Cohen v. Beneficial Industrial Loan Corp.
United States Supreme Court
337 U.S. 541 (1949)
New Jersey law required shareholders owning less than 5% of a corporation's stock to post a bond covering the corporation's potential attorney's fees before bringing a derivative suit; Cohen (plaintiff), who owned about .0125% of Beneficial Industrial Loan Corp. (defendant), sued in federal diversity court alleging management self-enrichment. The district court held the bond statute was merely procedural under Erie and declined to apply it; the court of appeals reversed and ordered a bond posted, and the Supreme Court granted certiorari.
Whether (1) an appeal may be taken from a lower court's interlocutory ruling that conclusively determines a disputed issue that is separate from, and collateral to, the merits of the action and would be effectively unreviewable after a final judgment, and (2) a statute requiring a bond be posted before a shareholder brings a derivative suit is both constitutionally permissible and sufficiently substantive to be applied by a federal court sitting in diversity.