Eisenberg v. Flying Tiger Line, Inc.
451 F.2d 267 (2d Cir. 1971).
Eisenberg, stockholder of Flying Tiger, sued to enjoin merger and reorganization. He argued that a series of corporate maneuvers were intended to dilute his voting rights. Per NY law, plaintiffs suing derivatively were required to post security for the corporation’s costs.
- Eisenberg didn’t post the $35,000 security and his action was dismissed.
- He argued that the NY law applied exclusively to derivative actions, and that his suit was individual (i.e., direct) in nature.
Whether Eisenberg should have been required to post security for costs as a condition to prosecuting his action.
No. Case reversed.
If the injury is one to the plaintiff as a stockholder and to him individually and not to the corporation, the suit is individual in nature and not derivative.
- Here, by depriving Eisenberg of any voice in the affairs, he was deprived of his rights and privileges as a stockholder.
Rule: Harm to voting rights constitutes harm to a shareholder rather than harm to the corporation, and thus is a direct suit.