§23.1.6ANALYSIS
This section analyzes the requirements of CR 23.1 and Fed. R. Civ. P. 23.1.
(1)Summary of basic requirements of rule
A complaint in a derivative action by one or more shareholders under CR 23.1 must establish four elements: (1) the plaintiff must be a shareholder or member at the time of the transaction complained of (shareholder standing); (2) the action must not be a collusive attempt to confer jurisdiction that would otherwise be absent (avoidance of collusive jurisdiction); (3) the plaintiff must allege with particularity his or her efforts to have the directors or the corporation bring suit (demand for corporate action); and (4) the named plaintiffs must fairly and adequately represent the interests of the shareholder or member class (adequate representation). McLeod v. Estes, 106 Wn.App. 1014, No. 19152-4-III, 2001WL497080, at *8-9 (May 10,2001) (unpublished). In addition, the complaint in a derivative action must be verified. Huntington v. Fraternity Snoqualmie, Inc., 86 Wn.App. 1093, 1997 WL 401593, No. 38466-5-1 (July 14, 1997) (unpublished). Further, the plaintiff cannot settle or compromise the action without court approval after providing notice to the other shareholders or members.
Although CR 23.1 shares many of its basic procedural concepts and provisions with CR 23 (e.g., typicality of claim, shareholder standing, adequate representation, and court approval of settlements), a number of its provisions closely parallel the requirements of earlier case law.
(2)Verification of complaint
Unlike the complaint in an ordinary civil action, a complaint in a shareholder derivative action must be verified. Huntington, 86 Wn.App. 1093, 1997 WL 401593, at *11 (unpublished). This requirement discourages groundless or harassing strike suits. Surowitz v. Hilton Hotels Corp., 383 U.S. 363, 86 S. Ct. 845, 15 L. Ed. 2d 807 (1966). When an action is not a strike suit, verification may be based on advice received by plaintiff rather than on plaintiff's own knowledge. Id. Notably, failure to verify the complaint need not result in dismissal when the action is not a strike suit and the plaintiff has corrected the "technical defect." RCL Nw., Inc. v. Colo. Res., Inc., 72 Wn.App. 265, 271, 864 P.2d 12 (1993).
(3)Shareholder standing
CR 23.1 also requires that the complaint specifically allege that the plaintiff was a shareholder at the time of the transaction complained of or that membership "thereafter devolved on him by operation of law." See Sound Infiniti, Inc. v. Snyder, 169 Wn.2d 199, 213, 216, 237 P.3d 241 (2010) ("Standing to bring a stockholder derivative claim requires a proprietary interest in the corporation whose right is asserted." (quoting Haberman v. Wash. Pub. Power Supply Sys., 109 Wn.2d 107, 149, 744 P.2d 1032 (1987) (internal quotation marks omitted))). Therefore, in the shareholder context, the ownership of stock confers standing on the plaintiff. Finley v. Curley, 54 Wn.App. 548, 774 P.2d 542 (1989); Davis v.Harrison,25Wn.2d 1,167p.2d 1015(1946).Thisrequirementreflects the presumption that a party purchasing stock in a company after an offending transaction did so either with knowledge of the questioned transaction or at a price reflecting the overall worth of the corporation and its stock, taking into account any adverse effects resulting from the challenged transaction. An equitable interest or a surviving spouse's vested community interest in stock will also satisfy the shareholder/ ownership requirement of CR 23.1, LaHue v. Keystone Inv. Co., 6 Wn.App. 765, 496P.2d343, review denied, 81 Wn.2d 1003 (1972), as will a pledgee's interest, Gustafson v. Gustafson, 47 Wn.App. 272, 734P.2d949 (1987). Notably, the subsequent administrative dissolution of the corporation will not deprive the shareholder of standing to pursue the derivative claim because under such circumstances the shareholder has not been divested of shareholder status. Donlin v. Murphy, 11A Wn. App. 288, 295-302, 300 P.3d 424 (2013).
Because a shareholder derivative action plaintiff stands in the same shoes as the corporation, the shareholder...
