Source: https://supreme.justia.com/cases/federal/us/288/123/
Timestamp: 2019-04-23 16:11:50+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 288 › Rogers v. Guaranty Trust Co.
1. A stockholder, by becoming such, impliedly agrees that, in respect of its internal affairs, the corporation is governed by the laws of the its organization. P. 288 U. S. 130.
2. It is settled doctrine that a court, state or federal, sitting in one State will, as a general rule, decline to interfere with or control by injunction or otherwise the management of the internal affairs of a corporation organized under the laws of another State, but will leave controversies as to such matters to the courts of the the domicile. P. 288 U. S. 130.
3. Courts will exercise this discretion whenever considerations of convenience, efficiency and justice point to the courts of the the domicile as appropriate tribunals for the determination of the particular case. P. 288 U. S. 131.
4. Stockholders of a New Jersey corporation brought suit in New York against the corporation, some of its directors, and other persons to enjoin the issuing and selling of stock to the officers, directors, and certain employees of the corporation, and to annul the shares issued. Only a few of the company's directors were residents of New York, and only a few of the stock allottees were before the court, though the conditions entitling all to receive the stock had been complied with, and presumably some of it had been delivered. The corporation had its principal business office in New York and had its registered office in New Jersey, where stockholders' meetings were held, and had property in New Jersey and did business there and in other States and countries. The controversy depended on a construction of statutes of New Jersey which had not been passed upon by New Jersey courts, and involved grave doubts. The New Jersey law afforded a ready and complete remedy through an action in rem and service by publication.
(1) That the corporation could not be regarded as having been organized in New Jersey to do all of its business elsewhere, and could not be treated as a local concern in New York. P. 288 U. S. 131.
(2) That the case was within the general rule (par. 2, supra), and the District Court did not abuse its discretion in dismissing it without prejudice. P. 288 U. S. 132.
Certiorari to review the reversal of a decree dismissing the bills in two stockholders suits, which were begun in the Supreme Court of New York and removed to the District Court and consolidated. The opinion here directs that the decree of the District Court, 60 F.2d 106, be reinstated.
Petitioner, plaintiff below, owns 200 shares of the common stock of the American Tobacco Company which he acquired prior to the passage of c. 175, p. 354, New Jersey Laws, 1920, that is here involved. He also owns 400 shares of common stock B. He brought two suits in the Supreme Court of New York: one against the tobacco company and some of its directors, the other against the trust company, Junius Parker, and others. On application of defendants, both were removed to the federal court for the southern district of that state. The first was discontinued as to some defendants, and the cases were consolidated. The defendants before the court are the two companies, Parker, and five of the seventeen directors of the tobacco company, including its president, one of its vice-presidents, and its secretary.
and registered office" as designated in its charter, holds the stockholders' meetings, and does a substantial amount of business. It is authorized by the laws of New York to do business there, and has in New York City its principal place of business, where its directors usually meet, its executives have their offices, and most of its records are kept. It carries on business in that and many other states, and also in a number of foreign countries.
and others actively engaged in the conduct of the business as may be selected an opportunity to purchase stock "by way of additional compensation for services to be rendered," and allots for subscription shares of unissued stock. The board may offer stock to such persons in the service at prices not less than par and upon other terms and conditions determined by the president pursuant to authority granted him for that purpose by the board. No employee or person actively engaged in the conduct of the business of the corporation or its subsidiaries shall be deemed ineligible to its benefits by reason of being also a director of the corporation or of any of its subsidiaries or of holding any office therein.
the shares allotted were sold at $25 for cash to the trust company. The trust company allowed each allottee to subscribe at the same price. At that time, it was worth $112. The agreement stated that this was by way of additional compensation for service to be rendered between January 31 and December 31, 1931; that, until the end of the year, no allottee could take up his stock; that he was entitled to have dividends applied on the purchase price, and that, if he should terminate his employment before the end of the year, the trustees were to decide whether he should have his allotment.
The complaint attacked the transaction upon the following grounds: the directors being disqualified by reason of their interest as allottees, the plan was not passed by a valid vote or adopted as required by c. 175. The subsequent vote of the stockholders, required by the statute to be predicated upon action by the board, was likewise invalid. The plan was ultra vires in that the allotment "by way of additional compensation for services to be rendered" violated c. 195, p. 566, New Jersey Laws, 1917. Under the Company's charter and the statutes of New Jersey -- section 124, Laws 1926 -- every stockholder had the right according to the number of his shares to have pro rata distribution of the stock in question. And the complaint prayed decree that the defendants be enjoined from carrying out the plan; that the stock be declared void and cancelled, and that the defendants, other than the tobacco company, be held for costs and damages sustained by that company.
allotments were fair and reasonable, and were made in accordance with the company's bylaws and the statutes of New Jersey. Plaintiff moved for an order striking out the defenses as insufficient, and for a decree in accordance with the prayer of the complaint or, in the alternative, for an injunction pendente lite preventing the carrying out of the plan.
"In the present case, the validity of the shares sought to be cancelled depends primarily upon the interpretation and effect of the Act of 1920. The directors cited this statute as their authority for the plan when they formulated it, and have all along insisted that the plan is in conformity with the statute. The plaintiff takes the position that the statute is not applicable, and has been used by the directors merely as a cover for a raid upon the corporate treasury for their own profit. In addition, plaintiff submits that two other statutes, that of 1917 and that of 1926, must be taken as limiting the operation of the 1920 Act. It is obvious that the case presents not merely questions of fact, but questions of some complexity under the New Jersey laws. There seem to be no decisions of the New Jersey courts to serve as a guide in the proper construction and possible interrelation of these statutes. The legality of the corporate proceedings which resulted in the issuance of this stock is peculiarly a matter for determination in the first instance by the New Jersey courts. It may be noted that the American Tobacco Company is not a local enterprise. While its chief office is said to be here and it unquestionably carries on business here, its activities are known to be worldwide. It has a New Jersey charter; it refers to the New Jersey office as its principal office; it holds its stockholders' meetings there. It is not a resident corporation in any sense of the word. "
"in the exercise of this Court's discretion, each of the bills of complaint herein be and the same are hereby dismissed, without prejudice to the enforcement of the rights of plaintiff, if any, in the courts of New Jersey."
The Circuit Court of Appeals, 60 F.2d 114, dealing with plaintiff's contentions before it, held that the plan was authorized; that the stock was lawfully issued under New Jersey statutes, and that, for the reasons given in the opinion, the bill was properly dismissed. A dissenting opinion suggests that the plan was not sufficiently in detail to comply with the New Jersey statute. The court affirmed the judgment appealed from, and, upon its mandate, the District Court entered a decree that the bills of complaint be dismissed with costs.
Among the points and contentions raised and pressed by plaintiff in his petition for certiorari and argument here are the following: the plan is not definite and formulated as required by c. 175. That chapter, as construed below, is repugnant to the contract clause of the Federal Constitution. The decision that the plaintiff failed to comply with Equity Rule 27 is contrary to c. 175. Chapter 195, New Jersey Laws 1917, does not permit the issue of stock to employees for services to be rendered. The decree of the District Court declining to exercise jurisdiction is contrary to decisions of this Court and in conflict with the decision of the Circuit Court of Appeals for the Seventh Circuit in Williamson v. Missouri-Kansas Pipe Line Co., 56 F.2d 503.
participating in the distribution, on one side, and the purchasers of the new stock, the corporation, its directors, and officers, on the other. When, by acquisition of his stock, plaintiff became a member of the corporation he, like every other shareholder, impliedly agreed that, in respect of its internal affairs, the company was to be governed by the laws of the state in which it was organized. His rights, whatever the tribunal chosen for their vindication, are to be determined upon the ascertainment and proper application of New Jersey law.
exercise of a sound discretion, to decline to pass upon the merits of the controversy and to relegate plaintiff to an appropriate forum. Langnes v. Green, 282 U. S. 531, 282 U. S. 535; Heine v. New York Life Ins. Co., 50 F.2d 382. Obviously no definite rule of general application can be formulated by which it may be determined under what circumstances a court will assume jurisdiction of stockholders' suits relating to the conduct of internal affairs of foreign corporations. But it safely may be said that jurisdiction will be declined whenever considerations of convenience, efficiency, and justice point to the courts of the state of the domicile as appropriate tribunals for the determination of the particular case. Cohn v. Mishkoff-Costlow Co., 256 N.Y. 102, 105, 175 N.E. 529; Travis v. Knox Terpezone Co., 15 N.Y. 259, 263, 109 N.E. 250; Kimball v. St. Louis & S.F. Ry. Co., supra.
or be deemed in New York to be a local concern. This case is wholly unlike Williamson v. Missouri-Kansas Pipe Line Co., supra, relied on by plaintiff.
The determination of plaintiff's contentions requires not only the ascertainment of the true meaning and intent of c. 175 of New Jersey Laws, 1920, but also its constitutional validity. Its provisions have never been construed by the New Jersey courts, and they or their like are not familiar in the statute law governing corporations organized in other states. And other New Jersey statutes among which are c. 195, Laws of 1917, and c. 318, § 16, Laws of 1926, are claimed by plaintiff to have an important bearing upon this case. But the courts of that state have had no occasion to consider the interrelation, if any, between them and c.r 175 pursuant to which the stock in question purports to have been issued to employees. A mere inspection of the New Jersey statutes directly involved suggests grave doubts as to their proper application to the facts in this case, and the difference of opinion expressed below confirms that impression.
of discretion on the part of the district court in dismissing the bills of complaint without prejudice. As the Circuit Court of Appeals considered and decided the merits of the case, its judgment is reversed, the judgment of the District Court entered upon its mandate is vacated, and the case will be remanded to the district court with directions to reinstate the earlier judgment dismissing the bills of complaint without prejudice.
"Any stock corporation . . . may, upon such terms and conditions as may be determined in the manner hereinafter designated, provide and carry out a plan or plans for any or all of the following purposes: (a) the issue or the purchase and sale of its capital stock to any or all of its employees and those actively engaged in the conduct of its business or to trustees on their behalf, and the payment for such stock in installments or at one time with or without the right to vote thereon pending payment therefor in full, and for aiding any such employees and said other persons in paying for such stock by contributions, compensation for services, or otherwise."
"The board of directors shall first formulate such plan or plans and pass a resolution declaring that in its opinion the adoption thereof is advisable, and shall call a meeting of the stockholders to take action thereon. . . . If two-thirds in interest of each class of stockholders present at said meeting and voting shall vote in favor of any such plan or any modification thereof, the said plan shall thereupon become operative."
And that section gives to any dissenting stockholder the right upon surrender to receive from the company the appraised value of any stock that was acquired before the passage of the Act.
of its stockholders, by which they largely benefited. In that of 1926, the respondent Hill, the president and also a director of the company, acquired 8,000 shares of common stock, and other directors, who are respondents here, received substantial amounts. In that of 1929, one year before the transactions now complained of, 46,500 of 51,750 shares of common stock purchased by the corporation and set aside for the purpose were sold to the corporate directors at $47 per share less than market value. Convenient arrangements were made for postponed payment of the purchase price. Respondents received 23,050 shares, of which the president received 15,050.
of the stock was a subscription price of $25 per share, the par value, and the services of the allottee, not specifically described, to be rendered to the American Tobacco Company for the remainder of the year.
The certificates of stock were to be delivered to the respondents, the Guaranty Trust Company of New York and an individual, as trustees. They were authorized to borrow money upon them to the extent of $25 per share in order to effect immediate payment of the subscription price to the tobacco company, to apply dividends received on account of the purchase price to be paid by the allottees, and to deliver the certificates to them after the close of the year, upon payment in full of their subscriptions. They were given discretion to waive performance of the stipulated service by any allottee, and, in the event that the subscriber was discharged or resigned from the employ of the company within the year, to cancel the subscription agreement or not, as they pleased.
On the day of the resolution allotting the stock, its market price was $112 per share, more than four times the subscription price. It was then paying, and has ever since paid, dividends at the rate of $5 per year, sufficient to pay the subscription price in five years. Valuing the subscription privilege by the difference between the subscription price and the market value of the shares, the president received by the allotment the equivalent of $1,169,280, in addition to his annual compensation of more than $1,000,000. The stock subscription rights awarded the five vice-presidents, similarly valued, amounted to $1,451,595. That the subscription privilege, accorded for the avowed purpose of assuring the continuance of these executives in the company's employ, was then and has been ever since of great value, upon any theory of valuation, is not questioned.
the Supreme Court of New York, the state in which he resides, joining as defendants the American Tobacco Company, the trustees of the allotted stock, and certain of the directors, including the president, secretary, treasurer, and five vice-presidents, one of whom has since died and two of whom were not served with process. Included in the relief sought was a decree that the corporation, its officers, and directors be enjoined from carrying out the stock allotments, and that the stock allotted to the directors be surrendered to the company. On motion of defendants, the tobacco company and a nonresident director, the causes were removed to the District Court for Southern New York on grounds of diversity of citizenship of the parties to a separable controversy, and there consolidated.
Thus, called upon in this suit to account for their stewardship and to justify their action, the defendants, the respondents here, place their whole reliance upon a statute of New Jersey in conformity with which, they contend, they secured, in advance, the authorization of the stockholders to make the challenged allotments of stock.
"(a) the issue or the purchase and sale of its capital stock to any or all of its employees and those actively engaged in the conduct of its business or to trustees on their behalf . . . and for aiding any such employees and said other persons in paying for such stock by contributions, compensation for services, or otherwise. . . ."
take action thereon. . . ."
It requires an affirmative vote of two-thirds in interest of each class of stockholders present at the meeting for the adoption of the plan.
In June, 1930, the directors, purporting to act under this statute, presented to the stockholders, by notice of a special meeting, a so-called "plan" under which the employees of the corporation and those actively engaged in its business were to be permitted to subscribe to unissued shares of its common stock B. The notice of the meeting was accompanied by a document designated "Employees' Stock Subscription Plan," and by a copy of resolutions of the board of directors authorizing the submission of the plan to the stockholders, proposing a reduction in the par value of the common stock and the nonvoting common stock B from $50 to $25 per share, and an increase of the authorized common stock from 1,000,000 to 2,000,000 shares, and of the authorized common stock B from 2,000,000 to 4,000,000 shares, each stockholder to receive two shares of the new stock for one of the old. By thus increasing the authorized, unissued shares of common B, stock was to be made available for subscription by employees.
"to allot for subscription . . . by way of additional compensation for services to be rendered, shares of unissued common stock B . . . to such employees of the corporation and/or its subsidiaries and those actively engaged in the conduct of its or their business as may be selected. . . ."
stock to each individual pursuant to authority to be granted by the Board of Directors to the President for such purpose."
Accompanying the notice of the meeting was a circular letter by the president to stockholders, in which they were told of the prosperous condition of the company, that the purpose of the stock allotment plan was to encourage those who had made the company's success possible to continue in its employ, and that it was the expectation of the Board of Directors, if the program set forth in the notice of the meeting and accompanying documents should be approved by stockholders, to declare an extra dividend of $4 per share on the common stock and common stock B, and to initiate regular quarterly dividends on the newly authorized shares of common stock and common stock B at the increased annual rate of $5 per share. The letter closed with a request to sign and return the enclosed proxy, thereby indicating "your approval of the proposed steps and your support of your Company's management."
"No employee, or person actively engaged in the conduct of the business of the Corporation, or its subsidiaries, shall be deemed ineligible to the benefits of the Plan by reason of being also a director of the Corporation or of any of its subsidiaries or of holding any office therein."
With all these facts presented by the pleadings, the District Court, acknowledging its jurisdiction both as a federal court and a court of equity to decide the cause on its merits, nevertheless, held that, as the suit concerns the internal affairs of a New Jersey corporation, discretion should be exercised to dismiss it without prejudice to its maintenance in the courts of New Jersey. On appeal, the Circuit Court of Appeals for the Second Circuit, Judge Swan dissenting, considered the merits and upheld the legality of the stock allotments. The decree of dismissal was affirmed on the merits, and the trial court has entered a final decree accordingly. This Court now reverses that judgment, reestablishing the original decree of the trial court, on the ground that a proper exercise of judicial discretion requires that the cause should not be heard. Thus, after approximately two years of litigation in state and federal courts, all of which could, and I think should, have decided the case on the merits, the plaintiff must now start the litigation afresh in the courts of New Jersey.
upon them by the stockholders, and was therefore ultra vires.
their approval. If it were, it would be difficult to suggest any conceivable purpose of the statute which could not be thwarted by a similar procedure.
The respondents stand in no better position, even if we assume that the proposal submitted to the stockholders was a formulated plan within the meaning of the New Jersey statute. For, in that case, authority for the directors' action must be found in the stockholders' approval of the proposal which they submitted, and we must interpret the proposal and the action taken by the stockholders in terms of their legitimate expectation that the directors were complying with their duty as fiduciaries, and not dealing with them at arm's length. They were entitled to read the proposal in the light of the fundamental duty of directors to derive no profit from their own official action without the consent of the stockholders, obtained after full and fair revelation of every circumstance which might reasonably influence them to withhold their consent. Wardell v. Railroad Co., 103 U. S. 651; General Investment Co. v. American Hide & Leather Co., 97 N.J.Eq. 230, 233, 127 A. 659; see United states Steel Corp. v. Hodge, 64 N.J.Eq. 807, 813, 54 A. 1; Globe Woolen Co. v. Utica Gas & Electric Co., 224 N.Y. 483, 489, 121 N.E. 378; compare Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545; Wendt v. Fischer, 243 N.Y. 439, 154 N.E. 303. They were entitled to assume that the proposal involved nothing which did not fairly appear on its face, and, above all, that it was not a cloak for a scheme by which the directors were to enrich themselves in great amounts at the expense of the corporation, of whose interests they were the legal guardians.
of the Plan," because a director or officer. But it would be extravagant to say that these words, addressed by men in the position of trustees to their beneficiaries, gave warning of the wholesale gratuities which the directors subsequently bestowed upon themselves. No more extensive authority could be derived from this language than the disclosure which it made. By consenting that the directors should be "eligible" to share in a plan avowedly for the benefit of employees, the stockholders did not consent that they should be the chief beneficiaries of their own unrestrained munificence, or that they should add any new bounties to the unrevealed stock allotments and bonuses which the directors had previously enjoyed in secrecy. Even if the stockholders consented that some of the directors should be eligible to benefit from action taken by other disinterested directors, they certainly did not consent that the allotments should be made by a group of directors who, because of the magnitude of the benefits they anticipated for themselves, were obviously incapable of passing an independent and unbiased judgment upon the propriety of the distribution which they cooperated in making to each other. Respondents' contention that, if the directors were unable to vote on each other's participation, no plan could be put into effect under which a majority of the directors were to participate, is without weight, for it obviously could be if the statute were followed and the plan revealed in its entirety to the stockholders.
to speculate whether this outcome is to be attributed to the fact that those present, being without the aid of prevision, regarded the prediction as too improbable to be credited, or to the fact that those who attended the meeting were not, for the most part, the stockholders, but the recipients of their proxies selected by the management of the corporation for the occasion. A statement made to them would, as a New Jersey court has said, fall "upon ears not allowed to hear and minds not permitted to judge; upon automatons, whose principals are uninformed of their own injury." See Berendt v. Bethlehem Steel Corp., 108 N.J.Eq. 148, 151, 154 A. 321, 322. In any event, it is enough that neither in the notice of meeting and accompanying documents, which the stockholders saw and on which they relied, nor at the meeting itself, did the officers and directors disclose that such was their purpose.
We need not conjecture whether, if the directors had had the hardihood to disclose in advance the benefits which they were to award to themselves, the stockholders would nevertheless have given their approval. Nor is it important that these directors have successfully managed the corporation and that, under their direction it has earned large profits for its stockholders. Their business competence did not confer on them the privilege of making concealed or unauthorized profits, or relieve them of the elementary obligation which the law imposes on all corporate directors to deal frankly and openly with stockholders in seeking their consent to benefit personally by reason of their relationship to the corporation.
the stockholders could ratify. Continental Securities Co. v. Belmont, 206 N.Y. 7, 17, 99 N.E. 138; cf. Delaware & Hudson Co. v. Albany & Susquehanna R. Co., 213 U. S. 435. Authority of the directors to bestow gratuities upon themselves in the form of subscription rights must be found in a plan approved in advance as the statute provides, by two-thirds of each class of stockholders. If no plan was presented to stockholders, as I think was the case, the entire stock issue was ultra vires, and cannot be ratified any more than any other unauthorized disposition of corporate assets. If the proposal to the stockholders is regarded as a plan, so far as ordinary employees are concerned, as it plainly does not embrace authority to the directors to confer such extravagant benefits upon themselves, the result is the same, as to the stock allotted to the directors.
ex rel. Lake Shore Tel. & T. Co. v. De Groat, 109 Minn. 168, 123 N.W. 417; see Travis v. Knox Terpezone Co., 215 N.Y. 259, 263, 109 N.E. 250.
We are presented with no problem of administration. The only relief which the petitioner merits on the record before us or which he asks here is a decree that certain directors, now before the court, restore to the treasury of the corporation, also before the court, certain shares of stock alleged to have been illegally issued to them, and that certificates for the stock now in possession of the trustees, who are likewise before the court, be surrendered. There are no more obstacles to the rendition of an effective decree than in any other case in which a stockholder seeks reparation for depredations upon the corporate property committed by directors, some of whom only are before the court. Compare Wineburgh v. United states Steam & Street Ry. Advertising Co., 173 Mass. 60, 53 N.E. 145; Ernst v. Rutherford & B.S. Gas Co., 38 App.Div. 388, 56 N.Y.S. 403; Corry v. Barre Granite & Quarry Co., 91 Vt. 413, 101 A. 38; Ganzer v. Rosenfeld, 153 Wis. 442, 141 N.W. 121. The decree will be completely satisfied by delivery of the certificates, properly endorsed, to the corporation. There is and can be no suggestion that such a decree cannot be pronounced and enforced as effectively by the courts in New York as it could be by those in New Jersey. Cf. American Creosote Works v. Powell, 298 F. 417, 419; see Babcock v. Farwell, 245 Ill. 14, 34, 91 N.E. 683.
case. Such considerations are said to require that this suit be dismissed though the petitioner is thereby subjected to all the hazards of starting his action anew in the courts of New Jersey.
To support this conclusion, only two objections to the maintenance of the suit are suggested in the opinion of this Court or in that of the district court below. One is that numerous beneficiaries of the stock allotment, most of whom are not officers or directors of the corporation, are not made parties to this suit, and presumably can be reached as a group only by suit in New Jersey. Hence, the intimation is, if we decide this case and other suits should subsequently be brought in other jurisdictions, different results may be reached on the same questions -- a possibility which can be avoided by forcing the petitioner to bring a single suit in New Jersey. The other objection is that the court would be called upon to decide a novel question of New Jersey law.
The somewhat speculative possibility that those of the participating directors who have not been served with process in this suit may be called to answer in some other court and exonerated is of slight importance compared to the considerations favoring the exercise of jurisdiction. Petitioner has chosen to bring his suit in New York. He and all but one of the individual defendants reside there.
The principal office of the American Tobacco Company is in New York City, and it is there that its books and records are found, its board of directors meets, and the acts complained of took place. There the respondent Guaranty Trust Company is located and its cotrustee resides. Before the decree can be enforced, it must be obtained and the litigation must be brought to a successful conclusion. That involves the production in court of the necessary evidence. Of the parties to this case, none but the American Tobacco Company is amenable to process in New Jersey; all are amenable in the Southern District of New York. In New York, petitioner can compel them and others connected with the corporation to attend as witnesses; all can be ordered to make complete discovery, and petitioner can compel the production at the trial of the records of both corporate defendants. We cannot assume that compulsion will not be necessary. The tobacco company carried to the highest court of the state its resistance to petitioner's preliminary application to inspect its books. Rogers v. American Tobacco Co., 143 Misc. 306, 257 N.Y.S. 321, aff'd, 233 App.Div. 708, 249 N.Y.S. 993, leave to appeal denied. In New York also, the individual defendants and the trust company can be reached by injunction pendente lite, restraining the transfer to innocent purchasers of the stock, certificates for which are already issued and in the hands of the trust company. Under the circumstances of this case, only considerations of more compelling force than the possibility of inconsistent decrees should lead a forum, convenient in so many respects, to decline jurisdiction.
difficult. If there were any principle of federal jurisprudence, generally applicable, that, in cases between private parties, federal courts of equity may, in their discretion, decline jurisdiction because called upon to decide an unsettled question of state law, I would willingly acquiesce in declining it here. But this Court has not declared such a principle, and does not recognize it now. On the contrary, whether jurisdiction rests on diversity of citizenship or on a substantial constitutional question, this Court has consistently ruled that it is the duty of a federal court of original jurisdiction, and of this Court on appeal from its decree, to pass on any state question necessarily involved, however novel, and that the decision may be rested on that ground alone. Siler v. Louisville & Nashville R. Co., 213 U. S. 175; Risty v. Chicago, R.I. & Pacific Ry. Co., 270 U. S. 378.
Unless we are now to abandon that long settled practice, I can see much more reason for passing on this question than upon many others which this Court has decided. Our judgment would conflict with no local decisions, compare Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518; Burgess v. Seligman, 107 U. S. 20, nor apply an alien policy to matters which are the subject of delicate feeling in the state. Compare 68 U. S. Dubuque, 1 Wall. 175; Railroad Commission of California v. Los Angeles Ry. Corp., 280 U. S. 145. Indeed, we may not even avoid deciding the question of state law by sending the case to New Jersey, for it is not suggested that, if petitioner should elect to sue in the federal court for New Jersey, or if the suit should be properly brought there by removal from the state court, either that court or this may decline jurisdiction. Thus, we should do no more in deciding the question of New Jersey law now than if the case were brought to us from the federal courts in New Jersey.
Even if decision of the question of New Jersey law were more embarrassing than it appears to be here, a proper exercise of discretion would seem to require that the bill be retained, and that an interlocutory injunction restraining any disposition of the stock by respondents be granted as prayed pending the diligent prosecution by petitioner of a suit in New Jersey. Compare 25 U. S. Hinde, 12 Wheat.193; Dunn v. Clarke, 8 Pet. 1; Stover v. Wood, 28 N.J.Eq. 253.
If federal courts are to continue the general practice of deciding novel questions of state law whenever there are necessary or convenient grounds for the disposition of cases pending before them, there are peculiarly cogent reasons why there should be no departure from the practice in cases like the present. While a corporation, in legal theory, has only one domicile, in practice, its activities are often nationwide, and the legal domicile of the corporation, as in this case, is neither the place of its real corporate life nor the home of its officers and directors. Hence, if stockholders' suits, such as the present, are to be maintained with any hope of success, the practical necessities of making parties, securing evidence, obtaining the production of documents and relief by injunction against individual wrongdoers, justify, if they do not compel, their prosecution in the particular jurisdiction where necessary parties and witnesses may be found, rather than in the place of the technical corporate domicile.
courts should be quick to respond when their jurisdiction is rightly invoked. We should be slow indeed to make a reluctance to decide questions of state law, not exhibited in other classes of cases, the ground for declining to decide this one.
MR. JUSTICE CARDOZO, J., dissenting.
There is no need to consider whether the "plan" as proposed is insufficient on its face, with the result that the innocent employees as well as the culpable directors will be deprived of its benefits. If it be taken as sufficient, the shareholders who voted for it are not chargeable with notice that fiduciary powers would later be perverted by the award to the fiduciary of extraordinary benefits. Consent will not protect if reason and moderation are not made to mark the boundaries of what is done under its shelter.
structure of the corporation, if affected by the decree at all, will not be changed in such a way as to work substantial detriment to any stranger to the suit, but the fruits of an unjust enrichment will be put back into the treasury. I think we are at liberty to do so much, if nothing more, without waiting upon the judgment of any other court.
The doctrine of forum non conveniens is an instrument of justice. Courts must be slow to apply it at the instance of directors charged as personal wrongdoers, when justice will be delayed, even though not thwarted altogether, if jurisdiction is refused. At least that must be so when the wrong is clearly proved. The overmastering necessity of rebuking fraud or breach of trust will outweigh competing policies and shift the balance of convenience. Equity, it is said, will not be over-nice in balancing the efficacy of one remedy against the efficacy of another when action will baffle, and inaction may confirm, the purpose of the wrongdoer. Falk v. Hoffman, 233 N.Y.199, 203, 135 N.E. 243. Of the shares allotted to directors, as contrasted with those allotted to other employees, most are owned by the defendants sued. Whatever shares belong to others will be untouched by the decree. With all the procedural complexities possible hereafter if jurisdiction be declined, the hazard of inconsistent judgments affecting the directors inter se will not avail, without more, to halt the processes of justice and the award of such relief as the court is competent to give against those subject to its power.
I agree with MR. JUSTICE STONE, for the reasons stated in his opinion, that a breach of the fiduciary duties of the directors is a legitimate inference from the allegations of the bill, and agree with his conclusion that the cause should be remanded to the District Court for a determination of the merits.

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