The Business Litigation Blog

Director with no ownership interest in corporation lacked standing to maintain derivative suit

Plaintiff filed direct and derivative claims against a family charitable foundation on which he served as a director. Under Indiana law, only a shareholder or a member of a corporation may bring a derivative action on the corporation’s behalf. However, the foundation’s articles of incorporation stated that it shall have no members. Plaintiff argued that the ownership requirement should not apply because there are no shareholders or members of the foundation and without allowing directors to sue, the foundation would face no oversight. The court rejected that argument, citing to myriad other remedies under the Nonprofit Corporation Act.

Doermer v. Kathryn Callen, No. 15-3734 (7th Cir. Feb. 1, 2017)

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