What is the relationship between a class action lawsuit and a derivative action?

A class action lawsuit and a derivative action are both types of civil lawsuit, meaning a person or group is suing someone else in order to recover damages or obtain other relief. The primary difference between the two is who is bringing the lawsuit. In a class action lawsuit, the lawsuit is brought by a representative plaintiff (or plaintiffs) on behalf of all similarly situated individuals. These similarly situated individuals are known as the class, and the representative plaintiff is suing on their behalf in order to recover damages or obtain other relief. All members of the class must have suffered the same kind of wrong and be in the same legal situation. In contrast, a derivative action is brought by an individual shareholder of a corporation or a member of a limited liability company, on behalf of the corporation or LLC itself. The shareholder or member is suing another party on behalf of the whole, in order to recover damages from the party the shareholder or member believes has wronged the corporation or LLC. Class action lawsuits are often used when the wronged party is a large group of people who have suffered a similar harm, but who might not have the resources to bring an individual lawsuit. Derivative actions, on the other hand, are used when a single shareholder or member believes a third party has caused harm to the larger entity they are a part of. Both class action and derivative actions can be complicated proceedings, and it is important to seek the help of legal counsel to understand the full scope of civil litigation options in any given situation.

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What is the relationship between a class action lawsuit and a derivative action?

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