating and ultimately negotiated a settlement with Lewis's estate requiring repayment of about $15 million to Beatrice; the SLC moved for court approval and dismissal of the suit, which Carlton opposed.
Whether a court will approve the settlement of a derivative lawsuit negotiated by a special litigation committee.