First Security Bank of Cal. v. Paquet

In First Security Bank of Cal. v. Paquet (2002) 98 Cal.App.4th 468, minority shareholders brought a derivative action on behalf of a corporation. The minority shareholders named the majority shareholders and directors, the corporation, and a bank involved in the challenged transactions as defendants, but the minority shareholders did not allege individual claims on their own behalf. The bank filed a cross-complaint against the minority shareholders, the majority shareholders and directors, and the corporation. The bank sought relief against the minority shareholders on the theory the corporation was their alter ego. The trial court sustained the minority shareholders' demurrer and entered a judgment dismissing the bank's cross-complaint against the minority shareholders. (Paquet, supra, 98 Cal.App.4th at pp. 471-472.) On the bank's appeal, the Paquet court concluded the judgment dismissing the cross-complaint was a final appealable order because it disposed of all the claims between the bank and the minority shareholders in their individual capacity. (Paquet, supra, 98 Cal.App.4th at pp. 472-473.) Although the minority shareholders continued to prosecute the derivative claims alleged in their complaint against the bank, the judgment on the cross-complaint was a final appealable judgment because the minority shareholders alleged those claims in a representative capacity on the corporation's behalf, not in their individual capacity. (Id. at pp. 474-475.) As explained above, a shareholder bringing a derivative action is acting as a representative of the corporation and therefore is a plaintiff in name only because the action enforces the corporation's rights, not the individual shareholder's. The corporation is the real party plaintiff in the action. (Patrick, supra, 167 Cal.App.4th at pp. 1003-1004; Paquet, at pp. 474-475.)