Bringing Cayman Derivative Claims In NY Just Got Easier

A shareholder bringing a contested derivative claim in the Cayman Islands must seek leave from the Cayman Grand Court before proceeding. This litigation prerequisite — imposed by Rule 12A of the Rules of the Grand Court of the Cayman Islands — requires a prima facie factual showing, with the aim of protecting corporations from “vexatious or unfounded litigation.” But when a Cayman Islands-related derivative claim is brought in New York’s Commercial Division, does the same leave-of-court rule apply? The New York Court of Appeals recently answered “no,” holding in Davis v. Scottish Re Group Ltd. that Rule 12A is a procedural rule that does not apply to matters litigated in New York courts.

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