Shareholder Power: Court Leaves It to Shareholders 
to Determine if Derivative Claim Is in Corporation’s Best Interest

Business team

Many actions between members of small businesses are brought as derivative suits, which means that the individual bringing the action is suing on the corporation’s behalf and seeks damages for harm that has been done to the corporation. Any shareholder may theoretically bring a derivative suit, but Massachusetts law requires that the shareholder first demand that the corporation take suitable action to correct the misconduct at issue. Only if the corporation rejects or ignores this demand may the shareholder commence the derivative litigation. It should be noted that members of limited liability companies do not have to deliver a written … Continue reading

Plaintiffs Satisfy Delaware Pre-Suit Demand Requirement by Rejecting Own Demand

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In Nekoroski v. Mathai, 2012 WL 3126434 (Mass.Super. – Business Litigation Session), the directors and shareholders of OpenRisk, LLC brought suit against the former officers for, inter alia, theft of trade secrets and breach of fiduciary duty.  OpenRisk, formed under Delaware law in January 2011, is a technology company that provides a platform for insurance companies to better assess risk. The defendants, who were “service members” of the LLC until resigning a few months after joining the company, had entered into not only an Operating Agreement with the plaintiffs, but also a Service Agreement.  Defendants moved to dismiss the complaint, … Continue reading