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Shareholder derivative suit follows sexual misconduct allegations

Shareholders of stock in Wynn Resorts Ltd., a company which is a big player in Nevada's popular gambling and resort industry, have filed a derivative action against both the very corporation in which they hold stock as well as the board of the corporation.

The lawsuit pertains to the conduct of the former chief executive officer of the company, who had to resign under fire after allegations that he had the habit of harassing an otherwise pressuring the women with whom he worked in to sexual acts. The CEO was just the latest in a number of formerly powerful men who have been brought down by their inappropriate and unlawful sexual behavior.

According to the lawsuit, even though the board of directors knew or at least had reason to know that its CEO, whom the board could remove from office, was engaging in sexual harassment and using his position of authority within the organization to do so.

The shareholders who filed this suit allege this constituted a breach of fiduciary duty and made the shareholder derivative action, which those who hold stock can use when a board should take action but does not, an appropriate choice under the circumstances.

Although the underlying conduct won't always relate to sexual harassment, this story illustrates what an important type of business litigation a shareholders' derivate action can be. These sorts of suits serve as an important protection against corporate officers and directors who might otherwise disregard the best interests of a corporation and that corporation's stockholders. Those who feel they need to file a derivative action, as well as directors who may want to defend against one, should consider getting the help of an attorney experienced in the area of business litigation.

Source: Las Vegas Review-Journal, "Second shareholder lawsuit filed against Wynn Resorts, directors," David Ferrara, Feb. 15, 2018

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