Pennsylvania Code
Title 231 - RULES OF CIVIL PROCEDURE
Part I - GENERAL
Chapter 1500 - EQUITABLE RELIEF
Subchapter A - RULES
Rule 1506 - Stockholder's Derivative Action

Universal Citation: 231 PA Code ยง 1506

Current through Register Vol. 54, No. 38, September 21, 2024

(a) In an action to enforce a secondary right brought by one or more stockholders or members of a corporation or similar entity because the corporation or entity refuses or fails to enforce rights which could be asserted by it, the complaint shall set forth

(1) that each plaintiff is a stockholder or owner of an interest in the corporation or other entity,

(2) the efforts made to secure enforcement by the corporation or similar entity or the reason for not making any such efforts, and

(3) either
(i) that each plaintiff was a stockholder or owner of an interest in the corporation or other entity at the time of the transaction of which the plaintiff complains or that the plaintiff's stock or interest devolved upon the plaintiff by operation of law from a person who was a stockholder or owner at that time, or

(ii) that there is a strong prima facie case in favor of the claim asserted on behalf of the corporation and that without the action serious injustice will result.

(b) A plaintiff who files a complaint containing an allegation pursuant to subdivision (a)(3)(ii) shall forthwith file a motion to maintain the action. If the plaintiff sustains the allegation, the court shall allow the action to continue.

(c) If it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association, an appropriate person shall be substituted as plaintiff or, if an appropriate person is not substituted, the action shall be dismissed as provided by subdivision (d).

(d) The action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to shareholders or members in such manner as the court directs.

(e)

(1) Section 1782(a) and (b) of the Associations Code, 15 Pa.C.S.A. § 1782(a) and (b), shall be suspended only insofar as it is inconsistent with the provisions of this rule.

(2) Section 1782(c) and (d) of the Associations Code, 15 Pa.C.S. § 1782(c) and (d), shall not be deemed suspended or affected by this rule.

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