Oregon Supreme Court strengthens plaintiff's hand in shareholder derivative litigation

A shareholder who files a derivative action against corporate directors seeking changes in corporate policies can be awarded attorney fees in the action even if the defendants later voluntarily make those changes, mooting the litigation.  That was the holding last week by the Oregon Supreme Court in Crandall Capital Partners v. Shelk, a case that may embolden shareholders seeking to challenge corporate governance. 

The shareholders had filed suit to require the directors to remove the corporation's takeover defenses and to engage in negotiations with a proposed purchaser.  Before judgment was entered, the corporation took the very actions which the plaintiffs sought in their lawsuit.  Equitable principles allow a court to award fees to a shareholder whose actions have conferred a benefit on the corporation.  According to the court, a claim for fees based on those equitable principles does not become moot simply because plaintiffs' substantive claims are moot.  The court remanded to the Court of Appeals to determine whether plaintiffs' lawsuit had conferred a benefit on the corporation, entitling plaintiffs to fees.