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Business Associations Keyed to Coffee, 9th Ed.
Zapata Corp. v. Maldonado
Citation:
430 A.2d 779 (1981)Facts
In June 1975, William Maldonado, a stockholder of Zapata Corporation, filed a derivative action in Delaware Court of Chancery against ten Zapata directors and officers alleging breaches of fiduciary duty. Maldonado did not first demand that the board bring the action, claiming demand would be futile because all directors were named as defendants and allegedly participated in the wrongdoing. In June 1977, Maldonado filed a similar action in federal court in New York. By June 1979, four defendant-directors had left the board, and Zapata appointed two new outside directors who formed an “Independent Investigation Committee” to evaluate the litigation. The Committee was given final authority to determine whether the litigation should continue. After investigation, in September 1979, the Committee concluded the actions should be dismissed as contrary to Zapata’s best interests. Zapata then moved for dismissal in all pending actions. The New York federal court granted dismissal, but the Delaware Court of Chancery denied the motion, holding that Delaware law does not permit a committee to dismiss a properly initiated derivative suit.
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