833 A.2d 961 (2003)
- P is a shareholder of Martha Stewart’s company and brought a suit derivatively. P however, did not make a demand to the company’s directors.
- P is alleging that Martha Stewart breached her fiduciary duties to the corporation by engaging in insider trading and then subsequently embarrassing the company with bad media.
- P argues that it would be futile to make a demand to the board of directors to investigate his claim.
- The board consists of six people: Martha Stewart; President; and four other.
- Martha Stewart and the President were deemed as not being independent.
- P argued that two of the directors were good friends with Martha Stewart, which made them not independent.
- P further argued that the all members of the board faced loss of assets and personal liability.
- The investigative committee excused the lawsuit.
- P argues that due to all the interests the board members had in the action, the demand was futile and did not require that a demand be made.
- Was the pre-suit demand properly dismissed and did the P require a demand?
- The suit was not properly excused and the directors were sufficiently independent.
- In evaluating the independence of an investigative committee, there will always be an interest in the outcome for board members. They are, after all, board members.
- To the extent that friendship is a factor in the relationship between the investigators and the board appointers, the friendship must be one that rises to a bias-creating level.
- The court argues that the reputation of the company alone would be in jeopardy if the board publicly appointed members of an investigative committee that were known to have bias.