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Keywords

contractbreach of contractappealtrialfiduciarycorporationfiduciary dutycommon lawjury trial
appealtrialcorporationcommon lawjury trial

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Ross v. Bernhard, 396 U.S. 531, 90 S.Ct. 733, 24 L.Ed.2d 729, 13 Fed.R.Serv.2d 1042, Fed. Sec. L. Rep. P 92,566

Facts

Petitioners brought a derivative suit in federal court against the directors of their closed-end investment company, the Lehman Corporation, and its brokers, Lehman Brothers. They alleged that Lehman Brothers controlled the corporation through an illegally large representation on the board, violating the Investment Company Act of 1940, and extracted excessive brokerage fees. The directors were accused of gross misconduct and breaches of fiduciary duty, with the petitioners demanding a jury trial on the corporation's claims.

Petitioners brought a derivative suit in federal court against the directors of their closed-end investment company, the Lehman Corporation, and its brokers, Lehman Brothers.

Issue

Whether the Seventh Amendment guarantees the right to a jury trial in stockholders' derivative actions.

Whether the Seventh Amendment guarantees the right to a jury trial in stockholders' derivative actions.

Rule

The Seventh Amendment preserves the right to a jury trial in suits at common law, which includes derivative actions where the corporation would have been entitled to a jury trial if it had sued in its own right.

The Seventh Amendment preserves the right to a jury trial in suits at common law, which includes derivative actions where the corporation would have been entitled to a jury trial if it had sued in its own right.

Analysis

The Court applied the rule by determining that the derivative suit involved legal claims that would have entitled the corporation to a jury trial had it brought the suit itself. The allegations included breaches of fiduciary duty and ordinary breach of contract, which are legal issues. Therefore, the right to a jury trial was preserved under the Seventh Amendment, despite the derivative nature of the action.

The Court applied the rule by determining that the derivative suit involved legal claims that would have entitled the corporation to a jury trial had it brought the suit itself.

Conclusion

The Supreme Court reversed the Court of Appeals' decision, affirming that stockholders in a derivative suit are entitled to a jury trial on the corporation's claims.

The Supreme Court reversed the Court of Appeals' decision, affirming that stockholders in a derivative suit are entitled to a jury trial on the corporation's claims.

Who won?

The stockholders prevailed in the case because the Supreme Court recognized their constitutional right to a jury trial in derivative actions, emphasizing the importance of the Seventh Amendment.

The stockholders prevailed in the case because the Supreme Court recognized their constitutional right to a jury trial in derivative actions.

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