Document: 330 U.S. 518 67 S.Ct. 828 91 L.Ed. 1067 KOSTERv.(AMERICAN) LUMBERMENS MUT. CASUALTY CO. No. 206. Argued Dec. 19, 1946. Decided March 10, 1947. Mr. Julius Levy, of New York City, for petitioner. Stuart N. Updike, respondent. Justice JACKSON, delivered the opinion Court. 1 This is a derivative action, in equity as are all such actions, begun by plaintiff member and policyholder Lumbermens Mutual Casualty Company 'in right Lumbermen's on behalf its members policy holders.' It was brought United States District Court Eastern York, which citizen. Jurisdiction rests diversity citizenship. The defendants Company, nominal defendant, organized under laws Illinois; one James S. Kemper, president manager thereof, citizen Illinois, Kemper & Co., an Illinois corporation. relief asked that other account to Lumbermens, damages it has sustained profits they have realized certain transactions. alleged defendant officer company, been guilty breaches trust he, his family corporation friends profited. Plaintiff charges Kemper's salary improvidently increased from less than $75,000 over $251,000; although staffed equipped write insurance without intervention any agency, he employed paid 'substantial sums' 'commissions, fees otherwise' Lumbermens' prejudice profit, caused assets be sold himself favorites at prices their values. individually never served York. Unless should found within jurisdiction, some causes action cannot tried this event want indispensable party. Some issues could him. 2 district court, motion dismiss doctrine forum non conveniens,1 does business forty-eight states, but ts home principal place Illinois. There directors live; there records kept; no witness shown necessary either side case resides outside lives not appear attended meetings policyholders or raised objection acts alleged, otherwise personal knowledge so possibly except ownership denied. would him make own largely books Chicago testimony officers witnesses resident there. also evident legality many these transactions will turn law exists whose territory questioned took place. That if were Chicago; foreign case, there, involve conflict laws. urged plaintiff's total premium payments $250, maximum possible interest personally controversy. 3 Under circumstances, two courts below concurred view ample remedy available state federal Both relied upon Rogers v. Guaranty Trust Co. 288 123, 53 295, 77 652, 89 A.L.R. 720. dissenting judge considered our more recent decision Williams Green Bay Western R.R., 326 549, 66 284, implies disapproval restricts application conveniens. We here certiorari. 329 700, 61. 4 involves special problems conveniens inhere little 720, feature given almost attention emphasis entirely extent involved inquiry into 'internal affairs corporation,' certainly most distinguishing actions. 5 stockholder's policyholder's analogous, invention supply adequate redress fiduciary duty corporate managers. Usually wrongdoing possess control enables them suppress effort entity wrongs. Equity therefore traditionally entertains secondary single stockholder may sue corporation's when shows proper demand refused pursue remedy, sho facts demonstrate futility request. With rare exceptions, actions only and, present can get reason citizenship parties. Their existence peculiar character recognized old Rules. Rule 27, 226 U.S.App., p. 8. complexities unique features however, relevant issue, these, petitions equitable relief, who seeks must do equity, court alert see remedial process way abused. 6 cause brings before corporation's.2 real party allowed act protection somewhat 'next friend' might individual, because disabled protecting itself. If, treated realign parties jurisdictional purposes according interests. In typical many, put side. corporations then among plaintiffs defendants, jurisdiction ousted. City Indianapolis Chase National Bank 314 63, 62 15, 86 47. But saved class cases dispensation antagonistic hands. Doctor Harrington, 196 579, 25 355, 49 606. 7 Plaintiffs also, often small financial large Plaintiffs, like one, stake test, sometimes sufficient individual up required amount. Again favored with fiction plaintiffs' recovery measure amount test damage asserted Hence, small, conditions laid down 23 Federal Rules Civil Procedure, 28 U.S.C.A. following section 723, shareholders complied established, empowered entertain case. peculiarities overlooked. 8 Where dispute, e good why choice. He deprived presumed advantages clear showing (1) establish oppressiveness vexation out proportion convenience, slight nonexistent, (2) trial chosen inappropriate considerations affecting court's administrative legal problems. balancing conveniences, convenience sued normally outweigh inconvenience shown. where hundreds potential plaintiffs, equally entitled voluntarily invest themselves whom equal show go courts, claim appropriate merely considerably weakened.3 Such represent important public bringing faithless managers book. nature invitation stockholders approval supervision, volunteers position itself creates something relationship. 9 While, even ordinary residence suitor fix reference considerations, fact 'high significance.' International Milling Columbia Transportation 292 511, 520, 54 797, 799, 78 1396. But, substantial protect, mere phantom enough enable institute more. taken active part affairs, them, had dealings course protest requisite least expedient trial. Or may, plaintiff, presence help whatever made 10 To places responsibility toward whole assumes represent. prevent collusive settlements abuses, approve dismissal compromise give notice holders sues heard propriety settlement. 23, Procedure. takes troublesome fixing allowances counsel accountants payable against defendants.4 Thus, litigation task adjudication; administration; what require consideration relation group well himself. 11 imports unusual faced applications reasons books, near forum. distant perhaps here. suit important—in likely affected choice production records. response defendant's supporting affidavits, prima facie established inappropriateness provable record suit. undenied every source evidence prove disprove it, 12 'the relates internal corporation' 'courts domicile tribunals determination case.' 64 F.Supp. 595, 599. kinds 'relate corporation', same significance settings. 13 Every issue ultra vires proof officers' authority contract relegated jurisdiction. contracts liabilities events realization net earnings submit scrutiny order determine liability adjudicate. 284. On hand, private visitation existing purpose examining conduct keeping powers, correct abuses nullify irregular proceedings. See Guthrie Harkness, 199 148, 159, 26 4, 8, 50 130, Ann.Cas. 433. persuasive challenge doctrine. presented 'with problem administration' sort lead decline Stone, J., 145, 303, 14 rule law, moreover, requires relate factor witnesses, appropriateness familiar domicile, enforceability granted. ultimate best serve ends justice. modern obtain charters states maintain agent comply local requirements, while activity conducted far c artering state. Place circumstances conveniens, resists formalization looks realities doing 15 holds '* * free exercise sound discretion pass merits controversy relegate Obviously definite general formulated determined assume stockholders' suits relating corporations. safely said declined whenever efficiency, justice point particular pages 131, 297, 298. disagreement whether warranted governed none power court. 16 we reversed laying rigid govern said, 'Each turns facts.' page 557, 288. quite different those us now. recover amounts due debentures. possibility construction debentures, review dividends, another view, decide applicable directors' here, resided points legally domiciled elsewhere, maintained office York; five six directors, executive fiscal auditor, there; customarily held records, transfer minute kept Reciting facts, others, concluded 'These plainly indicate vexatious oppressive availability aspect considered.' 560, 290. Accordingly, dismissed. 17 Since pending observe applicable, effect questions cases. petitioner relies contention similar seem ones property assure effectiveness judgment. Miller Quincy, 179 N.Y. 294, 72 N.E. 166; Ramsey Rosenthal, 242 App.Div. 526, 275 N.Y.S. 783; Hamm Christian Herald Corp., 236 639, 260 743; Tarlow Archbell, Sup., 47 N.Y.S.2d 3, 7, affirmed, 269 837, 56 363.5 Those cases, consider interests concerns uniform conclusion not. taking factors applying say nothing detract stated Cardozo, Travis Knox Terpezone 215 259, 264, 109 250, 251, L.R.A. 1916A. 542, Ann.Cas.1917A, 387: 'To trace advance precise line demarcation between controversies assumed difficult hazardous venture. A litigant not, excluded stockholder, unless efficiency tribunals.' And Langfelder Universal Laboratories, 293 200, 204, N.E.2d 550, 553, 155 1226, said: 'But settled absence strict sense rights litigants regulation management dependent State sought unable enforce decree appropriately adjudicated country owes existence.' 18 Confronted affidavits reciting earlier set forth herein, utterly silent advantage expense, speed trial, adequacy recited process, proposed visit York.' For rest, memorandum law. makes inadequate, impossible, counts admitted. extent, adjudicate closely related issues, deciding grievances piecemeal. Petitioner deny complaint exhaustive examination corporations, occurred d demanded matter irrespective defendant. abused giving weight sworn statements papers, especially failure answering affidavit plaintiff. hold refuse much harassment discloses countervailing benefit indicates disadvantage support inference chose ordinarily thought suitable 19 Affirmed. 20 BLACK, dissenting. 21 I agree substantially dissent REED, wish add thought. Today's goes beyond dubious announced instances provide multi-state defendants. prayer appointment receiver detailed continuing supervision headquarters my constitute situation. Cf. Commonwealth Pennsylvania Williams, 294 176, 55 380, 79 841, 96 1166. 22 trend congressional legislation protect stock security holders. e.g., Securities Act 1933, 48 Stat. 74, U.S.C. § 77a et seq., seq. intended complete substitute antidote provided dangers inherent development frequent conflicts owners Laswell, Dean Podell, Non-Bureaucratic Alternative Minority Stockholders' Suits, 43 Col.L.Rev. 1036, 1045, 1047; Koessler, Stockholders Suit: Comparative View, 46 238, 241. Yet Court's sets insuperable obstacles bring suits. California Florida easily Delaware, Jersey, press claims. reason, curb mismanagement, lives, bought stock, agents business. Put going across continent litigate cause, nullifies opportunity inclination owners. RUTLEDGE joins opinion. 24 assume, Yowk Cir., 153 F.2d 888, 890, Court, discretion, ground vexatiously inconvenient Still think need restate amply majority. sole abuse power. joined grounds interference that, further, served, dismissed foru convenient. Circuit Appeals affirmed convenient complaint. 27 By venue statute, Congress residing starts presumption favor residence. 112, 112. tarry corporation, nor realigning true lies. However interesting implications exist forum, accordingly pertinent inquiry. Nor concern ourselves strike Whatever motives now 29 expense analysis grouped important. crowded condition calendar lack familiarity weighty factors. neither Union Telegraph Russell, Tex.Civ.App. 82, 33 S.W. 708; Robinson Oceanic Steam Nav. 112 315, 625, 636; Burdick Freeman, 120 420, 949; Morris Missouri Pacific R. Tex. 17, 228, 349, Am.St.Rep. 17; collected 32 34. Smith Empire State-Idaho Mining Development C.C., 127 F. 462. Davis Farmers Co-operative 262 312, 317, 556, 558, 996. hesitates bear Douglas N.H. H.R. 279 377, 387, 356, 73 747. transitory state, outweighed citizens arm. Arizona Commercial Iron Cap Copper 119 Me. 213, 110 A. 429. Mexican Nat. Ry. Jackson, 107, 857, 31 276, 59 28; Slater 194 120, 581, 900. particularly states. W.R. 554, 286. 30 concerned relative choosing regardless making proof, long properly laid. out, fair oppress legitimate vex opponent. agree, assessing burden positive choosing. convince both Despite necessity elsewhere ev dence, hardly capricious state; so-doing usually apparent. Accordingly dismiss. affiants come 'vast quantities documents' located main offices situated, transporting documents great expense. They ever protested Department Insurance audited establishment status stockholder.' being Lumbermens. As last argument: (153 890) kind 'to York' action. specifically concedes administration leads refusal depends If significant. Almost affairs. Here inquiry, misconduct relationship Although inevitably breach trust, administration. When administration, seeking forced depend 'will justice.' This, think, strong overcome controlled statute. Mere enough. 34 admitting documentary situated amiss carry defense necessary. initially transport bear, proof. supposing meet bare allegation hardship ort, though allegations mass accessible puts powerful weapon hands improperly break barriers calling wrong Neirbo Bethlehem Shipbuilding 308 165, 60 153, 84 167, 128 1437. qualified regular shares stronger holder away relief. 35 Petitioner, excessive services dominate sales company persons inadequate prices. allegations. None denied petitioner's success result 'monetary damage' seems impossible. Petitioner's enrich mulcted sums. speaks membership From record, basis respondent's remedies 36 BURTON dissent. broadly it. Hyde How. 170, 175, 874; Suydam Broadnax, Pet. 67, 357; President, Directors Tennessee Jolly's Adm'rs, 503, 472. statute restricting proceedings defeats were, Chicot County Sherwood, 148 529, 695, 37 546. recognizes established. holding autonomous discharge judicial duties, subject Congress. provides 'that wherein found.' 1214. reinforces reinforcement Moreover, obvious facilitating residence, assures sued. Greenberg Giannini, 140 152 966. service party, Davenport Dows, Wall. 626, 938, chance Corporations find qualify consent stockholders. Before circuit Northern Division. Schwartz D.C.N.D.Ill.E.D., 69 152. barred hearing prosecution statutory period. All entered appearance, lawyers associated Trustees Greenough, 105 527, 1157; cited throughout Hornstein, Counsel Fee Stockholder's Derivative 39 784. Fees allowed, vary greatly professional scales determinants Of petitioner, Goldstein Lightner, 266 357, 42 338, 670, 98, gave expressed Jacobs Sugar Refining 104 242, 93 776, question decided subject-matter Ernst Rutherford Boiling Springs Gas 38 388, 403. Hallenborg Greene, 590, 403, Appellate Division broad Supreme restrict conform statement doctrine: 'When judgment effectual aid sister contravene rest interpretation doubt,—as strictly corporation,—the organized.' 597, 408.

Category: 8