West v. American Tel. & Tel. Co.
311 U.S. 223

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U.S. Supreme Court

West v. American Tel. & Tel. Co., 311 U.S. 223 (1940)

West v. American Telephone & Telegraph Co.

Nos. 44 and 45

Argued November 13, 1940

Decided December 9 1940

311 U.S. 223

Syllabus

1. In a suit in a federal court for equitable relief in protection of legal rights growing out of an unlawful transfer of stock by a corporation, the state laws defining those rights are the rules of decision. P. 311 U. S. 236.

2. A rule announced and applied by state courts as the law of the State, though not passed on by the highest state court, may not be rejected by a federal court because it thinks that the rule is unsound in principle or that another is preferable. P. 311 U. S. 236.

Page 311 U. S. 224

3. In deciding local questions it is the duty of the federal court to ascertain from all available data what the state law is and apply it, however superior a different rule may appear from the viewpoint of general law and however much the state rule may have departed from prior decisions of the federal courts. P. 311 U. S. 237.

4. Where an intermediate state appellate court rests its considered judgment upon the rule of law which it announces, that is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the State would decide otherwise. P. 311 U. S. 237.

This is the more so where, as in this case, the highest state court has refused to review the lower court's decision, rendered in one phase of the very litigation which is being prosecuted by the same parties before the federal court.

5. The Ohio County Court of Appeals, by a judgment which the Supreme Court of the State declined to review, decided that an action against a corporation for damages resulting from its issue of a certificate for shares of its stock in the name of one who was a life tenant of the stock, without disclosing on the face of the certificate that the stockholder was a life tenant or the interest of the remaindermen, followed by a wrongful transfer of the stock to a third person, was premature because no demand had been made on the corporation to reinstate the plaintiffs' rights in the stock and because the corporation had not refused this in advance of the suit. In a second suit brought in the federal court after a sufficient demand had been made, in which the same plaintiffs sought equitable relief and damages from the same corporation, the Circuit Court of Appeals, declining to follow the ruling of the state Court of Appeals, held that a demand was not essential -- that the cause of action accrued when the stock was issued to the life tenant and, counting from that time, was barred by a statute of limitations, or laches. Held:

(1) No reason appears for supposing that, if the second suit had been brought in a state court, the state Court of Appeals would depart from its previous ruling or that the Supreme Court of the State would grant the review which it withheld before. P. 311 U. S. 238.

(2) The law thus announced and applied by the state Court of Appeals is the law of the State, applicable to a case between the same parties in the federal court, and the federal court is not free to apply a different rule, however desirable it may believe it to be,

Page 311 U. S. 225

and even though it may think that the state Supreme Court may establish a different rule in some future litigation. P. 311 U. S. 238.

(3) Since the cause of action under the Ohio law did not arise until demand, which was either when the suit was brought in the state court or when the formal demand was made, the statute of limitations did not begin to run until one or the other of those dates. P. 311 U. S. 238.

(4) No special circumstances are shown effective under Ohio law to limit the time of demand or shorten the statutory period after demand; the findings of the District Court that the plaintiffs were not estopped or guilty of laches were supported by evidence and should not be disturbed. P. 311 U. S. 239.

108 F.2d 347 reversed.

Certiorari, 310 U.S. 618, to review a decree of the Circuit Court of Appeals which (upon separate appeals by the petitioners and respondent here, but on a single record) reversed a decree of the District Court requiring the respondent corporation to procure shares of its common stock to be held in a trust during the life of a decedent's widow and to be ultimately distributed to remaindermen, as directed by the will. Jurisdiction was by diversity of citizenship.

Page 311 U. S. 231

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