Also known as: derivatives · derivatively
Written by attorneys · grounded in primary & secondary sources — see below
A civil suit brought in the right of a corporation or limited liability company to recover for an injury to the entity itself. The plaintiff must be a shareholder or member both at the time of the challenged conduct and when the action is filed. Any recovery belongs to the entity rather than the individual plaintiff.
Dominic Drake owns shares in Desert Oil. After learning the board approved an insider sale of equipment at a steep discount, he sent a detailed demand letter to the corporation. Because Dominic acquired his shares after the challenged transaction closed, the court must decide whether he satisfies the contemporaneous-ownership requirement to maintain the derivative action.
Derek Douglas became a member of Diamond Manufacturing after the managers diverted funds to an affiliate they controlled. He filed a derivative action on the LLC's behalf seeking recovery of the diverted amounts. Because Derek was not a member when the misconduct occurred, the court must determine whether his later-acquired status satisfies the contemporaneous-ownership requirement.
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Darrell Duncan acquired his limited-partner interest by inheritance after the general partners had already engaged in self-dealing. He now seeks to bring a derivative action to recover the diverted funds for the partnership. The court must decide whether status acquired by operation of law satisfies the requirement that the plaintiff be a partner both at the time of the conduct and when suit is filed.
Diego Duarte filed a derivative complaint against Davenport Pharmaceuticals alleging improper payments to a board member's relative. The corporation promptly formed a committee to investigate the allegations and moved for a stay of the litigation. The court must decide whether to pause discovery while the committee completes its review.
Deanna Davenport, a member of Dynamic Solutions, prevailed in a derivative action that recovered misappropriated funds for the LLC. The court must determine whether the judgment proceeds belong to the company or whether Deanna may retain any portion for herself.
Daphne Doyle filed a derivative action naming the limited partnership as a defendant. The partnership appointed a special litigation committee to investigate the claims and moved to stay discovery while the committee conducted its review. The court must decide whether to grant the stay to allow the committee to determine whether pursuing the claims serves the partnership's best interests.
Yes. The governing statutes require that the plaintiff be a shareholder or member both when the challenged conduct occurred and when the action is commenced. Loss of that status during the litigation can result in dismissal.
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If the corporation or partnership commences an inquiry into the allegations, the court may stay the proceeding for a period it deems appropriate. The stay permits the entity to investigate without interference from ongoing litigation.
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Any recovery belongs to the corporation, LLC, or limited partnership, not to the individual plaintiff. The plaintiff may, however, receive reasonable expenses, including attorneys' fees, from the entity's recovery if the action succeeds in whole or in part.
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…judgment. Whatever constitutional status the doctor-patient relation may have as a general matter, in the present context it is derivative of the woman's position. The doctor-patient relation does not underlie or override the two more general rights under which the abortion right is justified: the right to make family…