CORPORATIONS-DERIVATIVE SUITS-WHO IS A SHAREHOLDER UNDER FEDERAL RULE 23 (b)

Authors

Kent Chandler, Jr., University of Michigan Law School

Abstract

Plaintiff brought suit in a federal district court to enforce the rights of defendant, an Illinois corporation, to monies allegedly embezzled by its president and to certain shares of stock allegedly issued to him illegally. The complaint alleged that plaintiff, a Delaware corporation, "is now and has been at all times hereinafter complained of the owner of 6538 shares of the common stock of . . . defendant herein." Defendant, showing by affidavit that plaintiff had never been a shareholder of record, moved to dismiss the complaint for failure to meet the requirements of federal rule 23 (b). The court granted the motion, holding that plaintiff's status as shareholder was governed by the law of the state of incorporation, and Illinois law required that a shareholder bringing a derivative suit be one of record. On appeal, held, reversed. The word "shareholder" in rule 23 (b) includes the equitable owner, who also is permitted to sue under Illinois law. Further, who is a shareholder under rule 23 (b) is a question to be determined irrespective of local law. H.F.G. Co. v. Pioneer Pub. Co., (C.C.A. 7th, 1947) 162 F. (2d) 536.

Recommended Citation

Kent Chandler, Jr., CORPORATIONS-DERIVATIVE SUITS-WHO IS A SHAREHOLDER UNDER FEDERAL RULE 23 (b), 46 Mich. L. Rev. 431 (1948).
Available at: https://repository.law.umich.edu/mlr/vol46/iss3/13