Source: https://supreme.justia.com/cases/federal/us/244/261/
Timestamp: 2019-04-21 06:20:21+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 244 › United Copper Securities Co. v. Amalgamated Copper Co.
United Copper Securities Company v.
The established principles limiting the right of a stockholder to sue on behalf of the corporation when it refuses to do so restated and held applicable to an action for damages based on alleged injury to the corporation through violations of the Sherman Act.
The rule which confines the individual stockholder to the equitable forum when seeking to enforce a right of the corporation applies when the cause of action arises under the Sherman Act, as in other cases. Fleitmann v. Welsbach Co., 240 U. S. 27, distinguished.
Whether or not in an action by stockholders to enforce an alleged right of their corporation this Court has power to substitute as plaintiffs persons appointed receivers of the corporation while the writ of error is pending, held that, in the circumstances stated in the opinion, such a motion was without merit in this case.
"IV. In or about the month of January, 1912, and before the commencement of this action, the plaintiffs, United Copper Securities Company and Arthur P. Heinze, each made a demand upon the defendant, United Copper Company, that this or a like action be instituted by said corporation defendant, and said corporation defendant and its board of directors have refused to comply with said demand, and have failed and refused to commence or cause to be commenced any action whatever in compliance therewith."
plaintiff United Copper Securities Company, and by the plaintiff Arthur P. Heinze, each individually and for himself and also on his own behalf and on behalf of all the other stockholders of said United Copper Company."
"Wherefore, the plaintiffs demand judgment in their favor and in favor of any stockholders of the United Copper Company who may join with them in the prosecution of this action in the sum of threefold damages under § 7 of the Act of Congress aforesaid, and that each of the defendants shall be compelled to pay the damages sustained by the United Copper Company, as hereinbefore alleged."
The district court sustained a demurrer and dismissed the complaint. Its judgment was affirmed by the circuit court of appeals. 223 F. 421, and the case comes here on writ of error. A motion for substitution of plaintiffs, hereafter referred to, was made in this Court and argued with the merits.
There is no statement in the complaint that the alleged wrongful acts have caused injury to the plaintiffs as individual shareholders, and no recovery is sought for damages to them or to their property . The case involves, therefore, this single question: whether a stockholder in a corporation which is alleged to have a cause of action in damages against others for conduct in violation of the Sherman Act may sue at law to recover such damages in the right of the corporation if, after request, it refuses to institute the suit itself? Insuperable obstacles to the maintenance of the action are presented both by the substantive law and by the law of procedure.
seldom to control such discretion intra vires the corporation except where the directors are guilty of misconduct equivalent to a breach of trust or where they stand in a dual relation which prevents an unprejudiced exercise of judgment, and, as a rule, only after application to the stockholders, unless it appears that there was no opportunity for such application, that such application would be futile (as where the wrongdoers control the corporation), or that the delay involved would defeat recovery. [Footnote 2] In the instant case, there is no allegation that the United Copper Company is in the control of the alleged wrongdoers, or that its directors stand in any relations to them, or that they have been guilty of any misconduct whatsoever. Nor is there even an allegation that their action in refusing to bring such suit is unwise. No application appears to have been made to the stockholders as a body, or indeed to any other stockholders individually; nor does it appear that there was no opportunity to make it, and no special facts are shown which render such application unnecessary. For aught that appears, the course pursued by the directors has the approval of all the stockholders except the plaintiffs. The fact that the cause of action is based on the Sherman law does not limit the discretion of the directors or the power of the body of stockholders, nor does it give to individual shareholders the right to interfere with the internal management of the corporation.
sought in Fleitmann v. Welsbach Co., 240 U. S. 27, was denied, but this denial affords no reason for assuming that the long settled rule under which stockholders may seek such relief only in a court of equity will be departed from because the cause of action involved arises under the Sherman law.
"all the properties owned by the said defendant [the United Copper Company] or in which the said defendant has any ownership or interest, whether such property be real, personal, or mixed, of whatsoever kind and description, and wheresoever situated, including . . . things in action, credits, stocks, bonds, securities, shares of stock in the corporations described in the said bill of complaint, and all shares of stock, certificates of equitable interest, and other certificates representing any interest in any property, and all other securities of whatsoever character owned by the defendant company or in which it has any interest or which it controls directly or indirectly,"
and that, on February 14, 1913, the same persons had been appointed ancillary receivers by the United States District Court for the District of New Jersey. We have no occasion to consider the power of this Court to grant the motion for substitution. See Railway Co. v. Twombly, 100 U. S. 78, 100 U. S. 81. It is without merit, and is denied.
The bill is framed on the theory that the injury to the United Copper Company was suffered directly, as a competitor of the other defendants, and the case will be discussed on that supposition. It is proper to observe, however, that the allegations of the bill are ambiguous in this respect, and that the United Copper Company appears to have been a mere holding company, which suffered injury only indirectly as controlling stockholder in various mining companies alleged to have been damaged by the conspiracy, and which were not made parties to this suit.
Hawes v. Oakland, 104 U. S. 450; Quincy v. Steel, 120 U. S. 241; Corbus v. Alaska Treadwell Gold Mining Co., 187 U. S. 455; Delaware & Hudson Co. v. Albany & Susquehanna R. Co., 213 U. S. 435. See Macon, D. & S. R. Co. v. Shailer, 141 F. 585.
Hawes v. Oakland, 104 U. S. 450, 104 U. S. 454; Quincy v. Steel, 120 U. S. 241. The latter case was an equity suit by a stockholder to enforce a purely legal claim of the corporation, damages for breach of contract, and the court sustained a demurrer to the bill not because the suit should have been at law, but because the bill failed to show that complainant had made sufficient effort to induce the directors to enter suit.

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