Wednesday, April 1, 2015

Surowitz v. Hilton Hotels Corp case brief summary

Surowitz v. Hilton Hotels Corp case brief
Posture: District Court dismissed the case, appeals affirms. Judgment reversed by SCOTUS. 
Facts: Surowitz, a stockholder in Hilton, files derivative action on behalf of the corporation against officers and directors who had defrauded it of several million dollars in violation of Securities Act of 1933, Securities Exchange Act of 1934, and Delaware Corp Law. 60-page complaint in line with the language of Federal Rule 11 with a verification of the complaint stating that some of the allegations were true and she on “information and belief” thought all other allegations true. 
Hilton moved to dismiss the complaint because Surowitz knew nothing about the complaint, facts of the case, or who defendants were. Her deposition stated so. District court dismissed rule as false under Rule 23 because the affidavit was a sham. 
Surowitz was an uneducated seamstress relying on her sons business knowledge to make investments.
Reasoning: Rule 23(b) was not there to discourage everyone from suing, just to stop frivolous suits. Surowitz did not what was going on but her son did and investigated it. Serious fraud required investigations and it does not matter that she personally does not understand what is going on here. No evidence of any trickery from the plaintiffs, the only thing wrong is Surowitz relied on her son. Judgment reversed. 

Harlan Concurrence: Thinks that her lawyer verifying the affidavit is enough to prove that suit is not frivolous. 

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