CORPORATIONS-SHAREHOLDERS-SETTLEMENT OF DERIVATIVE SUITS UNDER THE FEDERAL RULES

Authors

George S. Flint, University of Michigan Law SchoolFollow

Abstract

Plaintiff, a minority stockholder in the Kaiser-Frazer Corporation, objected to the approval by a federal district court of a settlement in a stockholder's derivative action against various directors of the company and several firms in which they were interested. The compromise covered a series of similar suits filed in state and federal courts, involving contracts negotiated by the directors with defendant companies and alleged manipulations through security purchases preceding a projected issue of stock in 1948. The court had approved the compromise under rule 23(c) of the Federal Rules of Civil Procedure. Plaintiff contended that the settlement was collusive and a fraud on other members of the class represented by defendant stockholder in the compromise negotiations. On appeal from the judgment approving the compromise, held, affirmed, one judge dissenting. The policy underlying rule 23(c) is best served if the interests of the corporation are protected; where the trial court has exercised adequate supervision over the terms of a settlement, its findings are conclusive absent clear error. Masterson v. Pergament, (6th Cir. 1953) 203 F. (2d) 315, cert. den. 346 U.S. 832, 74 S.Ct. 33 (1953).

Recommended Citation

George S. Flint, CORPORATIONS-SHAREHOLDERS-SETTLEMENT OF DERIVATIVE SUITS UNDER THE FEDERAL RULES, 52 Mich. L. Rev. 748 (1954).
Available at: https://repository.law.umich.edu/mlr/vol52/iss5/11