Sarnacki v. Golden

(United States First Circuit) – In this shareholder derivate suit, plaintiff Sarnacki asserts Nevada state-law claim against Smith & Wesson’s officers and directors, including breach of fiduciary duties, wastes of corporate assets, and unjust enrichment. In reaction to earlier and parallel cases, Smith & Wesson’s Board formed a Special Litigation Committee (SLC) to investigate and determine the viability of any of these claims and to make a recommendation to the Board whether to pursue any of these claims. The SLC recommended against filing any claims. The district court granted defendant’s motion for summary dismissal on the basis of the SLC recommendation, and after limited discovery. The judgment is affirmed, where: 1) the Board has met its burden as to proving the independence of the SLC; 2) the SLC’s investigation was reasonable and in good faith; and 3) the district court’s decision to limit discovery was not an abuse of the court’s discretion, as it was adequate to aid its review.