*1 ROSS TRUSTEES v. BERNHARD et et al. al., Argued 10, No. 42. November February 2, 1969 Decided William E. Haudek argued petitioners. the cause for With him on the briefs were Meyer Richard M. Stanley M. Grossman.
Marvin Schwartz argued the cause respondents. With him on Roger Waldman, the brief were L. William Manning, E. Roger Frisch. opinion delivered the of the Court.
Mr. Justice White The Seventh provides Amendment Constitution that in at common where law, the value in “[s]uits con- troversy twenty shall exceed dollars, the right of trial preserved.” by jury shall be Whether the Amendment guarantees stockholders’ deriv- ative actions is the issue now before us.
Petitioners
this derivative
federal
court
against
directors of their closed-end investment
company,
the Lehman Corporation, and
corpora-
brokers,
tion’s
They
Lehman Brothers.
contended that
Lehman Brothers controlled the corporation through an
illegally large representation on the corporation’s board
directors,
violation
Company
Investment
Act
54 Stat.
seq.,
U. S. C. 80a-l et
and used
this control to extract excessive brokerage fees from the
corporation.
directors of the corporation were ac-
corporate
of converting
assets and of “gross
cused
abuse
misfeasance,
faith,
bad
trust, gross misconduct, willful
Both the individual defendants
gross negligence.”
[and]
*2
of breaches of fidu-
and Lehman Brothers were accused
to Lehman
ciary duty.
alleged
payments
It was
that the
and
spoliation,
that
Brothers constituted waste
Lehman Brothers
corporation and
contract between the
de-
requested that
had been violated. Petitioners
Corporation
to the
pay
“account for and
fendants
also
losses.” Petitioners
profits
gains
their
claims.
corporation's
trial on the
jury
demanded a
jury
demand,
petitioners’
trial
On motion to strike
jury
held
a shareholder’s
District Court
be judged
of action was to
corporation’s
on his
cause
Only the
plaintiff.
itself the
corporation
if the
speak
for the
initial claim
shareholder’s
Supp.
F.
569. Con
judge.
had to be tried
for difference
grounds
that “there are substantial
vinced
opinion
question
ap
as to this
and ...
an immediate
peal
materially
would
advance
ultimate termination
permitted
of this
the District Court
an inter
litigation,”
locutory appeal.
(b).
28 U.
C.
The Court
S.
Appeals reversed,
a derivative action
holding that
entirely
nature,
jury
and no
was avail
try any part
specifically
able to
of it.
We reverse the holding Appeals Court of in no event does the preserved by the Seventh Amendment extend to derivative actions corporation. stockholders We hold trial attaches to those issues derivative actions as to which the if corporation, it had *5 own been suing right, been in its would have entitled preserves Amendment litigants Seventh in suits at common law— merely the common suits, recognized “not which law among proceedings, its old and settled but suits which were be ascertained and rights deter- mined, in contradistinction to equitable those where alone rights recognized, remedies just were administered In sense, *6 .... a the amend- may ment then well be construed to embrace all suits are not equity admiralty which and juris- diction, may peculiar whatever form which they may rights.” assume to settle Parsons v. Bedford, Pet. (1830).
However difficult it may have been to define with precision the line between actions dealing at law with and in legal rights equity dealing suits with Shattuck, Whitehead matters, v. 138 U. S.
(1891), proceedings unmistakably some at actions law triable to a The Amendment, ex- Seventh for parties entitled ample, in trial actions for person to damages a or for property, slander, libel and recovery of land, for for personal and conversion of property.1 clearly, Just a corporation, an although commonly artificial being, was entitled to sue and be in the forms action, sued usual at least in its own State. Paul v. Virginia, 8 Wall. the corporation
Whether
entity
was viewed as an
separate
from its stockholders or as a device
permitting
stock-
carry
holders to
on their business and to sue and be sued,
corporation’s
suit to
a legal right
enforce
was an action
¶
head
1 See,
[5]
Shattuck,
e.
g.,
(2d
Curriden ed.
the sue on second, and, corporation’s merits claim itself.5 the of the posed prob- Amendment Derivative suits no Seventh lems where action the and third against directors a had cor- equity would have been bill poration Our is with suit. concern cases upon based a claim of the corporation against parties. directors or third Does the of such claims trial at suit of a stockholder and violate without the Seventh Amendment? question arose in this Court the context of for
derivative suit
treble
damages under
antitrust
Co.,
Fleitmann v.
Lighting
laws.
Welsbach Street
(1916).
S. 27
that
Noting
U.
the bill
set
up a claim
corporation alone,
of the
Justice Holmes
Mr.
if the corporation
observed
“no
plaintiff,
that
can
one
doubt
that
only remedy
law,”
would be at
“why
inquired
defendants’
away
should be
plaintiff
taken
because the present
persuade the
cannot
only party
a cause of action
having
the liability
sue—how
which is the
matter
principal
can be
into an
converted
incident of
plaintiff’s
domes-
company
tic difficulties with the
wronged”?
has been
Id., at 28. His answer
did
the bill
not state
good
cause of action in equity.
there
Agreeing
were “cases in which the
nature
asserted
company,
or the failure of the defendants concerned
upon
insist
their
or a
rights,
different state
has
system,
Koster
See
v. Lumbermens Mut. Cas.
330 U. S.
(1947);
A,
522-523
Ashwander v. TV
536 he disposed equity,” of in being to the whole matter
led penalty triple damages that when the concluded a plainly anticipated the antitrust statute sought, to authorize “attempting should be read as trial and the ver- through than liability to be enforced otherwise Id,., at 28-29. a in a law.” dict of court common had obvious Seventh Amendment the decision Although in the overtones, grounded ultimate rationale was laws.6 antitrust however, involved, were not penal damages
Where Fleitmann in the parallel was no authoritative there system squarely applicability on the passing federal of a claim legal the Seventh Amendment can pre-merger derivative suit. What presented opinions7 from gleaned this Court's is not inconsistent seeking damages dilemma of for The treble stockholder Copper corporation complete became Co. v. real United Amalgamated Copper Co., (1917), 244 U. S. where the stock sought holder-plaintiff damages in an law. The treble action at rejected by reiterating view that Court claim the traditional standing corporate was to sue on a a shareholder without at law only treble-damage proceeding cause. action was bring Appeals for the could it. The Court of Circuit has the federal resolved the Second held that rules have damages under dilemma and that derivative actions treble Marco, & v. Para proper. laws are Fanchon Inc. antitrust now Inc., 1953). Pictures, (C. mount 2d 731 2d Cf. F. A. Cir. Ramsburg Ill., (C. 7th v. American Inv. Co. F. 2d 333 A. 1956). Comment, generally Law— Cir. Federal Antitrust Injury Resulting From Anti Corporate Stockholders’ Remedies For Duty Fiduciary trust Violations: Derivative Antitrust Suit and Action, L. 59 Mich. Rev. Amalgamated Copper example, in Court noted that For Quincy Steel, (1887), bill U. S. shareholder’s sought purely legal corporation— claim to enforce “a dismissed, damages for breach because the of contract” “not law, have because show should been at but the bill failed to complainant had made sufficient effort induce the directors
537 with the general by the understanding, reflected state court secondary decisions and sources, equity could properly corporate resolve any claims of kind without a jury when properly pleaded in derivative suits complying with rules.8
Such was the prevailing opinion when the Federal Rules of Civil Procedure adopted in 1938. It con tinued until 1963 when the Court of Appeals for the Ninth Circuit, on the relying Federal Rules as construed Theatres, Westover, Beacon applied Inc. v. 359 Queen, Dairy Wood, U. S. 500 (1959), Inc. v. 369 U. (1962), S. 469 required the legal issues a derivative Security to be tried to a jury.9 DePinto v. Provident Co., Ins. 323 2dF. 826. It was this decision Li fe the District Court followed in the case before us and that Appeals Court of rejected. Queen
Beacon
Dairy
presaged DePinto. Under
cases,
those
where equitable and legal
joined
claims are
S.,
enter suit.” 244
264-265,
U.
n. 2. Delaware & Hudson Co.
at
Albany
Co.,
supra,
& S. R.
v.
4,
n.
involved
derivative suit
money
damages due under a
lease. The stockholders’
sustained;
jury
sue was
no
appears
trial issue
to have been raised.
8 See,
g.,
e.
Goetz v.
Co.,
& Traders’ Trust
154
Manufacturers’
733,
Marcus,
Misc.
277
(Sup.
N. Y. S. 802
Isaac v.
1935);
Ct.
257,
Realty
258 N.
Morton v. Morton
(1932);
Y.
We of the pects: sue on behalf first, right to the stockholder’s second, the equitable matter; an corporation, historically parties or corporation against directors third claim pre- had and the which, corporation if the sued claim on issues, company a legal sented the could demand Fleitmann, by Holmes in implied As Mr. Justice trial. equitable converted into legal magically claims are by of presentation equity their to a court a issues pressed by The the derivative suit. claim stockholder not his the directors or third “is own but against Co., Koster v. Lumbermens Mut. Cas. corporation’s.” The (1947). corporation 330 U. 522 is a neces- party action; the without it the cannot sary to case a the real proceed. Although defendant, named is it party interest, the stockholder at the nomi- being best proceeds The plaintiff. belong nal the action corporation it is and bound the result of the suit.11
10 indicate, “legal” our As cases the nature of an issue is deter by considering, first, pre-merger mined the custom with reference questions; sought; second, remedy and, third, to such juries. practical factors, Of abilities limitations these inquiry, first, requiring possibly extensive abstruse historical obviously James, Jury apply. Right the most difficult to Actions, (1963). Civil 655 Trial in Yale L. J. (1947); Mut. See Koster v. Lumbermens Cas. U. S. Meyer Dows, Fleming, (1946); Davenport 327 U. S. Wall. If corporate of the action is the claim. it heart corporation one presents legal issue, entitling Amendment, under the jury trial Seventh merely is not forfeited because the stockholder’s sue an adjudicated must first as Queen Beacon Dairy court. issue triable require no less.
If older procedures, discarded, under now court of try the equity properly corpora- could claims in a presented suit, tion derivative irrep- because injury remedy arable was threatened and no at law long existed as stockholder was without standing to sue and the pursue itself refused to from Indeed, judicial own remedies. 1789 until 1938, the forbade expressly code courts of from entertaining any suit for there remedy which was an adequate at provision law.12 This guard served “to *11 by preserved by the Seventh Amendment and to that end it be liberally construed.” Schoenthal should Irving Trust 92, If, U. before 1938, the law had borrowed from equity, it borrowed things, other idea litigate stockholders could for their recalcitrant corporation, corporate claim, if legal, undoubtedly would have been tried to jury. a
Of did course, occur, this but the Federal Rules had a impact. similar Actions are no longer brought as equity. actions at law or suits in Under the Rules there only is one action —a “civil action” —in which all claims may joined be and all remedies are Purely available. procedural impediments to presentation of any issue by any party, based on the difference between law and 1911, The 267, Judicial Code of re-enacting Stat. § Sept. 24, 1789, Act of 82, provided: Stat. “Suits in equity any shall not be sustained court of the United States in any plain, adequate, case a complete where remedy may be had at law.” In destroyed. presenting a civil action
equity, court claim, passing after derivative stockholder’s corpora to sue on behalf upon plaintiff’s right try damages claim for corporate tion is now able to may tried jury.13 claims Separable the aid of a with (b), Proc. 42 or legal Fed. Rule Civ. separately, Fanchon may be handled in the same trial. equitable issues Pictures, Inc., 202 F. Marco. Inc. v. Paramount & 1953). pre The historical rule (C. 2d 731 A. 2d Cir. from a shareholder’s entertaining a court of law venting no obsolete; on behalf of the is both court, administering tenable for a district longer action, deny in the remedies equity law and same merely corporation’s spokes because the corporation, rather its men are shareholders than directors. Under rules, procedurally combined; law and are upon turns now the form of the action or the nothing procedural happen devices which the to come “expansion of adequate legal before court. provided by necessarily remedies . . . the Federal Rules Theatres, scope equity.” affects the Beacon Inc. v. Westover, S., 359 U. at 509.
Thus,
example, before-merger class actions were
largely
equity,
device of
and there was no
jury even on issues that
under other circum-
might,
stances, have been tried to
Moore,
Federal
appear
It would
the same conclusions could have been
*12
Equity
Equity
reached under
Rule 23 and
Law and
Act
3, 1915,
Act of March
38 Stat. 956. See Southern R. Co.
City
Greenwood,
(D.
1928);
“If in a suit a matter determinable at law arises, according such matter shall be determined in that to the applicable, sending question principles without the case or law side of the court.”
541 Practice ¶ 38.38 [2] (2d ed. 1969); 3B id., ¶ 23.02 [1]. least held Although post-merger at one court try legal issues,14 device it available now seems plain settled in the lower courts that class action federal on jury any legal they tiffs obtain a issues may Langer, & 2d present. Montgomery Ward Co. v. 168 F. Carmel, (C. 1948); 182 8th Cir. see Oskoian v. 269 F. A. aff’g Syres D. (C. 1959), 307; 311 A. 1st 23 F. R. 2d Cir. Union, (C. Int’l Local 2d A. 257 F. 479 v. Oil Workers (1959). 2 denied, 358 U. 929 W. 1958), 5th cert. Cir. Federal Practice and Procedure Holtzoff, Barron & A. 1961). ed. (Wright § 571 one kind of been described as suits have
Derivative Id., 562.1. are inclined “true” action. We class recog- extent at least to the description, with the agree suit and the class action nizes that the derivative who parties to be heard allowing ways both 3B J. Federal Practice speak Moore, at law.15 could not 14 Co., Co-operative Socony-Vacuum Co. v. Oil Oil Farmers 1942). (D. Supp. C. N. D. Iowa F. depriv under rules without devices are used Other right jury trial on employing to a ing them may although intervene some example, issues. For & limited, the Use Browne United cases States Benefit of Bonding 2d Bryan Ins. F. Co. v. Massachusetts & Lumber Burnham, (C. 1962); 197 F. 2d 2d Dickinson A. Cir. denied, (1952), intervention (C. Cir.), U. S. 875 when A. 2d cert. has trial on generally, intervenor permitted Moore, Federal Practice any legal presents. he See 3B J. issues ¶ [7] (2d ed. 1969); 5 id., ¶ 38.38 [3]. A similar devel taking place in lower courts in inter- opment to be seems lay only interpleader merger Before actions pleader actions. equity, even on issues that there was no circumstances, tried to a might, other have been under Liberty Bank, v. Condon Nat. U. S. 235 Co. Oil Bynum merger, time after see This continued for some view *13 542
¶¶23.02 [1], 23.1.16 [1] (2d ed. 1969). After adoption any procedural obstacle longer of the rules there is no however legal juries, assertion of before rights those party may acquired standing rights. have to assert of legal in a derivative action both availability Given Amend- think equitable remedies, we the Seventh preserves parties in a ment stockholder’s historically belonged same and to against corpora- those whom the pressed legal tion its claims.
In the instant case we have no doubt the cor- poration’s is, at in part, claim least one. sought money damages. relief is are There allegations complaint in the of of duty, a breach fiduciary but there also ordinary are allegations breach contract and gross negligence. The it corporation, had sued on its own behalf, jury’s would have been entitled ato deter- mination, at minimum, its damages against its broker under the brokerage contract and of rights against its own directors because of negligence. their Under these unnecessary circumstances to decide v. Prudential Ins. (D. 7 F. R. D. 585 C. E. D. C. Life 1947), but numerous courts and have commentators now come to the conclusion that should not turn on happen how Pan to be into court. Revere, American Fire Cas. & Co. v. (D. Supp. 188 F. 474 C. Block, Savannah Bank & Trust 1960); E. D. La. Co. v. Supp. 175 F. (D. 1959); Westinghouse Corp. 798 C. Elec. S. D. Ga. v. United Elec. Radio & Mach. & A. But see 1961); Yarrow, (D. C. Holtzoff, 3A J. Pennsylvania W. D. F. Moore, Supp. Federal Practice Pa. 1951); Fire Federal Practice Workers Ins. Co. American (D. John C. E. D. Hancock Mut. Procedure America, ¶ Pa. 1951); Airlines, [4] 99 Life 556 (Wright (2d F. Ins. Inc., W. Supp. ed. Barron Co. 180 F. 1969). ed. v. 1960); Liberty Supp. (D. Nat. C. E. D. N. Y. Ins. Co. Life Brown, (D. 1954). Supp. F. C. M. D. Ala. properly are also other claims *14 corporation’s whether the Wood, Queen, 369 U. S. Dairy a Inc. triable to is Appeals the Court of (1962). The decision of reversed.
It ordered. is so Stewart, The Chief Justice with whom Justice Mr. dissenting. Harlan join, and Mr. Justice in share- plaintiff does the a holding In as it constitutionally to entitled suit is holder’s derivative trial, rely upon sort today to some jury the Court seems Seventh Amendment ill-defined combination of the the the Federal Rules of Civil Procedure. Somehow what to do Amendment the Rules interact magically namely, expressly do, intended to separately each was in civil actions jury to a trial enlarge right to the United in the courts of the States. extend, by terms, does not Amendment,
The Seventh jury trial Suits merely preserves right the to a but “[i]n the reach agree All that this means at common law.” that were limited those actions the Amendment is to in 1791 the Amendment jury when tried historically tried equity, in were adopted.1 Suits which by Similarly, therefore unaffected it. court, right no on the bearing 38 of the Federal Rules has Rule it simply preserves jury equity, trial suits by as jury of trial declared right by inviolate “[t]he Amend- Rule, like the Amendment.” Thus this Seventh jury itself, enlarges restricts nor ment neither nothing Congress, and action created new cause of Where jury determined tried, to be trial issue is is said about how it is analogy. Luria by fitting into its nearest historical the cause Jury States, 9; James, Right Trial see United 231 U. S. Actions, 72 J. 655. Yale L. Civil rightly Rules can nothing in the Federal
trial.2 Indeed trial, for enlarge construed to expressly pro- legislation authorizing Rules, Congress nor mod- enlarge, abridge, vided that “shall neither they 1064. ify rights any litigant.” Stat. substantive simple, I plain, 2072. take this U. S. C. pro- after language to mean that straightforward before, the constitu- Rules, of the Federal mulgation only tional to suits at attaches So, every apparently, common law. has federal court Since, that has the issue.3 as the Court discussed con- cedes, a shareholder’s could be brought derivative *15 only by in equity, it seem to me to follow would most elementary in logic that such suits there is no constitu- by right jury.4 Today tional to a trial the Court tosses aside history, years and over of firm logic, precedent to plaintiff hold a shareholder’s derivative 65; 5 Moore, 2See, 3The principle J. e. g., Ettelson v. Federal Practice 38.07 the Rules Metropolitan effected no ¶ Life [1] Ins. and cases enlargement Co., 137 F. 2d cited or restric therein. 62, of right tion complete judicial of trial appro has “received bation.” 5 Moore, therein. 4 Virtually every state and federal Federal Practice court ¶ [1] has faced this cases cited similarly issue has reasoned See, g., to the same conclusion. e. Goetz v. & 733, Traders’ Trust Misc. Manufacturers’ Ct.); N. (Sup. Y. S. 802 Shamel, App. 789, 166 Cal. 2d Metcalf 857; Shaffer, P. 2d 432; Weiant, Liken Supp. 64 F. Miller v. Supp. equitable F. 760. The of nature the derivative suit has been recognized in See, g., several decisions of this e. Cohen v. Court. Corp., Industrial Loan 337 U. S. 547-548. It was also Beneficial adoption Equity reflected in of Rule 94 in and Rule 27 of Equity Rules preconditions of which established to bringing shareholders’ derivative suits the federal courts. These rules are the (b) forerunners of Rule 23 of Fed. Rule Civ. Proc. of 1938, and of (1966), Fed. Rule Civ. Proc. 23.1 which now controls the initiation Moore, of such suits. See 3B J. Federal Practice 23.1.15 ¶ [1]. by right does indeed have a constitutional
suit questionable policy5 has a basis in holding This whatever the Constitution. and no basis the “dual nature” begins assuming The Court plaintiff’s action. While the get shareholder’s equitable, into court at all is conceded to be once he is says there the Court his claim is to be viewed as though it were the claim of the If itself. the cor- poration would have been entitled trial on such a claim, then, said, so would the shareholder. This conceptualization any is without historical basis. For the fact is that a shareholder’s suit not originally was viewed in country, this or England, as suit to enforce a corporate of cause action. Rather, shareholder’s initially permitted only was against the of managers the corporation parties third it was conceived —not —and an equitable action to enforce the a bene- ficiary against his trustee.6 The shareholder not, in court therefore, to enforce indirectly the corporate action, but to directly enforce his own right of action an against unfaithful fiduciary. Later the rights the shareholder were enlarged encompass suits against third harming corporation, but “the *16 postulated ‘corporate cause- of action’ has never been to describe an thought actual historical class of suit which 5See, g., Frank, e. J. Courts on Trial Certainly 110-111 among there is no consensus desirability commentators on the jury generally. in Particularly trials civil actions where the issues complex they likely in the case are are to be in a derivative —as allowing suit —much can be said for the try court discretion to the case in 5 Moore, itself. See discussion J. Federal Practice [1], 38.02 ¶ 6 Smith, Paige (N. Robinson Y.); Attorney Ch. General Co., v. Utica Ins. (N.Y.), Johns. Ch. 371 discussed in Prunty, The Shareholders’ Derivative Suit: on Derivation, *17 applicable 654. These law side of the court.” 226 U. S. principles jury Consequently, included the trial.9 Copper said in United Co. v. Amal- when the Court Co., gamated Copper 261, 264, that “it is clear” U. S. the of a stockholder to enforce the remedy seeking in of a their rights nature —is —whatever in “pro- law but it not because there were equity, impediments” cedural on issues.” jury any “legal Rather, it was because the suit itself was conceived of as a wholly equitable cause of action.
This was also true in Fleitmann v. Welsbach Street Lighting on U. S. which Court so heavily though pre-Federal-Rules relies even was a In Fleitmann plaintiff derivatively case. sued to en- corporate force a for damages action treble under the antitrust laws. Treble damages were considered punitive, and the statute imply was read to jury opinion defendant trial. In for his Court, recognized potential Mr. Justice Holmes abuse: derivative rather corporate than actions could be in order to deprive the defendant of his right to a jury trial. Court’s solution was to dismiss bill because the antitrust statute “should not be read to authorize attempting liability to be enforced other- wise than through verdict of a jury a court of Id., common I law.” at 29. do not see how the Court today can draw from sustenance this decision. Rather, the Fleitmann case seems to me to for a proposi- stand tion diametrically opposed to that which the Court seeks to establish, namely, proposition that because a wholly derivative action is equitable, there is no right to Fleitmann simply held that trial. The Court a statutory since there was right to a all actions for treble under damages laws, antitrust a derivative Co. City See Southern 2dF. Greenwood, B. 679. *18 seeking damages such could not be maintained. Thus the bill had to be dismissed.10 pre-1938 cases, firmly
These establish the uni- then, of tary, equitable basis shareholders’ derivative suits and in no way support holding But, Court’s here. Court says, may whatever the have been be- situation fore 1938, the Federal of Rules Civil Procedure that year, at least as construed in our decisions more than Theatres, Westover, 20 years later in Beacon Inc. v. Queen, Wood, U. and Dairy Inc. v. 369 U. S. any event require the conclusion reached today. I can find nothing either of these cases that leads to that conclusion.
In Beacon Theatres plaintiff both an in- sought junction preventing the from defendant an instituting antitrust action and a declaratory judgment that certain picture moving distribution contracts did not violate the antitrust laws. The defendant answered and counter- claimed for treble damages under the antitrust laws. He demanded a jury trial on the factual relating issues to his counterclaim. The district court held even that though there were factual issues common to both the complaint and the counterclaim, it would first hear the plaintiff’s suit for equitable relief before submitting the counterclaim The Court of Appeals affirmed, reversed, upon this Court ground if that equitable claim were tried first, there might be an estop- pel which would defeat the defendant’s a full jury trial on all the factual issues raised in his counter- Queen claim. Similarly Dairy the Court simply held 10Moreover, since the suit promulgation after Equity Rule 23 it seems here, too, evident that merely it was not “procedural impediments” prevented the antitrust claim from being jury, tried presumably but arising the fact no matter in a derivative suit —whatever its “inherent nature” —was considered “ordinarily to be one determinable at law.” plaintiff by joining could not avoid a in one complaint. causes action Theatres it that the It is true that Beacon was stated scope juris- did of federal equity 1938 Rules diminish particulars. diction in certain But the Court’s effort to mold of force facts this case into the Beacon Queen Dairy simply does succeed. Theatres *19 historically sepa- of Those cases involved a combination and one in Their facts suits, equity. rable one law pattern Rules, equity of before the the where, fit the cases and disposed equitable court would have claim jurisdiction either retained over the would then have despite availability remedies, of suit, adequate legal enjoined subsequent legal or action between same involving controversy.11 same present traditionally But case is not one involving by traditionally claims one equitable party, legal it in which the claims other. Nor is a suit plaintiff is a combination of asserting equitable For, seen, claims. as we have a derivative suit has equitable been of always single, unitary, conceived as reason, cause of action. It is for this and not be- “procedural of impediments,” cause courts did transfer derivative suits to the side. equity not law wholly In of action is a creature of short, equity. the cause of Beacon And whatever else can be said Theatres and Dairy they did cast aside Queen, altogether not equity division between historic law. history cavalierly
If dismissed, is be so the derivative artificially broken can, course, sep- be down into any But so then can traditionally arable elements. action, logic cause and the of the Court’s would lead to the virtual elimination of position all An equitable suit for an jurisdiction. injunction, for J.,L. discussionin 74 Yale at 736-737. damages if which, of fact issues instance, often involves jury. triable to a would have been sought, been had only injunctive for asking mean that a suit Does this jury, with must be tried to relief factual issues these jury’s given the only whether, to decide left the'judge Cer- remedy? injunction appropriate an is the findings, possible try a suit make it tainly the Federal Rules they more certainly but even injunction way, an Yet any such effect. intended to have any if require that seems, it would approach, Court’s jury, could be tried to a procedurally issue” “legal must tried to constitutionally are, for the most course, there is, fact or in- “legal issues” part, things inherently no such There are factual herently only “equitable issues.” from [they] “like take their color issues, and, chameleons “nature Thus the Court’s surrounding circumstances.” approach hardly meaningful. of the issue” points the Court ground conclusion, As a final for its supposed involving class actions. analogy suits *20 It that before the Federal Rules such suits were says equitable jury, considered not triable but of the Rules the federal courts have promulgation since “plaintiffs any obtain a trial on may found that may they present.” plaintiff issues Of course the legal in Nothing such a trial even a derivative suit. obtain precludes judge or the in the Constitution the Rules a matter of granting from a trial as discretion. James, supra, it, put n. at 692. As Professor Moore has legal equitable may, upon course, depend or issues are “Whether they presented Moore, in Fed manner which are J. virtually every [1], he, along And 38.04 n. 40. with eral Practice ¶ commentator, presented concludes if issues are a other in they plaintiff has derivative suit are shareholder’s Moore, no to have them tried a constitutional Federal Practice ¶ [4]. if Court means federal courts
But even that some plaintiff have ruled that class action some sit- jury trial, uations has a constitutional unpersuasive. suits is For analogy wholly derivative it Federal in- is clear that the draftsmen Rules pertained tended Rule 23 as it actions should to class joinder be other applicable, governing like rules claims all parties, actions, “to whether denomi- formerly equitable.” nated or legal This does mean that action formerly equitable is triable to a jury simply because it on behalf class, of a but only that historically cause of action can be tried to a jury even is brought as a class action. Since a if historically wholly derivative suit is creation of equity, “analogy” class action is in no analogy truth at all. today Court’s decision can perhaps explained an a reflection of unarticulated but apparently over- powering bias favor jury trials civil It actions. certainly explained cannot be of either Fed- terms eral or Rules the Constitution.
13Original Moreover, Note Committee of 1937 to Rule 23. out, points Professor Moore certain class actions could be main tained law in federal courts even before the at Federal Rules. 5 Moore, Practice Federal ¶ [2]. Notes 32 N. Y. U. L. 980. Rev. Indeed the commen- recognized by courts law.” tators, postulating cited as including by those the Court analytic duality suit, of the shareholder’s derivative historically always recognize practice that suit has exclusively as in equity. been treated cause tried single They agree that there is no therefore constitutional to a even might where there have been one the corporation had itself suit.8 This simply has been not the “general” “prevailing” or view the federal courts says, as the Court but unanimous exception view with the single of the Ninth Circuit’s Security DePinto Provident 1963 decision Ins. 2d 826, F. a decision that has since Life by been followed no court the present until case. The Court would have us discount all those decisions rendered before 1938, when the Federal Rules of Civil Procedure adopted, it says because that before promulgation of Rules, “[pjurely procedural impedi- ments” somehow blocked the exercise of a constitutional In right. itself this would seem a premise rather shaky upon which to build an argument. posi- But the Court’s tion is still further weakened any fact “[pjurely procedural impediments” trial in a derivative suit were eliminated, not in 1938, but at least early as 1912. For Rule Equity Rules year provided if a ordinarily “matter determi- nable at law” arose in an equity suit it should “be determined in that suit according to principles ap- plicable, without sending the case or question to the 7 Note, Right Jury The Trial Stockholder’s Derivative Action, 725,730. 74 Yale L. J. 8 See, g., e. Lattin, N. Corporations, Law of e. §3; Homstein, Corporation G. Law and §730; Practice Fletcher, 13 W. Cyclopedia of the Law of Corporations (1961 Private ed.); §5931 5 Moore, Federal Practice ¶ [4].