Question 1

What is a shareholder derivative action?

Accepted Answer

A derivative action is a shareholder lawsuit brought on behalf of the corporation against directors, officers, or majority shareholders who harmed it. Recovery goes to the corporation. The suit requires either a board demand (which gets refused under the business-judgment rule) or pleading demand futility under Aronson/Marciano factors.

Question 2

Can I challenge a will or trust in Alabama or Florida?

Accepted Answer

Yes, but standards are demanding and deadlines short. Common grounds: lack of capacity, undue influence, fraud in the inducement, improper execution. Alabama's will-contest statute runs six months from probate; Florida's is generally 90 days from notice of administration. Trust contests have separate deadlines tied to the trustee's notices.

Question 3

What's a duty of loyalty, and how is it different from duty of care?

Accepted Answer

Duty of loyalty prohibits self-dealing — strict, fault-based. A director profiting from a transaction with the company at unfair terms breaches loyalty, period. Duty of care requires reasonable conduct under the deferential business-judgment rule. Loyalty cases are where recovery is — the business-judgment rule doesn't shield self-dealing.

Question 4

Are ESG policies a breach of fiduciary duty?

Accepted Answer

It depends on whether the policy advances or subordinates shareholder interests. A board's decision to systematically pursue political or social objectives at shareholder expense, without express shareholder authorization, is at minimum ripe for challenge. Cases turn on what the policy actually does, not what it says.

Question 5

I'm a minority shareholder being squeezed out by the majority. What are my remedies?

Accepted Answer

Several. Direct minority-oppression claims (Alabama by case law; Florida under § 607.0140), derivative claims, direct fiduciary-duty claims, buy-sell valuation challenges, and books-and-records demands. Remedies include court-ordered buyout at fair value, dissolution, accounting, and damages. Which path fits turns on the structure and what the majority did.

Question 6

What is a 'demand letter' on a board, and why does it matter?

Accepted Answer

Before filing a derivative suit, a shareholder must demand that the board take action OR plead with particularity that demand would be futile. Pre-suit demand often gets refused on business-judgment grounds. Pleading demand futility — conflicted directors, lack of independence, substantial likelihood of liability — preserves the shareholder's power to drive the case.

Question 7

I'm a director facing a derivative suit. Will my D&O policy cover me?

Accepted Answer

Probably, but watch the exclusions. Most D&O policies cover defense costs and indemnity for breach-of-duty claims but exclude intentional misconduct, dishonesty, and sometimes shareholder claims above certain ownership thresholds. The insured-vs-insured exclusion is the classic trap when the company itself sues you. Coordinate coverage counsel early.

Shareholder, trust, and director duty cases

About this practice

From the Library — Fiduciary Litigation writing