Petitioners, residents of New York and holders of Class B
debentures issued by respondent, a Wisconsin corporation, brought
suit in a New York court to recover amounts due and payable under
the debentures out of earnings in lieu of interest. Under the
covenant in the Class B debentures, the holders thereof were
entitled to all of the remaining net earnings each year after
holders of Class A debentures had received 5% on the face value
thereof and stockholders had received 5% on the par value of the
stock, the amounts payable to the Class B debenture holders to "be
fixed and declared by the Board of Directors." Respondent's
railroad lines were wholly in Wisconsin, and its president and
general auditor were there. However, it did business in New York;
its Class B debentures were payable, listed, and traded in there;
it maintained its financial office, a traffic office, and a bank
account there; five of its six directors (including all of the
executive and fiscal officers except the president and general
auditor) and two of the three members of its executive committee
were there; directors' meetings were customarily held there, and
its financial records, transfer books, minute books, and the like
were kept there. After removing the case to a federal district
court in New York on the grounds of diversity, respondent moved to
dismiss on the ground that the suit concerned the internal affairs
of a foreign corporation, and could more conveniently
Page 326 U. S. 550
be tried in the state of its incorporation. The district court
granted the motion.
1. It was improper to dismiss the suit on the ground of
forum non conveniens.
Pp. 326 U. S. 552
326 U. S.
2. This rule was designed as an instrument of justice to prevent
a case from being tried in one court when, in fairness, it should
be tried in another. (Illustrations given.) P. 326 U. S.
3. When it is invoked, each case turns on its facts. P.
326 U. S.
4. The relief sought, a money judgment, was not of such a
character that a federal court in New York would be so handicapped
that it should remit the parties to Wisconsin. P. 326 U. S.
5. Nor should the case have been remitted to Wisconsin on the
theory that a construction of the covenant would primarily affect
the interests of the public in that State. P. 326 U. S.
6. Since the suit sought only a money judgment, it did not
involve sufficient interference in the internal affairs of the
foreign corporation to justify dismissal on forum non
P. 326 U. S.
7. Under the facts in this case, it would not be vexatious or
oppressive to entertain the suit in New York, whether the
availability of witnesses or any other aspect of a trial be
considered. P. 326 U. S.
147 F.2d reversed.
p. 699, to review affirmance of a
judgment, 59 F. Supp. 98, dismissing a suit under the rule of
forum non conveniens.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
Petitioners, residents of the City of New York, are holders of
Class B debentures issued by respondent railroad company, a
Wisconsin corporation. They brought this suit in the New York
courts to recover amounts alleged to be due and payable under the
debentures out of earnings in lieu of interest. On petition of
Page 326 U. S. 551
action was removed to the federal District Court for the
Southern District of New York on the grounds of diversity.
Respondent thereupon moved (1) to set aside the service because
respondent was not doing business in New York, and (2) to dismiss
because the subject matter was concerned with the internal affairs
of a foreign corporation. The District Court denied the first
motion, but granted the second. 59 F. Supp. 98. On appeal, the
Circuit Court of Appeals affirmed by a divided vote, holding that
the District Court did not abuse its discretion in basing its
dismissal on forum non conveniens.
147 F.2d 77. We granted
certiorari because of the importance of the question presented.
The Class B debentures, issued in 1896, have no maturity date.
Their principal is payable "only in the event of a sale or
reorganization" of the company and "then only out of any net
proceeds" remaining after specified payments to the Class A
debentures and to the stock. The covenant in the Class B debentures
out of which this litigation arises is set forth below. [Footnote 1
] The Circuit Court of
Page 326 U. S. 552
Appeals was divided as to its meaning. The majority concluded
that, even though there were net earnings after the payments to the
Class A debentures and to the stock, the directors had discretion
to determine whether or not that sum should be paid to the Class B
debentures. The court thereupon held, in reliance on Rogers v.
Guaranty Trust Co., 288 U. S. 123
Cohn v. Mishkoff-Costello Co.,
256 N.Y. 102, 175 N.E. 529;
Cohen v. American Glass Window Co.,
126 F.2d 111, that the
suit concerned the internal affairs of respondent and could better
be tried in Wisconsin, the state of its incorporation. The minority
thought that the amount of net earnings remaining after deducting
the payments made to the Class A debentures and to the stock was to
be paid to the Class B debentures, that the directors had no
discretion to withhold such amounts, and that their payment
involved nothing more than a ministerial act. [Footnote 2
] In that view, the suit was
substantially the same as one for a liquidated sum, and would
entail no interference with the internal affairs of a foreign
We leave open the question of the proper construction of the
"net earnings" covenant in the Class B debentures. Although we
assume that the majority of the court below
Page 326 U. S. 553
was right in its interpretation of the covenant, we think it was
improper to dismiss the case on the grounds of forum non
Rogers v. Guaranty Trust Co., supra,
is the only
decision of this Court holding that a federal court should decline
to hear a case because it concerns the internal affairs of a
corporation foreign to the State where the federal court sits. A
corporation chartered by one State commonly does business in the
farthest reaches of the nation. Its business engagements -- the
issuance of securities, mortgaging of assets, contractual
undertakings -- frequently raise questions concerning the
construction of its charter, bylaws and the like, or the scope of
authority of its officers or directors, or the responsibility of
one group in the corporate family to another group. All such
questions involve, in a sense, the internal affairs of a
corporation -- whether, in a suit on a contract the corporation
interposes the defense of ultra vires,
or a bondholder
sues on his bond or a stockholder asserts rights under his stock
certificate. But a federal court which undertakes to decide such a
question does not trespass on a forbidden domain. See
Williamson v. Missouri-Kansas Pipe Line Co.,
56 F.2d 503, 510.
Under the rule of Erie R. Co. v. Tompkins, 304 U. S.
, a federal court in a diversity case applies local
law. In conflict of laws cases, that may mean ascertaining and
applying the law of a State other than that in which the federal
court is located. Klaxon Co. v. Stentor Electric Mfg. Co.,
313 U. S. 487
fact that the corporation law of another State is involved does not
set the case apart for special treatment. The problem of
ascertaining the state law may often be difficult. But that is not
a sufficient ground for a federal court to decline to exercise its
jurisdiction to decide a case properly before it. As we said in
Meredith v. Winter Haven, 320 U.
, 320 U. S.
"The diversity jurisdiction was not conferred for the benefit of
the federal courts or to serve their convenience. Its purpose
Page 326 U. S. 554
was generally to afford to suitors an opportunity in such cases
at their option, to assert their rights in the federal, rather than
in the state, courts."
So long as diversity jurisdiction remains, the parties may not
be remitted to a state court merely because of the difficulty of
making a decision in the federal court. Meredith v. Winter
If the District Court were sustained in
declining to exercise its jurisdiction in this case, there could be
no assurance that the litigation would be transferred to the
Wisconsin state courts. If petitioner sued in the federal court in
Wisconsin, as they could by reason of diversity of citizenship, no
reason is apparent why that court should not proceed to decision.
The fact that the federal court in Wisconsin could pass on this
internal affair of this corporation does not, of course, mean that
the federal court in New York need do so. The nature of the problem
presented and the relief sought might be of controlling
significance in inducing the federal court in New York to remit the
parties to Wisconsin. But, as we shall see, no special
circumstances of that nature are present here.
We mention this phase of the matter to put the rule of forum
in proper perspective. It was designed as an
"instrument of justice." [Footnote
] Maintenance of a suit away from the domicile of the
defendant -- whether he be a corporation or an individual -- might
be vexatious or oppressive. [Footnote 4
] An adventitious circumstance might land
Page 326 U. S. 555
a case in one court when, in fairness, it should be tried in
another. The relief sought against a foreign corporation
Page 326 U. S. 556
may be so extensive or call for such detailed and continuing
supervision that the matter could be more efficiently handled
nearer home. [Footnote 5
limited territorial jurisdiction of the federal court [Footnote 6
] might indeed make it
difficult for it to make its decree effective. [Footnote 7
] But where, in this type of litigation,
only a money judgment is sought, the case normally is different.
The fact that the claim involves complicated affairs of a foreign
corporation is not alone a sufficient reason for a federal court to
Page 326 U. S. 557
decide it. [Footnote 8
same may be true even where an injunction is sought. [Footnote 9
] We give these merely as
illustrations. Each case turns on its facts. There are no special
circumstances here, however, which should lead the District Court
in New York to decline to exercise the jurisdiction which it
If petitioners' theory of the case is right, the court need go
no further than it would in enforcing any contract to pay money.
If, as the majority of the court below thought, the payment of net
income to the Class B debenture rested in the discretion of the
directors, the question under the applicable local law would
normally be whether their discretion had been abused. [Footnote 10
] In case it were found
Page 326 U. S. 558
have been abused, the customary remedy is comparable to that
which a court of equity affords in a suit for specific performance.
] The point is
that, however this suit be viewed, the relief sought is not of such
a character as to suggest that the federal court in New York would
be so handicapped that it should remit the parties to Wisconsin.
There is a suggestion that the parties should be remitted to
Wisconsin because a construction of the covenant will primarily
affect the interests of the public in that State where all of
respondent's railroad lines are located. Reference is made to
New York, L.E. & W. R. Co. v. Nickals, 119 U.
, where preferred stockholders sued for dividends
which they claimed had been earned on their stock and wrongfully
withheld. The Court construed the particular contract as vesting
discretion in the directors. In holding that their discretion in
withholding a distribution of net earnings had not been abused, it
"the duty of the company to maintain its track and cars in such
condition as to accommodate the public, and to provide for the safe
transportation of passengers and freight."
p. 119 U. S. 306
But such considerations will frequently be involved in applying the
rule of Erie R. Co. v. Tompkins, supra.
They go no further
than to suggest one additional phase of local law which the federal
court, whether it sits in New York or in Wisconsin, may have to
apply. They fall far short of those instances, reviewed in
Meredith v. Winter Haven, supra,
p. 320 U. S. 235
where the federal court declines to act because its action might
interfere with state proceedings, or state functions, or the
functioning of state administrative agencies.
It was held in Weiss v. Routh,
149 F.2d 193, that a
federal court in a diversity case was required by Erie
Page 326 U. S. 559
Co. v. Tompkins, supra,
to apply the local rule of
forum non conveniens.
We reserve decision on that
question. For, even if we assume the New York rule to be applicable
here, we would reach no different result. Cohn v. Mishkoff
Costello Co., supra,
on which the court below relied, was a
suit against a foreign corporation for the redemption of its shares
of stock or, in the alternative, for a declaration of a dividend.
But that involved a degree of visitation not present here, where
petitioners seek only a money judgment on their debentures. Nor do
petitioners challenge an act of the corporation which "offended
solely against the majesty of the State to which it owed its life."
Ernst v. Rutherford Gas Co.,
38 App.Div. 388, 392, 56
N.Y.S. 403. The Court of Appeals in the Cohn
that "contracts between a foreign corporation and its members will
usually be enforced in the courts of this state." 256 N.Y. p. 105.
Cardozo, J., stated the New York rule in Travis v. Knox
215 N.Y. 259, 264, 109 N.E. 250, 251, as
"To trace in advance the precise line of demarcation between the
controversies affecting a foreign corporation in which jurisdiction
will be assumed and those in which jurisdiction will be declined
would be a difficult and hazardous venture. A litigant is not,
however, to be excluded because he is a stockholder, unless
considerations of convenience or of efficiency or of justice point
to the courts of the domicile of the corporation as the appropriate
the New York authorities reviewed in Weiss
v. Routh, supra.
In the Travis
case, the court
entertained a suit by a stockholder of a foreign corporation to
compel the transfer of shares or to recover their value. We
perceive in the present case no greater interference in the
internal affairs of this foreign corporation.
Nor can we conclude that the maintenance of this suit in New
York will be vexatious or oppressive. Petitioners, as we have said,
reside there. While respondent's railroad
Page 326 U. S. 560
lines are wholly in Wisconsin, it does business in New York. The
Class B debentures are listed and traded in on the New York Stock
Exchange. The amounts payable on them in lieu of interest are
payable in New York. Respondent maintains its financial as well as
a traffic office in New York. It maintains a bank account in New
York, not only to take care of obligations under its securities,
but also to handle excess operating funds not needed in Wisconsin.
Five of respondent's six directors are to be found in New York.
These five directors include all the executive and fiscal officers,
except the president who supervises operations in Wisconsin and the
general auditor who is in Wisconsin. Directors' meetings are
customarily held in New York. Two of the three members of the
executive committee, which acts for the board between meetings, are
to be found in New York. Financial records, transfer books, minute
books, and the like are kept in New York. These facts plainly
indicate to us that it would not be vexatious or oppressive to
entertain this suit in New York, whether the availability of
witnesses or any other aspect of a trial be considered. We
accordingly conclude that, the requirements of jurisdiction and
venue being satisfied (Judicial Code, §§ 24, 51, 28 U.S.C. §§
41(1), 112), the District Court should not have declined to hear
and decide the case.
MR. JUSTICE JACKSON took no part in the consideration or
decision of this case.
"The said Railroad Company Hereby Agrees that, until such
payment, the holders of this Series of Debentures shall, in lieu of
interest thereon, participate in the distribution of annual net
income to the following extent, viz.:
so much of the
annual net earnings of the said Company in any year as would be
applicable to the payment of dividends on stock shall be applied as
to the holders of Class A Debentures, 2 1/2
percent upon the face value thereof, or if such annual net earnings
are insufficient for the payment of the same, then all such net
earnings shall be distributed pro rata
among the holders
of said Class A Debentures. After the payment of 2 1/2 percent upon
the face value of Class A Debentures, the stockholders of the
Company are entitled to receive the balance of such net earnings
until 2 1/2 percent shall have been paid out of the same upon the
par value of the said stock, and all surplus net earnings then
remaining shall be paid to the holders of Class A Debentures and of
the stock pro rata
until five percent shall have been paid
upon the face value of said Debentures and upon the par of said
stock for such year, and any surplus net earnings arising in such
year which may then remain shall be paid to and distributed among
the holders of class B Debentures pro rata.
None of such
payments shall be cumulative. The amounts, if any, payable upon
this series of debentures out of the net earnings in any year will
be fixed and declared by the Board of Directors on or before the
first day of February in the following year. . . ."
Petitioners alleged that, with the exception of three years,
respondent had substantial net earnings in each year from 1924 to
1943 inclusive, in excess of the amounts required to be paid and
actually paid on the Class A debentures and on the stock. The
aggregate amount of such net earnings, after deducting reserves for
additions and general improvements and depreciation, and after
deducting the payments on the Class A debentures and the stock, was
alleged to be approximately $1,650,000. The amounts actually paid
on the Class B debentures during those years was $840,000, leaving
due, according to petitioners, about $810,000.
Mr. Justice Cardozo, dissenting, Rogers v. Guaranty Trust
p. 288 U. S.
In Gibb, International Law of Jurisdiction (1926), pp. 212-213,
the law of England and Scotland is stated as follows:
"[T]he court will not hold its hand unless there be, in the
circumstances of the case, such hardship on the party setting up
the plea as would amount to vexatiousness or oppression if the
court persisted in exercising jurisdiction. The inconvenience,
then, must amount to actual hardship, and this must be regarded as
a condition sine qua non
of success in putting forward a
defence of forum non conveniens.
For the general rule is
that a court possessing jurisdiction must exercise it unless the
reasons to the contrary are clear and cogent."
In Societe du Gaz de Paris v. "Les Armateurs Francais,"
1926 S.C.(H.L.) 13, perhaps the leading English case on the
subject, a French manufacturing company sued a firm of French
shipowners in a Scottish court on a charter party. It provided that
the vessel was to load a cargo of coal in England and proceed to a
French port. The vessel, after loading, sailed and foundered. The
plaintiff attached another vessel of defendants' found in a
Scottish port, and claimed damages by reason of the unseaworthiness
of the vessel. Neither plaintiff nor defendant had a place of
business in Scotland. The bulk of the evidence necessary to
determine the controversy was French, no machinery existed for
compelling the attendance of French witnesses in a Scottish court,
no question of Scots law was involved, and a trial in Scotland
would deprive defendants of a defense open under French law. A
judgment sustaining the plea of forum non conveniens
sustained. Lord Chancellor Cave summarized the rule as follows:
". . . if, in any case, it appeared to the Court, after giving
consideration to the interests of both parties and to the
requirements of justice, that the case could not be suitably tried
in the Court in which it was instituted, and full justice could not
be done there to the parties, but could be done in another Court,
then the former Court might give effect to the plea by declining
jurisdiction and permitting the issues to be fought out in the more
Pp. 16-17. Lord Shaw of Dunfermline stated:
"If, in the whole circumstances of the case, it be discovered
that there is a real unfairness to one of the suitors in permitting
the choice of a forum which is not the natural or proper forum,
either on the ground of convenience of trial or the residence or
domicile of parties or of its being either the locus
or the locus solutionis,
then the doctrine
of forum non conveniens
is properly applied."
And see Canada Malting Co. v. Paterson Steamships,
285 U. S. 413
285 U. S. 423
where Mr. Justice Brandeis speaking, for the Court, said,
"Courts of equity and of law also occasionally decline, in the
interest of justice, to exercise jurisdiction where the suit is
between aliens or nonresidents or where, for kindred reasons, the
litigation can more appropriately be conducted in a foreign
For reviews of the cases, see
Blair, The Doctrine of
Forum Non Conveniens
in Anglo-American Law, 29 Col.L.Rev.
1; Foster, Place of Trial in Civil Actions, 43 Harv.L.Rev. 1217, 44
Harv.L.Rev. 41; Dainow, The Inappropriate Forum, 29 Ill.L.Rev.
See Wallace v. Motor Products Corp.,
25 F.2d 655, where
a suit was brought in the federal court in Michigan to annul the
reorganization of a New York corporation and to restore the
stockholders of the old corporation to the position they had
occupied prior to the reincorporation; Eberhard v. Northwestern
Mut. Life Ins. Co.,
210 F. 520, where policy holders of a
Wisconsin life insurance company sued in the federal court in Ohio
for an accounting of dividends received and paid and for an
injunction against the election of trustees, and praying that the
trustees who had committed allegedly wrongful acts be decreed not
to be officers of the company, and that a receiver of the company
be appointed; Boyer v. Travelers' Protective Assn.,
F.2d 440, where suit was brought in the federal court in
Pennsylvania to enjoin a Missouri corporation from enforcing
certain amendments to its constitution; Cohen v. American
Window Glass Co.,
126 F.2d 111, where stockholders of a
Pennsylvania corporation sued in the federal court in New York to
enjoin a proposed merger, to have declared illegal the payment of
dividends, and to have a receiver, resident in Pennsylvania,
Georgia v. Pennsylvania R. Co., 324 U.
, 324 U. S.
-468, and cases cited.
The same is true, of course, of state courts. See Taylor v.
Mutual Reserve Fund Life Assn.,
97 Va. 60, 33 S.E. 385;
Howell v. Chicago & N. R. Co.,
51 Barb., N.Y. 378,
383. Cf. also
the cases where the court in which suit is
brought cannot give the relief necessary to produce an equitable
result, Marshall v. Sherman,
148 N.Y. 9, 42 N.E. 419;
State ex rel. v. Denton,
229 Mo. 187, 129 S.W. 709, or
where the right of recovery is incapable of enforcement because it
is so dissimilar to any which the court, whose jurisdiction is
invoked, recognizes. Slater v. Mexican National R. Co.,
194 U. S. 120
American Seating Co. v. Bullard,
290 F. 896, 901, where
stockholders of a New Jersey corporation, who did not consent to
the sale of its assets pursuant to a plan of reorganization and
refinancing, sued in the federal court in Michigan to recover the
value of their stock; United Milk Products Corp. v.
75 F.2d 923 (semble
); National Lock Co.
101 F.2d 576 (semble
); Overfield v.
113 F.2d 6, where stockholders brought a
derivative action in the federal court in Pennsylvania to recover
for wrongs done their company, a Delaware corporation, by a
Pennsylvania company; Williamson v. Missouri-Kansas Pipe Line
). Cf. Kelley v. American
Sugar Refining Co.,
139 F.2d 76.
Harr v. Pioneer Mechanical Corp.,
65 F.2d 332, where
stockholders of a Delaware corporation sued in the federal court in
New York to enjoin the sale of stock on the representation that it
had priority over the shares held by plaintiffs; American
Creosote Works v. Powell,
298 F. 417, where stockholders of a
Maryland corporation sued in the federal court in Louisiana to
annul and cancel the issuance of certain stock.
That is the usual rule in suits to compel the declaration of
dividends. Dodge v. Ford Motor Co.,
204 Mich. 459, 170
N.W. 668; Morey v. Fish Bros. Wagon Co.,
108 Wis. 520,
529, 84 N.W. 862; Hiscock v. Lacy,
9 Misc. 578, 30 N.Y.S.
860; Kassel v. Empire Tinware Co.,
178 App.Div. 176, 164
Spellman, Corporate Directors (1931) § 141; Weiner,
Theory of Anglo-American Dividend Law, 29 Col.L.Rev. 461;
Ballantine & Hills, Corporate Capital and Restrictions Upon
Dividends Under Modern Corporation Laws, 23 Calif.L.Rev. 229.
For the decree entered in Dodge v. Ford Motor Co.,
supra, note 9 see
Kales v. Woodworth, 20 F.2d
, 396. And see Boardman v. Lake Shore & M.S. R.
84 N.Y. 157, 180; Kassel v. Empire Tinware Co.,
supra, note 10