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CAYMAN ISLANDS RULE GOVERNING SHAREHOLDER DERIVATIVE ACTIONS IS PROCEDURAL, NOT SUBSTANTIVE, FAILURE TO COMPLY WITH RULE DOES NOT BAR SUIT IN NEW YORK (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Feinman, reversing the appellate division, determined that a Cayman Islands rule (Rule 12A) governing prerequisites for bringing a shareholder derivative action was procedural, not substantive. Therefore the New York suit, which must apply Cayman Islands substantive law, should not have been dismissed for failure to comply with the rule. Whether plaintiff had standing to sue under substantive Cayman Islands law was not determined by the Court of Appeals:

 

In Tanges [93 NY2d 48] we … described general policy considerations that ought to be weighed when determining whether a rule is substantive or procedural. Specifically, we consider whether our determination would impose a burden on the foreign court (Connecticut in that instance) or federal courts operating under diversity rules and whether it would threaten to cause delay in the “conduct of judicial business and impair judicial efficiency” … . Here, these factors further weigh in favor of our conclusion that Rule 12A is procedural.

Holding that Rule 12A is procedural does not impose a burden on our courts, or the courts of the Cayman Islands (see Tanges, 93 NY2d at 58). However, were Rule 12A held to be substantive, it is unclear what procedural path a party seeking to bring a derivative action in New York on behalf of a Cayman company would follow to comply with Rule 12A. …

Therefore, a Tanges analysis also leads to the conclusion that Rule 12A is procedural in nature. Because the procedural law of the forum typically applies under our conflict of law rules … , plaintiff’s failure to first comply with Rule 12A’s leave application procedure does not bar his derivative claims … . Davis v Scottish Re Group Ltd., 2017 NY Slip Op 08157, CtApp 11-20-17

 

CIVIL PROCEDURE (SHAREHOLDER DERIVATIVE ACTION, CAYMAN ISLANDS LAW, CAYMAN ISLANDS RULE GOVERNING SHAREHOLDER DERIVATIVE ACTIONS IS PROCEDURAL, NOT SUBSTANTIVE, FAILURE TO COMPLY WITH RULE DOES NOT BAR SUIT IN NEW YORK (CT APP))/CORPORATION LAW  (SHAREHOLDER DERIVATIVE ACTION, CAYMAN ISLANDS LAW, CAYMAN ISLANDS RULE GOVERNING SHAREHOLDER DERIVATIVE ACTIONS IS PROCEDURAL, NOT SUBSTANTIVE, FAILURE TO COMPLY WITH RULE DOES NOT BAR SUIT IN NEW YORK (CT APP))/SHAREHOLDER DERIVATIVE ACTION (CORPORATION LAW, CAYMAN ISLANDS RULE GOVERNING SHAREHOLDER DERIVATIVE ACTIONS IS PROCEDURAL, NOT SUBSTANTIVE, FAILURE TO COMPLY WITH RULE DOES NOT BAR SUIT IN NEW YORK (CT APP))/DERIVATIVE ACTION (SHAREHOLDER DERIVATIVE ACTION, CAYMAN ISLANDS LAW, CAYMAN ISLANDS RULE GOVERNING SHAREHOLDER DERIVATIVE ACTIONS IS PROCEDURAL, NOT SUBSTANTIVE, FAILURE TO COMPLY WITH RULE DOES NOT BAR SUIT IN NEW YORK (CT APP))/CAYMAN ISLANDS LAW SHAREHOLDER DERIVATIVE ACTION, CAYMAN ISLANDS LAW, CAYMAN ISLANDS RULE GOVERNING SHAREHOLDER DERIVATIVE ACTIONS IS PROCEDURAL, NOT SUBSTANTIVE, FAILURE TO COMPLY WITH RULE DOES NOT BAR SUIT IN NEW YORK (CT APP))

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