§23.1.5 Purpose and Procedure

• Jurisdiction: Washington

§23.1.5PURPOSE AND PROCEDURE

CR 23.1 establishes procedures governing suits in equity by one or more shareholders of a corporation or members of an association to enforce rights of the corporation or association that the entity fails, refuses, oris unable to assert itself. McLeodv.Estes, 106Wn.App. 1014, No. 19152-4-III, 2001WL 497080 (May 10,2001) (unpublished) (citing Goodwin v.Castleton, 19 Wn.2d 748,761-62,144 P.2d 725 (1944));Loffue v. Keystone Inv. Co., 6 Wn.App. 765, 496 P.2d 343, review denied, 81 Wn.2d 1003 (1972). Although most CR 23.1 cases involve corporations rather than associations, the rules and principles applicable to the two types of suits are the same. Such suits are commonly referred to as shareholder derivative actions because they are appropriate not when the right sought to be enforced is a right of the plaintiff (primary right) but when the right is one of the corporation (a secondary or derivative right). McLeod, 106 Wn.App. at 1014 (dismissing claim for conversion of corporate asset because brought by shareholder on his own behalf, not that of the corporation); Daily Income Fund, Inc. v. Fox, 464 U.S. 523, 104 S. Ct. 831, 78 L. Ed. 2d 645 (1984); see also Hames v. Spokane-Benton Cnty Natural Gas Co., 118 Wash. 156,203 P. 18(1922) (dismissing as improper a complaint that attempted to plead both a shareholder derivative cause of action and a cause of action solely on behalf of the shareholder's individual interests); 5 James W Moore, Moore's Federal Practice §23.1.02 (3d ed. 2013).

Determining whether a particular complaint states an individual or a derivative cause of action is often difficult and involves an analysis that relies on historical distinctions as frequently as logical ones. Developments in the Law, Multiparty Litigation in the Federal Courts, 71 Harv. L. Rev. 874 (1958), quoted in 3AKarl B. Tegland, Washington Practice: Rules Practice §§597-608 (6th ed. 2007).

Shareholder derivative actions...