Reply Brief — Ross v. Bernhard

‘oT. gi 32

*

ne ie eee

Eran

a Office, Supreme Court, U.S.

uU. & i ks As ie ae

a9

* | JOHN F. DAVIS, CLERK

IN THE :

Supreme Court of the United States

| ‘OCTOBER TERM, @@> 1969

cry

HOWARD ROSS and BERNARD ROSS, as Westin for =. | F

_LENA ROSENBAUM, fn

Petitioners,

—V.—

ROBERT | A. BERNHARD, et al,

Respondents,

| and

PAUL L. DAVIES, et al.,

aa

seh

- ON WRIT JF CERTIORARI TO THE UNITED STATES COURT OF APPEALS

; FOR THE SECOND CIRCUIT

ie ene MSE rR pe rxecarrpeegrmee ne ne d “,

REPLY BRIEF FOR PETITIONERS 4

a

Wim EB. Havpex |

° Attorney ‘for-Petitioners

295 Madison Avenue —

; re New York, N. Y. 10017 ©

Of Counsel |

‘AprauamM L. Pomerantz ©

Ricuarp M. Meyer os

Stantey M. Grossman

Pomerantz Levy Havupex & Buiock

295 Madison ‘Avenue

New York, N. Y. 10017

Case, Pazss Inc.,

ee

422 Hupson Sr.¢ N.Y.—ORegon 5-4540

TABLE OF CONTENTS

e PAGE

| | corporation 's legal cause of action is tri. ble to”

a jury whether jt js asserted by the corporation

itself or by a stockholder derivatively on its-behalf ]

‘TI—The underlying causes of action of the Corpora-

tion are Jegal claims trisite by jury. F264 2 7

COMGAMION: 555.305 2ieh ah cs ieths tuo ce anats 12

TaBLe or Cases

Beacon Theatres y. Westorer, 359 U.S, 500 (1959)... s

Brown v. Bullock, 294 F. 2d 415 (2 Cir. os Wile n i)

Cates v. Allen, 149 U.S. 454 (Senne te re ne a

Curriden vy, Middlemen. 232 U.S. 633 (1914) nM metres a. 10)

Dairy Queen vy. Wood, 369 U.S. 469 Bie) Cage « 8,9, 10, 31

DePinto vy. Provident Security Life Ins. Co... 2: 2d

826 (9 Cir. 1963), cert. den, 376. U.S, 950 2. ‘,8

Dodge vy. Woolsey, 59 U.S. (18 How.) 331 (1855) .__. a

Fanchon & Marco y. Paramount Pictures. 202 F. 2d

431 (2 Cir.'1953) .....0000........._. i - 6

_ Fleitmann y. Welshach Street Lighting Co., 240 U.S.

Nas oS? Sere ites eA Nae nto en 1:23, 4:5

Gomberg x. Midvale Co.. 157 F. Supp. 132 (Ep. Pa.

Fite OOO Ota ete tan ela ee ra Wits ene 7

Goodrich Co,. B. P<. Naple Pa eg Supp. 345 (SP

CALE Tee eee ia sehen ee ee ee 9

Gottfried ¥, Gottfried, 269 Ap. Div. 413, 56 DR ge. 8 1]

UTERO NT 5 rn. ns Mody a eet a eee :

Halpern vy. Pesinsylvania R. Co,..189 F. Supp. 494

ES MO ss 50 ios Sk Manton Ce (5

Hawes v. Oakland “104 US. 450 { ISS?) ane Ske 5. 6

&

Kelly ¥. wae 233 Ped. 635 (3 Cir. 1916) Be a Ain tot i

“Kirby vy. Lal. Shore & M.S.R. Co., 120 US, 150 (1887)

Kocon vy. Cordeiro, 98 R.L 772, 200 A. 2d TOS (1965) ~

Kogan v. Schenley Industries, 20 } “KD. 4 (D. Del.

a's) NAAN SA rare oe core romten tT

Leimer v. Woods, 196'F. 2d 828 (8 Vir. 1952) .......

Letulle v. Scofield 308 UUS. 415 (V940) oe eee eee

McCullough v. Dairy Quecn, 194 F. Supp. GS6 (1.1.

Da 1061) f accecerieee yee ee eee ae co eee eee

Minister Led S. Co. 6. Laufersweler, 37 Ohio App.

375, 36 N.K. 2d 890 (1940) a ng aang Ste yaar coe

Myers v. flurley Motor o.. 213 US. 18 (A880) i.

‘O'Brien's. Fitzgerald, 145 N.Y. 34, 3 NE 8A

(ISDE) fc ieakec web dew ee reeset ert sex tar mee ane

Okeechobee County v. Nuveen, 140 F. 2d Gs4 () Cir,

OAS acs yadete arenes SP Gurren ieee.

Phillips v. S.ELC., 388 F, 2d 964 (2 Cir. 1968)... 6

Potter v. Walker. 276 N.Y. 15, 11 NBL 2d 355 (1257)...

Ramsburg vy. American Investment Co., 251 F, 2d 3385

Wey yg) aed ge & te ae asad vc Mek tere ee Be nner

Riviera Congress Associates v. Yassky, 18 N.Y. 2

340, 277 N, YS. 2d 386, 222 N.B. 2d 876 (1966)...

Roacrs Vv. Anierican Can (‘o.. 305 F. tT 907 (3 Ctr.

OER) ko So Sten A 4A Re Fae rai eag ee,

Sherk many. Wolfson, 044 F.2d 307 (2 Cir. 1957) -.

Si line Vv. Schine, 367 F.2d Gso (2 tty, POOH)

Seuttv, Neely, 140 U.S. 106 (1891) ..

l‘nited States v. Bitter Root Bev. ('ov., 200 U.S. 45]

SENS 5g coca eh aeaths BORE pL, ae At aiOna eianat ete tetas are eater ad

Van Sweringen Co., In re The, WW I, Ql 231 (6 Cir.

TOOLY 5 i bac bc nes eet ceases ear Tie ews weeks

Wagner v. Armsby, 264 \pp. Div. 379, 85 NLY,S. 2d

$88 (1942)

Wilshire Oi Co. vy. Riffe, 405 F. 2d 1061 (10 Cir, 1969)

~!

ill |

AUTHQRITIES.

: PAGE

Ballantine, Corporations (Rev. Ed. 1946) © 145 at

te ea ner Pe Pe es eee rr

3 Fletcher, ¢ ‘orporatio ns (M. Wolf Ed. 1961) 946

et AOD oy ev cat eeec gece pees nengarey sees sud a

5 Moore’s Fed. Pr (2d Ed. 1968) * O11! a1 at 11: 14 i

Restatement, Restitution, pp. 5-9 (1987) .......5-. i)

Srarutes axp Recunatroxs

Constitution of the United States ‘Seventh Amend-

ment ...-- se ararals Oa 8 Pies are ERNE OF spectre eee ete sss heh

Federal Rules of Civil Procedure

‘Bale 16:5 202 Te 6 COLTER ORM UTI bik > Aa Kipp ere 12

Rake STUD) occ nca ks phn teeta ese nsess ae oer 11

Investinent Company Act of 140 © 44, 15 csc

BOGBD oso coiviee's weeny stent Need erect x a ak es 4

: IN THE

Supreme Court of the United States

: October Term, 1968

_ No. 992

er »

.

tlowarp Ross and Berxarp Ross, as Trustees for

LEXA Rosexpaum.

Petitioners,

—vV.—

Rosexr A. Berxuany, ct al... *

Respondents.

and

Paut L. Davies, et al.

Defenda nts.

.

> af

REPLY BRIEF.FOR PETITIONERS f

*

*

“

I,

A corporation’s legal cause of action is triable

toa jury whether it is asserted by the corpora-

tion itself or by a stockholder derivatively on

its behalf, ee,

The nub of respondents’ argument. and

ations leval claim,

is transmuted into an equitable ¢

of the decision

below, is that a corpor

triable by jury,

ause when a stockholder

isserts it derivatively on behalf of the

roposition, we submit, is cont rary to rea

recedent.

COrporal TOTP Th

-on,and controlling

ear, ;

| Scere

~ x ‘

1. Fleitmann *. Welshach Street Lighting Co., 240 US:

27 (1916), « ‘ts a stockholder’s. derivative action for treble

damages under the antitrust laws. The Court noted that

“the claim: set up is -that of the corporation alone;’* if

asserted by the corporation, it Would be at law and triable

loa jury (p. 28) This raised the question of whether **the

defendants’ right to a jury trial should be taken away’?

Just because is stockholder, tinabie to induce action by hist

corporation, brought the suit-derivatively on, its behals.

The Court, by Mr. Justice ilolmes, answered the ques-

tion in thehegative? The damage ciais Was.at law. It did

not lose its legal nature through assertion in a derivative

suit. The derivative suit did vot transnmute the legal into

an equitable claim. The right to jury trial remained intaet

and inviolate, :o

Under then existing procedure, this conclusion was: fatal

to the plaintiff. In 1916 law and equity were separate,

Mleitmanu bad brought his suit on the equity side of the

district court. Kqnity alone gave hin standing to sue on

behalf of the corporation. But an equity court-could not

couduct a jury trial. The complaint thus had to be dis.

missed. &

So far ie Fleitmanu dealt with the jury issue, it coritrols

the present case. Here, as in Eleitinaun: w stockholder iis-

<erts his corporation's legal claims derivativay~ay its

behalf. Here, as in Fleitmaun, the Caius, no matter how

asserted, remain what ‘they are, claims at law belonging to

the corporation. Here, as in Fleitmaun, the derivative:

action does not impair the parties’ right to Jury trial of

the legal claims.

What hax, changed since the days of Fleitwann are the

CONC nences flowing from this state of affairs. Law

\ ‘

Loe 3

and equity have been merged by the adoption of the Federa|

‘Rules in 1938. The same court can now administer legal

and equitable relief in the same case. The equitable issyox

are tried by the court, the legal issues by a jury, Under

its equity powers, the court determines, without a jury,

Whether the complaining stockholder has the requisite stand-

ing to sue derivatiyely on behalf of the corporation. [ny the

“ame suit, however, the court can try the corporation’ -

legal cause of action to a jury. No more room, theretore,

is left today for a dismissal such as was necessary in the

pre-merger era of Fleitmangis The right to Jury trial.

recognized by -this Court in Fleitmann, can now be giver

full scope and effect. Sp Tad

2. The decision below misconceiyed the impact of

Fleitmaun. Thi majority of the court read the cuse a.

holding that “there could be no right % a jury trial in the

equitable derivative action’? (AGT). The opinion over-

looked that Fleit many sustained the right to jury trial: it

merely held that an equity court éould not administer jt,

This obstacle has disappeared under the Federal Rules.

The Majority below alse “Ouxzht to distinguish //. Hinman

as relating ‘only to the statutory right to Jury trial created

by the Sherman Act" (A68: emphasis by the court). The

attempted distinction between the constitutional and th.

‘tatutory jury right resis on several erroneous premises,

In the first: place, the antitrust laws create no’ right lay

Jury trial. In fact. neither the Sherman Act nor‘the Claytoy,

Act so much as mentions trial by jury. The two Acts do

create the rigly to treble damiiges: but it is the Seventh

Amendment to the Constitution which provides for the

4

: p.

trial of the claim by jury. 5 Moore's Fol. Pro BS AVL) at

113-14 (2d Fd. 1968).* ~ : :

secondly, even if the right to jury trial of treble. daanage

claims had a stat utory basis, it is diflic ult to sve why the

statutory right should enjoy greatér sanctity than the con.

stitutional right toa jury. Ifa statutory jury right sur-

Vives in a derivative suit, thy jury wight created by the

Constitution cannot be more fragile.

Pinally, if the sherman and Clayton Acts were thought

to inipely aa statutors right to jury trial, the’ same mist be

sald of the Investment Company Act, under whicle the

present action is. brought (A2Q). Section 44 of that Act,

1 TSC | SOa4d35, expressly provides for “actions ~ law

brought fo enforee any liability or duty eve: ited by? che

Aet.. Uf the statutory basis of the jury right be relevant

at all, the Tnvesteucnt Cotupany Aet provides that basis

no less than the Shernian and Chivtonw Acts.**

We submit, therefore, that Fleifmann eannnot be dis-

tinguished from the present case. It clearly establishes:

petitioners” right to ae yury trial of ie underlying cor.

porate claim.

* ser fs iter N, Movods, l TS Zt ss %, tt ie Cir, | a eye hie

right to jury trial of double seu ¥ ker the anergeney

rice Comtrol Act falls within the jury tra guaranty of the Sev-

ent Amendment. ,

** The majority below refit od te ee ke Mis ureument ta the

belief that it had not been rai wed tn tlw chy trict coturt and that the

record Was tiaulticient to cable the court io « hires. the issue (.\08,

nN. Fe. In fact, however, pettioves. lao! ro ced the same argument

1 thet district ceoprrt burtet of Viet t ft pac aeny ey or. \urcover,

wee petitioners had pres el iw the «istre ' the: were free

to Silvance any arguments, oe tes es, be -tetuin that court's

decision: Letulle + Seofi ld, HX US bho pt x at nn, & gael

Finally, it is eAscure in what respects the record helow % {posed

tw have leet: insufficient: the « fect Ol Sth ani te Invespinent ¢ on

pany Act is a pure question of Mw.

, 4 e

. .

~

e : o : '

4. Respondents maintain (Br. 10-11) that the two ele-

ments of a derivative suit—the corporation’s cause of ac-

tion and the stockholder’s right fo assert it—were never

deemed, to be separate for jury trial purposes. Prior to

195%, they say, legal and equitable claims could not be

Joined in one equity action; Scott vy. Neely, 140 U.S. 106

(1891); Cales v. Allen, 149° U.S. 451 (1893). Yet the fed-

eral courts did accept jurisdiction.of derivative suits. It

follows, according to respondents, that this Court must

have rejected the notion that derivative suits can involve |

separate legal and equitable rights.

Respondents’ syllogism ‘is faulty. In the two decisions.

of this Court which they leit ‘—Dodge v. Woolsey, 59 U.S.

(1s Tiow,) 351 (1850) ind Mawes v. Ouklaud. tod Us, 450)

(1882)—the underlying claims, seeking an injunction, were

equitable, so that the problem of combining legal with

equitable claims in a single derivative suit did not arise.

The one ease in which the problem did arise-was Fleitmanh;

and there the Court did bar the assertion of a legal claim

us Incompatible with the equitable character of a deriva-

‘tiv e suit.

In this context, Mr. Justice Holmes -addressed himself

to the very point which respondents raise here: If a cor-

poration’s ‘legal claim: could not be asserted in an equity

suit such as a stockholder’s action, how could the federal

courts ever accept jurisdiction of derivative suits? The

answer wws simple. iy other derivative cases, the undér-

lying corporate claim had been equitable: or, if it: was

legal, the defendants had not insisted on their jury rights.

As states by Justice Hélmes (1; itmann, 240 U.S..at 28.29) ;

“No doultt there are cases in which the fequtit.

able} nature of the right asserted far the company,

* . %»

)

~

* the f failure of the defendants, concerne “d s in-

ee unon their [jury | “rights, or a diiferent state:

: . system, has led to sberwhole matter being: disposed

ages Bees in-equity;.* felon dn | Parenthaticat niterpol: lions

: added | 7 oh See Pea oe

= : Ta short, for purposes of determining ‘the right to jury

=~ tg trial, it was well settled even before 1938 that the eorpora-

tion's uiderlying claim prese nited” issues wholly separate

Pol “frpt- those pert: Lining. 10 tae stoe ‘kholder’s standing, ALS

al dead tire: recognition, of the dual nature of the deriyhtive

he suit hits lis, root. in Thywesv. Oaktaid. Ds Ugs.4 03) 452 “iD

Ln (1882),. “whe Ve the C ourt vie awed tiv stockholder ’s derivativ

‘wena

et ote eee action as ‘eombining: “two. Ci uses ott aetion”’ i ) f° an

*

|

ee ee

teens “Mone against his own “coinpany, of whic fh~ he 1s: \it

aac ar ee a Le -corporator, for refusiny ta lo Whitt he has requcsted ~

f° them. to do: andthe other A@aitst. the party yhieh |

He ees contests the cmatter ih eQULLONe rey fs that cor.

ee ig err nie, wie tion? ae, f |

he.

a haley

ioe 2 ‘

i-

See

Powe aoe ‘Aceond; Ballantine, Corporations; § ay at 349-44 44-(Rev. Ed.

vox | vie 1946} ‘13 f letcher, A! orporations, SOs O46 al 425 (M.- Wolf.

Ed. $961) (both with mymer ons vitatiofis) ; Datnern v. Penn-

r og sybtania R..Co., T89\F/ Sapp, 44, 498 (E DN.Y. 1960);

7s. Riviera Congress” Asste iate ee: ¥ assk, y) IS NSY Y,,2d 540, 547,

42 OTT NLY.S, 20-386, 392, 233 'N.E, 2d ‘$76 (1966), a ot

+—

es Wiegiate * -ithe-adoption ie If di ral Balas: in 195 8 has ino changed

ea us he dual nature of Ney erivative suit; hut it has eliminated

baka’ ’ the. procedural imps frmaents to jury ir ial Gf. the legal issues

-< involved ink suchy “action, The leading case on the subject,

,

ce * Fanchowel 3 for. Paramount Ricta $,202 F. 2 aT: 1, 730

¥ 42 Cir. 19538), so held; ayd 1 has been’ consixte nithy followed

te ta,

me .* eons * ¢ 2

eye 2S by later: detistons: ‘y agers ve bwericnn Can Co. 303. Y 2d

: ; : * ny . 3 woe rier . a ‘ pr. * gn :

‘ . : ; = . Ee. . ; ‘ v . , Pd

‘ . ‘ae 2 . - = ~ oF a e e .

~*~ oe % *

' 7 “ye oa < =

Me . - * Ae |

Pr

‘at would force it into equity.’

297, 307-8 (3 Cir. 1962) ; Riunsburg v. American Investment

“Co., 231 F. 20°338, 339. (7 Cir. 1956) ; DePinto v. Provident

Security Life Ins. Co.. 323 F. 2d 826, 836-37 (4 Cir. 1963),

cert. den. 376 Us. 950: Schechiman v. Wolfson, 244,F. 2d

tee 537, doo (2 Cir, 1957); Kogan v. Schenley Indust ries,.20

F.R.D: 4°.(D. Del. 1996) ; Gombe rg v. Midiale Co., 157 F.

“Supp. 1 32, 140-41 (1s.D. Pa. 1955).

We, submit that petitioners’ right to trial by jury of the

corporation’s cause of action is ngt to be. denied just be-_

. cause the‘claim is asserted in a stockholders’ Geri ative:

action. any ai

IL.

__The underlying causes ef action of the corporation

are legal claims triable by jury.

he District Court held that this action, ‘Vie eed a= Oe

rough by the ¢ ‘orporation, is ‘ta suit at common luw’

Within the meaning of the Seventh Amendment { A46- 48).

‘The majority, of the Court of Appeals’ did not reach {ine

tte sstion (.A64), but the dissenting Judge. agreed with’ the

District Court. that the action is at law be CUUSC | Heys Stor

a money judgme nt. for unlawful conversion, ‘breach of

fiduciary duty, fraud and gross negligence e724 she ye

eeanondents contend that an. action against corporate

directors for breach of fiduciary duty cannot be brought at

Kaw amid thi: u, im int event, the complexity’ of. this action

5 ” \

\

re OE, Contrary to responde yts™ assertion, danitge “claims

for breaches of duty by corporate directors are tradition-

ally at law, unless. the legal remedy is inadequiite. In

-

»s

-

< we e8

Hazard v. Wight, 201. Ney: 399, O4 y. K. $95 (1911), the

defendant president and director caused: his corporation to

pay him part of its capiti ul. The court held (201 NY. at

402) : i Se

“The defendant the reby viola ed the statute |cita-

tion} and the principles’ef the common law and

became liable in an action at kw to the corporation

for wasting its assets.””

Accord, e.g., DePinto vy. Provident Seoneil a Life Ts. Co.

boils 2a 826, $65.37 (9 Cir. 1965), ce rt. den. 376 U.S. 950

(1964); Aelly v. Dolan, 233 aes 639, O87 (3 Cir. 1916);

O'Brien v. Fitzgerald,. 143 N.Y; , 380-81, 38- N.E. 37

(1894); Potter v. Walker, 276 N. Y. aa 26,31 N.b. 2d 330,

Dot (1937) ; Kocon +. Cordeiro, 98 ik.1. 772: 200 A. 2d 708,

710-11 (1964); Winister L. d& S. Co. vy Laufersiveler, 37 Ohio

App. 375, 36 N.E.°2d 895 (1940)..

The present actiow alleges a claim for damages. The legal

remedy is adequate. In light of the discovery procedures

of the Federal Rules, neither an equitable discovery nor an

equitable agcounting is necessary. The prayer of. the com-

plaint for an accounting may be ignored: Dairy Queen vy,

Waod, 369 U.S. 469, 477-78 and n. 19 (1962): Beacon The alres

v. Westocer 309. U.S. 500, 509-10 ( 1900).

2. Respondents suggest (Br) 16) that an action at law lies

Pe for negligent - (as distinguished from willful), fiduciary

breaghes, The present complaint does allege negligence

(A26). The scope of thevaction-at law is not, however,

limited to negligence, The notion that a jury may find a’ fidi-

ciary to be negligent but must bow out if it finds a higher

degree of fault defies both reason and authority. In Schiie

Schine, 367 F. 2d 685 (2 Cir. 1966)—-2 case invoked yy

respondents—the second count of the complaint sought

damages for the fraud of the defendant fiduciaries; the .

court held that the claim was at law and triable by jury.*®

Willful conversion, such as is here alleged, (A26), is-like-

wise a familiar area of jury competence, United States y.

Bitter Root Dev. Co., 200 U. S. 451, 472 (1906). A fiduciary

chargeable with conversion, see Brown vy. Bullock. 294 F. 2d

415, 420 (2 Cir. 1961), cannot sidestep a jury just because

he .is a fiduciary. This is equally true of a claim ‘for waste

of corporate assets; Hazard v. Wight, supra, 201 N.Y. 399,

402, 94 N.E. 855.

3. Respondents’ liability for the profits they derived

from their breaches of duty is likewise cognizable at law. Al

though claims of that character have often been entertained.

in equity, Schive v. Schine, supra; In re The Van Sweringen

Co., 119 F. 2d 231, 235 (6 Cir. 1941), they need not be. A.

fiduciary who profits from his breach of duty is unjustly

enriched. He is liable in siete for money hdd and re- ©

ceived. B. F. Goodrich Co. . Naples, 121 F. Supp. 345,

~~ 347-48 (S.D. Cal. 1954) ; Bie v. Gottfried, 269 App.

Div. 413, 56 N.Y.S, 2d 50, 56 (1945); Wagner v. . Armsby,

264 App. Div. 379, 35 N.Y S.-2d 488, 489 (1942), Although

this quasi- -contractual form of action employs equitable —

principles, it is, nevertheless, an action at law, one of the

common counts, and hence is triable by jury. See Myers v.

Hurley Motor Co.7.273 US. 18. 24 (1927 ys Okeechobee .

County v. Nuveen, 145 F.2d 684, 6S7-and n. 5 (5 Cir. 1944) :

Restatement, Restitution, yp. 5-9 (1937). In fact. the ne.

counting claim in Dairy Queen, supra, Which this Court held

_—

* The fourth count. seeking an accounting of profits, was held to

be equitable. The nature of the second and fourth counts appears

from the record of the Schiie case.

bes)

10

tobe triable to a jury, sought ‘tan accountiny of profits”

see the lower court’s decision in that case, MeCullough v

Dairy Queed, 194 FE. Supp. 686; G87 CED. Pa, 1961)."

4. Respondents argue’ that the complexity of thw» claims

necessitates their trial in equity. Coniplexity as such is

Curridy wv. Middle-

not, however, an obstacle to jury trial,

man, 232 U.S. 6335, 636 (1914):

ere complication of fuets alone and diffi-

culty of proof are not a basis of ult jurbsdiction,??

Accord: United States v. Bitter Root Dev. Co., 200 US.

451, 472 (1906). |

An exception to thts broad rule used to apply where ‘the

accounts between the parties’? were of such a complicajed

nature that only a court of equity could satisfactorily un-

ravel them. Kirby vy. Luké Shore ¢ US.R, Co., 120 U.S.

150, 134 (157); Dairy Queen v. Wood, 369 U. Ss. 469, 475

(1962): Respondents themselves do not contend that this

action is based on **the accounts between the parties’’, An

account could arise, as it did in Kirby, from a long-drawn

‘contractual re lationship between the parties, By contrast,

a mere multiplicity of torts, such ax is here alleged, was

—_never thought to create an ‘tacconnt”’ and never afforded

the wrongdoer an escape from the jury.

In any case, equity's jurisdiction of complicated accounts *

has, under modern practice, shrunk to the ee of disap-

pearance; Datry (hit he ¥; Wood, ape, 269 uF “al 408:

‘In view the powers given to District Courts by

Federal Rule of. Civil Procedure Ho(b) to appoint

Masters to assist the jury in thase exe eptional cases

where the legal issues are too complicated for the

* See also p. 6 of the Brief for Respondents in this Court in Dairy

Queen: . -

*

11

jury adequately to handle alone. the burden of such

a showing [that only equity can unravel the coni-

plicated acedunts| is considerably inercased. and’ it

will indeed he a rare case in which it can @e met.’’

(Parenthetical interpolation added: footnotes omit-

ted) ,

The present action is not that “rare case’. The ex-

petienced trial judge below held that ‘‘[t]he issues are not

so complicated as to make it impracticable for a jury to

‘ascertain the amount, if any, to which plaintiffs may be.

entitled’? (A47). Jadge Smith in the Court of Appeals

agreed that * [t]he issues are not so complex as to be.beyond

the competence of a trial jury”’ (A73). .

Respondents’ apprehension that ‘‘many thousands of

separate portfolio transactions’* must be serutinized would

not take the case into equity and is, in’ any ‘event, un-

founded. Petitioners do not propose to present their evi-

dence in such piecemeal fashion. ‘They propose to provay

from respondents’ own admissions, that respondents: en-

vaged deliberately did systematically in the proper prac.

tices here alleged. If.pérsistent wrongdoing on respondents’

part emerges, the Corporation’s damages may well be

measured by the readily ascertainable amount of respond-

ents’ compensation, Wilshire Oil Co. y. Riffe, 406 F. 2d 1061

(10 Cir. 1969); and the same will be true if the illegal com-

position of. the Corporation’s’ board of directors (Compl.

par. 19; A25-26) invalidates the Corporation’s relationship

to the respondent broker, see Phillips v. S:E.C., 388 F. 2d

964, 966 (2 Cir. 1968). 3 “.

None of these issues presents inordinate difficulties for a

jury. If unexpected complications were to develop, the jury

might receive the help of a master, Rule 93(b) FRCP:

Dairy, Queen, supra. These and other details may safely be

2

left to the trial court and ean be dealt with at the pre-trial

conference, Rule 16 FRCP. The time, we submit, has passed -

when technicalifies of that nature could stand in the way

of the constitutional right to jury trial.

CONCLUSION

The judgment of the Court of Appeals for the Second

Circuit should be reversed. ; “

Dated: October 14, 1969. Jena

Respectfully submitted, .

Wiuian EB. Havie

Attorney for Petitioner.

295 Miidison Avenue

New York, N. Y. 10017

Of Counsel ° 5

Aspranam L. PoMERAntz

Rrewarp M. Meyer

SranLey M. GrossMan

Pomerantz Levy Iavpek & Biock

295 Madison Avenue a

New York, N. Y. 10017