Corporate Defendants Evoke The Ghost of CapCorp Suit

Despite alleging different crimes, the three lawsuits targeting seized corporate credit unions have one thing in common: defendants are arguing plaintiffs don’t have the right to sue because the charges are so-called “derivative claims.”

A derivative claim varies from a direct claim in that shareholders must file suit in the name of the corporation against parties allegedly causing harm to the corporation. According to West’s Encyclopedia of American Law, derivative suits enforce legal rights when the corporation itself is unwilling to sue its own officers or directors. If a derivative claim is successful, damages are awarded to the harmed corporation, not the individual shareholders who initiated the action.