Shareholder derivative actions are the principal means of holding corporate fiduciaries accountable for many kinds of misconduct, including excessive executive compensation, self-dealing transactions, and failures of oversight that lead to major violations of environmental, health & safety, anti-bribery and securities laws.
Derivative actions are subject to a unique procedural hurdle: the “demand requirement.” This requirement obligates a plaintiff to show that corporate directors are incapable or unwilling to pursue the wrongdoing, and subjects the case to an unusually high level of scrutiny at its outset. To clear this hurdle, we utilize “books and records” demands, consulting experts, and independent investigation to develop the strongest complaint possible before filing.
Where fiduciary breaches have not resulted in a private benefit to directors and officers that justifies a monetary recovery, the most effective remedy is often corporate governance reforms that strengthen internal risk management systems, change management incentives, and improve accountability within the corporation.
As an example of our derivative work, we represented public shareholders of New Senior Investment Group challenging a self-dealing transaction in the Delaware Court of Chancery; the case settled for $53 million (the largest recovery in Delaware history as a percentage of market cap).
To discuss a shareholder derivative matter, please contact us, and an attorney will reach out to evaluate the matter with you.