Derivative Or Direct?

A sometimes confusing area of corporate litigation concerns whether a claim asserted by a stockholder in a lawsuit against a corporation's officers and directors is a "derivative" claim brought on behalf of the corporation, or a "direct" claim brought by the stockholder on his or her own behalf rather than the corporation's. The distinction is important, as the proper characterization of a stockholder claim can have a significant impact on the parties and how the lawsuit proceeds, in some instances determining whether it proceeds at all. In a new opinion, <i>Tooley v. Donaldson, Lufkin &amp; Jenrette, Inc.</i>, the Delaware Supreme Court has cleared up some of the confusion, holding that a claim is derivative whenever the corporation has suffered the alleged harm and will be the beneficiary of the relief granted by the court.

18 minute read May 26, 2004 at 10:46 AM
By
Joe Click
Derivative Or Direct?

A sometimes confusing area of corporate litigation concerns whether a claim asserted by a stockholder in a lawsuit against a corporation's officers and directors is a “derivative” claim brought on behalf of the corporation, or a “direct” claim brought by the stockholder on his or her own behalf rather than the corporation's.

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