High Hurdles Remain For Texas Derivative Plaintiffs

Law360, New York (June 24, 2015, 10:21 AM EDT) -- In Sneed v. Webre, No. 12-0045, (Tex. May 29, 2015), a recent Supreme Court of Texas case, the court ruled that shareholders in closely held corporations have the unencumbered right to pursue corporate causes of action without the interference or involvement from the company's board of directors. The business judgment rule, usually used by corporate defendants to attack a derivative plaintiff's standing, does not insulate a board's refusal or failure to pursue a corporate cause of action in the context of a closely held corporation because, under the relevant Texas corporate statutes, there is no demand requirement. As a result,...

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