A corporation’s board of directors customarily is entrusted with overall management control of a corporation, whether through its articles of incorporation, its bylaws or applicable law. As such, the decision to have a corporation commence, or refrain from commencing, litigation usually rests with its board. There are times, however, recognized by the New York Court of Appeals and other precedent, when absent board action those decisions may validly be made by the corporation’s president.

We examine below the divergent court of appeals decisions on this issue, and the application of the legal principles in those decisions by the Commercial Division. These decisions focus on the interplay between a president’s authority to commence litigation and the action or inaction by the corporation’s board on that issue. Even where a president’s authority to authorize a corporation to commence litigation is lacking, however, a corporate president who is also a stockholder of the corporation may be able to seek relief for the corporation through a shareholder derivative action.

Appellate Precedent