Recently, the Harvard Law School Forum on Corporate Governance and Financial Regulation posted a piece by Joseph M. McLaughlin, a partner in the Litigation Department at Simpson Thacher & Bartlett LLP, on special litigation committees formed when a public company is implicated in shareholder derivative litigation. The post, based on a Simpson Thacher client memorandum by Mr. McLaughlin, describes describes how such committees can be formed "to ensure that its members and advisers can, in appearance and fact, objectively evaluate the merits of a . . . suit and the best interests of the corporation when a disabled board cannot."
The article goes through the "'Zapata' Procedure," wherein shareholder plaintiffs decide whether to approach the board about pursueing a claim against management, or to pursue the litigation purportedly on behalf of the corporation and its shareholders. Mr. McLaughlin lays out some of the legal underpinnings of the demand procedure, and the role a special litigation committee plays.
The full text of Mr. McLaughlin's post is available at: http://blogs.law.harvard.edu/corpgov/2010/04/25/special-litigation-committees-in-shareholder-derivative-litigation/#more-8594