Opinion
January 5, 1949.
Morris J. Levy, of New York City, for plaintiff.
Wellman Smyth, and Herbert C. Smyth, all of New York City, for Playford.
Suit pursuant to the Securities Exchange Act, by Tessie Arbetman, stockholder of Alaska Airlines, Inc., suing on behalf of herself and all other stockholders similarly situated, and on behalf of and in the right of Alaska Airlines, Inc., against Harry R. Playford and Alaska Airlines, Inc., for payment to Alaska Airlines, Inc., by Harry R. Playford, of alleged profits realized by him, by purchase and sale of stock in Alaska Airlines, Inc. On motion to vacate a demand for trial by jury made by Harry R. Playford.
Motion granted.
This is a motion to vacate a demand for trial by jury made by the defendant Playford.
The plaintiff brought suit pursuant to Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78p(b) in behalf of herself and all other stockholders similarly situated and in behalf of the defendant corporation for the payment to the corporation of the alleged profits realized by defendant Playford by purchase and sale of stock in that corporation.
Section 16(b) provides that if any corporate director, officer or beneficial owner of more than 10 per centum of any class of registered equity security of the issuing corporation, through short term trading in the securities of the corporation realizes profit, such profit shall be recoverable by the corporation, and that, if the corporation fails to prosecute the action diligently within 60 days after demand by the stockholder, the stockholder may bring suit in the name and in behalf of the corporation and that suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction.
The stockholder's suit brought under Section 16(b) is a suit not for the direct benefit of the plaintiff himself but for the benefit of the corporation and all its stockholders and is a derivative suit in the nature of an equitable action. See Smolowe v. Delendo Corporation, 2 Cir., 136 F.2d 231, 241, 148 A.L.R. 300; Pottish v. Divak, D.C., 71 F. Supp. 737, 738.
The Securities Exchange Act confers upon the plaintiff the choice to institute his action to assert a right created by the Act, at law or in equity. By failing to make demand for trial by jury and by moving to vacate the defendant's demand for a jury trial, the plaintiff has clearly indicated his choice to have the case tried in equity. The plaintiff having exercised his choice the defendant can not at his option have the case tried at law.
The motion is granted.