Rule 52.09.Derivative Actions by Shareholders.

A derivative action lets a shareholder or member step in when the corporation or unincorporated association itself has failed to enforce a right it could properly assert. Rule 52.09 requires the petition to be verified, and it must allege that the plaintiff was a shareholder or member at the time of the transaction being complained of, or that the plaintiff's share or membership passed to the plaintiff afterward by operation of law. That timing requirement keeps the derivative device from being used by someone who bought into the entity only after learning of a dispute worth suing over.

The petition must also allege, with particularity, what efforts the plaintiff made to get the directors, or a comparable governing authority, and, if necessary, the shareholders or members, to pursue the claim themselves, along with the reasons the plaintiff either failed to obtain that action or did not make the effort at all. This demand requirement pushes the decision to sue back to the entity's own governance structure before an individual shareholder or member takes it over.

Even after those threshold showings, the case cannot go forward if it appears the plaintiff does not adequately represent the interests of other shareholders or members who are similarly situated in enforcing the entity's right. And because a derivative suit is brought on behalf of others who are not directly before the court, Rule 52.09 requires court approval before the case can be dismissed or compromised, with notice of the proposed dismissal or compromise going to shareholders or members in whatever manner the court directs.