Judge Castel’s decision in Bahnmaier v. Bank of America, 10 Civ. 1234 (S.D.N.Y.) reaffirms the Southern District approach that a plaintiff cannot at the same time represent the shareholders of a corporation in a derivative suit against the corporation’s officer and directors, while at the same time pursing his own related individual lawsuit against the corporation.  

Under Rule 23.1(a), a derivative plaintiff must “fairly and adequately represent the interests of shareholders or members who are similarly situated in enforcing the right of the corporation.”  Judge Castel concluded that the “derivative action may not be maintained by this plaintiff because he cannot fairly and adequately enforce a right of the corporation while suing that corporation” on circumstances arising from the same transactions – here, B of A’s Countrywide and Merrill acquisitions. 

Plaintiff argued that any determination of a conflict in his role was premature, and could be resolved at a later stage, and that his potential individual recovery was not significant enough to pose a real conflict. In a nice turn of phrase, Judge Castel rejected those rationales:

“The plaintiff has engaged in the litigation equivalent of riding two horses until the rider determines which is stronger and faster. This might be acceptable if only [Plaintiff]’s private rights were at issue. But a willingness to cast aside a derivative claim, if it is the slower and weaker horse, does not speak well of a person’s adequacy as a representative of others.”