Derivative Actions for Breach of Fiduciary Duty and Fraud
When an officer, director, or controlling insider steals from the company, hides assets, or abuses power, shareholders can sue on behalf of the business. These cases move fast. We build the record, pursue emergency relief when needed, and litigate aggressively to protect the company and preserve recovery.
What a Derivative Action Is
A derivative action is a lawsuit brought by a shareholder (or member) on behalf of the company when the people in control refuse to pursue wrongdoing inside the business.
The money, opportunity, or value was taken from the business.
The wrongdoer often controls records, accounts, and decision-making.
Emergency applications can be necessary to stop asset dissipation.
Derivative and direct claims often run together in one fight.
“An officer drained accounts. What can we do right now?”
“Can we freeze assets before they disappear?”
When You Should Call
This is a good fit if any of the following are true:
- Company funds were misappropriated by an insider.
- Officers or directors are self-dealing or diverting business opportunities.
- You are frozen out of decision-making and the company refuses to act.
- You need emergency court relief to protect assets or records.
- The other side is preparing a countersuit to control the narrative.
What We Do
- Case strategy designed for motion practice, discovery, and trial.
- Early record-building: documents, timelines, account tracing, communications.
- Emergency applications where assets are at risk.
- Offense + defense planning when counterclaims are expected.
Claims We Bring in Derivative Fiduciary Litigation
These cases often involve multiple overlapping claims. We routinely litigate:
Derivative Claims
- Breach of fiduciary duty
- Fraud
- Aiding and abetting fraud
- Aiding and abetting breach of fiduciary duty
- Conversion of company funds
- Unjust enrichment
- Faithless servant
- Usurpation of corporate opportunity
Direct Claims (When Appropriate)
- Removal of officers or directors
- Intentional interference with prospective economic advantage
- Declaratory judgment actions tied to authority and control
Every case is different. The right mix of derivative and direct claims depends on ownership structure, governance documents, and how the misconduct occurred.
Emergency Relief and Asset Protection
In many derivative actions, delay is the enemy. If assets may be transferred, sold, or hidden, early court intervention can matter.
- Orders to Show Cause
- Preliminary injunctions
- Asset restraints and escrow orders
- Early discovery orders
- Litigation planning designed to preserve recovery
Attorneys’ Fees and Litigation Leverage
Some disputes include contract-based components that can create fee exposure. Where fee recovery is legally available, we pursue it intentionally. Where it is not, we structure the case to force accountability and avoid wasted motion practice.
In high-stakes cases, leverage is built early: pleadings, proof, and court credibility.
Counterclaims Are Expected
Derivative actions often trigger immediate counterclaims meant to shift blame and control the narrative. We plan for defense from day one, including allegations of:
- Fraud, theft, and self-dealing
- Breach of fiduciary duty
- Conversion and unjust enrichment
- Interference with business relationships
- Declaratory judgment claims
FAQ: Derivative Actions for Fraud and Fiduciary Misconduct
These are common questions people ask when they are dealing with internal business theft or insider misconduct.
Do I have a case if an officer or director took company money for personal use?
Potentially, yes. If company funds were diverted for personal benefit, that can support claims for breach of fiduciary duty, conversion, unjust enrichment, and fraud depending on the facts. The key is proving how the money moved, who authorized it, and what records exist.
What is the difference between a derivative claim and a direct claim?
A derivative claim seeks recovery for harm to the company. A direct claim seeks recovery for harm to you personally as an owner. Many cases involve both. The correct structure affects standing, remedies, and how the case is litigated.
Can we freeze assets before the wrongdoer moves or hides them?
In some situations, the court can grant emergency relief such as injunctions or escrow-style orders. These applications are fact-specific and depend on proof of risk, irreparable harm, and the likelihood of success. If assets are at risk, time matters.
What if the company refuses to sue because the wrongdoer is in control?
That is one of the classic reasons derivative actions exist. When decision-makers will not act due to conflict or control, owners may be able to bring the case on behalf of the company, subject to the rules that apply to derivative litigation.
What if they counter-sue me for fraud or theft?
Counterclaims are common in internal business warfare. We assume they are coming and build the case and record accordingly. The goal is to protect credibility with the court and keep the focus on provable financial wrongdoing and fiduciary misconduct.
Frequently Asked Questions
When your business is on the line, you deserve clear answers. These FAQs address the legal risks and remedies our clients face when business partnerships fall apart, contracts are broken, or fraud is suspected.
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