Chicago Business Litigation Lawyer Blog
In Illinois, a derivative lawsuit can be filed by an individual shareholder or a member of a limited liability company (LLC) to enforce a right that belongs to the corporation or the LLC (Silver v. Allard, 16 F.Supp.2d 966 (1998)), (Pistone v. Carl, Not Reported in N.E. Rptr. (2020). The aim of such a lawsuit is to protect the interests of the corporation or the LLC from the misconduct of its directors and managers (Silver v. Allard, 16 F.Supp.2d 966 (1998)).
There are certain prerequisites for filing a derivative lawsuit. Firstly, the shareholder or member must make a demand upon the board of directors to enforce a corporate right (Silver v. Allard, 16 F.Supp.2d 966 (1998)). However, this demand requirement can be excused in certain situations. For instance, if the shareholders can demonstrate that the directors were aware of the misconduct but consciously chose not to act, the demand can be excused. In such cases, the plaintiffs would effectively be arguing the futility of such a demand. It’s important to note, as per Illinois choice of law rules, that the pre-suit demand requirement is governed by the law of Delaware in the case of corporations incorporated there (Wells v. Reed, — N.E.3d —- (2024). Continue reading ›