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Corporate Fraud: Direct Vs. Derivative Actions: Nichols V. Healthsouth Corp.

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.
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