## Facts

- TP Orthodontics, Inc. (TPO) was a closely held family corporation.
- Minority shareholders (siblings) brought a shareholder derivative action alleging the president and majority shareholder engaged in misconduct that reduced shareholder value.
- TPO’s board formed a Special Litigation Committee (SLC) under Indiana corporate law to investigate the derivative claims.
- After a lengthy investigation, the SLC issued a written report recommending pursuit of some claims and dismissal of others.
- TPO moved to dismiss certain derivative claims and filed a heavily redacted version of the SLC report, asserting attorney-client privilege and work-product protection.
- The minority shareholders moved to compel production of the unredacted SLC report to challenge the SLC’s good faith and the adequacy of its investigation.
- The trial court ordered production of the full, unredacted report; TPO sought interlocutory review.

## Issues

1. Whether minority shareholder-plaintiffs in a derivative action are entitled to discovery of an SLC report to test the SLC’s good faith and the adequacy of its investigation supporting a motion to dismiss.
2. Whether, and to what extent, attorney-client privilege and work-product protection shield portions of an SLC report from disclosure when the report is used to support dismissal of derivative claims.
3. What procedure should govern separating discoverable, nonprivileged material from privileged communications and attorney work product within an SLC report.

## Decision

- The Indiana Supreme Court held the SLC report was relevant to evaluating the SLC’s good faith and investigative adequacy in connection with TPO’s motion to dismiss.
- The Court rejected a categorical waiver approach and held that attorney-client communications and attorney work product within the report remain protected.
- The Court required a tailored disclosure process rather than full production of an unredacted report.
- The Court remanded with instructions that TPO must specifically identify the privileged portions and that the trial court must conduct an in camera review to determine whether the designations are valid and what redactions are proper.

## Legal Principles

- An SLC report is relevant evidence on whether an SLC acted in good faith and conducted a reasonable and adequate investigation supporting dismissal of derivative claims.
- The business judgment rule does not bar judicial inquiry into the SLC’s good faith and investigative process; limited scrutiny is permitted to assess those predicates.
- Attorney-client privilege and work-product protection apply to qualifying material included in an SLC report and are not automatically waived by the report’s existence or use in litigation.
- The party asserting privilege bears the burden to identify privileged communications or attorney work product with specificity.
- In camera review is an appropriate mechanism to resolve privilege disputes over mixed-content documents and to allow production of nonprivileged portions while protecting privileged material.

## Conclusion

The court required production of nonprivileged portions of the SLC report necessary to evaluate the SLC’s good faith and investigative adequacy, while preserving attorney-client and work-product protections through specific privilege designations and in camera review on remand.


TP Orthodontics, Inc. v. Kesling, 15 N.E.3d 985 (Ind. 2014)