Sax v. World Wide Press, Inc.

809 F.2d 610 (1987)

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Nature of the Case

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Facts

World Wide (WW) manufactures and markets punchboards and other gambling supplies and equipment. The individual defendants own more than half of the stock of the corporation. In 1972, WW hired P as its general manager for the purpose of creating a plant at Great Falls, Montana. The real agreement gave P right to purchase up to 75,000 shares of stock. After P started the business and acquired approximately 5% of the stock, D allegedly breached the option agreement by refusing to sell him further stock. P terminated his employment on June 30, 1976. P alleges that the individual defendants conspired to deplete WW's assets and depreciate the value of his stock, which deprived him of income consisting of the going rate of interest of the value of his stock. He claims that the members of the conspiracy illegally sold punchboards and kept inadequate records of inventory. He also alleges that they diverted the WW's assets to their own use. He also claims that the conspirators published false and fraudulent annual statements concealing their personal interests and conflicts of interest. On 12/3.1983, P filed a complaint as an individual shareholder seeking compensation for actual and punitive damage. In response to D's motion, the district court struck P's claims for actual and punitive damages under Fed.R.Civ. P 12(f). P filed an amended complaint in an attempt to comply with the district court's order and opinion. On July 19, 1989, the district court withdrew its earlier opinion and dismissed the counts seeking damages in the amended complaint on the ground that the claims stated a derivative causes of action and that P had failed to comply with Fed. R.Civ.P 23.1. It reasoned that the alleged wrongful acts of Ds did not injure P personally but rather damaged WW and that therefore the action must be brought derivatively. Accordingly, the district court dismissed the action. We affirm.