shareholder derivative suit

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.

shareholder derivative suit

A special type of class action lawsuit filed by one shareholder or by a limited number of shareholders on behalf of all of the other shareholders in a firm. An example is such a suit filed against a mutual fund's management in which the litigants claim excessive management and distribution fees.
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1991) ("A shareholder derivative suit is a uniquely equitable remedy in which a shareholder asserts on behalf of a corporation a claim belonging not to the shareholder, but to the corporation").
Goodwin Litigators Secure Second Circuit Win for Mutual Fund Trustees in Shareholder Derivative Suit
Once Wal-Mart's bribery scandal made headlines, the California State Teachers Retirement System (CalSTRS), concerned that Wal-Mart's bribery practices and the corresponding potential for hefty penalties would negatively impact its substantial holdings in Wal-Mart, filed a shareholder derivative suit against Wal-Mart's board in the Delaware Court of Chancery.
767, 783 (1999) [hereinafter West, Information, Institutions, and Extortion] (commenting that investors only recently began using the shareholder derivative suit as a result of the 1993 Commercial Code amendment that reduced filing fees).
Baker once represented a Park City resident in a shareholder derivative suit against a major company.
355, 357 (1994) ("Traditionally, the debate over frivolous shareholder suits has focused to a large extent on the shareholder derivative suit rather than on direct shareholder actions.
the case of a shareholder derivative suit, lead plaintiffs may not have
To address the analogous problem in the for-profit context, Delaware courts have required a stringent set of conditions to obtain before a shareholder derivative suit may survive the board's motion to dismiss.
7) One factor supporting this transformation (8) was the use of the shareholder derivative suit system to buttress the increased emphasis on an independent and effective board of directors.
While such cases rarely go to trial, the Delaware chancery court permitted a shareholder derivative suit alleging a breach of fiduciary responsibility against Disney's board to proceed.
One such area may be shareholder derivative suits brought against directors and officers of companies that experience a data security breach.
Shareholder derivative suits arising out of data breaches have opened a whole new front for suing corporate officers focusing on cybersecurity.