Gall v. Exxon Corp.
U.S. District Court, Southern District of New York
418 F. Supp. 508 (1976)
After revelations that Exxon Corporation (defendant) had paid $59 million in secret bribes and political contributions, its board created a special committee that investigated the matter and unanimously determined that pursuing legal action against any current or former Exxon director would be against the corporation's and shareholders' best interests, authorizing officers to seek dismissal of pending shareholder derivative suits. Shareholder Gall (plaintiff) sued, and Exxon moved for summary judgment based on the committee's determination, but Gall alleged committee members may have themselves been involved in, or interested in transactions related to, the underlying wrongdoing, calling into question whether the committee acted independently and in good faith.
Whether a corporate committee's decision not to pursue a derivative claim is automatically protected by the business judgment rule when a shareholder plaintiff plausibly alleges the committee lacked independence or good faith.