Petition for a Writ of Certiorari — Denicke v. Anglo California National Bank

Supreme Court brief1944

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Text

“Iu the Supreme Gout —— >

OF THE

United States

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vu Le

Jo Rarer ree coment

CUARLES § PLE

ee ee eee — a

Octoser Term, 1943

———_ SISNSE Ie

No. iva DE \ : > S N\ |

Ernest H. Denicxe and Mary E. Dose,

Petitioners,

vs.

Tue Ancio Cauiroryia Nationat, Bank or San

Francisco (a national banking association),

Mortimer FrrtsHnacker, Hersert FLrisi-

HACKER, Mortimer FLeisHHacker, J R., GEORGE

I. Cocuray, Pump S. Baxer, R. D. Bric-

HAM, Water E. Buck, Watrer A. Haas,

Paut E. Hoover, WruuiaM F. Hompnrey,

Samvuet Kann, Vicror Kuinker, Wii1aM B.

Reis, Paut Sxour, Leon Stoss, Jr., Lours

Surrer, Aurrep B. Swrverron, T. C. TILDEN,

JosepH O. Topix, Wuuarp 0. WayYMAN,

Trene L. Bere, Executrix of the will of Wil-

liam H. Berg, Deceased, R. Stantey Doar

and Frank Moss,

Respondents. e

PETITION FOR WRIT OF CERTIORARI

to the United States Circuit Court of Appeals

for the Ninth Circuit

and

BRIEF IN SUPPORT OF PETITION.

Aaron M. Sarcent,

Hobart Building, San Francisco 4, California,

Attorney for Petitioners.

4a a eae

Subject Index

Petition for Writ of Certiorari Page

Statement of matter involved... .........ccccscccccvcsnvce 2

Irregular signature clause on opinion.................

Court rule governing opinions filed during adjournment 5

Irregular entries in violation of rule.................. 6

Refusal to vacate or reassign. ..................eceee- 6

Pre Or Ik Nia koe ao a oe ees 7

Questions not decided in District Court :

Ss ee NE 55-2 bee de ea Re eee eh een

Violation of Supreme Court decisions requiring findings

Standards governing proceeding under Rule 23(e)

ARNIS Mpg aDE ores erat ye ee cnet robo OT AS mee tat

Derivative status established by Supreme Court deci-

re re PE ye Pet En Pa ee ES gh

Local law defining shareholders’ rights...............

Cross-examination of bank officers....................

Depositions of Schram and Husbands.................

Status of Reconstruction Finance Corp................

Infringement of right to amend and intervene.........

Suppression of record on certiorari.................22000-

Duty to render opinion disposing of appeal................

i Ee Per yer EOP eee ee re

Sn SN 6 5 dis chic ceca vuSe Sp aphccaexeeevans

Reasons for granting the writ...............ccccccccccces

Brief in Support of Petition

Ne: Ole DO Ns cir ot vk ee eae wks hae awad be eae

IR, oo arr en ee ee ee

bnGeent OF ENG GARG ces. cktcccs cade Gow naw dala g os Rivac chee

Proceedings in the District Court.....................

Proceedings in Cirenit Court... .........ccsccccccances

I CI i ee ru elem paw ab Rk aks

Right to vaeate void entries in Cireuit Court..............

Duty to render written opinion, supported by signatures...

i Sussect INDEX

Page

Reversal for failure to make findings.....-..----+-++++++> 53

Duty to reverse because of denial of hearing..........---- 56

Right to vacate decree on ground of mistake.......------- a7

Standards governing approval of a settlement under Rule

tly I oo ais cn en ec ee hn eee heaven ens det enneees 58

Right to nonsuit of the petition. ...-.------+es sere erertees 61

Duty to follow local Jaw coneerning derivative status...... 65

1 nial of right to amend and intervene.....-----+++-+25> 68

Cross-examination of bank officers handling the negotiations 69

Right to take depositions of witnesses Schram and Husbands

under Rule 26 FRCP. .......------eseee cere ce eeceecee 73

Right to take depositions of federal officials under Rule 31

doy a thaxersceneeencaanpenetasseness ss 74

Privilege of witnesses ......-.--0--eeseerereer reste 82

Question presented by refusal of bank to employ independ-

ih ee a chads bh aeameen as Aepeweus ehh snes ss 85

Duty to issue writ to protect right of appeal........-----+-- 87

Denial of due process in the Circuit oka ia hash 89

py PORN I IS EFS

Table of Authorities Cited

Cases Pages

Alford v. United States, 282 US 687 at 692............... 56

Anderson v. Akers, 7 Fed. Supp. 924 at 939............... S4

Arizona v. California, 283 US 423 at 452................-. 81

Aspen Mining & Smelting Co. v. Billings, 150 US 31....... 24

Atherton v. Anderson, 99 Fed. 2d 883 at 889.............- S4

Avery v. Alabama, 308 US 444.............: cee eee ec ee 56

Brassfield v. United States, 272 US 448................65. 56

ee ae a yD rr rrr S4

Bruno v, United States, 308 US 287............ een ercat: 56

California Water Service Co. v. City of Redding, 304 US

kee oe ica FA Wolk a he wie aaoniw INS Soa aw aIA eB 8 * 56

Case v. Los Angeles Liunber Products Co., 308 US 106 at

eae ee a ae Tee ba dn eas keke aie OUD 11, 12, 26, 59

(Chesbrough v. Woodworth, 244 US 72.............05 0006: 24,3

Chicago & Great Western v. Basham, 249 US 164......... 24

Citizens Bank v. Opperman, 249 US 448................5- 24

Cohen v. Young, 127 Fed. 2d 721 at 725............... 12, 27, 60

Cohens v. Virginia, 19 US (6 Wheat.) 264 at 408.......... 28, 47

Consolidated Rock Products Co. v. DuBois, 312 US 510 at

ie eee ee ee OS USS e Ge Kn akewelem 4 11, 54, 60

Cox v. Montague, 78 Fed. 845. 0.0.6.0... cece eee eee S4

Delaware & Hudson Co. v. Albany & Susquehanna RR Co.,

hi pie wdnakeu ss seco need vss 13, 27, 61, 68

Denicke v. Anglo Bank, 26 Fed, Supp. 240...............- 32, 34

Denicke v. Anglo Bank, 45 Fed. Supp. 524...............- 32

Denicke v. Anglo Bank, 141 Fed. 2d 285................. 32

Doetor v. Harrington, 196 US 579 at 587............ 13, 27, 62, 68

Eggers v. National Radio Co., 208 Cal. 308 at 313, 281 Pace.

eh ee eae hie heh PERO LE ORR ON CR EOS 17, 25, 66

Erie RR Co. v. Tompkins, 304 US 64...............45- 17, 25, 67

Federal Deposit Insurance Corp. v. Mason, 115 Fed. 2d 548 = 84

Federal Housing Administration v. Burr, 309 US 242..... 83

Federal Land Bank v. Priddy, 295 US 229.............-4. 83

Fleming v. Bernardi, 1 FRD 624................0 eee eens 84

SDSL EGER LEAL LEAL LL ENTE

ERE AGERE SAE STS Be cas

e Seaaeets

iv TABLE oF AUTHORITIES CITED

Pages

Giasser v. United States, 315 US 60 at 69-70..........+++- 57

loess v. Ehret, 85 Fed. 2d 109......2---- eee eeee ee ereces 84

Hill v. Texas, 316 US 400.........6 5 cece eee eee ee renee 56

Interstate Cireuit Inc. v. United States, 304 US 55 at 56... .11, 54

In re Culhane, 269 Mich. 68, 256 NW 807........--.++-+: 84

In re French, 315 Mo. 75, 285 SW 513, 47 ALR Backes &4

In re Giannini Ine., 90 Fed. 2d 445. ........ 2-0 eee eens 46 -

In re Millspangh, 307 Mo. 185, 270 _, Bi BAe err ers. 84

Johnson v. Zerbst, 304 US 458.......... ee cence eee pies 56

Keifer & Keifer v. Reconstruction Finanee Corp. and Re-

vional Agricultural Credit Corp., 306 it” PR 20, 83

Kelley v. Everglades District, 319 US 415 at 420... .10, 11, 54, 60

Klopstoek v. Superior Court, 17 Cal. 2d 15 at 16, 108 Pae.

ik sc ink cine nk ea bare neha heer eserhe sees hs 17, 25, 65

Mahnich v. Southern Steamship Co. (Oct. Term, 1943 No.

es eee ada n mek REN DEK EMTS eT er AeA Les 55

Mayo y. Canning Co., 309 US Oe Es ree ee 11,54

Morgan v. United States, 304 Ean ere ft 56

National Surety Co. v. Coriell, 289 US 426 at + _ ee gay ee 11, 58

Norris v. Alabama, 294 US 587.......------e eee er erences 56

Pepper v. Litton, 308 US 295.2... +... seers e reer 20, 28, 82

Powell v. Alabama, 287 US 45. ........5- eee cece errr ee eee 56

Reconstruction Finance Corp. v. Menihan Corp. 312 US

Rio Grande Irrigation Co. v. Gildersleeve, 174 US 603 at 608 46

Securities and Exchange Commission v, Chenery Corp., 318

Td. & OT Pre rer rn TY ToC e er ae et 10, 54

Securities and Exchange Commission v. United States

Realty & Improvement Co., 310 2 AP ys 11, 60

Smith v. O’Grady, 312 US 329........-.- eee cere reece ces 56

Smith v. Texas, 311 US 128......... cece cece cere ee ecees 56

Texas & Pacifie Ry. v. Murphy, 111 US 488. ....------0 +> 24

SARGERAS RE

meg

SEY

tbe

TaBLE OF AUTHORITIES CITED Vv

Pages

Sn NE Ti TI. So ip cas ocin pe dheddass sa chee eeeenene 29, 84

United States v. General Motors Corporation, 2 FRD 528.. 4

Voorhees v. Noye Mfg. Co., 151 US 135................4.. 24

Ward ¥. TORO, BEG Te GGG oss snd 6 oie eed csivicsuvendeecs a6

Weil v, Neary, B70 UG. WOO OF DODD oon 6 cick cccccvcvescines 46

Werner vy. Crippen, 245 App. Div. 363, 282 NY Supp. 722,

SF Dy ee SE As cc his ci wee despise sheer sennaeees “4

Whitten v. Dabney, 171 Cal. 621. ........... cece eeeeees 17

Wichita Royalty Co. v. City National Bank of Wichita

Pie, SOG TS SOR Oe BI oo hi viii ic ce Sone cnncecsestecs 11, 54

Codes and Statutes

Act of Mar. 3, 1891, 26 Stat. 826, Chpt. 517, See. 3.2... .4, 44, 87

California Code of Civ. Proec., See. 2055. ..............46. 82

EE Br nccccawcedew eats ueks owrNapensieueeee as keke 76

ee I ck as eka sehc nes cent adeeshacahvnaeny 14, 81, 82

Se ens ok acd burg eee ee eaNheneN aha 76, 77

I Be gnc vc hee een own ced oe dean ka whe cekeedcsstex 23

We TE vou ct canlia KA a oe OES 4 ENE Res ae ee pn cea eee 23

got | RE arenes erm yey araeny mes pa Ararg 78

Oe Ge NE bigs einen ok sche nee nhes abe Rbaeeiens aha wia ee 84

OE PI ngs xd ch dda eat ¥h4 ced EON EMA CSRS ERE E ETS 78

Pe I SE oes ok Ki ok Sarg ees aaah awed sen ewieuesnure 76

Re See - hivoas Kee ou sc onebeoettaeev eNews ea weneen 23

Re RY, SOE os os he oh D ne ews SOL eke nnnws DekGweenn 76

GSR As nt on os ale ciate wae Side Ot Oe wee yee ei a Cediers 77

Oe Re as inka evened t Ka bod oviee en Caen a cen hanes 83

Be Ry I oer as Rees kee eh Se eS RARER eR 23

Se EE AE EW nen sad eee au odiec ranean snare Ow eee 23

OT Ie avons okarnk ed eek avaden es eee beawencomwan aan 20, 83

Bt of et | ee eae Se rrcrerre rirg rh eC 81

Se oe os Uo reas Cou ha eee eek eae Oran 23

Pi Eine rier erie Crass nee errr 23,47, 51

pe? 3 ere ener errr ery rarer sa ee ee 2, 23, 87

ANAT EK SSR GEER ARYA RE ROIS SR rt IESE SHER a a EU ETE ENTALION NIRIG DD EAE EINE EA CNN

vi Tape or AutTHoRITIES CITED #

Rules |

Supreme Court: Pages i

RIN ee PC net ile ites ie cktp loss 32 Of

er canine ts 32 i

MEE ee Ne Ces se eae GAs a dee ee Ts ee be 32, 52, 87, 89 ;

Cireuit Court:

Ne ee te SRY we 64s W sede 5s ay a

he oe ake hal ghee 66 HEA S 2 bo 24a bh Oe 7

MORE En aecees ott e ees Wh aS Baty CUR SY sine agra Sm gee 24

RRP te nec gcreig a Gs kbc Xa a > o,0o Siva ba Boe 48

Federal Rules of Civil Procedure:

Ce ka yy Wie bak ede Khia ad 67

Be vce cucleneaas SiMe oie ea bed passcdnesvacteve 14, 15

Na oo is Gh GS ne we vik Hes 2, 12, 20, 25, 26, 58, 60

RUNNIN ccs che ok 6 Se 4 uk BAe Bw 6.4 9 wr ae 18, 36, 39, 43, 74, 82

sr es oe eels ne bw ROA a halen ee 6 oR 18, 25, 43, 74

Ee kG ai a alg sas RENE SE RASS OEY 82

TR ea aera taal oes ah Waele Ran MOONS 24, 26, 48, 52, 53

TN ook ele ae a bans Cae brk Ue Ae Ae oo Rae 25, 43, 57

Texts and Miscellaneous

American Law Institute—Address of Hon. Robert H. Jack-

RR arteries ae ToT igihate ciea ee Wa ase A OS MNO ee 56

ae ae eked od eben te 64 asa wee VOdee ew heee bee 71

Democracy and Finanee—William O. Douglas, pp. 56, 234,

PR re eee rrr ery Seer rr rrr s Pr reer 64, 72

Diseovery—Against Federal Administrative Agencies—Pike

& Fischer (56 Harvard Law Rev. 1125)................. 84

Federal Administrative Procedure Act—proposed by Am.

Bar Assn. (Journal issue of Apr. 1944, p. 228)........... 51

Jurisdiction of the Supreme Court of the United States—

Robertson & Kirkham, p. 542................cccccceees 88

Law and Its Administration—Harlan F. Stone (Columbia

University Press 1924), p. 2138................ cece eee 49

2 SPIT eS

; REAR ee I Bah Ane Re ad » ‘ eT NE ET a Me Lie Boe

aR rh AES

TABLE OF AUTHORITIES CITED

Methods of Reaching and Preparing Appellate Court De-

cisions-—published by Judicial Section of Am. Bar Assn.

Pe EE iho SOL a ea kau RENE eRe oS eves a eeRs ot

Report of Will Shafroth, Chief of Division of Procedural

NE SI SIN Sloe cna Sa ci asd Seed eeke pao cae

Statement of Hon. Louis D. Brandeis before Commission on

Industrial Relations of 64th Congress, Ist Session—

Senate Document Vol. XXVI, p. 7661 (1915)...........

Supreme Court of the United States—Charles Evans

Hughes (Columbia University Press), pp. 64-65.........

Testimony of Justice Van Devanter on Senate Bill 2176,

74th Congress, Ist Session in 1935.....................

The Business of the Supreme Court—Frankfurter & Landis,

eM RENO SES AXEL ares Fan Sead GORY RSE Ls ches

The Modern Corporation and Private Property—Berle &

Re es DS ahah sul veuiula v ned va Wha tabi eas

The Struggle for Judicial Supremacy—Robert H. Jackson

(Alfred A. Knopf, 1941), pp. 293-294

Page

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LENE NR EET Re

TERETE PME CI STERN I

CMTE Tie ITY

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SELLY TY PS BIDS Be LIE Le NT

Ernest H. Denicke and Mary E. Doster,

In the Supreme Court

OF THE

United States

OctToser Term, 1943

Petitioners,

vs.

THe Ancio Carivornia Nationa Bank or San

Francisco (a national banking association),

Mortimer FLemsHHacker, Hersert Firisu-

HACKER, Mortimer FLEISHHACKER, JR., GEORGE

I. Cocnran, Pumire S. Baker, R. D. Bric-

HAM, Water fk. Buck, Watter A. Haas,

Paut KE. Hoover, Wittiam F. Humpnrey,

SaMvueL Kaun, Victor Kuryxer, WituiaM B.

Rets, Paut Suour, Leon Stross, Jr., Louis

Sutter, ALrrep B. Swinerton, T. C. Tivven,

JosepH QO. Topix, Wittarp ©. WayMan, |

Irene L. Bere, Executrix of the will of Wil-

liam H. Berg, Deceased, R. Staxuey Dotar

and FRANK Moss,

)

Respondents. |

PETITION FOR WRIT OF CERTIORARI

to the United States Circuit Court of Appeals

for the Ninth Circuit.

;

To the Honorable Harlan Fiske Stone, Chief Justice of the

United States, and to the Honorable Owen J. Roberts,

Hugo L. Black, Stanley Reed, Felix Frankfurter,

William O. Douglas, Frank Murphy, Robert H. Jack-

son, and Wiley Rutledge, Associate Justices of the

Supreme Court of the United States:

This is an application under Section 240 of the Judicial

Code (28 USCA 347) for a review, on certiorari, of the |

following matter, viz:

Case No. 10,329 (CCA 9th Cir.) entitled ‘‘ Ernest H.

Denicke and Mary E. Doble, Appellants v. The Anglo

California National Bank of San Francisco, et al.,

Appellees.”’ ;

SUMMARY STATEMENT OF THE MATTER INVOLVED.

We come to this Court with a record disclosing serious

misconduct in the Circuit Court of Appeals for the Ninth

Cireuit. There has been a miscarriage of justice. Certiorari

is necessary to correct that condition.

Nature of the Litigation.

Petitioners are prosecuting a derivative suit on behalf

of The Anglo California National Bank of San Francisco.

Respondents are present and former directors charged

with violations of Federal Banking Laws. The damages

arise from breach of trust. The loss exceeds four million

dollars.

The District Court approved a settlement without mak-

ing the inquiry required by Rule 23(c) FRCP. The

bank engineered this proposal. It accepted five percent

of the liability, thus obtaining a release for twenty-two

of its directors.

NE I SST ER

RIOR

Nae

RE EE OTE

Petitioners objected. They were denied a hearing. There

were no findings. Judgment was entered without a trial.

A motion to vacate was denied.

Gross Irregularities in the Circuit Court.

The Cireuit Court refused to decide the questions pre-

sented. An irregular opinion was filed during adjourn-

ment. This document was void, and in violation of Court

rules because of the lack of a concurring signature. We

present same as,—

Petitioners’ Exhibit No. 1.

Signature Clause Attached to ‘‘Opinion’’.

‘We need not stop to inquire whether the order

denying appellants’ motion to vacate the judgment

was appealable, for the opinion already sufficiently

indicates our view that appellants had ample time

and a reasonable opportunity to present a full show-

ing in opposition to the compromise. We find no

merit in other points argued.

‘* Affirmed.

William Healy,

United States Circuit Judges.”’

This document was prepared for the signatures of

three ‘United States Circuit Judges’’. It was signed by

one Circuit Judge.

It was the act of Cireuit Judge Healy. It was not the

act of the Circuit Court of Appeals for the Ninth Circuit.

In that Circuit, the power of an individual judge is

strietly limited during adjournment. He has no authority

to announce a decision. He may join with one or more

of his associates and vender a decision by filing signed

opinions or other documents of decision with the clerk.

There is no other procedure.? Litigants are entitled to

documentary evidence, supported by the signatures of at

least two Circuit Judges.

This practice was established by an amendment of the

rules effective November 30, 1936. That amendment was

evidenced by a document signed by every member of the

Court. We present same as our next exhibit.

Werk of CCA refused to print a true copy of the opinion.

In spite of our designation (R, 2070, item 8) the irregular sig-

nature clause was left out. (R. 1996 at 2004.) The transcript

is false in not showing the matter quoted on preceding page.

We file, herewith, motion to correct diminution of record.

2Authority to adopt such rule granted by the Act providing

for organization of the Cireuit Courts of Appeal. See:

‘Act of Mar. 3, 1891, 26 Stat. 826, Chap. 517, Sec. 2. ‘‘The

court shall have power to establish all rules and regula-

tions for the conduct of the business of the court within

its jurisdiction as conferred by law.”’

Petitioners’ Exhibit No. 2.

**Unitep States Circuit Court or APPEALS

FOR THE NINTH Circu!r

Ix THE MATTER OF THE AMENDMENT

or Rue LU or tHe Ruues or

PRACTICE OF THIS Court.

Ir Is Heresy Orperep that Rule ILL of the Rules of Prac-

tice of this Court be amended by the addition of a para-

graph number (4) to said rule, as follows:

(4) No adjournment in any of the terms of the Court

shall be made to the succeeding term save when made on

the last day prior to the beginning of such succeeding

term. Appeals shall be deemed decided when announced

from the bench in a session of the court at the place of the

term in which they are submitted, or when the signed opin-

ions or other documents evidencing their decision are filed

with the Clerk.

Dated: Nov. 30, 1936.

(Signed) Curtis D. Wilbur

Francis .. Garrecht

(Endorsed ) William Denman

Filed Nov. 30, 1936 Clifton Mathews

Paul P. O’Brien, Clerk Bert Emory Haney

“nited States Cireuit Judges.’”*

3Clerk of CCA disregarded our designation of this document

(R. 2074, Item 8a.) We inelude it in our motion filed herewith

to correct the record.

The Court had a membership of five when this doeument was

filed.

Pore

SM AS Tarn as

pare Fa

Sa a

Rae

BRST

poe RRS

ae ADORE TCR RE

Paine ani ata In at

Clerk’s Entries During Adjournment.

The ‘‘opinion’’ was filed March 1, 1944. On the same

day, the Clerk made an ‘‘Order’’ and entered a ‘‘ Decree’’.

Both were unsigned. The Court was not in session. /t did

not make any order. It did not direct the entry of any

decrees

Refusal to Vacate the ‘‘Decree’’.

We moved to set aside these proceedings. (R. 2005.)

Cireuit Judge Mathews presided. He was accompanied by

Judge Healy—author of the opinion. The third member

was absent." These two sat to pass upon their conduct in

our case. Argument on the motion was cut short. Judge

Mathews made the following statement from the Bench:

‘Rule 3, paragraph 5, is a rule made by this court

for the guidance and protection of its clerk. Neither

you nor your clients have any interest in enforcing

that rule. /t isn’t any of your business whether that

is complied with, or not.”’ (R. 2058.)

Application for Reassignment in Bank.

We sought an immediate reassignment to the Court in

bank. By praecipe, the clerk was requested to present such

‘The clerk was involved in four distinct violations of duty on

this date.

1. Entry of ‘‘Order Directing Filing of Opinion and Filing

and Recording of Deecree’’. (R. 1995.) Court held no session—no

signed document was furnished to sustain such entry. There

was no transaction to enter.

2. The Healy Opinion was not in due form. The elerk vio-

lated his duty to appellants in filing it.

3. Filing of ‘‘Deeree’’. Clerk took a printed form, filled in

the blanks with typewriter, and filed it without signature.

4, Entry of ‘‘Decree’’ in Minute Book. (R. 2004.) The same

document was then recopied after filing.

44Appeal was argued and submitted to Cireuit Judges Mathews,

Stephens and Healy February 15, 1944. (R. 1994.)

ae hee . .

SRE A is Oe ee ee ea

—

bes

a |

application to the senior judge for action under Rule 4 of

the Cireuit Court. (R. 2014, 2015.) It was ignored. The

docket fails to show whether it was presented, or withheld,

or considered, or denied.”

Denia] of Petition for Rehearing.

We petitioned for a rehearing in bank. We asked for

consideration of that petition in bank. It does not appear

to have been examined by any judge not originally assigned

to our case. Circuit Judges Mathews, Stephens and Healy

sat to deny rehearing.®

We now present the questions which the Cireuit Court

refused to decide.

Point No. 1.

Denial of a Hearing in the District Court.

We start with a flagrant violation of the Bill of Rights—

the entry of a judgment without trial. The facts do not

admit of dispute:

"CCA Rule 4 reads,—

‘Assigning of Causes for Hearing.

(1) The calendars of the court shall be made up by the

clerk under the direction of the senior circuit judge subject

to the approval of the majority of the judges.

(2) The senior circuit judge after conference with the

circuit judges shall designate and assign the judges who are

to hear the causes placed upon the ealendars of the court:

such designation or assignment may be modified or set aside

by a majority of the judges.’’

*We request this Court to read the Petition for Rehearing at

R. 2017. This document discloses deliberate failure to decide

the questions presented on appeal. In spite of the misearriage of

justice disclosed therein, it was impossible to obtain action from

any judge who did not sit in the first instanee. Order denying

rehearing is at R. 2061.

On March 19, 1942 the bank petitioned for approval of a

settlement. (R. 314.) An order to show cause issued. (R.

329.) Petitioners objected. (R. 333, 340.) These pleadings

raised factual issues requiring a hearing.

On March 31, 1942 the bank presented its case on the

petition. (R. 1845.) We moved for a nonsuit. (R. 1883.)

The Court suggested that counsel submit the entire matter.

fas

eat

‘S:

a”

“4

Re en ae

A discussion followed. Then the Court acted on its own

initiative. It continued the petition until April 21, 1942, for

996

a ‘‘ further hearing

By this order, the petition was put on the calendar.

SIR:

Thereafter it was kept on the calendar. The Court made

five subsequent orders. Kach postponed the date set for

Ahad

further hearing. The last one provided for a trial on

August 18, 1942.

Diseovery was conducted to prepare for that hearing.

The bank was required to photostat ledger cards. (R. 393.)

Petitioners employed an auditor. His report showed a loss

6March 31, 1942 Minute Order at R. 392; same facts are

shown by clerk’s worksheet (R. 1937), and by closing entry

in reporter's transcript. ( R. 1890.)

7April 13, 1942. ‘Ordered . . . further hearing on the motion

to terminate proceedings, be continued from April 21, 1942, to

May 5, 1942.’’ (R. 398-399.)

May 1, 1942. ‘“<Ordered .. . further hearing on the motion to

terminate proceedings, be continued from May 5, 1942 to May

19, 1942.’’ (R. 399.)

May 13, 1942. ‘Ordered . .. further hearing on the petition

to terminate . . . continued from May 19, 1942, to June 19,

1942.’’ (R. 402.)

June 13, 1942. ‘‘ Ordered that all matters now on the calendar

_. . are continued to July 1, 1942.”’ (R. 429.)

June 22, 1942. ‘‘Ordered that all matters in this case now

on the Calendar of this Court for July 1, 1942, be continued to

August 18, 1942.”’ (R. 438.)

‘

“~ acme potions Pt 5

grip i ae a ae

of $4,029,449.52. (R. 404, 406.) This data was assembled

in April and May, 1942.

Depositions were taken at Portland, Los Angeles and

San Francisco. These resulted in the discovery of material

documents, and the development of proof to establish pri-

mary liability... Counsel traveled 2500 miles to attend these

hearings.

Amended objections were filed May 20, 1942. (R. 405.)

In serving the bank, petitioners included a letter of trans-

mittal to confirm the state of the record. We quote there-

from:

‘“* . . aecording to the minute order entered Mar.

31, 1942, there is now pending a motion by plaintiff

for a nonsuit with respect to petition of the bank for

termination of the litigation. Jn case there should be

an order denying this motion for nonsuit, plaintiff ts

entitled to introduce evidence in support of his objec-

tions.’’ (R. 1941.)

By the end of June, 1942, depositions were ready. The

audit was complete. Petitioners were prepared for trial.

Their objections had been carried on the calendar for three

months.

The District Court then reversed itself without notice.

It had acted on its own motion in continuing objections

for a hearing. Jt now acted ex parte and overruled them

without trial. (R. 438.) Judgment was entered in peti-

tioners’ absence. (R. 458.)

The bank took this opportunity to suppress the suit.

Although joined as a defendant, it sought to act as plaintiff

SR. 797, 845, 866, 871, 879.

| a SRI ER ARASH aR RE Di

5 ack Mea ev oheisehdn as MA Seite:

PALER A Ee

for the purpose of filing a ‘‘Dismissal’’. (R. 461.) The

Court made an ex parte order to ratify such action.

Immediate steps were taken to vacate these proceedings.

Petitioners filed Demand for Trial (R. 464), Motion to

Vacate (R. 468), Supporting Affidavit (R. 471) and Offers

ot Proof (R. 481). These applications were denied from

the bench. (R. 736.) Petitioners were told to take their

case to the Circuit Court of Appeals.

Questions presented.

There were two distinct infringements of fundamental

rights, viz. :

1. Refusal to grant the trial secured to petitioners by

minute entries made in the District Court.

9. Right to vacate the decree under Rule 60(b) FRCP

on the ground of mistake.

Neither question was decided in the Cireuit Court.

Point No. 2.

Violation of Supreme Court Decisions

Requiring Findings.

We have a judgment unsupported by findings. There is

nothing except a general recital in the decree. The issues

raised by objections are not even covered by a recital.

There has been a total failure to comply with Rule 52(a)

FRCP.

The Cireuit and District Courts have each violated the

following decisions of this Court, viz. :

Kelley v. Everglades District, 319 US 415 at 420;

Securities and Exchange Commission v. Chenery

Corp., 318 US 80 at 94;

Se Su aap i hated ee ange

Consolidated Rock Products Co. v. DuBois, 312 US

510 at 525;

Mayo v. Canning Co., 309 US 310 at 316;

Wichita Royalty Co. v. City National Bank of

Wichita Falls, 306 US 103 at 110;

Interstate Circuit Inc. v. United States, 304 US 55

at 56.

Questions presented.

1. Duty of inferior Federal Courts to follow and apply

the law as laid down by decisions of the Supreme Court of

the United States.

2. Right of a litigant affected by a violation of that

duty to obtain relief and compliance on certiorari.

Point No. 3.

Standards Governing a Proceeding Under

Rule 23(c) FRCP.

In receivership and Chandler Act cases, this Court has

held that settlements with creditors and security holders

must be based upon ‘‘an informed and independent judg-

ment’*; that objections must receive ‘‘orderly considera-

tion’’; and that a Distriet Court must act in such mat-

ters on the basis of ‘‘detailed and authentic information’’.

We cite:

National Surety Co. v. Coriell, 289 US 426;

Case v. Los Angeles Lumber Products Co., 308 US

106;

Securities and Exchange Commission v, United

States Realty & Improvement Co., 310 US 434;

Consolidated Rock Products Co. v. DuBois, 312 US

d10;

Kelley v. Everglades District, 319 US 415.

Ricorer meee

In the Sixth Cireuit, a similar rule has been applied to

proceedings under Rule 23(¢) FRCP, for compromise of

shareholders’ suits. See Cohen v. Young, 127 Fed. (2d)

721.

In the Ninth Circuit, the Court has arrived at a result

which is diametrically opposed. It has refused to apply

any proper standard of conduct, leaving the dismissal of

such suits to the uncontrolled discretion of a district judge.

In our ease, the Court rejected proof of the damage.

An auditor’s report showing $4,029,449.52 loss was ex-

cluded. (R. 404.) It refused to consider the financial re-

sponsibility of parties released. (R. 421, 521.) It ignored

documentary proof sustaining the liability. Jt even denied

petitioners an opportunity to read depositions into the

record. (R. 573.)

The Cireuit Court refused to consider what standards

should have been applied. We cited Cohen v. Young (R.

2032) and Case v. Los Angeles Lumber Products Co. (R.

2043.) These decisions were ignored. It has been impos-

sible to obtain a ruling.

Point No. 4.

Refusal of Right to Recognize Derivative Status.

The bank had no right to dismiss. It should not have

been allowed to petition. The Court had no power to make

an ex parte order ratifying a dismissal. These questions

all depend on the same essential fact, viz.: derivative

right of stockholders to maintain suit.

A stockholder with status to sue has, as a corollary,

the right to manage and control the litigation. He has

the right to prevent a dismissal.

RIOT A AT GEO OTE RL GIN ROM AEN

The corporation, as a defendant, has rights similar to

any other party so joined. Tt has the right to obtain a

dismissal on payment or satisfaction of the claim. It may,

therefore, submit an offer on terms “fair and equitable”’

to stockholders. Such a settlement is equivalent to a satis-

faction. It has no right to dismiss on any other basis,

The District Court committed palpable error in treat-

ing petitioners as ‘‘guardians ad litem”’. It should not

have allowed the bank to supplant them by filing a peti-

tion. Derivative status was controlled by the decisions of

this Court in:

Delaware & Hudson Co. v. Albany & Susquehanna

RR Co., 213 US 435;

Doctor v. Harrington, 196 US 579.8%

Hostile conduct of the management is there held to create

a derivative right. It is also held that a corporation joined

in a stockholders’ suit must be aligned in accordance with

the facts—where shown to be opposed to the interests of

its stockholders—it must be treated as a defendant.

“In Delaware & Hudson case, Justice McKenna held that an

adverse interest within the corporation, resulting in a denial of lia-

bility, would create status. ‘‘... it was natural enough that a stoek-

holder should seek more earnest representatives . . . Emergencies

may arise in which the antagonism between the directory and

the corporate interest may be unmistakable, and the requirements

of the rule may be dispensed with, or, it is more accurate to Say,

do not apply.’’ (218 US 447, 451.)

“In Harrington case, Justice MeKenna held that ‘The ulti-

mate interest of the corporation made defendant may be the

same as that of the stockholder made plaintiff, but the corpora-

tion may he under a control antagonistic to him, and made to

act in a way detrimental to his rights... . If a controversy henee

arise... it ean be litigated in a federal ecourt”’. (196 US 587.)

Here, the corporation was aligned as defendant and diversity of

citizenship was thus established to support the jurisdiction.

Ce pce og ee eee

RAD NS eS

Derivative Facts Shown by the Record.

Rule 23(b) FRCP was satisfied by a demand before suit,

followed by an unsuccessful application at a stockholders’

meeting. (R. 47, 1494.)

The Reconstruction Finance Corporation acquired the

majority stock about two months later." We applied to

that agency. Its Chairman, Emil Schram, refused to in-

terfere.!"

The bank was caught in a conspiracy with its directors.

It was found prosecuting appeal from a judgment in its

own favor, That judgment was entered in another stock-

holders’ suit—being for recovery of secret profits obtained

by former president Herbert Fleishhacker.’"*

These facts were communicated to Chairman Schram.

Petitioners were again unable to secure relief. They were

not even successful in obtaining an explanation."

*Purehased $20,000,000 of preferred stock under 12 USCA

51(d), for a recapitalization completed Dee. 27, 1938. (R. 1000.)

These funds were used to retire a prior issue of preferred stock

($5,000,000 par value sold June 1933), to absorb writeoffs agegre-

gating $12,943,744.71 (R. 1280) and provide working capital.

Substandard assets (ineluding such writeoffs) amounted to $23,-

353.610.79 at date of the Dee. 1938 recapitalization. (R. 1283.)

“Counsel for petitioner Denieke received letter from Schram,

Chairman of RFC, Oct. 19, 1939, stating that it was REC poliey

to “refrain from interfering with the detail operation of a

bank whose preferred stock it owns’’, (R. 582.)

This violation of duty was exposed in the Cireuit Court.

Herbert Fleishhacker went on with his appeal seeking certiorari,

Transcript in that matter is of reeord as No. 181 Oct. Term,

1940. This record shows that the bank took a positive stand in

lower Court as appellant, assigning errors in its own behalf

to obtain reversal. (Blum, R. 775.) Case docketed in this Court

as Fleishhacker v. Blum.

‘Letter Sargent to Schram, Mar, 8/40, shows misuse of bank

name to reverse deeree against Herbert leishhaecker, former

president—activities of management in that behalf—use of cor-

porate power to protect direetors—impossibility of obtaining ap-

pointment of independent committee to inquire into faets. (R.

PEN, =e

Ere

ee eee eT,

Pay ene fea thed

Rule 23(b) FRCP allows a plaintiff to show “reasons

for not making (an) effort’? to obtain relief Within the

corporation, We complied with this part of the rule.

Facts Taking Case Out of Rule.

The bank moved to dismiss, alleging want of Jurisdiction,

(R. 926, item 5.) It stood by while executive committee

Inembers (represented by its present counsel) sought dis-

iiissal on the merits.’? It suppressed documents proving

directors’ liability. It pretended that shareholders were

not entitled to that information. (R. 1558.) It filed false

answers to interrogatories. It concealed $3,900,000 in loans

involving directors.’ It refused to employ independent

1588.) See also letter Sargent to Sehram, Mar. 20/40, showine

refusal of bank counsel to exolain conduct on this appeal CR,

1613); also letter Doble to Thomson, Mar. 13/40 (Pres. of bank

elected by REC), requesting disclosure of expense incurred to

overthrow such decree | R. 1205), and Thomson's denial of. re-

ceipt of such letter. (R, 1199.)

"Chickering & Gregory (now counsel for bank) filed motions

in March 1939, secking dismissal on behalf of executive eom.

mittee members Wayman, Kahn and Reis. (R. 51, 60.)

See interrogatories to bank (R. 84) and answers, (R. 191.)

Analysis thereof shows concealment of the following accounts

involving directors:

Robert Dollar Co. (R.S. Dollar) R. 1364.......... $1,659,900,00

Sitka Spruce Co. (H, Fleishhacker, R.S. Dollar)

USES AaedinClegetaighes Chek eh tu pe tos 356,695.95

Western Publishing Co. (H. Fleishhacker, Shoup,

SID PUI! MNES en ee lo ae i aay ee 125,000.00

Wilmae Inc. (Humphrey, H. Fleishhacker) R. 628 — 601,271.54

T. S. Cattle Co. (Humphrey) R, 628.............. 185,890.08

Planatol Co. (H. Fleishhacker, Humphrey, Tyson)

coc REE OEE CE ONS eT OEE lr nn 132,000.00

PE GE, , MONEE yy ic accnie a wkd bueee ks Sek ke oe 263,000.00

cn, SS IR ay eee 26,000.00

Pahrump Valley Co. (H. Fleishhacker, Shoup) R.

Ne nia k woh aS R mam CME RrgmeR AN ole! are Wine Ra Rigas 76,654.68

Spring Canyon Coal Co. (H. Fleishhacker, Shoup)

Ee OR carey Pee oe re rag een 284,654.93

Lindgren & Swinerton Co. R. 1869 .............. 190,000.00

Total amount. concealed ..............0..05. $3,901 067.18

counsel. In May, 1941, petitioners offered to cooperate with

any group able to furnish independent representation for

the common stock. (R. 1651.)

The body of the corporation has been used as a Trojan

Horse to shield directors. It has acted as plaintiff to seek

dismissal, as a defendant to oppose discovery, and as a

‘*neutral’’ when petitioners sought to investigate its con-

duct. It has never been represented by counsel not identi- .

fied with the defense of its directorate.

For five years, funds which should be held in trust for

stockholders, have been squandered to support collusive

efforts to suppress suit. The corporation has been spend-

ing money to prevent its shareholders from collecting

damages which belong to them. A so-called ‘‘new manage-

ment’’ installed after suit, has been party to this course

of action.

Questions presented.

1. Nature and extent of petitioners’ right to manage

and control the litigation.

2. Limitation on the right of the bank to petition for

dismissal.

3. Petitioners’ right to nonsuit the petition.

The Cireuit Court failed to decide these questions.

It refused to cite the Delaware & Hudson and Harring-

ton cases. The issue was avoided by a reference to Hawes

v. Oakland, 104 US 450, involving a set of facts not re-

motely in point.

MRE PRR IE 7 a? MDE AL

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Point No. 5.

Disregard of Local Law Defining Stockholders’ Rights

in Corporate Property.

The District Court treated petitioners as having no

greater standing than guardians ad litem. It relied on

dictum from an early California case.* On appeal, we

cited:

Klopstock v. Superior Court, 17 Cal. (2d) 13, 108

Pac. (2d) 906 (decided Jan. 10, 1941 3

Eggers v. National Radio Co., 208 Cal. 308, 281 Pae.

58 (decided Sept. 30, 1929).

In the Klopstock case. it was held that the ultimate in-

terest of a shareholder was sufficient to sustain suit—that

his derivative right passed to his executor in case of death,

with an ultimate right in favor of his heirs.

The Eggers case recognizes the status of minority stock

whenever a corporate management fails to press claims in

good faith. California decisions accord with the over-

whelming weight of authority.

The Cireuit Court ignored these decisions. It errone-

ously applied the rule in Erie RR Co. v. Tompkins, 304 US

64, assuming that the bank’s right to obtain realignment

would be governed by local law. Procedure and not sub-

stance was involved in this latter question. It was clear

Whitten v. Dabney, 171 Cal. 621, suggesting that a stockholder

suing for a corporation is a guardian ad litem who invokes legal

process for the purpose of starting a suit. The California Court

used that analogy, solely as dictum, to demonstrate that the

liability in a derivative suit would be barred when the corpo-

ration had lost its right to sue—also to show that an individual

shareholder had no power to discharge a corporate claim with-

out Court approval.

SEMI Me Ree VET PIS RAE TI IN ME LONIAY Gat HTD

ALTRI LTR eS REE TOT ENS, eT

under local law that petitionérs had property rights suffi-

cient to support relief in equity.

Point No. 6.

Cross-Examination of Bank Officers.

Petitioners sought to cross-examine the President,

William H. Thomson; First Vice-President Calkins, and

Vice-President Hoover. These parties handled the set-

tlement negotiations. Their testimony would have dis-

closed concealment of the loss,—suppression of docu-

ments,—and conspiracy to enable directors to avoid lia-

bility.

Point No. 7.

Depositions of Schram and Husbands.

Cross-examination of the witness Emil Schram (for-

mer Chairman of RFC) involved a letter sent to petition-

ers in October 1939, disclosing refusal to interfere with

management policy.

The testimony of Sam H. Husbands (director of RFC

and of Anglo Bank) concerned his participation in the

settlement negotiations.

Process was sought against both witnesses under Rule

26 FRCP. (R. 580.)

Point No. 8.

Depositions Under Rule 31 FRCP.

Interrogatories were propounded to officers connected

with various federal agencies:

1. To establish the flagrant character of the liability.

SA YG AONE IU ST RI EY aR et SALT PLO IRON

2. To show that the bank’s representatives had knowl-

edge of the guilt of the parties to be released.

3. To compare failure in law enforcement before suit

—with a failure to enforce liability after suit.

The following persons were named:

J. F. T. O'Connor (former Comptroller of the Cur-

rency) concerning law enforcement before suit.

Marriner S. Eccles (Chairman of Federal Reserve) con-

cerning failure of that agency to prevent mismanagement

(R. 680);

Leo T. Crowley (Chairman of Federal Deposit Insur-

ance Corporation)—to obtain the same facts regarding

action of FDIC as insurer of deposits of respondent hank

(R. 684);

William F. Folger (Chief National Bank Examiner) to

locate documents to complete case of directors’ liability,

and to explain relation of other agencies to mismanage-

ment existing between 1933 and 1938. (R. 693.)

Jesse Jones (Chairman of RFC) concerning failure

to exercise power of control over Anglo Bank manage-

ment acquired in 1933.

Bank officers and RFC officials were unquestionably

subject to process—the former on the ground that the

corporation was joined as defendant—the latter, because

RFC is an agency created with power to sue and be

sued. No statutory privilege existed in favor of the

other witnesses.

Refusal to allow this testimony affected the validity of

the judgment. The Circuit Court refused to pass on that

question.

Important Question—Status of Reconstruction

Finance Corporation.

This appeal raises questions of special importance.

RFC is majority stockholder. It is a fiduciary under the

decision of this Court in Pepper v. Litton, 308 US 295 at

306.

It was chartered with the power to sue and be sued.

(15 USCA 604.) Its officers and directors—in fact all of °

its operations, are necessarily subject to legal process.

(RFC v. Menihan Corp., 312 US 81; Keifer € Keifer v.

RFC and Regional Agricultural Credit Corp., 306 US

381.)

On certiorari it will be the duty of this Court to de-

termine the standards which apply to that set of facts.

There is presently a conflict between the Sixth and

Ninth Circuits which should be settled by the granting

of a writ. This Court should define the scope of hearing

required by Rule 23(c) FRCP.

Point No. 9.

Infringement of Right to Amend and Intervene.

Petitioners lodged a Third Amended Complaint con-

taining the proof developed by discovery hetween April

and June 1942. (R. 537.) Mrs. Doble applied for inter-

vention and leave to appear as co-plaintiff. (R. 466, 532.)

She had previously acted as an objecting stockholder,

Mr. Denicke being the original plaintiff.

Both motions were denied. The constitutional right to

a trial includes the right to plead a case on the merits.

BS IS RIP TITIES, ta IANS ARNE RSI SHI OMEN Nee SNORE? REG AIT TESTED PEER PME RETR I LE SOR ET asomhion pie artes te

21 :

Duty to Render Adequate Opinion. 5

This appeal involved nine substantial questions. None FE

of them have been decided. The Cireuit Court refused to E

cite or distinguish cases in point. It declined to follow a

opinions rendered by this Court. It infringed petitioners’ :

right to a decision, in writing, covering the issues involved.

It violated their right to have a document evidencing such ‘

decision, authenticated by the signatures of at least two '

circuit judges. i

SUPPRESSION OF RECORD ON CERTIORARI. :

We designated the documents required to show irregu-

larity in the Cirenit Court.’*> The judges responded by a

filing an ex parte order to keep such matter out of the 4

transcript. We present that order as: ¢

Petitioners’ Exhibit No. 3. :

“‘OrpER Re PREPARATION OF RECORD FOR

CERTIORARI PuRPOSES

Mr. Aaron M. Sargent, counsel for appellants, having

requested the clerk to prepare a record for use upon peti-

tion for writ of certiorari, in the above-entitled case, and

to issue as a part of the certified record a photostatie copy

of the opinion of this court, it is Ordered that the clerk

prepare the record in the usual and customary manner,

5Photostat of entire Opinion, including irregular signature

elause (R. 2070, item 8); also photostat of document evidencing

amendment of rules signed by entire Court. (R. 2074, item 8a.)

‘FAS

Dated: San Francisco, California, April 14, 1944.

Ciirton MaTHEws,

United States Cireuit Judge.

FrLep AvBerT LEE STEPHENS,

Apr. 14, 1944 United States Circuit Judge.

Paul P. O’Brien, Witiiam Heaty,

Clerk. United States Circuit Judge.”’

(R. 2066.)

The Clerk was requested to photostat and certify these

records as separate documents. He refused.’* An incom-

plete record has been transmitted to this Court. The body

of the Opinion was printed. The signature clause was

left out.'7 The clerk certified that the documents fur-

nished were true copies of the originals.'*

We then tested our right by motion. Circuit Judges

Mathews, Stephens and Healy sat to deny that motion.

No argument was permitted. Judge Mathews made the

following statement from the bench:

‘‘We have here a so-called motion to obtain certified

photostatic copies of designated records, in the case of

Denicke and Doble against The Anglo California Na-

tional Bank, No. 10329. We have examined this so-

called motion. We find that it is simply a request to

the Court that the Court require the clerk to do that

16Praecipe requesting such copies filed with clerk May 10,

1944—copy thereof included in motion to correct transcript.

17See IR. 2004 showing omission of signature. clause in print-

ing of Opinion.

18(Jerk’s certificate to this Court (R. 2078) is obviously false.

It states that the documents included are ‘‘full, true and cor-

rect (copies) .. . as the originals thereof remain on file’’.

SEPT LIELEL) DELIEND e002:

which we have told him not to do. We wont entertain

this motion. The motion is denied.’’

We demanded a hearing.

‘““Mr. Sargent. I ask for my constitutional right to

argue the motion.

Judge Mathews. Motion denied. Court will be ad-

journed.

Mr. Sargent. / renew my request for my constitu-

tional right to argue the motion.

Judge Mathews. You have no such right as that.

The Court will be adjourned.’

JURISDICTION.

This Court has jurisdiction under Section 240 of the

Judicial Code as amended by the Act of February 13, 1925.

(28 USCA 347.)

The Cireuit Court had jurisdiction under Section 128 of

said code (28 USCA 225); the District Court had original

jurisdiction under Section 24 thereof. (28 USCA 41.)

Suit arose under the laws of the United States. It was

an action to enforce directors’ liability created by the

National Bank Act and Federal Reserve <Act.?! Original

‘Statement appears in Reporter’s Transcript filed in Cireuit

Court—included in Motion for Enlargement.

*!Defendant directors were charged with permitting violation of

loan limit (12 USCA 84), with assenting to illegal loans to execu-

tive officers (12 USCA 375a), and with receipt of bonuses and

other considerations in connection with the granting of loans (12

USCA, 595). Directors were liable for such violations under 12

USCA, Sees. 93 and 50la, which are respectively part of the

National Bank Act and Federal Reserve Act.

jurisdiction is sustained by Chesbrough v. Woodworth,

244 US 72.

The Cireuit Court entered a ‘‘judgment”’ on March 1,

1944. (R. 2004.) Petition for rehearing was filed within

the time required by rule (R. 2017)?* and was denied April

7, 1944. (R. 2061.)

The time for certiorari did not run until denial of such

petition.?*

Petition for a writ is filed within three months of order

denying rehearing.

QUESTIONS PRESENTED.

1. Duty to issue a writ in order to cancel void entries

made by the Cireuit Court.

2. Duty to grant the writ in order to protect peti-

tioners’ right to an appellate review of their case.

3. Right to an adequate opinion or other decision in

writing, signed by two or more Circuit Judges, and dis-

closing the action taken by the Cireuit Court with respect

to all substantial questions raised on appeal.

4. Right to a writ to obtain reversal and compliance

with decisions of this Court requiring findings under

Rule 52(a) FRCP.

2CCA Rule 25 allowing filing within 30 days after judgment.

Decree was dated March 1, 1944. We filed March 29, 1944. Order

denying rehearing showing filing within time permitted. (R. 2061.)

23Citizens Bank v. Opperman, 249 U.S. 448; Texas & Pacific

Ry. v. Murphy, 111 U.S. 488: Chicago & Great Western v.

Basham, 249 U.S. 164; Aspen Mining & Smelting Co. v. Billings,

150 US. 31; Voorhees v. Noye Mfg. Co., 151 U.S. 185.

5. Duty to issue writ and direct reversal because of

judgment entered without trial of objections in the Dis-

trict Court.

6. Duty to issue such writ to direct reversal of judg-

ment under Rule 60(b) FRCP on the ground of mistake.

7. Duty to order reversal because of refusal of District

Court to admit evidence under Rule 23(c) FRCP.

8. Duty to direct District Court to grant nonsuit be-

cause of derivative status established by petitioners, and

lack of capacity in bank to maintain a petition.

9. Duty to recognize local law as declared in Klopstock

v. Superior Court, 17 Cal. (2d) 13, 108 Pac. (2d) 906;

and in Eggers v. National Radio Co., 208 Cal. 308, 281

Pac. 58, confirming property right of petitioners sufficient

to support stockholders’ suit.

10. Erroneous application of Erie RR Co. v. Tomp-

kins, 304 US 64, in holding that procedure for realign-

ment of bank as party plaintiff would depend on state

law rather than upon federal rules.

11. Right to cross-examine bank officers handling set-

tlement negotiations.

12. Right to take depositions of officers of RFC who

were parties to settlement discussions.

13. Right to propound interrogatories under Rule 31

FRCP to officers of RFC, Federal Reserve and FDIC,

regarding transactions before suit.

14. Right to propound such interrogatories to Chief

National Bank Examiner to locate documents within the

scope of a subpoena duces tecum.

15. Right to file amended pleading setting up facts

developed by discovery—and right to intervene and ap-

pear as co-plaintiff in such pleading.

REASONS FOR GRANTING THE WRIT.

1. To vacate the judgment and set aside the arbitrary

and irregular entries made by the Cireuit Court herein.

2. To protect petitioners’ right to an appellate review.

3. To enforce compliance with decisions of this Court

requiring findings under Rule 52(a) FRCP.

4. To secure petitioners’ constitutional right to a trial

of their objections and to correct the miscarriage of justice

whieh has resulted from a refusal to recognize that right.

5. To lay down adequate standards governing opinion

writing and the entry of judgments by Circuit Courts, to

the end that the irregularities disclosed in this case may

not be repeated.

6. To define adequate procedure governing the right of

a litigant to obtain rehearing in bank in a Circuit Court,

where necessary to correct palpable error.

7. To lay down proper standards governing approval

of settlements under Rule 23(¢) RFCP—and to define the

meaning of the term ‘‘fair and equitable’’, as applied to

such a proceeding.

8. To consider the application of the decision of this

Court in Case v. Los Angeles Lumber Products Co., 308

US 106, and other Chandler Act cases—in respect to pro-

ceedings for compromise of a shareholder’s suit.

%. Confliet between Sixth and Ninth Circuits. In the

former, standards similar to those in Chandler Act cases

are enforced. See Cohen vr. Young, 127 Fed. (2d) 721. In

the Ninth Circuit, dismissal of a stockholders’ suit has

been held to rest in the uncontrolled discretion of a Dis-

trict Judge.

10. Departure from proper course of Judicial proceed-

ings in the Cireuit Court—as shown by entry of a void

decree, the filing of an Opinion in violation of Rule, re-

fusal to vacate decree, failure to entertain proper motion

for that purpose, refusal to consider application for re-

assignment, refusal to grant rehearing in bank, suppres-

sion of material facts from transcript, refusal to sepa-

rately certify material records, and denial of motion for

copies of papers within the scope of records required

hy law to be kept public in said Court.

11. Complete disregard of duty in sanctioning arbi-

trary conduct of District Court in entering judgment

without trial or findings.

Special Questions of Public Importance.

12. Derwwative status. This ease involves a modern

application of the principles announced in Delaware &

Hudson Co. v. Albany & Susquehanna RR. Co., 213 US

435, and in Doctor v. Harrington, 196 US 579. The wide-

spread use of proxy voting, the dispersion of share-

holders, and the shifting of power in favor of corporate

managements has made this problem of unusual im-

portance. This Court should analyze and restate the law

applicable to that set of facts.

13. RFC Status. The Reconstruction Finance Corpo-

ration is majority stockholder. Its rights and obligations

por nenegen: Wea 4 Sy

should be defined. This Court should apply the rule in

Pepper v. Litton, 308 US 295, 306 to that situation.

14. Failure of jurisdiction on appeal. The Circuit

Court has arbitrarily declined to exercise the powers

granted to it by Congress. The result has been a mis-

carriage of justice. This condition establishes a right of

review on certiorari. Petitioners rely on the Opinion of

Chief Justice Marshall in Cohens v. Virginia, 19 US (6°

Wheat.), 264 at 403.

“The judiciary cannot, as the legislature may,

avoid a measure... . We cannot pass it by, because

it is doubtful. With whatever doubts, with whatever

difficulties, a case may be attended, we must decide

it, if it is brought before us. We have no more right

to decline the exercise of jurisdiction which is given,

than to usurp that which is not given.”’

15. Right of subpoena. In refusing to permit eross-

examination of the persons involved in settlement nego-

tiations, the District Court raised questions of tremen-

dous importance. Petitioners sought the testimony of

bank officers and federal officials.

This process was claimed to rebut adverse presump-

tions indulged without a trial. The Constitutional right

to a subpoena was invaded.

The remedy of a Congressional subpoena has recently

been the subject of public interest. That process fur-

nishes the method for discovering truth in legislative

matters.

Individual rights are secured by a similar process—

the judicial subpoena. This includes the subpoena duces

tecum. That right is basic. Without it, impartial adminis-

tration of justice is impossible.

We have created Courts where all men can be heard.

Due process of law has been guaranteed. We have pro-

vided for equal justice under law. The humblest man in

our nation is guaranteed these rights as against the most

powerful interest.

For one hundred and thirty-seven vears this process has

heen kept inviolate. It was recognized by Chief Justice

Marshall in June, 1807, on the trial of Aaron Burr.

““It is a principle of the English Constitution that

the King can do no wrong; that no blame ean be

imputed to him, that he cannot be named in debate.

By the Constitution of the United States, the Presi-

dent as well as every other officer of the government

may be impeached and may be removed from office

on high crimes and misdemeanors.

** * the President is elected from the mass of the

people, and, on the expiration of the time for which

he is elected, returns to the mass of the people again.

Whether essentially this difference of cireumstances

must vary the policy of the laws of the two countries,

in reference to the personal dignity of the chief ex-

ecutive, will be perceived by every person * * *

If, then, as is admitted by the counsel for the

United States, a subpoena may issue to the Presi-

dent, the accused is entitled to it, of course; and,

whatever difference may exist with respect to the

power to compel the same obedience to the process,

as if it had been directed to a private citizen, there

exists no difference with respect to the right to ob:

uae? **

The court can perceive no legal objection to issuing

a subpoena duces tecum to any person whatever, pro-

vided the case be such as to justify the process * * *

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It is not for the court to anticipate the event of the

present prosecution. Should it terminate as is ex-

pected on the part of the United States, all those who

are concerned in it should certainly regret that a

paper which the accused believed to be essential for

his defense, which may for aught that now appears

be essential, had been withheld from him. 1 will not

say that this circumstance would in any degree tar-

nish the reputation of the government; but I will say

that it would justly tarnish the reputation of the court

which had given its sanction to its being withheld.’

Under Section 240 of the Judicial Code, we apply for

issuance of a writ of certiorari to the Cireuit Court of

Appeals for the Ninth Cireuit.

Dated, San Francisco, California,

June 7, 1944.

Aaron M. Sarcent,

Attorney for Petitioners,

CERTIFICATE OF COUNSEL.

I hereby certify that in my judgment the foregoing

petition for writ of certiorari is well founded, and_ that

the same is not interposed for purposes of delay.

Dated, San Francisco, California,

June 7, 1944.

Aaron M. Sarcent.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.