Batchelder

We must decide whether the holder of an American Depository Receipt has standing to bring a shareholder derivative action against a Japanese corporation.

I

This is a derivative action brought by Harry C. Batchelder, Jr. on behalf of Honda Motor Company, Ltd. (“Honda Japan”) and American Honda Motor Company, Inc. (“American Honda”) for wrongs allegedly committed by directors, officers, and employees of Honda Japan and American Honda (the “Director Defendants”), and by certain third parties, including Lyon & Lyon and Roland Smoot (collectively, “Lyon & Lyon”). Honda Japan was incorporated under the laws of Japan. It is the sole shareholder of American Honda, a California corporation.

Harry C. Batchelder, Jr. alleges that at all times relevant to this case he owned 1,246 American Depository Receipts (“ADRs”), *917 each of which reflects ownership of ten shares of stock in Honda Japan. The ADRs are issued by the depository, Morgan Guaranty Trust Company of New York. Batchel-der purchased his ADRs under the terms and conditions of a deposit agreement (“Deposit Agreement”) with Honda Japan and Morgan Guaranty. Batchelder alleges that the directors of both Honda Japan and American…