Cuker v. Mikalauskas

692 A.2d 1042 (1997)

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Nature of the Case

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Facts

PECO (D) is a regulated utility company in Pennsylvania. Part of that regulation was a ten-year audit. The audit for 1991 recommended changes in twenty-two areas. After the audit report was released, minority shareholders filed a demand alleging wrongdoing by some of D's directors and officers. Katzman made allegations, and the board appointed a special committee to investigate those allegations. A group of minority shareholder's then filed a complaint against D and its officers and its directors. The Cuker (P) complaint made the same allegations as did the Katzman complaint. The committee conducted an extensive investigation over many months and maintained a separate existence from D. The committee consisted of three outside directors who had never been employed by D, the law firm of Dilworth et al, and Coopers & Lybrand. The committee deliberations were kept confidential. The final meeting occurred on January 26, 1994, when its report was issued. The extensive and in-depth 300-page report basically found nothing materially wrong that was not already criticized by the PUC. The twelve nondefendant board members voted unanimously to reject the Katzman claim and to terminate P's action. The court rejected D's motion for summary judgment. The court indicated that a corporation lacked the power to terminate pending derivative litigation.