William O. Douglas

“ No aspect of the substantive cause of action is before us. At the outset, two guiding principles governing this litigation must be kept clearly in mind: (1) These are constitutional cases, involving the 'judicial power' of the United States over controversies 'between citizens of different States.' (2) These are stockholders' suits; the stockholder sues not in his own right but in the right and on behalf of the corporation.
The contrasting difference between a stockholder's suit for his corporation and a suit by him against it, is crucial. ”

“ The ultimate interest of the corporation made defendant may be the same as that of the stockholder made plaintiff, but the corporation may be under a control antagonistic to him, and made to act in a way detrimental to his rights. In other words, his interests, and the interests of the corporation, may be made subservient to some illegal purpose. If a controversy hence arise, and the other conditions of jurisdiction exist, it can be litigated in a Federal court.' 196 U.S. at page 587, 25 S.Ct. ”

“ Harrington, where the Court was not very careful in making explicit separation of the two issues; it was also true of Venner v. Great Northern R. Co., supra, where the Court was very careful to separate the two issues. Such separation of very different concepts is of course essential when one characterizes the attitude of the directors. It is one thing when suit is against a third party to hold that a demand on the directors need not be made if such demand would for any reason be futile, and that sincere opposition by directors would make such a demand futile. ”

“ The answer, of course, always denies the charge of wrongdoing. To stop and try the charge of wrongdoing is to delve into the merits. That does not seem to us to be the proper course. It is a time-consuming, wasteful exertion of energy on a preliminary issue in the case. The instant case is a good illustration, for it has been over eight years in the courts on this question of jurisdiction. ”

“ Collusion is shown, for example, where the neglect or refusal of the directors to take the desired action on the part of the corporation is simulated so that it may be made to appear that the diversity of citizenship necessary for federal jurisdiction exists. ”

“ These two causes of action he combines in an equity suit in the Circuit Court of the United States, because he is a citizen of a different State, though the real parties to the controversy could have no standing in that court. ”

“ Diversity jurisdiction cannot be conferred upon the federal courts by the parties' own determination of who are plaintiffs and who defendants. It is our duty, as it is that of the lower federal courts, to 'look beyond the pleadings and arrange the parties according to their sides in the dispute.' City of Dawson v. ”

“ But it was not concerned with, or adverting to, jurisdictional alignment, any more than it was talking about jurisdictional alignment in Hawes, also now relied upon by the Court. Both cases involved by the liminary requirements for stating a cause of action under the Rules. (For a similar discussion of what stockholders must allege with respect to the attitude of directors, but in a case where there was clearly federal question jurisdiction, see Ashwander v. T.V.A., 297 U.S. 288, 318-323, and 341-344, 56 S.Ct. 466, 469-472, 480, 481, 80 L.Ed. 688.) ”

“ This court reversed the decree, saying (the quotation is of the part of the Court's opinion in Doctor, quoted supra, 77 S.Ct. 1120) . There was therefore in the case at bar the diversity of citizenship which confers jurisdiction.' Id., 209 U.S. at pages 32-33, 28 S.Ct. at page 330.
The jurisdictional doctrine of Doctor v. Harrington, as reaffirmed and elaborated in Venner v. Great Northern R. Co., was accepted without question only ten years ago in Koster v. (American) Lumbermens Mutual Casualty Co., 330 U.S. 518, 67 S.Ct. 828, 91 L.Ed. 1067. ”