Forbes v. Wells Beach Casino and the Contemporaneous Ownership Rule

Prior to the enactment of Title 13-A of the Maine Business Corporation Act in January 1972, it was unsettled in Maine law whether a stockholder suing in a derivative action had to allege ownership of stock at the time of the wrongful transaction. In Forbes v. Wells Beach Casino, Inc., initiated before Title 13-A became effective, the Maine Supreme Judicial Court handed down its initial pronouncement on the stockholder standing issue. The decision makes clear that even in those jurisdictions where contemporaneous ownership is required, the rule is not absolute. The Maine court found that there are instances in which a shareholder should be permitted to complain of corporate wrongs which occurred before the acquisition of stock. The case reached the Maine Law Court on appeal from a motion to dismiss the plaintiff's second supplemental pleading for failure to state a claim upon which relief could be granted. The court treated the appeal as a motion for dismissal of both the original complaint and the supplemental pleadings. After a lengthy analysis of the initial complaint, the court concluded that the plaintiff had stated a good cause of action on the contract. It did not, however, limit its decision to that issue. The court also held that the plaintiff's claim for derivative relief had, by itself, sufficient substance to defeat the motion to dismiss. It is this alternative holding, granting the plaintiff standing to sue as a stockholder, which is the subject of this Note.