Swanson v. Traer
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354 U.S. 114 (1957)
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U.S. Supreme Court
Swanson v. Traer, 354 U.S. 114 (1957)
Swanson v. Traer
Argued March 27, 1957
Decided June 10, 1957
354 U.S. 114
This is a stockholders' derivative suit brought in a Federal District Court in Illinois on grounds of diversity of citizenship by citizens of Nevada against an Illinois corporation, certain individual citizens of Illinois, a Delaware corporation and an Indiana corporation. The complaint alleged a conspiracy to defraud the Illinois corporation through sales to it of certain properties in which some of the directors were personally interested. It also averred a demand on the directors to bring suit, their refusal to do so, and the futility of making any demand on the stockholders. The Court of Appeals concluded that there was no such hostility to the plaintiffs as to make the Illinois corporation "antagonistic" to its stockholders, and it realigned that corporation as a party plaintiff and affirmed dismissal of the suit on the ground that there was no diversity jurisdiction.
Held: the judgment is reversed, and the cause remanded. Pp. 354 U. S. 115-117.
(a) The management is definitely and distinctly opposed to the institution of this litigation; it is therefore "antagonistic" to the stockholders, and the corporation was properly made a defendant. Smith v. Sperling, ante, p. 354 U. S. 91. P. 354 U. S. 116.
(b) Whether the stockholders may sue on behalf of their corporation is a question of local law on which the Court of Appeals did not rule, and the case is remanded to it for consideration of that question. Pp. 354 U. S. 116-117.
230 F.2d 228 reversed and remanded.