After the death of former CEO and majority shareholder, James Cotter Sr., the Board of Directors for Reading International Inc. (“RDI”) terminated the status of then CEO and president, James Cotter Jr. Tensions rose, and James Cotter Jr. brought a derivative action against RDI and the Board. Eventually, summary judgment was rendered against James Cotter Jr., with costs.
On appeal, the Supreme Court of Nevada first determined a nominal defendant corporation, like RDI, may not challenge the underlying claims in a derivative action, but may challenge the shareholder plaintiff’s standing to bring such an action. Second, the Court adopted the Ninth Circuit’s eight-factor test to determine whether a plaintiff adequately represents shareholders and thus has standing. Third, the Court sorted out appeals over costs and fees.
Ultimately, the Court determined that Cotter Jr. lacked standing to bring the derivative action, because he did not adequately represent shareholders. The Court did not consider the merits of the claim, but rather vacated the order denying RDI’s motion to dismiss for lack of standing. Consequently, they reversed the order of summary judgment and remanded.
Bodin, Connor, "Cotter v. Kane, 136 Nev. Adv. Op. 63 (Oct. 1, 2020)" (2020). Nevada Supreme Court Summaries. 1341.