Vaidik, J.
Case Summary
In 2010, three sibling shareholders, Christopher, Adam, and Emily Kesling (“the siblings”), filed suit against their brother, Andrew Kesling, on behalf of the family business, TP Orthodontics (“TPO”). In response, TPO’s board of directors established a special litigation committee to determine whether to pursue the siblings’ derivative claims against Andrew, the president of TPO. After an investigation, the committee issued a written report in which it recommended pursuing some of the siblings’ claims but not others. If a special litigation committee rejects derivative plaintiffs’ claims, Indiana law requires that those claims be dismissed, provided that the committee was disinterested and acted in good faith in reaching its decision. In accordance with Indiana law, TPO filed a motion to dismiss the rejected claims and attached a heavily redacted copy of the committee’s report. The siblings demanded access to the unredacted report, but TPO refused to produce it. The trial court ultimately ordered TPO to produce the report, and this interlocutory appeal followed.
The issue before us is whether a corporation must give derivative plaintiffs access to the report that the corporation relies on when seeking dismissal of the plaintiffs’ claims. We conclude that the corporation’s arguments against production are outweighed by basic considerations of necessity and fairness. Derivative plaintiffs must show that the special litigation committee was not disinterested or did not act in good faith in order to survive a corporation’s motion to dismiss. The best evidence of whether the committee acted in good faith is the committee’s report explaining how it so acted. Not only do derivative plaintiffs need the report in order to challenge the committee’s good faith, our trial-court judges need this report to make informed decisions.
We acknowledge that attorney-client privilege will undoubtedly infiltrate many of these reports; indeed, it is entirely conceivable that part of any special litigation committee’s reasoning for rejecting a claim will be based on counsel’s advice that a claim is unlikely to succeed on the merits or too costly given the prospects of success. And in such a case, the very reason that the committee acted in good faith is because of an attorney’s advice. Thus, we find that where a corporation forms a special litigation committee, and the corporation later requests dismissal of derivative plaintiffs’ claims based on the findings of that committee, privilege as to the committee’s report is waived. We affirm the trial court’s order compelling production of the special litigation committee report and remand for further proceedings.
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We therefore affirm the trial court’s order compelling TPO to file a copy of the entire report under seal and produce a copy to the siblings and their counsel, and we remand for further proceedings.
Affirmed.
KIRSCH, J., and PYLE, J., concur.