Stockholder Suits.

Moreover, adversity in parties has often been found in suits by stockholders against their corporation in which the constitutionality of a statute or a government action is drawn in question, even though one may suspect that the interests of plaintiffs and defendant are not all that dissimilar. Thus, in Pollock v. Farmers’ Loan & Trust Co.,388 the Court sustained the jurisdiction of a district court which had enjoined the company from paying an income tax even though the suit was brought by a stockholder against the company, thereby circumventing a statute which forbade the maintenance in any court of a suit to restrain the collection of any tax.389 Subsequently, the Court sustained jurisdiction in cases brought by a stockholder to restrain a company from investing its funds in farm loan bonds issued by federal land banks390 and by preferred stockholders against a utility company and the TVA to enjoin the performance of contracts between the company and TVA on the ground that the statute creating it was unconstitutional.391 Perhaps most notorious was Carter v. Carter Coal Co.,392 in which the president of the company brought suit against the company and its officials, among whom was Carter’s father, a vice president of the company, and in which the Court entertained the suit and decided the case on the merits.393

Footnotes

388
157 U.S. 429 (1895). The first injunction suit by a stockholder to restrain a corporation from paying a tax was apparently Dodge v. Woolsey, 59 U.S. (18 How.) 331 (1856). See also Brushaber v. Union Pac. R.R., 240 U.S. 1 (1916). [Back to text]
389
Cf. Cheatham v. United States, 92 U.S. 85 (1875); Snyder v. Marks, 109 U.S. 189 (1883). [Back to text]
390
Smith v. Kansas City Title & Trust Co., 255 U.S. 180 (1921). [Back to text]
391
Ashwander v. TVA, 297 U.S. 288 (1936). See id. at 341 (Justice Brandeis dissenting in part). [Back to text]
392
298 U.S. 238 (1936). [Back to text]
393
Stern, The Commerce Clause and the National Economy, 59 HARV. L. REV. 645, 667–668 (1948) (detailing the framing of the suit). [Back to text]