Derivative Actions And Notice Of Compromise

Law360, New York (September 3, 2009, 1:20 PM EDT) -- Rule 23.1(c) of the Federal Rules of Civil Procedure governs the settlement of shareholder derivative litigation.

The rule requires court approval of any settlement, voluntary dismissal or compromise in all derivative actions. The rule also requires that notice "must be given to shareholders or members in the manner that the court orders."

"Notice" issues are important because courts perceive derivative action settlements to be "particularly favored" due to the litigation of such actions being "notoriously difficult and unpredictable." In re Xcel Energy Inc., 364 F. Supp....
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