Strike suit
From Wikipedia, the free encyclopedia
A strike suit is a lawsuit brought against a corporation by a single person or group of people who, in total, own very few shares in the company. The purpose of a strike suit is to gain a private settlement before going to court that would be less than the cost of the company's legal defense. The suit itself is not intended to benefit the company or other shareholders. The actual content of the strike suit is not as important as the cost of the company's ability to defend it.
Strike suits are also called blackmail suits and holdup suits.
Some states in the United States have laws to restrict or ban such lawsuits by reducing the financial gain of the plaintiff.
[edit] Examples of strike suits
The following examples of strike suits demonstrate how the shareholder makes a claim for damages against the company in a manner that is truly designed to cause the company to opt for a quick settlement instead of a complete legal trial. In each example, the amount of technical information that must be examined by the company's lawyers is what causes the company to opt for an out-of-court settlement instead of paying lawyers to examine the case.
- A minor shareholder sues a company for falling short on projected earnings. The lawsuit makes multiple technical claims of incompetence by the company.
- A minor shareholder sues a company for failure to follow bylaws set by the company. The lawsuit makes multiple technical claims of bylaw infractions by the company.
