Delaware & Hudson Co. v. Albany & Susquehanna R. Co., 213 U.S. 435 (1909)

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Delaware and Hudson Co. v. Albany

and Susquehanna Railroad Company
No. 416

Argued February 23, 24, 1909
Decided May 3, 1909
213 U.S. 435

CERTIFICATE FROM THE CIRCUIT COURT

OF APPEALS FOR THE SECOND CIRCUIT

Syllabus

Equity Rule No. 94, which is intended to secure the federal courts from imposition upon their jurisdiction, recognizes the right of the corporate directory to corporate control, and expresses primarily the conditions which must precede the right of the stockholders to protect the corporation in cases where the directory is derelict; but the requirements of the rule may be dispensed with where they do not apply by reason of antagonism between the directory and the corporate interest.

Equity Rule No. 94 is intended to have a practical application, and it does not apply where the corporate interests can only be protected by a suit which, if successful, would be detrimental to all the directors in other capacities.

Where, as in this case, stockholders of a lessor corporation sued, for its benefit, the lessee corporation, the directors of the two corporations being almost identical and the lessee corporation also owning, or holding the voting power, of sufficient stock of the lessee corporation to control a stockholders’ meeting, the fact that the stockholder bringing the suit made no demand for relief upon the board of director nor any effort to obtain relief at a stockholders’ meeting does not prevent them from maintaining the bill.

Quaere, and not decided, whether stockholders have power to compel directors to institute suits to which the latter are opposed.

The facts, and the questions certified, are stated in the opinion.