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To support such claims, a derivative plaintiff, like a direct plaintiff, can turn to both common and statutory law. 3a which instructs courts to take into consideration the “reasonable expectations of the shareholders”); 1986 Minn.
Minnesota case law has long recognized that “directors or controlling shareholders stand in a fiduciary relationship to the corporation.” The Minnesota Supreme Court stated that, in order to establish a claim of breach of fiduciary duty, “a plaintiff must allege facts which show that the action attacked is so far opposed to the true interests of the corporation as to lead to the clear inference that no officer thus acting could have been influenced by an honest desire to secure such interest.” The trial court had dismissed plaintiff’s claim, finding no breach of fiduciary duty. 2 by substituting “closely held corporation” for “corporation having 25 or fewer shareholders”); 1983 Minn.
Part III describes the special problems faced by derivative plaintiffs as contrasted with direct plaintiffs and thereby shows why the direct/derivative distinction matters.
Part IV explains why it is important to draw that distinction early in any litigation.
Part V examines and critiques Minnesota’s current approach to the direct/derivative analysis.
Part VI proposes a special rule for making the distinction in the context of closely held corporations, and Part VII wraps up the analysis with some important details concerning procedure and remedies. Direct Claims In learning to distinguish between direct and derivative claims, it is useful to first understand each claim in its pure form.
Recognizing the vulnerability of minority shareholders in a close corporation, the statute accords them special protections. A direct suit typically names not only the corporation but also individual directors and shareholders as defendants.
A shareholder asserts a direct claim to vindicate some right personal to the shareholder.
The shareholder suffers the harm directly, rather than as a consequence of damage to the corporation.
It specifies several grounds for judicial intervention and provides a panoply of equitable remedies. (b) In an action by a shareholder when it is established that: . The corporation is a proper and often even a necessary party, because often the corporation takes the formal action which effects the injury.
For the close corporation claimant, the key grounds are found in clauses 2 and 3 of subdivision 1(b). Moreover, the corporation is typically the source or focus of the requested relief.