Two decisions last week by the New York Court of Appeals – New York’s highest court – may represent the end of plaintiffs’ lawyers’ recent attempts to turn the state’s courts into a focal point for derivative litigation involving non-U.S. companies. Both of the Court’s decisions affirmed the dismissals of derivative suits that had been filed in New York state court against directors of non-U.S. companies — Barclays and Bayer, respectively — asserting claims against them under their respective home countries’ laws. A copy of the court’s May 20, decision in the Barclays case can be found here. A copy of the court’s May 20 decision in the Bayer case can be found here.

Background

Readers may recall that in 2021, plaintiffs’ lawyers launched as many as ten shareholder derivative suits in New York state court against non-U.S. companies, including Barclays and Bayer. As I discussed in a blog post at the time, the filings set off alarm bells because they raised the possibility that the plaintiffs’ lawyers might have found a way to circumvent limitations for derivative litigation in the various companies’ home country courts. There was also concern that the plaintiffs’ lawyers might have found a way to pursue litigation against non-U.S. companies notwithstanding the restrictions imposed by Morrison v. National Australia Bank to sue non-U.S. companies in U.S. securities class action lawsuits.  

Because of the concerns surrounding these lawsuits, there was a sense of relief when the various trial courts in which many of these suits were pending granted the defendants’ motions to dismiss, as discussed here. The plaintiffs in those various cases of course did have the right to appeal, and is it turned out, the plaintiffs in the Barclays and Bayer cases did appeal, and the appeals eventually made their way up to the New York Court of Appeals. These appeals in the Barclays and Bayer case were the matters that the Court of Appeals decided last week.

The Barclays Decision

In the Barclays case, the Court of Appeals affirmed the lower courts’ holding that the plaintiffs in the case lacked standing under English law to pursue the derivative claims against the Barclays directors. The Court agreed with the defendants that under the principles of the “internal affairs doctrine,” the “substantive law of the place of incorporation governs disputes relating to the rights and relationships of corporate shareholders and managers.”

The plaintiff had tried to argue that amendments to various provisions of the New York Business Corporation Law overrode the internal affairs doctrine. The Court rejected this argument, saying that “the statutory provisions on which the plaintiff relies do not clearly manifest a legislative intent to displace the long-settled internal affairs doctrine, and thus do not preclude a defense that plaintiff lacks standing under English substantive law to maintain this derivative action.”

The Bayer Decision

In the separate Bayer case, the Court of Appeals also affirmed the lower courts’ dismissal of the case. The trial court had granted the dismissal motion on three independent grounds:  lack of personal jurisdiction, forum non conveniens, and lack of standing under German law. The intermediate appellate court affirmed on all three grounds. The Court of Appeals affirmed the lower courts’ rulings on forum non conveniens grounds, saying that the trial court had “considered all relevant factors and made no legal error in doing so.”

Discussion

Both of these decisions are significant, in that they provide substantial grounds for non -U.S. company defendants to oppose claimants’ efforts to try to use U.S. courts to pursue derivative claims against the directors and officers of non-U.S. companies, perhaps in ways that would not be available to the claimants in the home courts of the companies’ countries.

The Barclays decision is particularly important in that regard, as it affirms that – consistent with the requirements of the internal affairs doctrine – non-U.S. companies that are sued in derivative claims in New York courts retain all of the substantive defenses that would be available in their home countries’ courts. The fact that the plaintiff in the Barclays case lacked standing under English law was in fact case dispositive, even though there would have been no barriers to standing under New York law. Upholding these principles, particularly on the basis of the internal affairs doctrine, provides substantial assurance that non-U.S. companies cannot be subject to derivative suits without defenses that would be available to them in their home countries.

In a May 21, 2025 memo by the Sullivan & Cromwell law firm entitled “New York’s Highest Court Rejects Efforts to Make New York a Hub for Non-U.S. Derivative Litigation” (here), the law firm observed that “these two decisions from New York’s highest court likely will be dispositive precedent in most, if not all, of the remaining pending derivative actions, and could signify the end of plaintiffs’ short-lived efforts to turn New York into a hub for derivative litigation against non-U.S. companies.” The law firm memo adds that “the decisions are a victory for principles of comity and will provide non-U.S. companies with much-needed certainty about their exposure to U.S. derivative litigation.”

All of that said, it is important to add the note here that it is emphatically not the case that a non-U.S. company can never be subject to derivative litigation in a New York Court. Readers with long memories may recall the May 2024 decision by a New York state court trial judge, involving a derivative suit under Cayman law against a Cayman-domiciled company, in which the court denied the defendants’ motion to dismiss. In a decision that is very deeply fact-based, the court held that it had personal jurisdiction over the individual defendants and rejected the defendants’ forum non conveniens arguments.

The court’s decision in that case does show that New York’s courts may still be available for derivative suits against non-U.S. companies, at least in certain circumstances, notwithstanding even the rulings of the Court of Appeals discussed above.

Indeed, readers with even longer memories will recall that earlier a New York trial court had also denied the dismissal motions in the high-profile Renren case, also involving derivative claims under Cayman law against a Cayman company, underscoring the fact that at least in certain circumstances non-U.S. companies could have to face corporate disputes filed in New York state court. The Renren case itself arguably highlights the significance of this fact, given that the case ultimately settled for approximately $300 million, and was for a time the largest ever derivative lawsuit settlement.

In other words, even though the possibility of a non-U.S. company having to face a corporate lawsuit in a New York court is, in light of the two recent decisions of the Court of Appeals, remote, the risks of such a suit is not zero. However, non-U.S. companies subject to derivative suits in New York court will, as a result of these recent decisions, have substantial defenses in the event of such a lawsuit.