Can a Suit Be Brought for the Benefit of the Corporation If It Refuses to Take Action Against Corporate Wrongs ?
In Greenwood v. Greenblatt,173 Ga. 551, 556 (3) (161 SE 135) (1931). the Supreme Court stated that "the right of action against officers and directors to redress, or to recover damages for, wrongs inflicted by them upon the corporation is in the corporation and not in the stockholders."
If the corporation refuses to take action, and the stockholders sue to compel officers or directors to account for waste or misapplication of corporate funds, "the corporation should be before the court and should be made either a party complainant or defendant," and the suit must be brought "for the benefit of the corporation."
Because the right of action for corporate wrongs is in the corporation, the plaintiff shareholder in a derivative suit is at best a nominal plaintiff, and the corporation is the real party in interest.
The Eleventh Circuit has noted that as a practical matter, the corporation is initially named as a defendant.
In this way the stockholder insures the presence of the corporation as an indispensable party.
Once joined and present before the court, the corporation is then realigned, if necessary, according to its real interests.
The U.S. Supreme Court has stated that, "although named a defendant, the corporation is the real party in interest, the stockholder being at best the nominal plaintiff."
Regardless of the proper procedure for joining the corporation, it seems clear that the mere fact that a shareholder has filed a derivative action for the benefit of the corporation does not mean that the corporation itself has properly been made a party to the action, either as a plaintiff or a defendant.