Plaintiff, a citizen of New York and the owner of some preferred stock in the defendant Delaware corporation, brought a class action against the corporation in a federal district court in Pennsylvania to compel the declaration and payment of dividends on the preferred stock, alleging that the directors had acted in had faith in violation of their duties as fiduciaries. Defendant's articles of incorporation provided that the preferred stock was entitled to receive dividends "when and as declared by the Board of Directors"; the by-laws permitted a majority of the hoard to constitute a quorum for purposes of transacting business. In an interlocutory order the court directed that a majority of the directors were necessary parties and should he served. Of the twelve directors, only the three who resided in Pennsylvania were served, there being no one state in which a majority could he served. On appeal from the granting of a motion to dismiss for lack of indispensable parties, held, reversed and remanded. In an action by a defrauded stockholder to compel the declaration and payment of dividends, the plaintiff has a cause of action against the corporation itself which can he enforced by a court of equity without the necessity of joining the directors, provided the corporation is properly made subject to suit and has property within the state. Kroese v. General Steel Castings Corporation, (3d Cir. 1950) 179 F (2d) 760.
Daniel A. Isaacson S.Ed.,
CORPORATIONS-STOCKHOLDER'S SUIT TO COMPEL DECLARATION OF DIVIDENDS- NECESSITY OF DIRECTORS AS PARTIES,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol49/iss2/12