Ross v. Bernhard

Decision Date03 November 1967
Docket NumberNo. 65 Civ. 665.,65 Civ. 665.
Citation275 F. Supp. 569
PartiesHoward ROSS and Bernard Ross as Trustees for Lena Rosenbaum, Plaintiffs, v. Robert A. BERNHARD et al., Defendants.
CourtU.S. District Court — Southern District of New York

Rosenthal & Gurkin, New York City, for plaintiffs; Pomerantz, Levy, Haudek & Block, Abraham L. Pomerantz, Richard M. Meyer, New York City, of counsel.

Simpson, Thacher & Bartlett, New York City, for defendants Bernhard and others; Lawrence M. McKenna, New York City, of counsel.

Sullivan & Cromwell, New York City, for defendants Clark and others; Cornelius B. Prior, Jr., New York City, of counsel.

Walsh & Frisch, New York City, for defendant Lehman Corp.

McLEAN, District Judge.

This is a stockholders' derivative action by stockholders of The Lehman Corporation against directors of that corporation and against Lehman Brothers, the corporation's broker.* The complaint charges in substance that The Lehman Corporation has paid to Lehman Brothers brokerage commissions which are excessive for a variety of reasons and that the assets of The Lehman Corporation have thereby been wasted. This is said to be a violation of the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.). Defendants Clark, Francis, Kircher, Puckett, Reavis, Thornton, and Wilde move to strike plaintiffs' demand for a jury trial.

Whether or not plaintiffs are entitled to a jury trial depends upon the answer to two questions:

(1) Does the fact that this is a stockholders' derivative action, a creature of equity, in and of itself deprive plaintiffs of a trial by jury?

(2) If not, and if the question of a jury trial is to be viewed as though the corporation were suing, is the action a "suit at common law" within the meaning of the Seventh Amendment?

As to the first question, opposite conclusions were reached in Richland v. Crandall, 259 F.Supp. 274 (S.D.N.Y. 1966), and DePinto v. Provident Security Life Insurance Company, 323 F.2d 826 (9th Cir. 1963), cert. denied, 376 U.S. 950, 84 S.Ct. 969, 11 L.Ed.2d 970 (1964). In my opinion the DePinto view is the correct one. The court there held that although the aid of equity is needed in order to establish the stockholders' right to sue on behalf of the corporation, the claim is that of the corporation and the right to a jury trial is to be judged as though the corporation were suing. This decision gives effect to Fleitmann v. Welsbach Street Lighting Co., 240 U.S. 27, 60 L.Ed. 505 (1916), and Fanchon & Marco, Inc. v. Paramount Pictures, Inc., 202 F.2d 731, 36 A.L.R.2d 1336 (2d Cir. 1953), in which this result was reached in antitrust treble damage actions. I see no reason why this rule should be peculiar to antitrust litigation. I will follow it here.

As to the second question, the allegations of the complaint are controlling. The complaint uses a number of harsh words. It charges that defendants have been guilty of "gross abuse of trust, gross misconduct, willful misfeasance, bad faith, gross negligence and a reckless disregard of their fiduciary duties." The prayer is for a judgment "requiring the defendants jointly and severally to account for and pay to the Corporation for their profits and gains and its losses."

The fact that plaintiffs seek an accounting, a word which smacks of equity, is not determinative. Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962).

Plaintiffs are seeking a money judgment. They ask that defendants "pay" to the corporation defendants' gains and the corporation's loss. The issues are not so complicated as to make it...

To continue reading

Request your trial
4 cases
  • Ross v. Bernhard
    • United States
    • U.S. Supreme Court
    • February 2, 1970
    ...corporation were itself the plaintiff. Only the shareholder's initial claim to speak for the corporation had to be tried to the judge. 275 F.Supp. 569. Convinced that 'there are substantial grounds for difference of opinion as to this question and * * * an immediate appeal would materially ......
  • Zenith Radio Corp. v. Matsushita Elec. Indus. Co.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • September 14, 1979
    ..."the Seventh Amendment does not ask that we assess the suitability of a given type of litigation for jury trial." See Ross v. Bernhard, 275 F.Supp. 569, 570 (S.D.N.Y. 1967), rev'd on other grounds, 403 F.2d 909, 915 (2d Cir. 1968), rev'd on other grounds, 396 U.S. 531, 90 S.Ct. 733, 24 L.Ed......
  • Guerrino v. Ohio Casualty Insurance Company, 17889.
    • United States
    • U.S. Court of Appeals — Third Circuit
    • March 24, 1970
    ...* *" was not tried by the Judge. See id. supra, at 532, 90 S.Ct. at 735, and the decision in the trial court in the cited case, 275 F.Supp. 569 (S.D.N.Y. 1967). There has been no determination in the instant case as to whether the suit at bar is fundamentally legal rather than equitable tho......
  • Burgess v. General Electric Company
    • United States
    • U.S. District Court — District of New Jersey
    • May 20, 1968
    ...Inc. v. Cunningham, 352 F.2d 150 (10th Cir. 1965); Swofford v. B & W, Inc., 336 F. 2d 406 (5th Cir. 1964); and Ross v. Bernhard, 275 F.Supp. 569 (S.D.N.Y. 1967)—cases which recognized the fact that the determination as to whether a request for an accounting is equitable is to be made after ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT