The opinion of the court was delivered by: RYAN
To correct clerical oversight of the Court and with the consent of counsel for all parties, the following opinion and order is filed in lieu of and in place of our decision and order of October 14, 1966:
The complaint alleges that plaintiff, a stockholder of "Standard" sues derivatively on behalf of "Standard", representatively on behalf of its stockholders, and derivatively on behalf of its two wholly owned subsidiaries, "American" and "Holdings".
There is no allegation of plaintiff's residence. It is alleged that "Standard" is an Indiana corporation with its principal place of business in Illinois, authorized and doing business in New York,
and actively concerned with the operations of its two subsidiaries. It is pleaded that "American" is a Maryland corporation with its principal place of business in New York, and that by "virtue of a transfer agreement" it controls the "operating assets which were previously controlled by 'Standard'." Defendant "Holdings" is alleged to have been incorporated in Luxembourg for the purpose of raising funds there for its own uses and to assist "Standard's" subsidiaries. Its principal place of business is not shown. The 19 individual defendants are the directors and officers of "Standard"; their citizenship or place of residence is not pleaded.
The complaint then charges that the individual defendants breached their trust duties to "Standard" not to waste corporate assets in that they authorized "Holdings" to float a bond issue outside of the United States, payment of which was guaranteed by "Standard"; that American citizens and residents will not be able to participate in this and future bond issues; and that this has and will cause "Standard" and/or "Holdings" to pay exorbitant rates of interest for the funds so obtained, which it would not have had to pay had the bonds been offered for sale in the United States where the interest rates are lower. It is also alleged that the failure of the individual defendants to offer the bonds for sale in the United States constituted a breach of their fiduciary obligation and a diversion and waste of the property and assets of "Standard" and its subsidiaries, causing damages amounting to millions of dollars.
Demand to sue, if made upon the directors of the three corporations, it is alleged would be futile because of their participation in these wrongs; demand upon the stockholders, it is alleged, would be unduly burdensome and expensive.
Plaintiff alleges that it has no adequate remedy at law and prays for judgment restraining the three corporations and their officers, directors and agents and the individual defendants from proceeding with the sale of these and similar bond issues, requiring all the defendants to account to "Standard" and its subsidiaries and awarding plaintiff costs and counsel fees.
The only defendant which has been served with process is "American". Other than the named officers and directors of "Standard", the officers and directors of "American" and "Holdings" against whom an accounting as well as an injunction is sought are not named.
This action comes to this Court on an order of removal from the New York State Supreme Court, where the suit was originally. The complaint therefore does not contain jurisdictional allegations of diversity. It does appear however that diversity is present.
However, defendants "Standard" and "American" have moved to dismiss the complaint for additional reasons.
"Standard" has moved to dismiss for failure to state a claim as a matter of law and alternatively, if a claim were stated, for summary judgment in its favor for failure to join the indispensable parties "Amoco Holdings" and the individual defendants not within the jurisdiction of the Court; and for failure to obtain jurisdiction over its person in that the service attempted to be made on it is invalid.
"American" has moved to dismiss for failure to state a claim as to it and for failure to join the indispensable parties - "Standard", "Holdings" and individual defendants not within the jurisdiction of the Court.
"Standard" has submitted a Rule 9-G statement in support of its motion for summary judgment; none has been submitted by plaintiff. In fact, plaintiff's affidavits do not contradict any of the factual statements recited by defendants in their affidavits. Therefore, although no answers have yet been served, it would appear that there are no disputed questions of fact.
We consider first "American's" (the only defendant served) motion to dismiss for failure to ...