WEBVTT 00:00:06.006 --> 00:00:08.942 What is a shareholder Derivative action? 00:00:08.942 --> 00:00:14.014 A shareholder derivative action is a lawsuit brought by a current shareholder of a company 00:00:14.014 --> 00:00:16.750 on behalf and for the benefit of that company, 00:00:16.750 --> 00:00:22.622 usually seeking to remedy mismanagement or wrongdoing by the company's officers and directors. 00:00:22.622 --> 00:00:25.725 Why should I serve as a representative plaintiff? 00:00:25.725 --> 00:00:28.161 The pursuit of a shareholder derivative action 00:00:28.161 --> 00:00:32.332 can greatly benefit the harmed company in the event there is a resolution of the action 00:00:32.332 --> 00:00:34.968 resulting in a monetary payment to the company 00:00:34.968 --> 00:00:38.371 for the implementation of corporate governance reforms. 00:00:38.371 --> 00:00:42.776 These reforms lessen the likelihood that the same or similar misconduct 00:00:42.776 --> 00:00:46.012 and associated losses will recur at the company 00:00:46.012 --> 00:00:49.282 and afford the company a stock price premium. 00:00:49.282 --> 00:00:54.020 In addition, representative plaintiffs may apply to the court for a service award 00:00:54.020 --> 00:00:55.755 subject to court approval 00:00:55.755 --> 00:00:59.793 in recognition of the time and effort devoted to the action. 00:00:59.793 --> 00:01:04.497 Will bringing a shareholder derivative action hurt the company's stock price? 00:01:04.497 --> 00:01:07.133 The purpose of a shareholder derivative action 00:01:07.133 --> 00:01:09.602 is to benefit the company, not harm it, 00:01:09.602 --> 00:01:16.276 by seeking to address alleged wrongdoing caused by the company's executive officers and its board of directors. 00:01:16.276 --> 00:01:20.647 Indeed, the successful resolution of a shareholder derivative action 00:01:20.647 --> 00:01:23.416 often benefits the company's long term value 00:01:23.416 --> 00:01:26.519 as the result of the adoption and implementation 00:01:26.519 --> 00:01:30.290 of the corporate governance reforms in at least two ways. 00:01:30.290 --> 00:01:34.594 First, academic literature confirms that improved corporate governance 00:01:34.594 --> 00:01:39.332 directly leads to higher market valuations or higher stock prices. 00:01:39.332 --> 00:01:44.104 Second, corporate governance reforms are designed to avoid a recurrence of 00:01:44.104 --> 00:01:47.674 or significantly lower the likelihood of repetition of the events 00:01:47.674 --> 00:01:50.577 leading to regulatory or legal actions. 00:01:50.577 --> 00:01:53.980 What are my obligations as a representative Plaintiff? 00:01:53.980 --> 00:01:59.819 A representative plaintiff pursues claims on behalf of and for the benefit of the corporation, 00:01:59.819 --> 00:02:01.588 not themselves personally, 00:02:01.588 --> 00:02:06.793 and therefore, must act in the best interests of the corporation and its shareholders. 00:02:06.793 --> 00:02:12.966 A representative plaintiff must also own company stock continuously during the period of wrongdoing 00:02:12.966 --> 00:02:16.469 and throughout the litigation, even if just one share. 00:02:16.469 --> 00:02:19.439 Do I have to personally compensate Johnson Fistel 00:02:19.439 --> 00:02:23.810 for prosecuting shareholder derivative claims on behalf of a company? 00:02:23.810 --> 00:02:29.983 No. All attorneys fees and expenses of the litigation are advanced by Johnson Fistel. 00:02:29.983 --> 00:02:33.653 If the case is successful, Johnson Fistel will ask the court 00:02:33.653 --> 00:02:37.624 for an award of attorney’s fees and reimbursement of expenses, 00:02:37.624 --> 00:02:42.295 which are typically paid by the defendants or the company's insurance carriers. 00:02:42.295 --> 00:02:43.696 Conclusion. 00:02:43.696 --> 00:02:46.366 If you are interested in or have questions about 00:02:46.366 --> 00:02:50.603 serving as a representative plaintiff in a shareholder derivative action. 00:02:50.603 --> 00:02:52.272 Please contact us