## Facts

- Oracle Corporation, a Delaware corporation, was the nominal defendant in a stockholder derivative action.
- Stockholder-plaintiffs alleged that certain Oracle directors traded Oracle stock in early 2001 while possessing material nonpublic information that Oracle would miss earnings guidance, and that other directors breached fiduciary duties by failing to act.
- Oracle’s board formed a two-member Special Litigation Committee (SLC) to investigate the derivative claims and determine whether continuation of the litigation served Oracle’s interests.
- The SLC members were Oracle directors who joined the board after the challenged trades and held academic positions at Stanford University.
- After an extensive investigation and a written report, the SLC concluded Oracle should not pursue the claims and moved to terminate the derivative litigation.
- Discovery showed substantial overlapping social, professional, and institutional relationships among the SLC members, the director-defendants, and Stanford-affiliated entities, including major philanthropy to Stanford by director-defendants and their participation in Stanford-related programs and boards.
- The SLC report did not disclose or meaningfully analyze several Stanford-related ties that were potentially relevant to assessing the SLC’s independence.

## Issues

1. Whether the SLC met its burden to show there was no material factual dispute regarding its independence when seeking dismissal of a derivative action under the Zapata framework.
2. Whether non-financial relationships—such as social, institutional, and reputational ties—can create reasonable doubt about an SLC’s ability to act impartially.
3. Whether the SLC’s investigation and reporting sufficiently addressed relationships bearing on independence to justify terminating the litigation.

## Decision

- The Court of Chancery denied the SLC’s motion to terminate the derivative litigation.
- The court held the SLC failed to demonstrate the absence of a material factual question regarding its independence.
- The court found the Stanford-related connections and elite-network relationships were substantial enough to raise reasonable doubt about the SLC’s impartiality.
- Because the SLC did not satisfy Zapata’s first-step requirements, the court did not proceed to Zapata’s second step (the court’s own business-judgment assessment of dismissal).

## Legal Principles

- When an SLC moves to dismiss derivative claims under Zapata, it bears the burden of persuasion to show there is no material issue of fact calling its independence into doubt and that it conducted a good-faith, reasonable investigation.
- Independence turns on whether a director is, for any substantial reason, incapable of making a decision based solely on the corporation’s best interests; the inquiry focuses on impartiality and objectivity.
- Independence analysis is fact-intensive and may consider social, institutional, and reputational ties, not merely direct financial interests.
- An SLC’s failure to investigate, disclose, and analyze relationships that could bear on independence can support a finding that material fact issues remain, requiring denial of dismissal.

## Conclusion

The court refused to terminate the derivative action because the SLC did not carry its Zapata burden to establish independence free from material factual dispute, particularly in light of substantial Stanford-centered relationships and the committee’s incomplete treatment of those ties in its report.


In re Oracle Corp. Derivative Litig., 824 A.2d 917 (Del. Ch. 2003)