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LEHMAN BROTHERS V. SCHEIN, 416 U. S. 386 (1974)

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U.S. Supreme Court

Lehman Brothers v. Schein, 416 U.S. 386 (1974)

Lehman Brothers v. Schein

No. 73-439

Argued March 19, 1974

Decided April 29, 1974*

416 U.S. 386


Shareholders' derivative diversity suits were brought in federal court in New York, alleging that the president of a Florida corporation as a fiduciary, with others, used inside information about projected corporate earnings for profit, and hence was liable to the corporation for the unlawful profits. The District Court, looking to New York's choice of law rules, held that, under Florida law, which it held governed, the defendants were not liable, and dismissed the complaints. The Court of Appeals reversed, finding that Florida law, though controlling, was not decisive, and that, in this situation, Florida "would probably" apply a certain New York decision to impose liability.

Held: While resort to an available certification procedure, such as is available in Florida, is not obligatory where there is doubt as to local law, and its use in a given case is discretionary resort to such procedure seems particularly appropriate here in view of the novelty of the question, the unsettled state of Florida law, and the fact that, when federal judges in New York attempt to predict uncertain Florida law, they act as "outsiders" not exposed to local law. Hence, the case is remanded to the Court of Appeals to reconsider whether the controlling issue of state law should be certified to the Florida Supreme Court. Pp. 416 U. S. 389-392.

478 F.2d 817, vacated and remanded.

DOUGLAS, J., delivered the opinion for a unanimous Court. REHNQUIST, J., filed a concurring opinion, post, p. 416 U. S. 392. chanroblesvirtualawlibrary

Page 416 U. S. 387

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