stockholder derivative suit

(redirected from Shareholder Derivative Suits)

Stockholder Derivative Suit

A lawsuit filed by one or more shareholders of a publicly-traded company in the name of the company. Often, this lawsuit is filed against a member of the company's management who committed an illegal, unethical, or negligent act. Directors' and officers' liability insurance can protect the management from losses as the result of one of these lawsuits. They are also called derivative suits and derivative action.

stockholder derivative suit

A lawsuit filed by one or more of a company's stockholders in the name of the company. A derivative suit is filed when the firm's management will not or cannot sue in the name of the company. For example, a stockholder may enter a derivative suit against the firm's chief executive officer to recover funds from a questionable or an improper act by that officer. Also called derivative suit.
References in periodicals archive ?
Most cybersecurity breach litigation today falls into one of four categories: 1) shareholder derivative suits to recover for losses in stock value; 2) securities fraud class actions to recover for the diminution in stock value following a cyber breach; 3) class action lawsuits by the breached company's outside customers or business partners whose sensitive or personal information was compromised during the breach; or 4) enforcement actions by governmental agencies invoking their regulatory authority under relevant state or federal laws.
One such area may be shareholder derivative suits brought against directors and officers of companies that experience a data security breach.
Fallout from the hack not only prompted the ousting of Target's chief executive officer, Gregg Steinhafel, but it also spawned at least two shareholder derivative suits against the company and its directors and officers, and prompted proxy firm Institutional Shareholders Services to recommend that investors remove seven board members for allegedly breaching their fiduciary duties by failing to protect the company from the breach.
Compliance programs also help demonstrate that officers and directors are fulfilling their fiduciary duties to shareholders by adopting proper procedures for corporate legal compliance, and can be useful in defending shareholder derivative suits that may arise following export violations.
For shareholder derivative suits, we use the size of attorneys' fees as a proxy for the settlement amount, and we find that fees are related to the level of backdating activity.
In investor terms, DRRT helps its clients generate "Legal AlphaSM" through uncompromising pursuit of loss recovery in private and class actions, shareholder derivative suits, appraisal disputes, and in the class action and semi-class action settlement claims filing area through Pro-Active Portfolio MonitoringSM.
Shareholder derivative suits arising out of data breaches have opened a whole new front for suing corporate officers focusing on cybersecurity.
(12) CalSTRS sought to overcome the demand requirement by pleading demand futility because the directors, having already ignored the need for an investigation, were now "incapable of impartially investigating or taking appropriate action against themselves and others." (13) In fact, multiple shareholder derivative suits against Wal-Mart make similar allegations and are still in pretrial stages at the time of publication: seven in Delaware and five in Arkansas state and federal court.
Similar securities lawsuits could follow against other banks, as could shareholder derivative suits.
And companies can still face nonclass action securities litigation in the form of individual securities suits, shareholder derivative suits and M&A-related suits.
(213) Then, in 1997, the Osaka High Court issued what many academics view as a watershed judgment that "served to check a growing tendency by courts to grant liberally defendants' motions for security for expenses." (214) Several prominent scholars opined that the tightening of security for expense awards "set an important precedent for further expanding the use of shareholder derivative suits." (215)