Waller v. Coler

U.S. Circuit Court for the District of Southern New York

Waller v. Coler

125 F. 821, 1903 U.S. App. LEXIS 5131

U.S. Circuit Court for the District of Southern New York·Decided October 19, 1903·Published

Opinion

LACOMBE, Circuit Judge.

If the trust company defendant were aligned with the stockholders’ complainant, there would be citizens of the same state on both sides of the controversy, and this court would be without jurisdiction. It is manifest from the bill that the company rightfully belongs on the complainant’s side of the controversy, but it is contended that the wholesome rule which aligns parties according to interest does not apply to stockholders’ actions against the corporation and other parties, founded on rights which may properly be asserted by the corporation. The case of De Neufville v. N. Y. & N. R. R., 81 Fed. 10, 26 C. C. A. 308, decided in this circuit,, is authority for this proposition, but intimates that it should be appliedi only in cases which are brought within the ninty-fourth rule in equity. The bill in this cause does not comply with the requirements of that rule, which provides that it must set forth with particularity the efforts of the plaintiff to secure such action as he desires on the part of the managing directors or trustees, and, if necessary, of the shareholders, and the causes of his failure to obtain such action. If it be conceded1 that the plaintiff has set forth with sufficient particularity his efforts to induce the directors so to act, and the causes of his failure to secure such action by them, it then became necessary to set forth with equal particularity his efforts to secure action on the part of the stockhold[822] ers, or at least to show some good reason why any such effort would be futile; as, for instance, that a majority of the stockholders are hostile to complainant’s proposed action. No averments of this sort, however, are found in the bill, and the cause is therefore not brought within the ninty-fourth rule, and so not excepted from the general rule which aligns parties according to interest. Such alignment brings a citizen of New York on each side of the controversy, and leaves this court without jurisdiction.

The motion to dismiss for want of jurisdiction is granted.

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LACOMBE, Circuit Judge.

If the trust company defendant were aligned with the stockholders’ complainant, there would be citizens of the same state on both sides of the controversy, and this court would be without jurisdiction. It is manifest from the bill that the company rightfully belongs on the complainant’s side of the controversy, but it is contended that the wholesome rule which aligns parties according to interest does not apply to stockholders’ actions against the corporation and other parties, founded on rights which may properly be asserted by the corporation. The case of De Neufville v. N. Y. & N. R. R., 81 Fed. 10, 26 C. C. A. 308, decided in this circuit,, is authority for this proposition, but intimates that it should be appliedi only in cases which are brought within the ninty-fourth rule in equity. The bill in this cause does not comply with the requirements of that rule, which provides that it must set forth with particularity the efforts of the plaintiff to secure such action as he desires on the part of the managing directors or trustees, and, if necessary, of the shareholders, and the causes of his failure to obtain such action. If it be conceded1 that the plaintiff has set forth with sufficient particularity his efforts to induce the directors so to act, and the causes of his failure to secure such action by them, it then became necessary to set forth with equal particularity his efforts to secure action on the part of the stockhold[822] ers, or at least to show some good reason why any such effort would be futile; as, for instance, that a majority of the stockholders are hostile to complainant’s proposed action. No averments of this sort, however, are found in the bill, and the cause is therefore not brought within the ninty-fourth rule, and so not excepted from the general rule which aligns parties according to interest. Such alignment brings a citizen of New York on each side of the controversy, and leaves this court without jurisdiction.

The motion to dismiss for want of jurisdiction is granted.

Waller v. Coler, 125 F. 821, 1903 U.S. App. LEXIS 5131 (circtsdny 1903).

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Opinion

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