Shareholder Derivative Litigation Lawyer

When you own stock in a company, you are counting on officers and directors to act a certain way and put your interests first. Your investment can suffer when they fail to uphold the duties that they owe to the shareholders. 

The shareholder derivative attorneys at Federman & Sherwood can file a lawsuit on behalf of the shareholder to recover losses from damages caused by certain actions of directors and officers.

We passionately believe in standing up for the rights of investors, and we commit to fighting for you to help the company in which you invested get money back for its losses. You can begin the legal process by calling us to schedule a free case review.

Clients praise Federman & Sherwood for its experience and versatility. “The attorneys of Federman & Sherwood bring many years of experience in many types of litigation. I highly recommend using them!”

What Is a Shareholder Derivative Lawsuit?

The value of a shareholder’s investment can be eroded due to wrongful corporate actions. A shareholder has an incentive to restore that financial value through a derivative lawsuit in which the company may recover money from the officers who have violated the fiduciary duty that they owe to those who actually own the company or have done anything else wrong that may cost the shareholders money.

As a shareholder, the value of your investment depends on it. Shareholder derivative lawsuits can be complex legal actions that require an experienced attorney who knows how to hold the officers accountable for wrongdoing.

In a shareholder derivative lawsuit, you are actually filing a lawsuit on behalf of the company itself. You would not receive any money yourself if you win your case. Instead, those who are held responsible would need to pay money back to the company. Directors and officers could be personally liable for their actions.

Usually, an officer or director would have liability insurance that would at least partially cover themselves from financial consequences, although they may even have to pay money out of their own pocket. 

Circumstances Covered By Shareholder Derivative Lawsuits

Shareholder derivative lawsuits can cover a wide variety of corporate actions that can include:

• Self-dealing
• Excessive compensation for corporate executive
• Failed corporate transactions, such as mergers and acquisitions
• Corporate transactions that involve conflicts of interest
• Breaches of fiduciary duty on the part of officers and directors
• Failure to provide oversight of the company (a recent case in the Delaware Court of Chancery held that both officers and directors can be sued for this)
• Waste of corporate assets

Any Company Can Be Sued in a Shareholder Derivative Lawsuit

Many shareholder derivative lawsuits are filed against large publicly traded companies, and these cases tend to see higher dollar-value settlements. However, any company that has shareholders can be sued in one of these cases.

Officers and directors of private companies can also commit wrongful actions, and they can be sued. In fact, minority owners of private companies can also file a derivative lawsuit.

In fact, there are some exceptions in the law that make it easier for shareholders to sue in a closely-held company, recognizing their own tenuous legal position.

Challenges in a Shareholder Derivative Lawsuit

There is often a presumption at work that the directors and officers of a company are in the best position to know what is best for that business. There is a “business judgment” rule that protects corporate officers when they act in good faith, using reasonable care and believe that they are acting in the best interests of the company. In other words, the directors and officers may not be liable just because the decisions that they made proved to be wrong in the end. 

However, it is possible to overcome these presumptions in a shareholder derivative lawsuit. For example, if the directors and officers were grossly negligent, or they acted with a conflict of interest, you may be able to overcome any protections afforded by the business judgment rule.

Why You Need a Lawyer for a Shareholder Derivative Lawsuit

The officers and directors go into overdrive to protect themselves when they have been accused of misconduct. In addition, they have often purchased D&O liability insurance to protect themselves when you are coming for their money. The board and corporate officers often hire high-priced lawyers to pull out all the stops to defend themselves, and you need an aggressive and experienced attorney who can fight back. 

Shareholder derivative lawsuits often require delving deeply into company actions to show why they are wrong. Much of these cases are developed during the discovery process of a lawsuit, where your shareholder derivative litigation lawyer aggressively pursues information through document requests and depositions. These cases may sometimes involve novel legal issues that require courts to set new standards. 

Contact a Shareholder Derivative Litigation Attorney Today

If you suspect that the officers and directors cost a company, and you are a shareholder, call the aggressive shareholder derivative litigation law firm of Federman & Sherwood today to learn more about your legal rights. Our shareholder derivative litigation lawyers can begin the fight on your behalf once you call us at 405-235-1560 or 800-237-1277 to schedule a free evaluation.