US SUPREME COURT DECISIONS

Respondent, stockholder of petitioner company, brought a civil action in federal court for deprivation of his and other stockholders' preemptive rights by reason of a merger involving the company, allegedly effected through use of a false and misleading proxy statement. The complaint has two counts, one based on diversity and claiming a breach of directors' fiduciary duty to stockholders and the other alleging a violation of § 14(a) of the Securities Exchange Act of 1934. The District Court held that, in a private suit, it could grant only declaratory relief under § 27 of the Act as to the second count, and that a state statute requiring security for expenses in derivative actions applied to everything but that part of Count 2 seeking a declaratory judgment. The Court of Appeals reversed, holding that the state law was inapplicable and that the District Court had power to grant remedial relief.

Held:

1. Private suits are permissible under § 27 for violation of §14(a) for both derivative and direct causes. Pp. 377 U. S. 430-431.

2. Federal courts will provide the remedies required to carry out the congressional purpose of protecting federal rights. Pp. 377 U. S. 433-435.

(a) Remedies are not limited to prospective or declaratory relief, but the overriding federal law controls the measure of redress. P. 377 U. S. 434.

(b) The character of the right remains federal, although state law questions must also be decided. P. 377 U. S. 434.

(c) The determination of a remedy in this case must await trial on the merits. P. 377 U. S. 435.

317 F.2d 838, affirmed. chanrobles.com-red

Page 377 U. S. 427