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Shareholder Derivative Litigation

The Shuman law firm shareholder derivative litigation practice seeks to protect and enhance the rights of shareholders by holding board of directors and executive officers accountable.  We require corporations to adopt robust corporate governance reforms that are directed towards enhancing the corporations overall internal controls and operations.  We represent investors who demand that board of directors’ act in the best interests of the corporation and their shareholders.

In a shareholder derivative action, an individual shareholder serves as a representative plaintiff and takes legal action on behalf of the corporation.  The shareholder derivative action is typically brought against insiders of the corporation, such as the executive officers board of director, who are suspected of misconduct or other acts that cause harm to the corporation.  A shareholder derivative action allows shareholders to redress harm to the corporation where it is unlikely that the board of directors or management will redress the harm itself.   By filing a shareholder derivative action, a single shareholder may be able to compel changes that otherwise might not happen at the corporation, such corporate governance reforms, the removal of officers or directors whose misconduct injured the corporation, and monetary payments in the form of damages and/or disgorgement (recovery) of ill-gotten gains.

Corporate misconduct harms not only shareholders, but also the financial markets by driving down stock prices, decreasing shareholder value, and creating mistrust among investors.  Past revelations of corporate fraud, including Enron, Qwest, and WorldCom, the stock options backdating scandals, highlight the need to enforce the legal duties of loyalty and good faith that corporate directors and officers owe to their shareholders.  Shareholder derivative actions provide greater accountability for shareholders, inspire investor confidence in the financial markets, and protect companies and shareholders from further harm.