Chicago Business Litigation Lawyer Blog
Summary: Derivative suits let owners enforce the company’s rights when insiders won’t. Done right, they’re powerful. Done wrong, they’re dismissed. Here’s a field guide for LLCs and closely held corporations.
Who can sue and when?
LLCs: Members may sue derivatively under 805 ILCS 180/40‑1 when managers/members harm the company. Relief can include restitution, constructive trusts, injunctions, and fees—plus orders to stop unilateral withdrawals or restore records access.
Corporations: Shareholders proceed derivatively; the entity is the real party in interest. Oppression claims (for corporations) are addressed separately under 805 ILCS 5/12.56.
Pleading essentials (don’t get 2‑615’ed):
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State your demand (or futility) with facts. If you didn’t ask the company to act, plead why demand would be futile with concrete details, not speculation. Judges read this closely on a motion to dismiss.
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Name the company as a nominal defendant. It’s indispensable. Forget this and the case can’t proceed.
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Mind “information and belief.” If you use it, plead the specific facts that support that belief and what you did to obtain records (or why you couldn’t). Courts reject fishing expeditions.
- Don’t double‑count damages. Separate derivative (company) harms from individual claims; if your “personal” count just repackages company damages, expect dismissal.
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Use the records statutes before you sue.