§ 3.06 THE CORPORATION AND THE PARTIES
[1] Joinder of the Corporation
Derivative plaintiffs join as a nominal defendant the corporation on whose behalf they sue, both because the corporation is the real party in interest and because corporations and defendants may obtain collateral estoppel protection from later suits by other shareholders pleading the same claims. See, e.g., Ross v. Bernhard, 396 U.S. 531, 538, 90 S. Ct. 733, 24 L. Ed. 2d 729 (1970); Patrick v. Alacer Corp., 167 Cal. App. 4th 995, 1004, 84 Cal. Rptr. 3d 642 (2008). In Washington, joinder of the company is typical in the vast majority of cases but may not be necessary under some circumstances. Whether joinder is required is determined by pragmatic considerations: "If nonjoinder does not prejudice the rights of the absent corporation sought to be benefited, or the rights of the defendants against whom the corporate cause of action is asserted, judgment in favor of the absent corporation in the stockholder's derivative suit may be upheld." LaHue v. Keystone Inv. Co., 6 Wn. App. 765, 778-79, 496 P.2d 343, review denied, 81 Wn.2d 1003 (1972). Joinder may be excused, for instance, when the corporation no longer exists, has been liquidated, or when the corporation has "shown no interest" in participating in the litigation after an extended opportunity to do so and would not be prejudiced by the lack of joinder. Id.
[2] The Duties of the Derivative Plaintiff
Historically, a shareholder asserting a derivative claim was held to "occup[y] a strictly fiduciary relationship to the corporation whose interests he assumes to represent, and his position in the litigation is in a legal sense the precise equivalent of that of a guardian ad litem, while the position of the corporation is the equivalent of the status of a ward or beneficiary." Goodwin v. Castleton, 19 Wn.2d 748, 763, 144 P.2d 725 (1944); see also Beal ex rel. Martinez v. City of Seattle, 134 Wn.2d 769, 780, 954 P.2d 237 (1998) (referring to guardian ad litem as "fiduciary role[]"). This accords with Delaware law, which likewise recognizes that the derivative plaintiff acts as a corporate fiduciary while conducting litigation for the benefit of the corporation. See, e.g., Crothall v. Zimmerman, 94 A.3d 733, 735 (Del. 2014) (noting that a derivative plaintiff "undertake[s]" a "fiduciary status"). While perhaps better called a quasi-fiduciary relationship, the shareholder plaintiff is required to exercise good faith and ordinary diligence but does not become a guarantor or insurer for the corporation and is not liable to the corporation for mere errors of judgment. See In re G'ship ofDeming, 192 Wash. 190, 202, 73 P.2d 764 (1937). Delaware courts have recognized the right of corporations to sue derivative plaintiffs for breaching such duties to the corporation in conducting the derivative litigation. Wied v. Valhi, Inc., 466 A.2d 9, 15 (Del. 1983), cert. denied, 465 U.S. 1026 (1984). The typical, but not exclusive, remedy in such cases is disqualification of the derivative plaintiff from serving in that role. See OptimisCorp v. Atkins, C.A. No. 2020-0183-MTZ, 2021 Del. Ch. LEXIS 153, at *23 (Del. Ch. July 15, 2021) (unpublished).
In practice, derivative plaintiff duties that were historically referred to as fiduciary in nature have been largely superseded by the express requirement in CR 23.1 that a shareholder derivative plaintiff must "fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association." This more limited standard is derived from and akin to the duties imposed on persons seeking to be class...
