Otis & Co. v. Pennsylvania R.R.

155 F.2d 522 (3rd Cir. 1946)

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Nature of the Case

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Facts

Otis & Co. (P) was an investment banking house and owner of 60 of 17,400,000 shares of stock of the Pennsylvania R.R. (D). P sued D in a derivative action to recover $1,000,000 from certain directors of D and the Ohio & Detroit Railroad Company (D1). It is alleged in the complaint that D owned all the capital stock of D2 and that D's President and D1's President, who was also Vice President of D, entered into a deal with Kuhn, Loeb & Co. to sell bonds at par subject to ICC approval. P claimed that the transaction was entirely private and that $1/2 million was lost in failing to shop the transaction and another $1/2 million was lost in failing to put the new issue to competitive bidding. P contends that the corporations were made defendants merely for a technical reason; they refused to prosecute the action against the individual defendants. P concedes that in substance the corporations are the real plaintiffs. P claims as such that the corporate Ds should not be permitted to file answers designed to defeat P's claims and that the proper conduct is to remain neutral or aid P.