Sunday, November 24, 2013

Eisenberg v. Flying Tiger Line, Inc. case brief

Eisenberg v. Flying Tiger Line, Inc. case brief summary
451 F.2d 267 (1971)

Appellant challenged the dismissal of his suit by the United States District Court for the Eastern District of New York after he failed to post security for costs in compliance with N.Y. Bus. Corp. Law § 627.

Appellant instituted suit on behalf of himself and all other stockholders of appellee corporation to enjoin its reorganization and merger. Appellee moved for an order requiring appellant to comply with N.Y. Bus. Corp. Law § 627, which required a plaintiff suing derivatively on behalf of a corporation to post security for the corporation's costs. The trial court granted appellee's motion and, after appellant failed to post security, dismissed the suit. Appellant sought review, claiming the cause of action to be personal and not derivative within the meaning of § 627.


  • In reversing the dismissal and remanding the matter for further proceedings, the court determined that because appellant claimed the reorganization deprived him and other minority shareholders of any voice in the affairs of the corporation, the injury suffered was personal and not derivative. 
  • The dismissal for failure to post security under § 627 was therefore improper.

The order of dismissal was reversed as the action filed by appellant was personal and not derivative; thus, the obligations to post security for derivative actions was inapplicable.

Recommended Supplements for Corporations and Business Associations Law

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