Derivative Action


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Derivative Action

A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do.

A derivative action, more popularly known as a Stockholder's Derivative Suit, is derived from the primary right of the corporation to seek redress of legal grievances through the courts. The procedure to be followed in such an action is governed by the rules of federal Civil Procedure and state provisions, where applicable.

derivative action

n. a lawsuit brought by a corporation shareholder against the directors, management and/or other shareholders of the corporation, for a failure by management. In effect, the suing shareholder claims to be acting on behalf of the corporation, because the directors and management are failing to exercise their authority for the benefit of the company and all of its shareholders. This type of suit often arises when there is fraud, mismanagement, self-dealing and/or dishonesty which are being ignored by officers and the Board of Directors of a corporation. (See: corporation)

References in periodicals archive ?
SUMMARY NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTION, SETTLEMENT HEARING, AND RIGHT TO APPEAR
On November 13, the New York Supreme Court, New York County, granted a motion to dismiss a stockholder derivative action filed against the directors, officers and controlling stockholders of Weil client Fairway Group Holdings Corporation.
transplanted derivative action lay moribund for almost four post-war decades, while at the same time the derivative action was a staple of shareholder litigation in the United States.
Unlike the more familiar shareholder class-action lawsuits, in which investors sue to recover their own losses, a derivative action is filed against a company's officers by shareholders acting on the company's behalf.
Andersen argued that the only remedy that applies was a derivative action by the shareholders on behalf of the corporation, since Andersen owed no direct duty to individual shareholders.
SAN DIEGO -- The United States District Court for the Central District of California recently appointed Johnson & Weaver, LLP to pursue a derivative action on behalf of Questcor Pharmaceuticals Inc.
OTC LLEN) ("L&L" or the "Company"), today announced that it has agreed to settle the four pending derivative action lawsuits against it.
Robbins Umeda LLP highlights that Sealy shareholders have the option to file a shareholder derivative action to hold those officers and directors accountable for damaging the company.
This comprehensive legal study features an up-to-date listing of state derivative action statutes and rules, plus analysis of other significant developments, such as the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act on shareholder derivative litigation and recent case law concerning the demand requirement and attorneys' fees.
IF THE COURT APPROVES THE SETTLEMENT AND DISMISSAL OF THE FEDERAL DERIVATIVE ACTION, SHAREHOLDERS OF HQSM WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE SETTLED CLAIMS.