What is the difference between a class action and a derivative action?

A class action lawsuit is a legal action that is brought by one or more plaintiffs on behalf of a group of people who have suffered similar injuries or damages. These suits are typically used when it would be cost prohibitive for each individual to file their own lawsuit. The group of individuals is known as the class and the person bringing the suit is the representative plaintiff. The outcome of the lawsuit will apply to all members of the class, regardless of whether those individuals actually opted-in or took part in the lawsuit. A derivative action lawsuit is a legal action that is brought by shareholders of a corporation on behalf of a corporation. This type of lawsuit is usually brought when the corporation has suffered some type of harm, such as financial losses, due to the misuse or mismanagement of corporate funds or resources by directors or officers. The shareholders bring the lawsuit because they are the owners of the corporation, and thus are the ones who would have suffered the losses as a result of the wrongful activities. The primary difference between these two types of lawsuits is the parties who bring the suit. In a class action lawsuit, a group of individuals bring the suit, while in a derivative action lawsuit, shareholders of a corporation bring the suit. Additionally, the type of injuries or damages at issue are different--in a class action suit, the plaintiffs share similar injury or damages, while in a derivative action suit, the plaintiffs are generally shareholders of the corporation suing on behalf of the corporation itself.

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What is the difference between a class action and a derivative action?

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