Eisenberg v. Flying Tiger Line, Inc.
451 F.2d 267 (2d Cir. 1971).

Facts:
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.

Issue:
Whether Eisenberg should have been required to post security for costs as a condition to prosecuting his action.

Holding:
No. Case reversed.

Reasoning:
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.