United Copper Securities Company v. Amalgamated Copper Company
| Citation | 61 L.Ed. 1119,37 S.Ct. 509,244 U.S. 261 |
| Decision Date | 21 May 1917 |
| Docket Number | No. 208,208 |
| Parties | UNITED COPPER SECURITIES COMPANY and Arthur P. Heinze, Plffs. in Error, v. AMALGAMATED COPPER COMPANY, Anaconda Copper Company, Adolph Lewisohn, United Copper Company, et al |
| Court | United States Supreme Court |
Messrs. Ferdinand E. M. Bullowa and Ralph James M. Bullowa for plaintiffs in error.
Messrs. Louis Marshall, John A. Garver, and Edward Lauterbach for defendants in error.
This is an action at law. The complaint alleges that plaintiffs are the holders of more than 200 of the 500,000 shares of the outstanding stock of the defendant United Copper Company, a New Jersey corporation; that the defendants other than that company have by conduct violating the Sherman Law (Act of July 2, 1890, chap. 647, 26 Stat. at L. 209, Comp. Stat. 1916, § 8820) injured it to the extent of more than $5,000,000;1 and that:
The complaint concludes:
'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. L.R.A. ——, ——, 139 C. C. A. 15, 223 Fed. 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.
Whether or not a corporation shall seek to enforce in the courts a cause of action for damages is, like other business questions, ordinarily a matter of internal management, and is left to the discretion of the directors, in the absence of instruction by vote of the stockholders. Courts interfere 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.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.
But even if the circumstances were such as...
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