COHEN V. BENEFICIAL INDUSTRIAL LOAN CORP.
337 U.S. 541 (1949)
NATURE OF THE CASE: This was a shareholder derivative action. A Federal District Court, having jurisdiction of a stockholder's derivative action solely because of diversity of citizenship, denied a motion to require Cohen (P) to post security for reasonable expenses incurred by the defense, as required by a statute of the forum State. The Court of Appeals reversed.
FACTS: Cohen (P) was required under state statute to post security bond for expenses in a shareholder derivative action suit. The district court denied D's motion for the bond. P's initial complaint alleged that since 1929, the individual defendants engaged in a continuing and successful conspiracy to enrich themselves at the expense of the corporation. The assets that were alleged to be wasted or diverted were in excess of $100,000,000. A demand was made to the corporation but it was prevented from addressing the issue as Ds controlled the company board. P sued in 1943 and in 1945 New Jersey enacted the statute that required the posting of a security bond for expenses in a shareholder derivative action suit. The court of appeals reversed and the Supreme Court granted certiorari.
ISSUE:
RULE OF LAW:
HOLDING AND
DECISION:
LEGAL ANALYSIS:
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