Corporate Fraud: Direct Vs. Derivative Actions: Nichols V. Healthsouth Corp.
Cunningham Bounds LLC
Nichols v. HealthSouth Corp., [Ms. 1151071, Mar. 23, 2018] __ So. 3d __ (Ala. 2018). The Court (Mendheim,
J., and Stuart, C.J., and Parker, Main, and Bryan, JJ., concur) reverses
a judgment of dismissal entered by the Jefferson Circuit Court in a fraud
action by employee shareholders of HealthSouth Corporation upon finding,
under Delaware law, that the employee-shareholders' claims were direct
claims as permitted by
Altrust Financial Services, Inc. v. Adams, 76 So. 3d 228 (Ala. 2011), rather than derivative claims requiring conformance
with Rule 23.1, Ala. R. Civ. P. Citing (Ms. *20-29)
Citigroup, Inc. v. AHW Investment Partnership, 148 3d 1125 (Del. 2016), the Court concludes that when the rights allegedly
infringed upon, including the right to choose to purchase and to hold
shares of stock, belong personally to the shareholders and not to the
corporation, the claims are direct in nature and therefore actionable
without conformance with Rule 23.1.