Six Degrees of Separation: from derivative suits to shareholder class actions

http://dx.doi.org/10.5007/2177-7055.2016v37n73p37 Trans-individual litigation has revolutionized modern law. Specifically, corporate law has partaken in this phenomenon. For instance, derivative suits allow individuals to sue for a large collectivity in relation to corporate matters. This paper aims to analyze this derivative suits, comparing then to shareholder class actions, explaining that the two procedures resemble each other only superficially and that they diverge from each other on a more profound level. Derivative suits aim at the vindication of a genuinely collective and indivisible right, while shareholder class actions seek to enforce an aggregation of individual entitlements. Consequently, these mechanisms also differ in the kind of representation they entail, in the objective they pursue, in how they construct fairness internally, and in how they approach the central problem of adequacy of representation. An appreciation of this dichotomy contributes to an understanding not only of the inner workings of each of these two devices but also of the corporation itself and of the relationship among the corporate entity, the board of directors, the investors, and even the stakeholders. In addition, it suggests the need for a new interpretation of the key distinction between both actions one should focus on the nature of the right at stake