Derivative suits in the United States
In the United States, corporate law is largely based upon state law. Although the laws of each state differ, the laws of the states such as Delaware, New York, and California, where corporations often incorporate, institute a number of barriers to derivative suits.
Under the Model Business Corporation Act (MBCA), the procedure of a derivative suit is as follows. There has been harm to the corporation but the board of directors has not taken a measure against the wrongdoers. First, eligible shareholders must file a demand on the board. The board may either reject, accept, or not act upon the demand. If after 90 days the demand has been rejected or has not been acted upon, shareholders may file suit.If the board accepts the demand, the corporation itself will file the suit. If rejected, or not acted upon, the shareholder must still meet additional pleading requirements. On the requirements being met by the shareholder, the board may appoint a “special litigation committee” which may move to dismiss. If the special litigation committee makes a required showing, the case will be dismissed. If the committee fails to make a showing, the shareholder suit may proceed.
The MBCA is not a law itself, but rather a model statute suggested for passage by different jurisdictions. Individual states adhere to the MBCA procedures to varying degrees. In New York, for example, derivative suits must be brought to secure a judgment "in [the corporation's] favor." Delaware has different rules in regards to demand and bond requirements too.
The famous case of Shaffer v. Heitner, which ultimately reached the United States Supreme Court, originated with a shareholder derivate suit against Greyhound Bus Lines.
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