Shareholders’ Derivative Actions

Shareholders’ Derivative Actions (also known as Derivative Actions or a Stockholder’s Derivative Suit) are lawsuits brought by individual company shareholders in the name of the corporation in which they hold stock. They most commonly arise when one or more stockholders believe management are acting improperly, or are failing to take action to defend the company’s rights. Examples include managers selling company assets to themselves or to outsiders at below market value – thereby diluting shareholder value and breaching the officers’ fiduciary duties – or a failure by management to defend the company’s patents and trademarks. It is important to note that because shareholders’ derivative actions are brought in the name of the company, any compensation won goes to the company and not directly to the plaintiffs who initiated the suit (though, as shareholders, the plaintiffs do benefit, albeit indirectly).

These suits represent a highly specialized form of law which many firms are not well-equipped to handle. The Philadelphia-based firm of Danziger Shapiro, P.C., however, brings a wealth of experience to this legal area. We typically handle shareholders’ derivative actions on a contingency fee basis. In such situations our final remuneration will be determined by the size of the ultimate settlement, and must be approved by the court.