Shareholders Do Not Have Standing To Bring an Individual Action Against Third Parties Who Have Damaged the Corporation: Adair v. Wozniak

Authors

Frank Carrino

Abstract

Apart from the context of a derivative action, can a shareholder in a corporation sue individually for wrongful acts committed against the corporation by third parties?

The general rule of corporate law states that a shareholder cannot attain standing for such a suit. This rule is grounded on the theory that all shareholders should incur loss from third party wrongdoing in proportion to the amount of shares he or she holds, and likewise should proportionately benefit when the corporate entity wins an action. In addition, courts are fearful that if this rule were not in force, then there would be a multiplicity of individual shareholder suits. Finally, the rule protects creditors' rights and allows the board of directors to decide how recovered damages should be used by the corporation. In Adair v. Wozniak, a case of first impression, the Ohio Supreme Court followed this rule and by a six to one decision held that shareholders do not have an independent cause of action against a third party.

Recommended Citation

Carrino, Frank (1987) "Shareholders Do Not Have Standing To Bring an Individual Action Against Third Parties Who Have Damaged the Corporation: Adair v. Wozniak," Akron Law Review: Vol. 20: Iss. 2, Article 6.
Available at: https://ideaexchange.uakron.edu/akronlawreview/vol20/iss2/6