Burk, with him on the briefs), Godfrey & Lapuyade, P. Upjohn argued in reply that the contract could not plausibly be interpreted to require royalty payments beyond 1996 and, in the alternative, that the Supreme Court's ruling in Brulotte v.
The bankruptcy court, therefore, explained that a reduction in value to Paladini’s shares as a result of the stock redemption also affected other shareholders, who shared equally in the devaluation.
Because Paladini could not prevail without showing an injury to the corporation, his redemption claims were derivative.
The bankruptcy court’s decision turned on whether the claims asserted were derivative or direct in nature.
Generally, if an injury is inflicted on a corporation, a lawsuit for that injury is said to be “derivative” of the corporation.
State law determines whether the claims are direct or derivative.