How do California courts determine whether a stockholder’s claim is direct or derivative?

We are faced at the outset with defendants' contention that if a cause of action is stated, it is derivative in nature since any injury suffered is common to all minority stockholders of the Association. Therefore, defendants urge, plaintiff may not sue in an individual capacity or on behalf of a class made up of stockholders excluded from the United Financial exchange,[1 Cal.3d 106] and in any case may not maintain a derivative action without complying with Financial Code, section 7616. ¹⁰ Defendants

Page 598

[460 P.2d 470] invoke Shaw v. Empire Savings & Loan Assn., 186 Cal.App.2d 401, 9 Cal.Rptr. 204. There the defendant majority stockholder, who controlled the board of directors, had the bylaws amended to delete a provision granting preemptive rights and thereafter caused the Association to issue shares to himself at less than market or book value, thus diluting plaintiff minority stockholder's interest. Plaintiff sought a declaration that he was entitled to maintain his proportionate interest in the Association either through purchase of a proportionate number of shares from the buyer or issuance of a proportionate number of additional shares to him by the Association on the same terms. The Court of Appeal concluded that inasmuch as the injury to the plaintiff was no different from that caused other minority stockholders, relief was available only in a derivative action.

Analysis of the nature and purpose of a shareholders' derivative suit will demonstrate that the test adopted in the Shaw case does not properly distinguish the cases in which an individual cause of action lies. A shareholder's derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when injury is caused to the corporation that may not otherwise be redressed because of failure of the corporation to act. Thus, 'the action is derivative, I.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance or distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets.' (Gagnon Co., Inc. v. Nevada Desert Inn, 45 Cal.2d 448, 453, 289 P.2d 466, 471; [1 Cal.3d 107] Sutter v. General Petroleum Corp., 28 Cal.2d 525, 530, 170 P.2d 898, 167 A.L.R. 271; see Ballantine & Sterling, California Corporation Laws (4th ed. 1968) 168B.) 'A stockholder's derivative suit is brought to enforce a cause of action which the corporation itself possesses against some third party, a suit to recompense the corporation for injuries which it has suffered as a result of the acts of third parties. The management owes to the stockholders a duty to take proper steps to enforce all claims which the corporation may have. When it fails to perform this duty, the stockholders have a right to do so. Thus, although the corporation is made a defendant in a derivative suit, the corporation nevertheless is the real plaintiff and it alone benefits from the decree; the stockholders derive no benefit therefrom except the indirect benefit resulting from a realization upon the corporation's assets. The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.' (Rules of Civ.Proc. for U.S. District Courts, Advisory Committee Notes (1966) H.R. Doc. No. 391, 89th Cong., 2d Sess. 40.)

It is clear from the stipulated facts and plaintiff's allegations that she does not seek to recover on behalf of the corporation for injury done to the corporation by defendants. Although she does allege that the value of her stock has been diminished by defendants' actions, she does not contend that the diminished value reflects an injury to the corporation and resultant depreciation in the value of the stock. Thus the gravamen of her cause of action is injury to herself and the other minority stockholders.

In Shaw v. Empire Savings & Loan Assn., Supra, 186 Cal.App.2d 401, 9 Cal.Rptr. 204, the court noted the 'well established general rule that a stockholder of a corporation has no personal or individual right of action against third persons, including the corporation's officers and directors, for a wrong or injury to the corporation which results in the destruction or depreciation of the value of his stock, since the wrong thus suffered by the stockholder is merely incidental to the wrong suffered by the corporation and affects all stockholders alike.' (186 Cal.App.2d 401, 407, 9 Cal.Rptr. 204, 208.) From this the court reasoned that a minority shareholder could not maintain an individual action unless he could demonstrate the injury to

Page 599

[460 P.2d 471] him was somehow different from that suffered by other Minority shareholders. (186 Cal.App.2d 401, 408, 9 Cal.Rptr. 204.) In so concluding the court erred. The individual wrong necessary to support a suit by a shareholder need not be unique to that plaintiff. ¹¹ The same injury may affect a substantial number of shareholders. If the injury is not incidental to an injury to the corporation, an individual cause of action exists. To the extent that Shaw v. Empire Savings & [1 Cal.3d 108] Loan Assn. is inconsistent with the opinion expressed herein, it is disapproved.

A minority shareholder may bring a cause of action for breach of fiduciary duty against majority shareholders as an individual claim or as a derivative claim, depending on the circumstances. (See Daly v. Yessne (2005) 131 Cal.App.4th 52, 63, 31 Cal.Rptr.3d 420; Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238, 1252-1253, 1257-1258, 18 Cal.Rptr.3d 187 (Jara); see also Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525, 530, 170 P.2d 898 ["a stockholder may sue as an individual where he is directly and individually injured although the corporation may also have a cause of action for the same wrong"]; Goles v. Sawhney (2016) 5 Cal.App.5th 1014, 1018, fn. 3, 210 Cal.Rptr.3d 261 ["A single cause of action by a shareholder can give rise to derivative claims, individual claims, or both."]; Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1222, 18 Cal.Rptr.3d 276 [same].) But where a cause of action seeks to recover for harms to the corporation, the shareholders have no direct cause of action "[b]ecause a corporation exists as a separate legal entity" (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1108, 72 Cal.Rptr.3d 129, 175 P.3d 1184 (Grosset)) and "is the ultimate beneficiary of such a derivative suit" (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1003, 84 Cal.Rptr.3d 642 ). (See Cotton v. Expo Power Systems, Inc., supra, 170 Cal.App.4th at p. 1380, 89 Cal.Rptr.3d 112 ["A derivative claim is a property right that belongs to the corporation."].)

"The shareholders may, however, bring a derivative suit to enforce the corporation's rights and redress its injuries when the board of directors fails or refuses to do so. When a derivative suit is brought to litigate the rights of the corporation, the corporation is an indispensable party and must be joined as a nominal defendant." (

[69 Cal.App.5th 150]

Grosset, supra, 42 Cal.4th at p. 1108, 72 Cal.Rptr.3d 129, 175 P.3d 1184; accord, Jones, supra, 1 Cal.3d at pp. 106-107, 81 Cal.Rptr. 592, 460 P.2d 464; see Patrick v. Alacer Corp., supra, 167 Cal.App.4th at p. 1004, 84 Cal.Rptr.3d 642 ["Though the corporation is essentially the plaintiff in a derivative action, ‘[w]hen a derivative suit is brought to litigate the rights of the corporation, the corporation ... must be joined as a nominal defendant.’ "].)

"An action is deemed derivative ‘ "if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets." ’ [Citation.] When a derivative action is successful, the corporation is the only party that benefits from any recovery; the shareholders derive no benefit ‘ "except the indirect benefit resulting from a realization upon the corporation's assets." ’ " (Grosset, supra, 42 Cal.4th at p. 1108, 72 Cal.Rptr.3d 129, 175 P.3d 1184, fn. omitted; see Bader v. Anderson (2009) 179 Cal.App.4th 775, 793, 101 Cal.Rptr.3d 821 ["a derivative suit is one in which the shareholder seeks ‘redress of the wrong to the corporation’ "].)

[284 Cal.Rptr.3d 300]

" ‘The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.’ " (Jones, supra, 1 Cal.3d at p. 107, 81 Cal.Rptr. 592, 460 P.2d 464; see Bader v. Anderson, supra, 179 Cal.App.4th at p. 793, 101 Cal.Rptr.3d 821; Denevi v. LGCC, LLC, supra, 121 Cal.App.4th at p. 1222, 18 Cal.Rptr.3d 276.) For example, " ‘[i]f the injury is one to the plaintiff as a stockholder and to him individually, and not to the corporation, as where the action is based on a contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting him directly, it is an individual action.’ " (Sutter v. General Petroleum Corp. , supra , 28 Cal.2d at p. 530, 170 P.2d 898.) "The individual wrong necessary to support a suit by a shareholder need not be unique to that plaintiff. The same injury may affect a substantial number of shareholders. If the injury is not incidental to an injury to the corporation, an individual cause of action exists." (Jones, supra, 1 Cal.3d at p. 107, 81 Cal.Rptr. 592, 460 P.2d 464; see Bader, at p. 793, 101 Cal.Rptr.3d 821 ["A direct (as opposed to a derivative) action is maintainable ‘only if the damages [are] not incidental to an injury to the corporation.’ "]; see also Schuster v. Gardner (2005) 127 Cal.App.4th 305, 313, 25 Cal.Rptr.3d 468; Denevi, at p. 1222, 18 Cal.Rptr.3d 276; Nelson v. Anderson (1999) 72 Cal.App.4th 111, 124, 84 Cal.Rptr.2d 753 (Nelson).)

Under California law, "a shareholder cannot bring a direct action for damages against management on the theory their alleged wrongdoing decreased the value of his or her stock (e.g., by reducing corporate assets and net worth). The corporation itself must bring such an action, or a derivative suit may be brought on the corporation's behalf." (Friedman, Cal. Practice Guide: Corporations, supra, ¶ 6:601.1, p. 6-128.1, citing Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525, 529-530, 170 P.2d 898, O'Hare v. Marine Electric Co. (1964) 229 Cal.App.2d 33, 36-37, 39 Cal.Rptr. 799.) A different rule would "authorize multitudinous litigation and ignore the corporate entity." (Sutter v. General Petroleum Corp., supra, at p. 530, 170 P.2d 898.)

[127 Cal.App.4th 313]

An action is derivative if "`the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance of distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets.'" (Jones v. H.F. Ahmanson &

[25 Cal.Rptr.3d 474]

Co. (1969) 1 Cal.3d 93, 106-107, 81 Cal. Rptr. 592, 460 P.2d 464.) Shareholders may bring a derivative suit to, for example, enjoin or recover damages for breaches of fiduciary duty directors and officers owe the corporation. (Friedman, Cal. Practice Guide: Corporations, supra, ¶ 6:604, p. 6-128.2.) An individual cause of action exists only if damages to the shareholders were not incidental to damages to the corporation. (Jones v. H.F. Ahmanson & Co., supra, at p. 107, 81 Cal.Rptr. 592, 460 P.2d 464.) Examples of direct shareholder actions include suits brought to compel the declaration of a dividend, or the payment of lawfully declared or mandatory dividends, or to enjoin a threatened ultra vires act or enforce shareholder voting rights. (Friedman, supra, ¶ 6:601, p. 6-128.)

Here, the gravamen of the second amended complaint was harm to Peregrine. It alleged that in "an effort to benefit themselves, certain [d]efendants: (a) solicited stockholder approval to increase the number of authorized shares of common stock from 200 million to 500 million shares, enabling Peregrine to issue shares in payment for an ill-conceived acquisition spree by issuing stock to pay for those acquisitions and diluting the interests of [p]laintiff and the [c]lass; (b) overstated assets and equity; (c) improperly recognized at least $509 million of revenue; and (d) understated expenses. In addition, [d]efendants solicited approval concerning board elections and the board's selection of outside auditor without first making corrective disclosures to Peregrine's financial filings with the Securities and Exchange Commission." The complaint also alleged the putative class members were damaged "by owning shares of stock now subject to the `fraud penalty,' pursuant to which shares of stock are undervalued because the [c]ompany has lost credibility and the market no longer believes a [c]ompany's ... reported numbers," and this so-called "`fraud penalty' ma[de] it difficult to borrow money or receive financing, a condition which contributed [to] Peregrine

[127 Cal.App.4th 314]

filing for bankruptcy." The damage to Schuster and the putative class members, diminution in stock value, was incidental to the injury to Peregrine.

Schuster contends the second amended complaint is a direct action because to avoid removal to federal court he chose to limit the putative class to persons who held Peregrine stock between July 19, 2000, and May 6, 2002. Without citation to the record, he asserts that Peregrine "issued 45 million shares of stock during the [c]lass [p]eriod, [and thus] no more than 40 percent of Peregrine's shareholders could be members of the [c]lass." He cites the language of Jones v. H.F. Ahmanson & Co., supra, 1 Cal.3d at pages 106-107, 81 Cal.Rptr. 592, 460 P.2d 464, that an action is derivative if "the gravamen of the complaint is injury to the corporation, or to the whole body of its stock," and submits this action is direct because it does not concern "the whole body" of Peregrine's stock.

[25 Cal.Rptr.3d 475]

The argument is specious. As defendants point out, whether Schuster "seeks to recover on behalf of all the stockholders, or tries to pursue claims on behalf of some subset, the damages sought are still incidental to the alleged injury to Peregrine, and any recovery should go to the company."

Schuster also contends California law recognizes direct "holder actions" for breach of fiduciary duties to shareholders. He relies on Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 132 Cal.Rptr.2d 490, 65 P.3d 1255 (Small), but it is unavailing. In Small, a stockholder sued the corporation and its officers for fraud, alleging they sent stockholders a fraudulent quarterly financial report that grossly over reported earnings and profit, and when the fraud was discovered, the stock price plunged, causing injury to stockholders like himself. (Id. at p. 170, 132 Cal. Rptr.2d 490, 65 P.3d 1255.) The issue presented was "whether California should recognize a cause of action by persons wrongfully induced to hold stock instead of selling it." (Id. at p. 171, 132 Cal.Rptr.2d 490, 65 P.3d 1255.) The court referred to "such a lawsuit as a `holder's action' to distinguish it from suits claiming damages from the purchase or sale of stock." (Ibid.)

The court held: "... California law should allow a holder's action for fraud or negligent misrepresentation. California has long acknowledged that if the effect of a misrepresentation is to induce forbearance — to induce persons not to take action — and those persons are damaged as a result, they have a cause of action for fraud or negligent misrepresentation. We are not persuaded to create an exception to this rule when the forbearance is to refrain from selling stock. This conclusion does not expand the tort of common law fraud, but simply applies long-established legal principles to the factual setting of misrepresentations that induce stockholders to hold on to their stock." (Small, supra, 30 Cal.4th at p. 171, 132 Cal. Rptr.2d 490, 65 P.3d 1255.)

[127 Cal.App.4th 315]

The court, however, expressly limited such an action to "stockholders who can make a bona fide showing of actual reliance upon the misrepresentations." (Small, supra, 30 Cal.4th at pp. 171, 184-185, 132 Cal.Rptr.2d 490, 65 P.3d 1255.) The plaintiff must allege with specificity "actions, as distinguished from unspoken and unrecorded thoughts and decisions, that would indicate that the plaintiff actually relied on the misrepresentations. [¶] Plaintiffs who cannot plead with sufficient specificity to show a bona fide claim of actual reliance do not stand out from the mass of stockholders who rely on the market. ... [S]uch persons cannot bring individual or class actions for fraud or misrepresentation. They may, however, be able to bring a corporate derivative action against the corporate officers and directors for harm done to the corporation. [Citation.] Because a plaintiff in a derivative action is suing on behalf of the corporation, he or she need not show personal reliance." (Id. at pp. 184-185, 132 Cal.Rptr.2d 490, 65 P.3d 1255.)

In Small, the plaintiff's complaint alleged no injury to the corporation or wrong common to the entire body of stockholders; rather, it alleged injury only to those stockholders who actually relied on the defendants' alleged misrepresentations. The court held the plaintiff did not adequately plead reliance, and thus it affirmed the sustaining of a demurrer. The court concluded that because it stated a new rule of law, the plaintiff should be given leave to amend his complaint. (Small, supra, 30 Cal.4th at p. 185, 132 Cal.Rptr.2d 490, 65 P.3d 1255.)

[25 Cal.Rptr.3d 476]

Schuster asserts the "same arguments that compelled the Supreme Court to hold that there is a direct action for a class of holders for fraud claims also apply to a direct action for holders for breach of fiduciary duty." We are not, however, required to reach the issue. Schuster points to no allegation regarding actual reliance. "The reviewing court is not required to make an independent, unassisted study of the record in search of error or grounds to support the judgment. It is entitled to the assistance of counsel." (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 594, p. 627.) We have nonetheless combed through the lengthy complaint and find no allegation that the alleged "massive fraud" of defendants actually induced Schuster or the putative class members to hold on to their stock. Further, Schuster does not contend he could amend the complaint to allege actual reliance. Rather, he ignores the reliance issue altogether.

Under California law, the second amended complaint is a derivative action that Schuster lacks standing to pursue.

" 'It is a general rule that a corporation which suffers damages through wrongdoing by its officers and directors must itself bring the action to recover the losses thereby occasioned, or if the corporation fails to bring the action, suit may be filed by a stockholder acting derivatively on behalf of the corporation. An individual stockholder may not maintain an action, in his own right against the directors for destruction of or diminution in the value of the stock....' " (Rankin v. Frebank Co., supra, 47 Cal.App.3d at p. 95, 121 Cal.Rptr. 348.)

Nelson contends that she suffered injury as an individual, and even if there were injury to the corporation, a derivative action was not her exclusive remedy. She points out that the same facts might give rise to two causes of action, one in favor of the corporation, another in favor of one or more individual shareholders. (See Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525, 530, 170 P.2d 898.) Her cause of action was individual, she argues, because she suffered injury to her reputation and emotional distress, and lost her out-of pocket expenses, as well as other employment opportunities. ⁵

The test is not whether Nelson's damages were unique, as Nelson's argument suggests; an individual cause of action exists only if the damages were not incidental to an injury to the corporation. (See Jones v. H.F. Ahmanson & Co., supra, 1 Cal.3d at p. 107, 81 Cal.Rptr. 592, 460 P.2d 464.) The cause of action is individual, not derivative, only " 'where it appears that the injury resulted from the violation of some special duty owed the stockholder by the wrongdoer and having its origin in circumstances independent of the plaintiff's status as a shareholder.' " (Rankin v. Frebank Co., supra, 47 Cal.App.3d at p. 95, 121 Cal.Rptr. 348.)

In other words, it is the gravamen of the wrong alleged in the pleadings, not simply the resulting injury, which determines whether an individual action lies. While we agree that in some cases, the same facts regarding injury to the corporation may underlie a personal cause of action, such as intentional infliction of emotional distress, breach of contract, fraud, or defamation, Nelson has not alleged or proved the elements of any such cause of action. (See e.g., Sutter v. General Petroleum Corp., supra, 28 Cal.2d at p. 531, 170 P.2d 898.) ⁶

The second amended complaint alleges that Anderson exercised "complete authority, power, legal and financial control over ... Lonan, and ... all aspects of [its] business and management decisions, to the exclusion of Nelson ..., resulting in the foreseeable deprivation of Nelson's rights as ... a shareholder." The injurious decisions included Anderson's preventing Nelson from hosting the infomercial without any legitimate business purpose; failing to use her best efforts to promote the product, and sabotaging Nelson's efforts; having a romantic relationship with Lonan's attorney, Brown, and while concealing such relationship, permitting Brown to "inject himself into the creative and promotional aspects of Lonan's conceptual and promotional efforts, knowing Brown had no expertise, experience or skill in the field ...," which had a "material, deleterious effect on the success and viability of Nelson's ongoing promotional efforts on behalf of Lonan and on Nelson's reputation in the industry." As a result, Nelson lost her capital investment and potential earnings. ⁷

Because all of the acts alleged to have caused Nelson's injury amount to alleged misfeasance or negligence in managing the corporation's business, causing the business to be a total failure, any obligations so violated were duties owed directly and immediately to the corporation. (See Anderson v. Derrick (1934) 220 Cal. 770, 773, 32 P.2d 1078.) Because the gravamen of the complaint is injury to the whole body of its stockholders, it was for the corporation to institute and maintain a remedial action. (Toboni v. Pennington Millinery Co. (1959) 172 Cal.App.2d 47, 50, 341 P.2d 845.) A derivative action would have been appropriate if its responsible officials had refused or failed to act. (Ibid.; Corps.Code § 800.)

The economic damages proven at trial were lost profits to the corporation as the result of rejected opportunities: Anderson substituted an inexperienced infomercial hostess in place of Nelson, causing the infomercial to be ineffective; Anderson refused to agree to provide personal information to the National Enquirer in exchange for advertising space; and she refused to allow marketing of the product on the Home Shopping Network. A lost opportunity to increase corporate assets or net worth is the most common situation in which a derivative action is the only appropriate remedy. (See 2 Marsh's California Corporation Law (3d ed.1995) § 15.20, p. 1271.)

Nelson relies on Smith v. Tele-Communication, Inc. (1982) 134 Cal.App.3d 338, 184 Cal.Rptr. 571, to suggest that her cause of action is necessarily individual because she is the sole minority shareholder. In Smith, the majority shareholder manipulated a transaction so that it would obtain a tax benefit in which the sole minority shareholder would not share, enabling the majority shareholder to retain a disproportionate share of the corporation's ongoing value. (See 134 Cal.App.3d at pp. 343-345, 184 Cal.Rptr. 571.) An individual action was appropriate in Smith, not because there was a single minority shareholder, but because the injury was done only to that shareholder. Whether there is one minority shareholder or many, an action is individual only if the stock of the individual plaintiff or plaintiffs is the only stock affected adversely. (See Crain v. Electronic Memories & Magnetics Corp. (1975) 50 Cal.App.3d 509, 520-522, 123 Cal.Rptr. 419.) Here, the corporation lost earnings, profits, and opportunities, rendering all the shares valueless. When the injury is to the "whole body of stock," the action must be derivative. (O'Hare v. Marine Electric Co. (1964) 229 Cal.App.2d 33, 36, 39 Cal.Rptr. 799.)

Nelson suggests that because she did not expressly allege that the value of her stock was diminished as the result of an injury to the corporation, she has successfully alleged an individual injury. Nelson's economic damages were lost capital investment, lost earnings, and lost opportunities. Her expert testified that she was deprived of at least $1,101,754, which represents her share of the profits which might have been earned from a successful infomercial, from retail sales and direct mail solicitations, and from sales which might have been generated on the Home Shopping Network and advertisements in the National Enquirer and other publications.

Page 763

Shareholders own neither the property nor the earnings of the corporation. (Miller v. McColgan (1941) 17 Cal.2d 432, 436, 110 P.2d 419.) Shareholders own only stock, from which their income is derived upon the liquidation of assets or the declaration of dividends by the directors. (Id., at pp. 436-437, 110 P.2d 419.) Nelson had no ownership interest in the profits of Lonan and cannot have been deprived of them. The nature of Nelson's proof establishes that any injury was to the corporation; and since she neither alleged nor proved the breach of a duty owing to her personally, her emotional distress and the loss of her investment were incidental to the injury to the corporation.

The court below in sustaining the demurrer concluded that because the "primary injury under the circumstances alleged here is to the corporation,

[179 Cal.App.4th 800]

not to the shareholder," the Complaint did not set forth a direct action. Bader challenges that conclusion, contending that she properly alleged both a derivative and a direct (class) action. We disagree.

Bader's claims consisted of challenges to (1) the adoption of the Plan under various theories, including the distribution of the Proxy Statement alleged to have contained misrepresentations and material omissions, (2) bonus payments made under the Plan, (3) issuance of RSU's to senior officers in 2003 and 2004, and (4) the stock option grant to Jobs in January 2000. The prayer requested a declaration that the shareholders' vote in favor of the Plan was void; cancellation of the Plan; "[a]n equitable accounting in favor of the Company for the losses that it has and will sustain by virtue of the conduct alleged" in the Complaint; equitable relief to prevent defendants from continuing to engage in wrongful acts determined unfair and unlawful under section 17200 of the Business and Professions Code; and, in the event Apple desired to implement a new bonus plan after the Plan's avoidance by the court, an order that the Plan would be subject to a new shareholders' vote after all proper disclosures were given. Looking to the gravamen of the Complaint (Nelson v. Anderson, supra, 72 Cal.App.4th at p. 124), we conclude that only derivative claims were alleged.

In Schuster, supra, 127 Cal.App.4th 305, the plaintiff—a shareholder of Peregrine System, Inc.—alleged a breach of fiduciary duty claim on behalf of himself and all current and former shareholders against officer and directors of the corporation. The operative complaint "alleged that in `an effort to benefit themselves, certain [d]efendants: (a) solicited stockholder approval to increase the number of authorized shares of common stock . . ., enabling Peregrine to issue shares in payment for an ill-conceived acquisition spree by issuing stock to pay for those acquisitions and diluting the interests of [p]laintiff and the [c]lass; (b) overstated assets and equity; (c) improperly recognized at least $509 million of revenue; and (d) understated expenses. . . ." (Id. at p. 313.) The plaintiff alleged further that the members of the class suffered damage "`by owning shares of stock now subject to the "fraud penalty," pursuant to which shares of stock are undervalued because the [c]ompany has lost credibility and the market no longer believes a [c]ompany's . . . reported numbers . . .' . . ." (Ibid.) The Schuster court rejected the plaintiff's argument that he could assert a direct claim on his behalf and on behalf of other Peregrine shareholders, concluding that only a derivative action was alleged because the plaintiff's and the putative class's damages, "diminution in stock value, [were] incidental to the injury to Peregrine." (Id. at p. 314.)

[179 Cal.App.4th 801]

Likewise, the damage alleged here—namely, bonus payments to executives, RSU's paid to senior officers in a manner that resulted in their not being deductible by Apple, and the stock option grant to Jobs that was also allegedly nondeductible—consisted of harm to the corporation itself. (See, e.g., Avikian v. WTC Financial Corp. (2002) 98 Cal.App.4th 1108, 1115 [120 Cal.Rptr.2d 243] ["core claim" of officers' and directors' mismanagement and entering into self-serving deals was injury to corporation and hence derivative]; PacLink Communications Internat., Inc. v. Superior Court (2001) 90 Cal.App.4th 958, 964 [109 Cal.Rptr.2d 436] ["essence of" claim based on fraudulent transfer of corporation's assets without consideration was injury to corporation and hence derivative].) Bader's alleged damage—as well as any damage to members of the putative class (i.e., Apple shareholders solicited to vote on the Plan)—consisted of a reduction in stock value caused by the depletion of corporate funds from the unauthorized payments and the absence of tax deductions. Her damage was incidental to that of the corporation. (Schuster, supra, 127 Cal.App.4th at p. 314.)