United States Court of Appeals for the Third Circuit
507 F.2d 759 (3d Cir. 1974)
American Telephone and Telegraph Company (AT&T) (defendant) provided communications services for the 1968 Democratic national convention. As a result, the Democratic National Committee (DNC) owed AT&T approximately $1.5 million, which AT&T made no effort to collect for nearly four years. AT&T’s shareholders (plaintiffs) filed a derivative action against AT&T and most of its directors, arguing the directors breached their obligations of due diligence. Further, the plaintiffs argued that the failure to collect amounted to a preference in violation of § 202 of the Communications Act of 1934 and a “contribution” to the DNC. Such corporate campaign contributions are forbidden under federal law. 18 U.S.C. § 610 (1970). The plaintiffs sued in federal court under diversity jurisdiction. The district court dismissed the complaint, and the plaintiffs appealed to the United States Court of Appeals for the Third Circuit.
Rule of Law
Holding and Reasoning (Seitz, J.)
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