A word for the wise for boards or special (i.e., audit) committees evaluating a shareholder demand for the company to file suit in a derivative action:  the board or special committee must be sufficiently directly and indirectly independent of the issues and of the potential defendants.  Recently the Delaware Court of Chancery handed down another in a line of opinions holding that a supposed independent board in fact was not independent (see In re INFOUSA, Inc. Shareholders Litigation, Civ. Action No. 1956-CC, Memorandum Opinion revised August 20, 2007).  In pertinent part, the Court held that a majority of the board members lacked independence for various different reasons including possible liability exposure relating to the issues in dispute, and financial or personal relationships with the alleged defendants or related entities.  Thus, the Court held that it would have been futile for the plaintiffs to have made a pre-suit demand on the board.

In an other development, shareholders of AIG are pursuing a derivative action against the auditor of AIG, PwC.  See discussion at http://retheauditors.blogspot.com/