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The Delaware Supreme Court, sitting en banc, recently affirmed Vice Chancellor Lori Will’s dismissal of the plaintiffs’ claims in In re Baker Hughes, a GE Company, Derivative Litigation, on the motion of a single-member special litigation committee. Addressing for the first time the Court of Chancery’s reliance on live testimony in connection with an SLC’s motion to terminate, the Supreme Court expressly reaffirmed that its 1981 decision in Zapata v. Maldonado “explicitly held open the possibility of . . . ‘a discretionary trial of factual issues,’” thus blessing V.C. Will’s permitting and relying on the live testimony of the SLC’s sole member. While the Supreme Court acknowledged that “holding an evidentiary hearing where the credibility of witnesses will be weighed poses a risk of procedural unfairness” and that “credibility determinations do not sit comfortably with the application of the summary-judgment standard” applied in such proceedings, it did not address the means by which the Court of Chancery might ameliorate such risks or expand on application of a summary judgment standard in the case of live testimony. In light of the plaintiffs’ acquiescence to the SLC’s live testimony and a thorough cross examination of the witness, the Supreme Court held that V.C. Will’s reliance on the SLC’s testimony was not an abuse of discretion.   While the practical implications of the use of live testimony offered in support of an SLC’s motion to terminate remain unsettled, the Supreme Court’s ruling reaffirms the propriety of single-member special litigation committees and makes clear that the Zapata process can include live witness testimony. SLCs are well-served to consider whether they might benefit from the use of a “mini trial” where there may be potential issues of fact relating to the factors to be considered in a Zapata hearing.   Continue reading: https://lnkd.in/e3UASSwJ

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