Shareholder Derivative Suits
In the wake of recent financial crises and accounting scandals, and emboldened by increased legislative and regulatory scrutiny of fiscal and fiduciary practices, shareholders are taking matters into their own hands. Shareholder derivative suits are on the rise, brought by individuals and groups of investors against parties — including directors and officers — that have allegedly caused harm to the organization.
The lawyers of McGuireWoods’ securities class action practice provide strategic legal counsel to defendants named in shareholder derivative suits. We fully understand the ramifications of these disputes, within the organization itself and in the public eye, and help clients determine the optimal course of action. This strategy necessarily helps preserve individual professional reputations, as well as the ongoing viability of corporations and business concerns.
As seasoned litigators, we have represented clients at every step of the investigative and trial processes, from pretrial discovery, witness deposition and serving as first-chair and national coordinating counsel to negotiating out-of-court settlements. From our offices across the United States and in Europe, we regularly defend senior corporate management, boards of directors and corporations against allegations involving breach of fiduciary duty, nonpayment of dividends and redemptions, excessive compensation, auditor activities and preparation of financial statements, disputed mergers and acquisitions, and backdating of stock option grants.
Among other recent successes, we won dismissal of a triple derivative action, with prejudice, in a matter alleging the diversion of more than $100 million in funds for the personal use of a senior corporate officer. Although the corporation was based outside of the United States, the shareholder who brought the complaint filed the lawsuit in Florida state court. The court agreed with our motion to dismiss, in which we argued that the laws of the corporation’s home country, which did not allow for a triple derivative action, should apply.
Because shareholder derivative suits often arise in conjunction with other investigations into the conduct of corporations and individuals, we work closely with other firm teams — white-collar criminal defense, directors and officers liability and accountants liability, for example. We regularly serve as counsel in grand jury investigations, agency investigations and law-enforcement actions implemented by the U.S. Securities and Exchange Commission (SEC), Department of Justice (DOJ) and other federal and state agencies.