Blogs

Posts Categorized: Derivative Actions

Posted: February 3, 2016

Arbitrary Decisions Not Covered by the Business Judgment Rule

On January 21, 2016, the First Department issued a decision in Tsui v. Chou, 2016 NY Slip Op. 00428, holding that the trial court “incorrectly determined that plaintiffs’ breach of fiduciary duty and breach of contract claims [we]re barred by the business judgment rule,” explaining: Plaintiffs, suing derivatively on behalf of all unit owners of... Read more »

Posted: January 24, 2016

When a Majority of Directors in Derivative Action Are Independent, Demand is Not Excused

On January 14, 2016, the First Department issued a decision in Wandel v. Dimon, 2016 NY Slip Op. 00252, holding that when the majority of the directors of a Delaware corporation are independent, demand is not excused in a derivative action because of allegations that some directors declined to investigate a matter for fear that... Read more »

Posted: November 30, 2015

Client Q&A: I am a shareholder in a family-owned business. I think that CEO of the company has been taking advantage of us. Besides firing her, is there anything we can do?

By John M. Lundin Shareholders own the corporation, but the directors and the officers they employ run it. Making sure that corporate officers act in the best interests of the shareholders, who own the company, rather than themselves, is one of the fundamental problems of corporate law. Fiduciary Duties A corporate officer has a fiduciary... Read more »

Posted: October 30, 2015

Court Blasts Derivative Class Action Settlement

On October 23, 2015, Justice Ramos of the New York County Commercial Division issued a decision in Matter of Allied Healthcare Shareholder Litigation, 2015 NY Slip Op. 51552(U), denying a “joint unopposed motion for the entry of an order directing notice to the proposed class and scheduling a hearing on class certification and settlement.” In... Read more »

Posted: October 8, 2015

Claims Direct, Not Derivative, Because Harm Alleged and Relief Sought Were to Plaintiffs

On October 6, 2015, the First Department issued a decision in SFR Holdings Ltd. v. Rice, 2015 NY Slip Op. 07222, upholding claims as direct, not derivative, explaining: As the motion court correctly found, in determining whether plaintiffs’ complaint alleges direct or derivative claims, the relevant analysis is who suffered the alleged harm and who... Read more »

Posted: July 26, 2015

Plaintiff Must Nullify Cancellation Before Bringing A Derivative Action On Behalf Of A Defunct Delaware LLC

On July 6, 2015, Justice Oing of the New York County Commercial Division issued a decision in Meissner v. Yun, 2015 NY Slip Op. 31181(U), granting summary judgment against all of a plaintiff’s derivative claims. Meissner involved the disputed ownership of a Delaware LLC, and the plaintiff advanced a number of claims—breach of fiduciary duty,... Read more »

Posted: April 5, 2015

First Department Examines Demand Futility

On April 2, 2015, the First Department issued a decision in Bodner v. Grunstein, 2015 NY Slip Op. 02849, reversing a trial court dismissal of a derivative claim for failure to make a demand on the company. The First Department explained that Plaintiff set forth sufficiently particularized facts to raise a reasonable doubt that defendant... Read more »

Posted: February 5, 2015

Damages in Derivative Action Must go to Corporation, Not Plaintiff

On January 28, 2015, the Second Department issued a decision in Sakow v. Waldman, 2015 NY Slip Op. 00742, regarding the distribution of a damages award in a derivative action. In Sakow, the plaintiff, who brought an action both individually and derivativly regarding the management of a real estate investment, prevailed at trial and was... Read more »

Posted: January 19, 2015

Shareholder Has Standing to Assert Unjust Enrichment Claim

On January 13, 2015, the First Department issued a decision in Scott v. Pro Management Services Group, LLC, 2015 NY Slip Op. 00318, illustrating the circumstances under which a shareholder has standing to assert a claim for unjust enrichment. It explained: Plaintiff’s unjust enrichment claim is direct, and not derivative, because plaintiff suffered the alleged... Read more »