Highlights

Search

Sidley Updates

News & Media

Publications

Events

Representing Multiple Parties in Derivative Litigation

Bloomberg Law Reports – Corporate Law
February 16, 2010

Shareholder derivative actions represent a narrow exception to the general rule that a corporation's board of directors has the power to decide whether the corporation should initiate litigation. In such actions, shareholders bring a lawsuit on behalf of the corporation for alleged wrongdoing by corporate officers or members of the corporation's board of directors, seeking relief for the corporation's benefit. Accordingly, while the corporation is named as a nominal defendant, the corporation is in actuality the plaintiff and will recover any settlement or judgment. On its face, the corporation's anomalous position of being both a plaintiff and a defendant indicates a potential conflict of interest between the corporation and the individual director and officer defendants. This article explores these potential conflicts of interest at various stages of shareholder derivative litigation and the implications of joint representation by a single counsel for the corporation and its directors and officers.

Originally published by Bloomberg Finance L.P in the Vol. 4, No. 4 edition of the Bloomberg Law Reports – Corporate Law.

• View Article