Oregon Law Review : Vol. 90, No. 3, p. 773-796 : Litigation Supply Should Not Exceed Shareholder ADR Demand: How Proper Use of the Demand Requirement in Derivative Suits Can Decrease Corporate Litigation

Abstract

This Comment explores the contours of the demand requirement— the forgotten alternative dispute resolution (ADR) mechanism available to all litigating shareholders—and how its efficient use could be beneficial for all parties as well as for the greater corporate community. Part I describes the derivative suit and the demand requirement generally, with particular attention focused on the procedures in Delaware and New York. Because these two states have the highest number of domestic incorporations of all states,13 it is important to see how their processes change the landscape of the requirement. Part II delves more deeply into the demand requirement and begins to explain its ADR policies and characteristics. Part III describes the MBCA model and explains why it gives the best possibility for improvement with corporate ADR. Part III discusses the positive effects in the states that have adopted the MBCA and how the same changes to other corporate codes could be the best way for companies and shareholders to save time and money. Finally, the Comment reemphasizes the importance of the demand requirement, argues why more states and corporations would benefit from it, and promotes the MBCA as an effective model for the future.