Attorneys face myriad hurdles and pitfalls in their representation of business owners. In its recent decision in Retirement Plan for General Employees of the City of North Miami Beach v. McGraw, the First Department reminded us of one often overlooked in the litigation context—the importance of an owner adequately alleging demand futility in a derivative action. 2018 N.Y. Slip. Op. 01027 (Feb. 13, 2018)
What Is a Derivative Action?
Before one can understand the role demand futility plays in a derivative lawsuit, and why it is so important, one must understand what a derivative claim is in the first place. Generally speaking, if a claim concerns harm directly to the business, but it is asserted by a shareholder on behalf of the business, then it is a derivative claim.
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