California  |  Business Law

Legal Question

Asked on: 2/04/10, 7:16 am

California Superior Court: Can a corporate shareholder sue the corporation in a pro-se capacity? Not a derivative-legal-action.

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Answered on: 2/09/10, 8:04 am by Bryan Whipple

I think you are mixing up two concepts, thinking that they are the opposite of one another, when in fact they are not even closely related. "Pro se" means unrepresented by a lawyer. A derivative legal action is one in which the plaintiff sues an entity, often a corporation, not due to an injury to himself or herself, but to enforce a right on behalf of the entity when the persons running the entity (e.g., management or directors) failed or refused to take care of the entity's rights themselves.

If the shareholder is an individual, he or she may sue the corporation in a pro-se capacity, but as in any lawsuit, the plaintiff must also have "standing," i.e., must be the "real party in interest," the party who suffered the injury, in order to sue directly. If the plaintiff shareholder, whether pro se or represented by counsel, sues to remedy an injury to the corporation (such as the directors declaring an illegal dividend), the suit will be deemed derivative and some special rules will apply to the pleadings, evidence and remedy.

If the corporation is small enough, many suits that would otherwise have to be brought derivatively can be brought directly, because when there are only a handful of stockholders, it is easier to find that directors' misfeasance or nonfeasance have caused injury to that stockholder. However, it takes legal training and research to identify which actions can be brought in individual capacity and which are derivative causes of action.


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Bryan R. R. Whipple, Attorney at Law P O Box 318 Tomales, CA 94971-0318

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Answered on: 2/09/10, 8:25 am by Daniel Bakondi

Yes, and I have dealt with litigation involving millions of dollars where you sue as both suits in one. You dont want to call it a "derivative suit", and have the case dismissed just because technically it is not, or vice versa. You need to understand this law very carefully. Also, you need an attorney. Without the experience litigating corporate and securities laws, you cannot even understand your disadvantage. You may call my office for a free consult.

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Daniel Bakondi, Esq. danielbakondi@yahoo.com 415-450-0424

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The Law Office of Daniel Bakondi 870 Market Street, Suite 1157 San Francisco, CA 94102

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Answered on: 2/09/10, 10:11 am by Timothy McCormick

Neither Bakondi nor Whipple know what they are talking about. Whipple does not understand that although "pro se" is a correct term for a person representing themselves without an attorney, in the context of shareholder suits it is the proper term for an action brought by a shareholder or shareholders based on their own standing to assert the cause of action, as opposed to a derivative suit. With that cleared up, whether or not you can proceed with a pro se action or must file a derivative suit depends on the nature of the cause of action. It also depends on whether or not the company is publicly traded, and what state it is incorporated in. For example, Delaware corporate law is very favorable to directors and officers and leaves little that shareholders can sue for pro se. As for Bakondi's suggestion that you sue for both in one action, I can't imagine why you would want to get a cause of action you have a right to bring pro se tied up in the technical mess of a derivative suit. It also would only be possible if you had multiple totally different causes of action, some derivative and some personal. That is very rare. If you would like to give me a call, I would be happy to discuss the causes of action you are intending to bring and let you know if they can be brought pro se or must be brought derivatively. I also maintain office facilities in Carlsbad should you need to retain counsel, or I could refer you to qualified attorneys who maintain their primary office in your area.


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