Tatum and Varon Explore Shareholder-Derivative Liabilities Following Sexual Harassment Lawsuits

Shook Partner Mark Tatum and Associate Jennifer Varon have authored an article for Ingram's detailing shareholder derivative suits that can stem from sexual harassment lawsuits. "In a typical workplace sexual harassment lawsuit, the plaintiff is a current or former employee who brings suit against the employer on the basis of the harassment he or she experienced," they explain. "In contrast, shareholder derivative lawsuits are brought by a company’s shareholders on behalf of the company against the company’s management or board of directors. These lawsuits are possible because a corporation’s directors and officers owe fiduciary duties to the company. Derivative lawsuits contend that directors or officers violated their duties to the company by taking actions contrary to the company’s best interests."

Tatum and Varon recommend that companies:

  • look for patterns of harassment, as one incident is unlikely to support a shareholder's claim;
  • establish reporting procedures, if they are not already in place; and
  • act quickly in responding to allegations of sexual harassment.