Shareholder Derivative Litigation

At times, corporate management, directors and/or other shareholders fail to exercise their authority for the benefit of the company and all its shareholders.  This failure can be the product of fraud, dishonesty, self-dealing or mismanagement to which officers or the corporate board of directors have turned a blind eye.  Examples include active wrongdoing by corporate officers such as the purposeful backdating of stock-options, or passive wrongdoing, such as failing to establish and maintain proper internal controls leading to accounting and procedural violations.

For shareholders who have invested hard-earned capital in these companies,  these transgressions represent a violation of trust and fiduciary responsibility on the part of corporate officers, directors and/or shareholders.

Derivative litigation permits a shareholder to seek to pursue litigation on behalf of the corporation when the directors are unwilling or unable to do so themselves, with any recovery flowing to the corporation, not the shareholders.  It also provides an avenue to effect valuable corporate reforms for the future benefit of the company.

Prior to forming Komlossy Law, P.A., the founder prosecuted several derivative cases, including In re Templeton Securities Litigation, Case No. 98-6059-CIV-Hurley/Lynch (S.D. Fla.) (founder was local counsel and one of plaintiffs’ counsel in case alleging both class and derivative claims, which settled after three and one-half years and provided that a fund of $6.5 million would be established, of which $2.9 million went into the fund, with the remainder shared pro rata by class members) and Rosky, et al. v. Farha, Case No. 8:07-cv-1952-T-26 MAP (M.D. Fla.)(as one of plaintiffs’ counsel, successfully defeated a motion to dismiss and after prosecuting the action for almost two years, the Board of Directors established a one-person Special Litigation Committee, implemented extensive corporate governance changes sought by virtue of the action and agreed to retain the restricted legend on stock held by certain former officers and ultimately, the Special Litigation Committee took over the derivative claims).