From our private database of 15,100+ case briefs...

Cohen v. Beneficial Industrial Loan Corp.

United States Supreme Court
337 U.S. 541 (1949)


Facts

A shareholder derivative action is a lawsuit in which a shareholder of a corporation alleges that the corporation is being managed in a way that benefits the management, not the shareholders. The shareholder must make a demand to the company that it recoup its losses from the managers who took benefits beyond what they should have received, and if the company does not comply with the request, the aggrieved shareholders can sue the company. Because this litigation can be very cumbersome to the corporation, New Jersey adopted a law providing that if a plaintiff in a shareholder derivative suit owned less than 5 percent of the shares of the corporation being sued, that shareholder must post a bond to institute the litigation. If the shareholder did not win, the shareholder was required to pay the corporation’s attorney's fees. Cohen (plaintiff) owned approximately .0125 percent of Beneficial Industrial Loan Corp. (defendant), which did business in New Jersey. Cohen believed that Beneficial’s management was enriching itself at the expense of the corporation and brought suit in federal district court. The district court held that it was not bound to follow the New Jersey statute requiring a bond because, under the rule of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), the statute was merely procedural. The court of appeals reversed and ordered a bond to be posted. The United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Jackson, J.)

Concurrence/Dissent (Douglas, J.)

Dissent (Rutledge, J.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.

  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.

Here's why 288,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 15,100 briefs, keyed to 205 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.