The opinion of the court was delivered by: STEWART
Plaintiffs in this action are corporations organized under the laws of the United Kingdom. Ruston & Hornsby Limited ("Hornsby") was acquired by the English Electric Company in 1966, and English Electric, in turn, was acquired by General Electric in 1968. Collectively they will be referred to as "GEC."
GEC is the minority shareholder of defendant Ruston-Bucyrus ("Ruston"), likewise a British corporation. GEC brings this action both individually and derivatively for alleged wrongs which it contends violate both the antitrust laws of the United States and also certain fiduciary duties owed GEC by defendant Bucyrus-Erie ("Bucyrus"), the majority shareholder in Ruston.
Before us is a motion by Bucyrus to dismiss the action on the grounds that:
1. GEC lacks standing as a shareholder, or otherwise, to individually assert the antitrust claims and, for various reasons, may not assert these claims derivatively;
2. The Amended Complaint is defectively pleaded and fails to state a cause of action under the antitrust laws;
3. Since GEC may not bring its antitrust claims, the court lacks subject matter jurisdiction to hear GEC's "pendent" claim for breach of fiduciary duty under English law. Alternatively, if there is a separate basis for jurisdiction over the English law. Alternatively, if there is a separate basis for jurisdiction over the English law claim, it should be dismissed pursuant to the forum nonconveniens doctrine.
GEC's Standing to Bring Its Claims Individually and Derivatively
Bucyrus asserts that GEC may not bring its antitrust claims either individually, or derivatively on behalf of Ruston. The first argument Bucyrus makes to this effect is circular and seeks to characterize the relevant law as yielding a "heads I win, tails you lose" result for defendants in derivative actions. Bucyrus contends that "[t]he heart of [GEC's] complaint -- and the only claim of direct injury -- is the claim of breach of fiduciary duty." Bucyrus wishes us to conclude, therefore, "that this is purely an individual action by GEC on its own behalf, and not a derivative action."
Bucyrus next goes on to correctly point out "that a stockholder lacks standing under the antitrust laws" to bring an antitrust actin individually for harm done to his or her corporation. E.g., Kreager v. General Electric Co., 497 F.2d 468, 472 (2d Cir. 1974), cert. denied, 419 U.S. 861, 42 L. Ed. 2d 95, 95 S. Ct. 111 (1974). Such actions may only be brought derivatively, which leads back to Bucyrus' original assertion that GEC's antitrust claims are not really derivative since they do not involve "direct injury" to GEC.
The fallacy of this argument hinges on Bucyrus' suggestion that GEC's derivative antitrust claims should not be entertained because they do not involve direct injury to GEC. The right to sue derivatively is an attribute of corporate ownership which, to be exercised, requires that the injury alleged be indirect as far as shareholders are concerned, and direct only insofar as the corporation is concerned. See Brooks v. Weiser, 57 F.R.D. 491, 494 (S.D.N.Y. 1972). Put simply, the whole purpose of Fed. R. Civ. P. 23. 1, the provision which authorizes derivative actions in the federal courts, is to allow shareholders "to enforce rights which are derivative (secondary) in nature." 3B J. Moore, Moore's Federal Practice P23.1.16 (1976) (emphasis in original). Therefore, we can hardly hold it against GEC that its derivative antitrust claims assert direct injuries to Ruston but not to GEC.
We are also unpersuaded that GEC's derivative standing is undermined by its prayer for money damages for itself and not for Ruston. Usually, damages won in a derivative suit do accrue to the corporation on whose behalf the action was brought. See e.g., Ross v. Bernhard, 396 U.S. 531, 538, 24 L. Ed. 2d 729, 90 S. Ct. 733 (1970). However, failure to pray for the proper relief is not fatal to the validity of a complaint, since the court, if judgment is entered, is capable of fashioning the correct relief. See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506, 3 L. Ed. 2d 988, 79 S. Ct. 948 (1959); New Amsterdam Casualty Co. v. Waller, 323 F.2d 20, 24-25 (4th Cir. 196), cert. denied, 376 U.S. 963, 11 L. Ed. 2d 981, 84 S. Ct. 1124 (1964). Further, although we need not decide now whether such an approach would make sense in our case, there is amply precedent for distributing damages won in a derivative suit directly to deserving shareholders. E.g., Perlman v. Feldmann, 219 F.2d 173, 178 (2d Cir. 1955). See generally, Gordon v. Fundamental Investors, Inc., 362 F. Supp. 41, 45-46 (S.D.N.Y. 1973); Note, "Individual Pro Pata Recovery in Stockholders' Derivative Suits," 69 Harv. L. Rev., 1314 (1956). Finally, we note that GEC has prayed for "such other and further relief as may be just and proper." Obviously this prayer would be consistent with our ordering damages paid to Ruston directly, should that appear appropriate.
Bucyrus also urges that GEC may not bring this action derivatively because it has not complied with certain formal requirements of Rule 23.1. First, Bucyrus terms inadequate GEC's "allegations [in the Amended Complaint] relating to the absence of a demand on Ruston's Board." In specific, Bucyrus asserts that
the allegations amount to nothing more than an admission that no request has been made of Ruston's directors that they cause Ruston to institute a suit such as this, and an accusation that Ruston's board of directors would not take ...