Full opinion text
MATHES, District Judge. Edward S. Birn, “owner of 400 shares of the capital stock of defendant Warner Bros. Pictures, Inc. * * * since August 21st, 1944,” commenced this action in this court on December 15, 1948, “suing derivatively on behalf of and for the benefit of defendant Warner Bros. Pictures, Inc., and the stockholders thereof.” The complaint contains three separate claims or causes of action. The third, alleging a violation of the Sherman and Clayton Acts, 15 U.S.C.A. §§ 1, 15, was dismissed without prejudice by order of court prior to trial. Fed.Rules Civ.Proc. rules 23(a) (1) (c), 41(a) (2), (b), 28 U.S.C.A. The second cause of action is asserted against defendants Harry M. Warner and Jack L. Warner alone and is-grounded upon alleged violation of “their fiduciary duties as directors” of defendant Warner Bros. Pictures, Inc. The first cause of action is asserted against all named defendants and the allegations material here are briefly: that defendant Milton Sperling is a son-in-law of defendant Harry M. Warner; that the latter and his two brothers, Albert Warner and defendant Jack L. Warner, “control and dominate Warner Bros.” and “actually select, dominate and control the directors and officers of Warner Bros.”; that about the summer of 1945 the individual defendants Milton Sperling and Harry M. and Jack L. Warner conspired “to waste * * * and misappropriate the assets and business opportunities of Warner Bros, in favor of, and to further and enrich the private interests of defendant Sperling * * * at the expense of Warner Bros.”; that in furtherance of the objects of this conspiracy defendant United States Pictures, Inc. was organized as a Delaware corporation and since September, 1946 defendant Sperling has been the sole stockholder; that “in or about September, 1945, the defendants caused Warner Bros, and United to enter into an agreement” for the production of motion pictures by United at the studios of Warner Bros, upon terms improvident and unfair as to Warner Bros, and unwarrantedly favorable to United; that “demand upon the directors of Warner Bros, to institute this action would be futile * * *”; and that plaintiff “and stockholders similarly situated and Warner Bros, will suffer irreparable damage unless the relief requested herein be granted.” The prayer is that “the defendants account to Warner Bros. * * * ”; that “a trust be impressed upon the capital stock and assets of United in favor of Warner Bros.”; that “the agreement between Warner Bros, and United * * be cancelled and terminated.” Defendants Harry M. and Jack L. Warner and Warner Bros, joined in an answer denying the substantive allegations of the complaint and pleading affirmatively the bar of California’s applicable statute of limitations. Defendants Sperling and United filed an answer to like effect. The original jurisdiction of this court is invoked upon the claimed ground that “the matter in controversy exceeds the sum or value of $3,000 exclusive of interest and costs, and is between * * * Citizens of different States * * * 28 U.S.C. § 1332. It is true, as alleged, that plaintiff is a citizen of New York, that defendants Warner Bros, and United are “corporations incorporated under the laws of * * * Delaware,” and that defendants Milton Sperling and Harry M. and Jack L. Warner are citizens of California. Since this court possesses only such jurisdiction as has been conferred by statute, U.S.Const. Art. Ill; Lockerty v. Phillips, 1943, 319 U.S. 182, 187, 63 S.Ct. 1019, 87 L.Ed. 1339 and “lack of federal jurisdiction cannot be waived or be overcome by an agreement of the parties”. Mitchell v. Maurer, 1934, 293 U.S. 237, 244, 55 S.Ct. 162, 165, 79 L.Ed. 338, jurisdiction is the threshold issue in every case brought here. State of Rhode Island v. Massachusetts, 1838, 12 Pet. 657, 37 U.S. 657, 720, 9 L.Ed. 1233; Brown v. Keene, 1834, 8 Pet. 112, 33 U.S. 112, 8 L.Ed. 885; Capron v. Van Noorden, 1804, 2 Cranch 126, 6 U.S. 126, 2 L.Ed. 229. “This question the court is bound to ask and answer for itself, even when not otherwise suggested * * *Mansfield, Coldwater & L. M. Railway Co. v. Swan, 1884, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462; Clark v. Paul Gray, Inc., 1939, 306 U.S. 583, 588, 59 S.Ct. 744, 83 L.Ed. 1001; St. Paul Mercury Ind. Co. v. Red Cab Co., 1938, 303 U.S. 283, 287-290, 58 S.Ct. 586, 82 L.Ed. 845; McNutt v. Gen. Motors etc. Corp., 1936, 298 U.S. 178, 184-189, 56 S.Ct. 780, 80 L.Ed. 1135; Robinson v. Anderson, 1887, 121 U.S. 522, 7 S.Ct. 1011, 30 L.Ed. 1021; Williams v. Nottawa, 1881, 104 U.S. 209, 211, 26 L.Ed. 719; Minnis v. So. Pac. Co., 9 Cir., 1938, 98 F.2d 913, 915, certiorari denied, 1939, 306 U.S. 631, 59 S.Ct. 461, 83 L.Ed. 1033. While jurisdictional issues in each case are properly triable to the court North Pacific S. S. Co. v. Soley, 1921, 257 U.S. 216, 221-223, 42 S.Ct. 87, 66 L.Ed. 203; Gilbert v. David, 1915, 235 U.S. 561, 566-568, 35 S.Ct. 164, 59 L.Ed. 360; Taylor v. Hubbell, 9 Cir., 1951, 188 F.2d 106, 109, certiorari denied, 1951, 342 U.S. 818, 72 S.Ct. 32, 96 L.Ed. 618, there is no statute or rule of court prescribing “any particular mode in which the question of * * * jurisdiction is to be brought to the attention of the court, nor how such question, when raised, shall be determined.” Wetmore v. Rymer, 1898, 169 U.S. 115, 120, 18 S.Ct. 293, 295, 42 L.Ed. 682. Rule 12(h) directs “that, whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.” Fed.Rules Civ.Proc. rule 12(h), 28 U.S.C.A. Rule 12(d) contemplates a hearing and determination of jurisdictional issues in advance of the trial of other issues. Fed.Rules Civ.Proc. rule 12(d), 28 U.S.C.A.; Stauffer v. Exley, 9 Cir., 1950, 184 F.2d 962, 967; 2 Moore’s Federal Practice §. 12.16 (2d ed. 1948). And the Supreme Court has declared that: “As there is no statutory direction for procedure upon an issue of jurisdiction, the mode of its determination is left to the trial court.” Gibbs v. Buck, 1939, 307 U.S. 66, 71-72, 59 S.Ct. 725, 729, 83 L.Ed. 1111; cf. Gulbenkian v. Gulbenkian, D.C.S.D.N.Y. 1940, 33 F.Supp. 19. As a general rule therefore the trial court may, in its discretion, try all issues of fact as to jurisdiction by receiving oral testimony and other evidence, Gilbert v. David, supra, 235 U.S. at pages 566, 568, 35 S.Ct. 164, or by receiving and weighing affidavits, KVOS, Inc., v. Associated Press, 1936, 299 U.S. 269, 277-278, 57 S.Ct. 197, 81 L.Ed. 183; Mechanical Appliance Co. v. Castleman, 1910, 215 U.S. 437, 440-441, 445-446, 30 S.Ct. 125, 54 L.Ed. 272; Wetmore v. Rymer, supra, 169 U.S. at page 119, 18 S.Ct. 293; Fed.Rules Civ.Proc. rule 43(a, e), 28 U.S.C.A. To borrow language from Land v. Dollar, 1947, 330 U.S. 731, 67 S.Ct. 1009, 91 L.Ed. 1209, “when a question of the District Court’s'jurisdiction is raised, either by a party or by the court on its own motion * * * Federal Rules Civil Procedure, rule 12(b)., 28 U.S.C.A., the court may inquire by affidavits or otherwise, into the facts as they exist.” 330 U.S. at page 735, note 4, 67 S.Ct. at page 1011. Whether the question be raised by the court or by motion or plea or answer of a party, see Steigleder v. McQuesten, 1905, 198 U.S. 141, 25 S.Ct. 616, 49 L.Ed. 986; Susquehanna & Wyoming Valley R. R. & Coal Co. v. Blatchford, 1870, 11 Wall. 172, 78 U.S. 172, 178, 20 L.Ed. 179; Smith v. Kernochen, 1849, 7 How. 198, 48 U.S. 198, 12 L.Ed. 666, the burden of proof always rests upon the party asserting existence of jurisdiction, KVOS, Inc., v. Associated Press, supra, 299 U.S. at page 278, 57 S.Ct. 197; McNutt v. Gen. Motors etc. Corp., supra, 298 U.S. at pages 189-190, 56 S.Ct. 780; Seslar v. Union Local 901, 7 Cir., 1951, 186 F.2d 403, 407, 30 A.L.R.2d 593, certiorari denied, 1951, 341 U.S. 940, 71 S.Ct. 1000; Barron & Holtzoff, 1 Federal Practice and Procedure (Rules Edition), § 352 (1950 ed., 1952 Supp.). That is to say, it is incumbent upon any party who invokes the jurisdiction of a federal court to establish by a preponderance of evidence all facts “upon which the court’s jurisdiction depends”. Fed. Rules Civ.Proc. rule 8(a), 28 U.S.C.A. In the case at bar oral motion was made by the defendants at pretrial hearing to dismiss the action for “lack of jurisdiction over the subject matter”, Fed. Rules Civ.Proc. rule 12(b) (1), (d, h), 28 U.S.C.A., upon the ground that requisite diversity of citizenship was lacking at the commencement of the action, in that Warner Bros., a Delaware corporation, must be aligned as a party plaintiff for diversity purposes, thus leaving a New York citizen and a Delaware corporation as plaintiffs and three California citizens and a Delaware corporation as defendants. See Mississippi Pub. Corp. v. Murphree, 1946, 326 U.S. 438, 441, note 2, 66 S.Ct. 242, 90 L.Ed. 185; St. Louis & San Francisco Ry. Co. v. James, 1896, 161 U.S. 545, 562-563, 16 S.Ct. 621, 40 L.Ed. 802; Doctor v. Harrington, 1905, 196 U.S. 579, 586-587, 25 S.Ct. 355, 49 L.Ed. 606; Louisville, Cincinnati & Charleston R. Co. v. Letson, 1844, 2 How. 497, 43 U.S. 497, 554-558, 11 L.Ed. 353; Marshall v. Baltimore & O. R. R. Co., 1853, 16 How. 314, 57 U.S. 314, 325-329, 14 L.Ed. 953. A trial of the jurisdictional and the statute-of-limitations issues, in advance of trial of the other issues in the case, was ordered. As the parties were aligned by plaintiff, complete diversity of citizenship appeared from the face of the complaint upon commencement of the action. Pacific R. Co. v. Ketchum, 1879, 101 U.S. 289, 298, 25 L.Ed. 932. Prior to trial the original plaintiff, New York citizen Edward S. Bim, died and the Probate Court of California appointed Charles B. Smith as Special Administrator of the estate. Cal.Prob.Code, §§ 460, 463. Smith, a citizen of California, was thereupon substituted as party plaintiff. Fed. Rules Civ.Proc. rule 25(a), 28 U.S.C.A. Where diversity jurisdiction exists at the commencement of an action, a subsequent change of citizenship of one of the parties does not oust it. Wichita R. R. & Light Co. v. Public Utilities Comm., 1922, 260 U.S. 48, 53-54, 43 S.Ct. 51, 67 L.Ed. 124; Louisville N. A. & C. Ry. Co. v. Louisville Trust Co., 1899, 174 U.S. 552, 566, 19 S.Ct. 817, 43 L.Ed. 1081; Clarke v. Mathewson, 1838, 12 Pet. 164, 37 U.S. 164, 171, 9 L.Ed. 1041; Dunn v. Clarke, 1834, 8 Pet. 1, 33 U.S. 1, 2, 8 L.Ed. 845; Mullen v. Torrance, 1824, 9 Wheat. 537, 22 U.S. 537, 538. It follows then that while the citizenship of the administrator at bar would have been a factor if he had originally brought the action, his citizenship as substituted party plaintiff is held not to affect determination as to diversity jurisdiction. See Continental Life Ins. Co. v. Rhoads, 1886, 119 U.S. 237, 7 S.Ct. 193, 30 L.Ed. 380; Blake v. McKim, 1880, 103 U.S. 336, 26 L.Ed. 563; Amory v. Amory, 1877, 95 U.S. 186, 24 L.Ed. 428; Rice v. Houston, Adm’r, 1871, 13 Wall. 66, 80 U.S. 66, 21 L.Ed. 484; cf. Jeffcott v. Donovan, 9 Cir., 1943, 135 F.2d 213. Subject to the exception that diversity jurisdiction can be acquired by ■dropping parties not indispensable, Dollar S. S. Lines v. Merz, 9 Cir., 1934, 68 F.2d 594; Sechrist v. Palshook, D.C.M. D.Pa.1951, 95 F.Supp. 746; Fed.Rules Civ.Proe. rule 21, 28 U.S.C.A., it is settled that as a general rule all other than mere “nominal” or “formal” parties are to be considered in determining whether there exists the diversity of citizenship required by 28 U.S.C. § 1332. See Hamer v. N. Y. Rys. Co., 1917, 244 U.S. 266, 274, 37 S.Ct. 511, 61 L.Ed. 1125; Waterman v. Canal-Louisiana Bank & Trust Co., 1909, 215 U.S. 33, 47, 30 S.Ct. 10, 54 L.Ed. 80; Geer v. Mathieson Alkali Works, 1903, 190 U.S. 428, 433, 23 S.Ct. 807, 47 L.Ed. 1122; Bacon v. Rives, 1882, 106 U.S. 99, 104, 1 S.Ct. 3, 27 L.Ed. 69; Barney v. Latham, 1880, 103 U.S. 205, 214, 26 L.Ed. 514; Walden v. Skinner, 1879, 101 U.S. 577, 588-589, 25 L.Ed. 963; Horn v. Lockhart, 1873, 17 Wall. 570, 84 U.S. 570, 579, 21 L.Ed. 657; Wood v. Davis, 1855, 18 How. 467, 59 U.S. 467, 469, 15 L.Ed. 460; Wormley v. Wormley, 1823, 8 Wheat. 421, 21 U.S. 421, 451, 5 L.Ed. 651; Schuckman v. Rubenstein, 6 Cir., 1947, 164 F.2d 952. In order to ascertain whether the Delaware corporation Warner Bros, is an indispensable party to appropriate adjudication of the stockholder’s derivative suit at bar, we must look to the law of California, Erie R. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, to “the entire body of substantive law governing an identical action in the state courts.” Ruhlin v. N. Y. Life Ins. Co., 1938, 304 U.S. 202, 209, 58 S.Ct. 860, 862, 82 L.Ed. 1290; and see Cohen v. Beneficial Loan Corp., 1949, 337 U.S. 541, 555-557, 69 S.Ct. 1221, 93 L.Ed. 1528. Insofar as the first cause of action involves validity of the 1945 agreement between Warner Bros, and United, since that agreement was executed in New York, any cause of action to cancel it presumably arose under New York law. And where suit is brought on a foreign cause of action in the courts of California, substantive matters- are held governed by the law of the place where the cause arose, while procedural matters are held governed by California law. Biewend v. Biewend, 1941, 17 Cal.2d 108, 109 P.2d 701, 132 A.L.R. 1264; accord, Restatement, Conflict of Laws § 584 (1934). Moreover, whether a matter in such a suit is substantive or procedural is a question of California law. Klaxon Co. v. Stentor Electric Mfg. Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; accord, Restatement, Conflict of Laws § 584 (1934). The courts of California apply to the conduct of foreign corporations doing business within the state, such as Warner Bros, here, the same standard as to domestic corporations. See Turner v. Markham, 1909, 155 Cal. 562, 102 P. 272; Findley v. Garrett, 1952, 109 Cal.App.2d 166, 240 P.2d 421; Angelus Sec. Corp. v. Ball, 1937, 20 Cal.App.2d 436, 67 P.2d 158; cf. Pratt v. Robert S. Odell & Co., 1942, 49 Cal.App.2d 550, 122 P.2d 684; Cal.Corp. Code, § 6601; Ballantine & Sterling, Calif.Corp.Laws, § 410, p. 515 (1949 ed.); see, also, Rogers v. Guaranty Trust Co., 1933, 288 U.S. 123, 53 S.Ct. 295, 77 L.Ed. 652; Overfield v. Pennroad Corp., 3 Cir., 1944, 146 F.2d 889, 894-896; Bovay v. H. M. Byllesby & Co., 1943, 27 Del.Ch. 33, 29 A.2d 801, Id., 1944, 27 Del.Ch. 381, 38 A.2d 808, 174 A.L.R. 1201. Speaking of a stockholder’s derivative suit, the California courts have declared that: “A stockholder who institutes it sues purely as a trustee to redress corporate injuries.” Whitten v. Dabney, 1915, 171 Cal. 621, 629; 154 P. 312, 315. Also that: “As a general rule of law * * * where a stockholder of a corporation seeks to maintain an action for a wrong done to the corporation, such stockholder occupies no better or different position with relation thereto than would the corporation itself suing in its own behalf.” Reid v. Robinson, 1923, 64 Cal.App. 46, 55, 220 P. 676, 680. “The fact that a stockholder is the nominal plaintiff does not in any manner enlarge the rights and remedies of the action.” Earl v. Lofquist, 1938, 135 Cal.App. 373, 376, 27 P.2d 416, 418. And in cases where the corporation and its board of directors are “wholly under the domination of those who committed the original fraud, the corporation is deemed to be in the same position as an incompetent person or a minor without legal capacity * * Beal v. Smith, 1920, 46 Cal.App. 271, 279, 189 P. 341, 345. See, also Sutter v. General Pet. Corp., 1946, 28 Cal.2d 525, 530, 170 P.2d 898, 900, 167 A.L.R. 271; Klopstock v. Superior Court, 1941, 17 Cal.2d 13, 17, 108 P.2d 906, 908, 135 A.L.R. 318; Turner v. Markham, supra, 155 Cal. at pages 569, 570, 102 P. at page 275. The substantive law of New York as to the nature and ownership of the cause of action involved in a stockholder’s derivative suit is in all material respects the same as that of California. See Clarke v. Greenberg, 1947, 296 N.Y. 146, 71 N.E.2d 443, 169 A.L.R. 944; Isaac v. Marcus, 1932, 258 N.Y. 257, 179 N.E. 487; Flynn v. Brooklyn City R. Co., 1899, 158 N.Y. 493, 53 N.E. 520; Alexander v. Donohoe, 1894, 143 N.Y. 203, 38 N.E. 263; Earl v. Brewer, 1936, 248 App.Div. 314, 289 N.Y.S. 150, affirmed 1937, 273 N.Y. 669, 8 N.E.2d 339. In the courts of California, then, and New York as well, the plaintiff-stockholder’s corporation is the real party in interest and an indispensable party to appropriate adjudication of the action. This view accords with that expressed in the decisions of the United States Supreme Court. See Cohen v. Beneficial Loan Corp., supra, 337 U.S. at page 548, 69 S.Ct. 1221; Koster v. (American) Lumbermens Mutual Co., 1947, 330 U.S. 518, 67 S.Ct. 828, 91 L.Ed. 1067; Meyer v. Fleming, 1946, 327 U.S. 161, 66 S.Ct. 382, 90 L.Ed. 595; City of Davenport v. Dows, 1873, 18 Wall. 626, 85 U.S. 626, 21 L.Ed. 938; also Lee v. Lehigh Valley Coal Co., 1925, 267 U.S. 542, 45 S.Ct. 385, 69 L.Ed. 782; Hamer v. N. Y. Rys. Co., supra, 244 U.S. at page 274, 37 S.Ct, 511; Dickerman v. Northern Trust Co., 1900, 176 U.S. 181, 188, 20 S.Ct. 311, 44 L.Ed. 423; Blacklock v. Small, 1888, 127 U.S. 96, 8 S.Ct. 1096, 32 L.Ed. 70; Pacific R. R. v. Ketchum, supra, 101 U.S. at pages 298-299, 25 L.Ed. 932; City of Memphis v. Dean, 1868, 8 Wall. 64, 75 U.S. 64, 73-74, 19 L.Ed. 326. As Mr. Justice Jackson wrote in Koster v. (American) Lumbermens Mutual Co., supra: “The cause of action which such a plaintiff brings before the court is not his own but the corporation’s. It is the real party in interest and he is allowed to act in protection of its interest somewhat as a ‘next friend’ might do for an individual, because it is disabled from protecting itself.” 330 U.S. at pages 522-523, 67 S.Ct. at page 831. Moreover, as Mr. Justice Douglas said in Meyer v. Fleming, supra: “The corporation is a necessary party. * * * Hence, it is joined as a defendant. But it- is only nominally a defendant, since any judgment obtained against the real defendant runs in its favor. * * * The fact that the corporation is nominally a defendant should not lead to any different result. That gives the suit only a difference in form, not a difference in substance.” 327 U.S. at pages 167-168, 66 S.Ct. at page 386. In California, as under our rules, Fed. Rules Civ.Proc. rules 17, 19(a), 28 U.S.C.A., every action must normally be prosecuted in the name of the real party in interest, Cal.Code Civ.Proc. § 367, “but. if the consent of any one who should have been joined as plaintiff cannot be obtained, he may be made a defendant * * * ” Id. § 382. With respect to “an executor,, administrator, guardian, trustee of an express trust,” Rule 17 states that each “may sue in his own name without joining with him the party for whose benefit, the action is brought * * Fed. Rules Civ.Proc. rule 17(a), 28 U.S.C.A. In such eases, since the person for whose benefit the action is prosecuted need not be joined, the citizenship of the representative who sues, and not that of the beneficiary of the suit, is considered in determining whether diversity jurisdiction exists. See Hamer v. N. Y. Rys. Co., supra, 244 U.S. at page 274, 37 S.Ct. 511; Hess v. Reynolds, 1885, 113 U.S. 73, 76, 5 S.Ct. 377, 28 L.Ed. 927; Knapp v. Railroad Co., 1873, 20 Wall. 117, 87 U.S. 117, 22 L.Ed. 328; Rice v. Houston, Adm’r, supra, 13 Wall, at page 67; Coal Co. v. Blatchford, supra, 11 Wall. 175, 78 U.S. at page 175; Childress v. Emory, 1823, 8 Wheat. 642, 21 U.S. 642, 668-669, 5 L.Ed. 705; cf. In re Moore, 1908, 209 U.S. 490, 28 S.Ct. 585, 52 L.Ed. 904; Mexican Cent. Ry. Co. v. Eckman, 1903, 187 U.S. 429, 23 S.Ct. 211, 47 L.Ed. 245; Anglo-California Nat. Bank v. Lazard, 9 Cir., 1939, 106 F.2d 693, 699-700, certiorari denied, 1940, 308 U.S. 624, 60 S.Ct. 379, 84 L.Ed. 521; Mayer v. Cohrs, C.C.E.D.Wash.1911, 188 F. 443. The stockholder’s derivative suit is a historical exception to the rule that the action be prosecuted in the name of the real party in interest. The exception permits the stockholder to sue in his own name, but he is required to join the corporation as a party. In City of Davenport v. Dows, supra, 18 Wall. 626, the Court pointed out the reasons in some detail, saying: “It would be wrong, in case the shareholder were unsuccessful, to allow the corporation to renew the litigation in another suit, involving precisely the same subject-matter. To avoid such a result, a court of equity will not take cognizance of a bill brought to settle a question in which the corporation is the essential party in interest, unless it is made a party to the litigation.” 18 Wall. at page 627; see also Helm v. Zarecor, 1911, 222 U.S. 32, 36-38, 32 S.Ct. 10, 56 L.Ed. 77; Steele v. Culver, 1908, 211 U.S. 26, 29, 29 S.Ct. 9, 53 L.Ed. 74; Porter v. Sabin, 1893, 149 U.S. 473, 478, 13 S.Ct. 1008, 37 L.Ed. 815; Dewing v. Perdicaries, 1877, 96 U.S. 193, 197-198, 24 L.Ed. 654; cf. Lee v. Lehigh Valley Coal Co., supra, 267 U.S. at page 543, 45 S.Ct. 385; Hamer v. N. Y. Rys. Co., supra, 244 U.S. at pages 272-275, 37 S.Ct. 511; American Bible Society v. Price, 1884, 110 U.S. 61, 3 S.Ct. 440, 28 L.Ed. 70. Clearly then, the corporation: for whose benefit a stockholder’s derivative suit is brought is an indispensable party to appropriate adjudication of the “matter in controversy”, and as such is one of the parties whose citizenship is to-be considered and counted in determining whether diversity jurisdiction exists, City of Dawson v. Columbia Trust Co., 1905, 197 U.S. 178, 180-181, 25 S.Ct. 420, 49 L.Ed. 713; Shields v. Barrow, 1854, 17 How. 129, 58 U.S. 129, 139, 145, 15 L.Ed. 158-in determining whether “the' matter in controversy * * * is between * * * Citizens of different States”, 28 U.S.C. § 1332, “all of whom on one side of the controversy are citizens of different states from all parties on the other side.” City of Indianapolis v. Chase National Bank, 1941, 314 U.S. 63, 69, 62 S.Ct. 15, 17, 86 L.Ed. 47; Strawbridge v. Curtiss, 1806, 3 Cranch 267, 7 U.S. 267, 2 L.Ed. 435. It is “the duty of the court in determining whether there was the requisite diversity of citizenship, to arrange the parties with respect to the actual controversy, looking beyond the formal arrangement made by the bill.” Helm v. Zarecor, supra, 222 U.S. at page 36, 32 S.Ct. at page 12; and see: Lee v. Lehigh Valley Coal Co., supra, 267 U.S. at page 543, 45 S.Ct. 385; Hamer v. N. Y. Rys. Co., supra, 244 U.S. at page 274, 37 S.Ct. 511; Steele v. Culver, supra, 211 U.S. at page 29, 29 S.Ct. 9; City of Dawson v. Columbia Trust Co., supra, 197 U.S. at page 181, 25 S.Ct. 420; Blacklock v. Small, supra, 127 U.S. at page 104, 8 S.Ct. 1096; Harter v. Kernochan, 1880, 103 U.S. 562, 566, 26 L.Ed. 411. In the words of Mr. Chief Justice Waite, a federal court should, “for the purposes of jurisdiction * * * ascertain the real matter in dispute, and arrange the parties on one side or the other of that dispute”, Pacific R. R. v. Ketchum, supra, 101 U.S. at page 298, 25 L.Ed. 932; “and the pleadings may be put aside, and the parties placed on different sides of the matter in dispute according to the facts.” Removal Cases, Meyer v. Delaware R. Construction Co., 1879, 100 U.S. 457, 469, 25 L.Ed. 593. As Mr. Justice Frankfurter observed in City of Indianapolis v. Chase National Bank, supra: “These familiar doctrines governing the alignment of parties for purposes of determining diversity of citizenship have consistently guided the * * * federal courts * * * .” 314 U.S. at page 70, 62 S.Ct. at page 17. One of the first tests to be applied in determining whether a defendant should be aligned with the plaintiff is the prayer for relief. City of Dawson v. Columbia Trust Co. supra, 197 U.S. at pages 180-181, 25 S.Ct. 420; Mahon v. Guaranty Trust etc. Co., 7 Cir., 1917, 239 F. 266, 269. In Steele v. Culver, supra, Mr. Justice Holmes declared for an unanimous Court that: “The omission of any prayer for relief against * * * [a corporate defendant] simply shows that properly it is to be treated as a plaintiff in this case.” 211 U.S. at page 29, 29 S.Ct. at page 9. Accord: Lee v. Lehigh Valley Coal Co., supra, 267 U.S. 542, 45 S.Ct. 385; Hamer v. N. Y. Rys. Co., supra, 244 U.S. at pages 272-274, 37 S.Ct. 511. As stated before, the complaint at bar discloses not the slightest pretence of asking relief against Warner Bros. as a party defendant. But plaintiff contends that a stockholder’s derivative action stands as an exception to all rules governing alignment of parties. First cited in support of this contention is Doctor v. Harrington, supra, 196 U.S. 579, 25 S.Ct. 355, which, says plaintiff, holds that the stockholder’s corporation, by refusing to sue and disputing or refuting the claim made on its behalf by the suing stockholder, in legal effect aligns itself on the defendants’ side of “the matter in controversy”. In other words, plaintiff contends in effect that refusal of the corporation to join with the suing stockholder operates as a matter of law, under the rule of Doctor v. Harrington, to align the corporation with the defense for diversity jurisdiction purposes. The inquiry is thus turned to consider whether the Court has laid down a fixed! rule to govern alignment in stockholder’s derivative actions, or whether alignment, in such cases, as in other cases, turns, upon the facts as disclosed by the pleadings and, where available, the evidence.. In Doctor v. Harrington the trial court, dismissed “on the ground that it had no. jurisdiction upon the fact alleged, and! certified to the [Supreme] court the-question of jurisdiction.” 196 U.S. at. page 579, 25 S.Ct. at page 355. It was. alleged in the bill of complaint that the-complainant stockholders were citizens, of New Jersey; that the corporate defendant, on whose behalf they sued to. set aside a judgment obtained against it by defendants Harrington, was a New York corporation and hence a citizen of' New York as were defendants Harrington. 196 U.S. at page 580, 25 S.Ct. 355. It was also alleged that “The board of' directors of said corporation is under-the absolute control and domination of' the defendant John Harrington [who],, by reason of having possession of a majority of the capital stock * * *- likewise controls the action of the stockholders.” 196 U.S. at page 582, 25 S.Ct. at page 356. Reversing the decree dismissing the bill for lack of jurisdiction over the-subject matter, the Court said: “The ninety-fourth rule in equity contemplates that there may be, and provides, for, a suit brought by a stockholder in a corporation, founded on rights which may properly be asserted by the corporation. And the decisions of this court establish that such a suit, when between citizens of different states, involves a controversy cognizable in a circuit court of the United States. The ultimate interest of the corporation made-defendant may be the same as that of the stockholder made plaintiff; but the corporation may be under a control antagonistic to him, and made to act in a way detrimental to his rights. In other words, his interests and the interests of the corporation may be made subservient to some illegal purpose. * * * “In [City of] Detroit v. Dean, 106 U.S. 537, 1 S.Ct. 560, 27 L.Ed. 300, * * * this court ordered the bill dismissed, not because Dean and the corporation had identical interests, but because the refusal of the directors of the corporation to sue was collusive. * * * Hawes v. Oakland, 104 U.S. 450, 26 L.Ed. 827, was cited, where a like right was decided to exist. See also Dodge v. Woolsey, 18 How. 331, 15 L.Ed. 401; Davenport v. Dows, 18 Wall. 626, 21 L.Ed. 938; Memphis v. Dean, 8 Wall. [64] 73, 19 L.Ed. 328; Greenwood v. Freight Company, 105 U.S. [13], 16, 26 L.Ed. 963; [City of] Quincy v. Steel, 120 U.S. 241, 7 S.Ct. 520, 30 L.Ed. 624. It was said that in Dodge v. Woolsey, that the refusal of the directors to sue caused them and Woolsey, who was a stockholder in a corporation of which they were directors, ‘to occupy antagonistic grounds in respect to the controversy, which their refusal to sue forced him to take in defense of his rights.’ Dodge v. Woolsey was modified by Hawes v. Oakland, as to what circumstances would justify a suit by a stockholder if the directors refuse to sue. * * * “The case at bar is brought within the doctrine of those cases by the allegations of the bill.” 196 U.S. at pages 587-588, 25 S.Ct. at page 357. Thus the Court, applying “the ninety-fourth rule in equity” as a federal rule •of substantive law, see Swift v. Tyson, 1842, 16 Pet. 1, 41 U.S. 1, 10 L.Ed. 865; Venner v. Great Northern Ry., 1908, 209 U.S. 24, 33, 35, 28 S.Ct. 328, 52 L.Ed. 666, held that the facts alleged were sufficient to invoke both the diversity and the equity jurisdiction of the Federal court. See Matthews v. Rodgers, 1932, 284 U.S. 521, 524, 52 S.Ct. 217, 76 L.Ed. 447; Twist v. Prairie Oil & Gas Co., 1927, 274 U.S. 684, 689-692, 47 S.Ct. 755, 71 L.Ed. 1297; Venner v. Great Northern Ry., supra, 209 U.S. at pages 34-35, 28 S.Ct. 328. That is to say, the court took as true the facts alleged in the bill of complaint, and in effect held that the complaining stockholders not only met the requirements of Equity Rule 94, but further showed that the corporation was “under a control antagonistic” to its own financial interests and should not, because of such incapacity, be aligned with the plaintiffs in determining whether diversity jurisdiction existed. In the earlier case of Hawes v. Oakland, 1881, 104 U.S. 450, 26 L.Ed. 827, the complaining stockholder of Contra Costa Water-Works Company, a California corporation, was a citizen of New York. The named defendants, including the city of Oakland, the Water-Works corporation and its directors, all were citizens of California. The bill of complaint alleged that the corporation had refused to cease furnishing the city of Oakland a free supply of water under disputed provisions of a contract between the Water-Works Company and the city. “To this bill the Water-Works Company and the directors failed to make answer; and the city of Oakland filed a demurrer, which was sustained by the court and the bill dismissed.” 104 U.S. at page 451. Upon sustaining the city’s demurrer and dismissing the bill of complaint on the merits, Judge Sawyer of the Circuit [trial] Court did not refer to jurisdiction or alignment of parties. See Hawes v. Contra Costa Water Co., C.C.S.D.Cal. 1878, 11 Fed.Cas. p. 862, No. 6,235. The fact that the Removal Cases, supra, 100 U.S. 457, were not decided until 1879, a year later, may account for Judge Sawyer’s failure to realign the Water-Works Company with the complainant and dismiss the bill for lack of jurisdiction over the subject matter. Some three years following his decision of the Hawes case, in a stockholder’s derivative suit brought by Dannmeyer, an alien, against Consolidated Virginia Mining Company, a California corporation, and California citizens Coleman, Flood, Fair, Machay, et al., Judge Sawyer, after citing the Removal Cases, wrote: “The complainant Dannmeyer’s interest as a stockholder is only secondary and derivative, and merely incidental to that of the corporation. Transferring the corporation from the side of the defendant to that of the complainant, who is simply using the corporation and litigating in his own name, and actually in behalf of the corporation and for its own benefit, as is suggested in the Removal' Cases, should be done for the purpose of determining the question of jurisdiction, and we have an alien and a California corporation on one side, and several California corporations and citizens on the other. Does not this oust the jurisdiction?” Dannmeyer v. Coleman, C.C.D.Cal.1882, 11 F. 97, 103: Whatever may have been the reasons for Judge Sawyer’s omission to dismiss the Hawes case for want of jurisdiction, still other reasons served Mr. Justice Miller, speaking for the Court upon appeal from Judge Sawyer’s decree dismissing the bill on the merits, to affirm the dismissal, not upon the merits, but upon the ground that the bill showed upon its face a want of equity. Four years previous to his opinion in Hawes v. Oakland, Mr. Justice Miller, sitting as Circuit Justice in the Circuit Court of the District of Colorado, heard a motion to remand to the state court a stockholder’s derivative suit, and upon denying the motion wrote: “The suit in this case is brought, as the parties concede, and as the petition shows, by the commissioners of the county of Arapahoe, who are citizens of the state of Colorado, against the Denver Pacific Railway and Telegraph Company, which is also a citizen of Colorado, and against two gentlemen, Mr. Sayre and Mr. Moffat, who are citizens of Colorado, and against seven or eight other persons, who are citizens of other states than Colorado. The case has been removed to this court upon a petition setting forth substantially these facts, and it is now asked to be remanded because the requisite essentials, as prescribed by the act of congress conferring jurisdiction upon this court, are not found in this case. The objection is that the Denver Pacific Railway and Telegraph Company, Sayre and Moffat, are citizens of the same state with the complainants in this action. * * * It is further alleged, in support of the objection to the jurisdiction of this court in this case, that the Denver Pacific Railway Company, and Sayre and Moffat, each of them, are necessary adverse parties to the complainants in this suit. The objection, if well taken, will require the suit to be remanded. “The reply is that the Denver Pacific Company, and Sayre and Moffat, are nominal parties, against whom no relief is sought, and against whom no decree can be rendered; that the bill is clear and specific on that point; consequently the right which belongs to the other parties to remove the case is not and cannot be defeated by the joinder in the petition of other defendants, citizens of the same state with the complainants, against whom no relief is prayed. As regards Sayre and Moffat, the case seems very clear. A careful reading of the bill shows that no relief can be had against them. * * * ” Confronting the problem of alignment for jurisdictional purposes, Mr. Justice Miller continued: “The case then rests upon the question of whether the fact that the Denver Pacific Railway Company is a party defendant, and is a citizen of the same state of the party plaintiff, ousts the jurisdiction of this court or defeats the right of removal of the other parties who are citizens of other states. That question does not rest upon the same principle as the ease of Messrs. Sayre and Moffat. The Denver Pacific Railway Company is a necessary party to this suit; it is one without which the suit cannot proceed. The main object of this suit * * * is to obtain an accounting * * *. The relief * * * asked is a decree in favor of the Denver Pacific Railway Company for the amount found due upon that accounting. The Denver Pacific Railway Company is a necessary party to that accounting. A party cannot be required to go to all the trouble of accounting and having a decree, when that accounting and decree will not be a valid defence against the principal party having the right to call such party to account. * * * This shows very clearly that the Denver Pacific Railway Company is not a mere nominal party, but is an indispensable party. But, as already stated, the main relief sought in this case will be, if the suit is successful, a decree in favor of the Denver Pacific Railway Company for the amount found due from the other defendants in this case. That is an important and significant feature of the transaction. * * * [I]t is very clear that the interest of the Denver Pacific Railway Company is the interest of the plaintiffs; that their interest is identical — that the board of county commissioners are using the name of the Denver Pacific Company to carry on this suit solely for the benefit of that company. * * * The complainants recognize this themselves, for in their prayer for relief they say expressly what they pray for is a decree in favor of the Denver Pacific Railway Company against the Kansas Pacific Railway Company and the other defendants. Now, the controversy in this case is one in which the commissioners of Arapahoe county and the Denver Pacific Railway Company are on one side, citizens of the state of Colorado, against all the other defendants. * * * “The best judgment I am able to give is that this is a controversy between citizens of the state of Colorado on one side, and citizens of other states on the other side, and is properly subject to removal.” Arapahoe County v. Kansas Pac. Ry. Co., C.C.D.Colo.1877, 1 Fed.Cas. No.502, pp. 1080, 1081-1083. It is interesting that Mr. Justice Miller wrote this opinion in Arapahoe County two years before the Removal Cases were decided. Since both Arapahoe, 1 Fed.Cas. p. 1080, and the Removal Cases, 100 U.S. 457, were decided under the Act of March 3, 1875, 18 Stat. 470, it seems safe to conclude that the former served as a forerunner to the latter, in which the Court declared for the first time that: “Under the new law the mere form of the pleadings may be put aside, and the parties placed on different sides of the matter in dispute according to the facts.” 100 U.S. at page 469. Two years later, when Mr. Justice Miller came to write the opinion in Hawes v. Oakland, he omitted to cite or mention the realignment rule of either Arapahoe or the Removal Cases and does not indeed appear to have considered dismissal for lack of jurisdiction over the subject matter rather than for want of equity, notwithstanding reference in the opinion to the Act of March 3, 1875, 18 Stat. 470. Rather, he referred back to and distinguished Dodge v. Woolsey, 1855, 18 How. 331, 59 U.S. 331, 15 L.Ed. 401, where both diversity and equity jurisdiction were sustained in a stockholder’s derivative suit brought by Woolsey, a Connecticut stockholder of an Ohio banking corporation, against Dodge, an Ohio tax collector, “the directors of the bank, and the bank itself, defendants.” 59 U.S. at page 336. “To this bill the defendant, George C. Dodge, filed an answer. The other defendants did not answer. He admits the material allegations of the bill, except the allegation that the tax law * * * is unconstitutional * * 59 U.S. at page 339. It is true, as Mr. Justice McKenna pointed out in Doctor v. Harrington, supra, 196 U.S. 579, 25 S.Ct. 355, that: “It was said that in Dodge v. Woolsey, that the refusal of the directors to sue caused them and Woolsey, who was a stockholder in a corporation of which they were directors, ‘to occupy antagonistic grounds in respect to the controversy, which their refusal to sue forced him to take in defense of his rights.’ ” 196 U.S. at page 588, 25 S.Ct. at page 357. The quoted statement from Dodge v. Woolsey was made by Mr. Justice Wayne in disposing of an “imputation of contrivance” between Woolsey and the directors of the bank to give the federal court jurisdiction “on account of their residence and citizenship being in different states.” 18 How. at pages 345-346. In comparing Hawes v. Oakland and Dodge v. Woolsey, it is of assistance to keep in mind that the latter was decided “under the old law,” and that, as stated in the Removal Cases: “Under the old law the pleadings only were looked at, and the rights of the parties in respect to a removal were determined solely according to the position they occupied as plaintiffs or defendants in the suit.” 100 U.S. at page 469. As authority for the statement last above quoted, the Court in the Removal Cases cites Coal Co. v. Blatchford, supra, where Mr. Justice Field observed that “In Osborn v. Bank of United States, 1824, 9 Wheat. 738, 22 U.S. 738, 857, 6 L.Ed. 204, the Chief Justice laid it down as a universal rule that, in controversies between citizens of different States, the jurisdiction of the Federal courts depended not upon the relative situation of the parties concerned in interest, but upon the relative situation of the parties named in the record.” 11 Wall. at page 175. Thus at the time of Dodge v. Woolsey the Court had no power to consider realignment of the parties — “the pleadings only were looked at.” Removal Cases, supra, 100 U.S. at page 469. But such power did exist at the time Hawes v. Oakland was decided, and it is clear from Arapahoe and the Removal Cases that the Court was then mindful of realignment. The tenor of the opinion in Hawes v. Oakland indicates that the Court deliberately chose that case as the springboard for a new rule of substantive law, Swift v. Tyson, supra, 16 Pet. 1, to curb the then prevalent evils of collusive maintenance of derivative suits by stockholders in federal courts. 104 U.S. at pages 459-462; see 18 Stat. 470, 472 (1875); cf. 28 U.S.C. § 1359. So instead of realigning the parties and dismissing for lack of jurisdiction over the subject matter, the Court affirmed dismissal of the bill, not on the merits, but for want of equity, “because the appellant shows no standing in a court of equity — no right in himself to prosecute the suit.” 104 U.S. at page 462; see Venner v. Great Northern Ry. Co., supra, 209 U.S. at page 34, 28 S.Ct. 328; cf. Bourdieu v. Pacific Oil Co., 1936, 299 U.S. 65, 70-71, 57 S.Ct. 51, 81 L.Ed. 42; Joint Anti-Fascist Comm. v. McGrath, 1951, 341 U.S. 123, 150-157, 71 S.Ct. 624, 95 L.Ed. 817 (concurring opinion). At the same October Term, 1881, Mr. Justice Miller, in an opinion, Huntington v. Palmer, 1881, 104 U.S. 482, 26 L.Ed. 833, affirming a decree dismissing for want of equity a stockholder’s derivative suit similar to Dodge v. Woolsey, supra, 18 How. 331, said: “There is here no formal written appeal to the board * * * and there is nothing to repel the reasonable presumption that parties were improperly and collusively made in order to invoke the jurisdiction of the Federal court.” 104 U.S. at page 484. Later in the same term, Mr. Justice Miller wrote the opinion in Greenwood v. Freight Co., 1881, 105 U.S. 13, 26 L.Ed. 961, in which the Court, without discussing possible realignment of the parties or any jurisdictional issue, held that the stockholder’s bill of complaint met the substantive requirements specified in Hawes v. Oakland, supra, 104 U.S. at pages 460-461, but affirmed the trial court’s decree sustaining a demurrer and dismissing the bill for want of equity. 105 U.S. at pages 16, 24. See, seriatim City of Detroit v. Dean, 1882, 106 U.S. 537, 1 S.Ct. 560, 27 L.Ed. 300; Central R. Co. of New Jersey v. Mills, 1885, 113 U.S. 249, 5 S.Ct. 456, 28 L.Ed. 949; Mills v. Central R. Co. of New Jersey, C.C.D.N.J.1884, 20 F. 449, 451; East Tenn., V. & G. Railroad v. Grayson, 1886, 119 U.S. 240, 243, 7 S.Ct. 190, 30 L.Ed. 382; cf. Smith v. McKay, 1896, 161 U.S. 355, 357, 16 S.Ct. 490, 40 L.Ed. 731; In re Lehigh Min. & Mfg. Co., 1895, 156 U.S. 322, 327, 15 S.Ct. 375, 39 L.Ed. 438. Of next importance to the problem at bar is City of Quincy v. Steel, 1887, 120 U.S. 241, 7 S.Ct. 520, 30 L.Ed. 624, which was a stockholder’s derivative suit brought in the Southern District of Illinois by a citizen of Alabama against the city of Quincy and the Quincy Gas Light and Coke Co., an Illinois corporation. A demurrer interposed by the city of Quincy was overruled, “the city refused to plead further, and decree was thereupon rendered against it.” 120 U.S. at page 243, 7 S.Ct. at page 522. Upon appeal by the city the decree was reversed and the case remanded with instructions to sustain the demurrer and dismiss the bill on the merits. Speaking again for the Court, Mr. Justice Miller said: “Prior to 1875 cases had come into the courts of the United States, especially into the Circuit Courts, where citizenship had been simulated, and parties improperly made or joined either as plaintiffs or defendants, for the purpose of creating a case cognizable in the circuit courts originally, or removable thereto from the state courts; and, as it very frequently occurred that both plaintiffs and defendants were willing to seek that court in preference to the state courts, it had been found very difficult to prevent these improper cases from being tried in those courts. In the act of March 3, 1875 [18 Stat. 470, 472], an attempt was made to correct this evil, and, by the fifth section of that act, it was declared ‘that if, in any suit * * * it shall appear to the satisfaction of said circuit court, at any time after such suit has been brought or removed thereto, that such suit does not really and substantially involve a dispute or controversy properly within the jurisdiction of said circuit court, or that the parties to said suit • have been improperly or collusively made or joined, either as plaintiffs or defendants, for the purpose of creating a case cognizable or removable under this act, the said circuit court shall proceed no further therein, but shall dismiss the suit, or remand it to the court from whence it was removed, as justice may require.’ “In the cases of Hawes v. Oakland, 104 U.S. [450] 456, [26 L.Ed. 827] and Huntington v. Palmer, [104 U.S.] 482 [26 L.Ed. 833],” Mr. Justice Miller continued, “the question of the growth of the form of invoking federal jurisdiction, where it does not otherwise exist, by the attempt of a corporation, which cannot sue in the federal court, to bring its grievance into that court by a suit in the name of one of its stockholders who has the requisite citizenship, was very much considered. In order to give effect to the principles there laid down, this court at that term adopted rule 94 of the rules of practice for courts of equity of the United States, which is as follows: ‘Every bill brought by one or more stockholders in a corporation, against the corporation and other parties, founded on rights which may properly be asserted by the corporation, must be verified by oath, and must contain an allegation that the plaintiff was a shareholder at the time of the transaction of which he complains, or that his share had devolved on him since by operation of law; and that the suit is not a collusive one to confer on a court of the United States jurisdiction of a case of which it would not otherwise have cognizance. It must also set forth with particularity the efforts of the plaintiff to secure such action as he desires on the part of the managing directors or trustees, and, if necessary, of the shareholders, and the causes of his failure to obtain such action.’ [104 U.S. ix-x.] “The bill in the present case, although verified by oath, is far from complying with the letter or the spirit of this rule.” 120 U.S. at pages 244-246, 7 S.Ct. at pages 522, 523. The 94th Equity Rule, so conceived, was later embodied in Equity Rule 27 and is now incorporated in Rule 23(b) of the Federal Rules of Civil Procedure. See Notes of Advisory Committee following rule 23, 28 U.S.C.A. Since it was not until 1938 that Erie R. R. Co. v. Tompkins, supra, 304 U.S. 64, 58 S.Ct. 817, overruled Swift v. Tyson, supra, 16 Pet. 1, Equity Rule 94 and successor Equity Rule 27 are to be considered as ■embodying both substantive and adjective law. See Hawes v. Oakland, supra, 104 U.S. at pages 459-461; Quincy v. Steel, supra, 120 U.S. at pages 244-248, 7 S.Ct. 520; Notes of Advisory Committee following rule 23, 28 U.S.C.A. Thus the Act of March 3, 1875, 18 Stat. 470, 472, in effect foreclosed the ■equity jurisdiction of the Federal courts to every stockholder’s derivative suit in which the complaining stockholder failed to establish lack of collusion. Consequently, whenever the allegations of the .stockholder’s bill of complaint were found insufficient to negative collusion under Equity Rule 94, or successor Rule '27 — insufficient to show “standing in a •court of equity * * * right in himself to prosecute the suit” Hawes v. Oakland, supra, 104 U.S. at page 462—the suit was dismissed for want of equity, and it was never considered necessary to raise the question of proper alignment of parties, since the allegations of ■the bill were always taken as true upon the demurrer for want of equity. See, e. g. City of Chicago v. Mills, 1907, 204 U.S. 321, 27 S.Ct. 286, 51 L.Ed. 504; Illinois Central R. Co. v. Adams, 1901, 180 U.S. 28, 38, 21 S.Ct. 251, 45 L.Ed. 410; Lehigh Mining & Mfg. Co. v. Kelly, 1895, 160 U.S. 327, 16 S.Ct. 307, 40 L.Ed. 444; cf. Niles-Bement-Pond Co. v. Iron Moulders Union, 1920, 254 U.S. 77, 81-82, 41 S.Ct. 39, 65 L.Ed. 145; Helm v. Zarecor, supra, 222 U.S. at page 35, 32 S.Ct. 10. Venner v. Great Northern Ry., supra, 209 U.S. 24, 28 S.Ct. 328, explains this ■practice. There, in the language of Mr. ■Justice Moody: “The [plaintiff], a citizen of New York, brought * * * suit in equity 'in the supreme court of New York against the defendant railroad, a ■citizen of Minnesota, and the other defendant, its president, also a citizen of Minnesota. The complaint set forth in ■substance * * *: The plaintiff was a stockholder in the defendant railroad at the time of the beginning of the suit in 1906. * * * The defendant James J. Hill was a director and the president of the other defendant, the Great Northern Railway Company, and that railroad and its board of directors were under his absolute control. While holding these offices and exercising this control, in 1900 and 1901, Hill purchased, or caused to be purchased * * * stock of the Chicago, Burlington, and Quincy Railroad Company of the par value of $25,000,000 * * * with the design of selling the stock at a higher price to the company of which he was * * * president. Subsequently, in 1901, while still holding his offices in the Great Northern Railway and exercising the same control over that corporation, he sold to it a large amount of the stock * * * and made an unlawful profit of $10,000,000 on the transaction. * * * The prayer was that Hill should account for his profit and pay it to the Great Northern Railway Company with interest, and for general relief. On the defendants’ petition the case was removed to the United States circuit court for the southern district of New York, on the ground of diversity of citizenship * * *. The complaint did not conform to the requirements of the 94th equity rule, relating to suits of this nature * * *. The defendants then demurred separately to the bill * * *. Thereafter the plaintiff moved to remand the cause to the state court * * *. This motion was denied. The demurrer was sustained and the bill dismissed [for want of equity]. * * * The ease comes here on direct appeal from the circuit court on the question of jurisdiction alone, certified * * The opinion by Mr. Justice Moody proceeds: “First, was there a controversy between citizens of different states? * * * Let it be assumed for the purposes of this decision that the court may disregard the arrangement of parties made by the pleader, and align them upon the side where their interest in and attitude to the controversy really places them, and then may determine the jurisdictional question in view of this alignment. Removal Cases, 100 U.S. 457 * * *. If this rule should be applied it would leave the parties here where the pleader has arranged them. It would doubtless be for the financial interests of the defendant railroad that the plaintiff should prevail. But that is not enough. Both defendants unite, as sufficiently appears by the petition and other proceedings, in resisting the plaintiff’s claim of illegality and fraud. They are alleged to have engaged in the same illegal and fraudulent conduct, and the injury is alleged to have been accomplished by their joint action. The plaintiff’s controversy is with both, and both are rightfully and necessarily made defendants, and neither can, for jurisdictional purposes, be regarded otherwise than as a defendant. * * * The case of Doctor v. Harrington is precisely in point on this branch of the ease, and is conclusive. * * * ” Turning to Equity Rule 94 and the cases which gave rise to it, the opinion continues: “Second. Did the circuit court have jurisdiction of the subject matter of the litigation? It has already been shown that the plaintiff in his petition did not bring this ease within the terms of the 94th rule in equity * * *. It may be noted that the plaintiff in Doctor v. Harrington complied with the requirements of the rule. It is argued that a compliance with that rule is essential to the jurisdiction, and that a controversy of the general nature contemplated by the rule is beyond the jurisdiction of the circuit court unless the plaintiff shows the existence of all the facts which the rule makes indispensable to his success in the suit. But this argument overlooks the purpose and nature of the rule. The rule simply expresses the principles which this court, after a review of the authorities, had declared in Hawes v. Oakland, 104 U.S. 450, 26 L.Ed. 827, to be applicable in the decision of a stockholder’s suit of the kind now under consideration. Neither the rule nor the decision from which it was derived deals with the question of the jurisdiction of the courts, but only prescribes the manner in which the jurisdiction shall be exercised. If a controversy of this general nature is brought in the circuit court and the necessary diversity of citizenship exists, but, upon the pleadings or the proof, it appears that the plaintiff has not shown a case within the decision in Hawes v. Oakland, or the rule of court declaratory of that decision, the bill should be dismissed for want of equity, and not for want of jurisdiction. * * * So it was that in Hawes v. Oakland the demurrer was sustained and the bill dismissed, not for want of jurisdiction, but, in the words of the court [104 U.S. at page 462], ‘because the appellant shows no standing in a court of equity, — no right in himself to prosecute this suit.’ The same order was made in Huntington v. Palmer, 104 U.S. 482, 26 L.Ed. 833, and Quincy v. Steel, 120 U.S. 241, 7 S.Ct. 520. This very question was considered by the court in Illinois Central Railroad Company v. Adams, 180 U.S. [28], at page 34, 21 S.Ct. [251], 253, 45 L.Ed. [410] 412, where it said: ‘* * * At common law neither an infant, an insane person, married woman, alien enemy, nor person having no interest in the cause of action, can maintain a suit in his or her own name; but it never would be contended that the court would not have jurisdiction to inquire whether such disability in fact existed, nor that the case could be dismissed on motion for want of jurisdiction * * *. The objection that plaintiff has failed to comply with the 94th rule may be raised by demurrer, but the admitted power to decide this question is also an admission that the court has jurisdiction of the case.’ ” 209 U.S. at pages 28-35, 28 S.Ct. at pages 330, 331. See Simpson, Fifty Years of American Equity, 50 Harv.L.Rev. 171, 190, n. 121 (1936). Next- cited by plaintiff at bar is Cutting v. Woodward, 9 Cir., 1918, 255 F. 633. There Illinois stockholders sued a California corporation and a California citizen, the appellant. The Court of Appeals said: “The court below found that during all this period the appellant had virtual control of the majority of the board of directors, and that they were ever ready to do his bidding. These transactions constitute actual and not constructive fraud. “The trust company raises the question of jurisdiction, asserting that the company is not an adversary party to the plaintiffs in the suit, but is the real party in interest as plaintiff, and that consequently there is no diversity of citizenship. But this is not a case in which the trust company, although made a defendant, should be realigned as a plaintiff, as in Hamer v. New York Railways, 244 U.S. 266, 274, 37 S.Ct. 511, 61 L.Ed. 1125. Here the attitude of the trust company is hostile to the plaintiffs. It appeared in a joint answer with the appellant, and by the same counsel, and it denied the allegations of the bill and prayed for the dismissal thereof. The cause is therefore one in which plaintiffs, citizens of Illinois, bring suit against defendants who are citizens of California. Doctor v. Harrington, 196 U.S. 579, 25 S.Ct. 355, 49 L.Ed. 606; Venner v. Great Northern Railway, 209 U.S. 24, 28 S.Ct. 328, 52 L.Ed. 666 * * * ” 255 F. at page 635. See Cutting v. Bryan, 9 Cir., 1929, 30 F.2d 754, 758; cf. Minnis v. Southern Pac. Co., supra, 98 F.2d at page 915. What then is to govern alignment of parties in a stockholder’s derivative suit where, as is the usual case, federal jurisdiction is invoked upon the ground of claimed diversity of citizenship ? Recalling that in Doctor v. Harrington, supra, where the stockholders’ bill of complaint alleged that the “board of directors * * * is under the absolute control and domination of * * * John J. Harrington [who] by reason of having possession of a majority of the capital stock * * * likewise controls the action of the stockholders”, 196 U.S. at page 582, 25 S.Ct. at page 356, the Court, faced with answering the certified question of jurisdiction, as to “Whether * * * the complainants’ bill * * * showed * * * diversity of citizenship * * * ” 196 U.S. at page 579, 25 S.Ct. at page 355, observed: “The ultimate interest of the corporation made defendant may be the same as that of the stockholder made plaintiff; but the corporation may be under a control antagonistic to him, and made to act in a way detrimental to his rights. In other words, his interests and the interests of the corporation may be made subservient to some illegal purpose.” 196 U.S. at page 587, 25 S.Ct. at page 357. Recalling that in Venner v. Great Northern Ry., supra, where the stockholders’ bill of complaint alleged that “defendant James J. Hill was * * * the president of the other defendant, the Great Northern Railway * * * and that railroad and its board of directors were under his absolute control”, 209 U.S. at page 29, 28 S.Ct. at page 328, the Court, likewise in response to the certified “question of jurisdiction”, 209 U.S. at page 30, 28 S.Ct. at page 329, found the jurisdictional facts by taking as true the allegations of the bill and the defendants’ petition for removal, and declared: “Both defendants unite, as sufficiently appears by the petition and other proceedings, in resisting the plaintiff’s claim of illegality and fraud. They are alleged to have engaged in the same illegal and fraudulent conduct, and the injury is alleged to have been accomplished by their joint action. The plaintiff’s controversy is with both, and both are rightfully and necessarily made defendants, and neither can, for jurisdictional purposes, be regarded otherwise than as a defendant. * * * The case of Doctor v. Harrington is precisely in point on this branch of the case, and is conclusive.” 209 U.S. at page 32, 28 S.Ct. at page 329. Recalling that in Cutting v. Woodward, supra, the defendant-president of the corporation was found to have “virtual control of the majority of the board of directors, [who] were ever ready to do his bidding”, and the Court of Appeals for this Circuit said: “ * * * this is not a case in which the * * * Company * * * should be realigned as a plaintiff * * *. Here the attitude of the * * * company is hostile to the plaintiffs.” 255 F. at page 635. Cf. Gage v. Riverside Trust Co., C.C.S.D.Cal. 1906, 156 F. 1002, 1007; Opici v. Cucamonga Winery, S.D.Cal.1947, 73 F.Supp. 603. Recalling also that in Koster v. (American) Lumbermens Mutual Co., supra, the Court commented that “jurisdiction is saved in this class of cases by a special dispensation because the corporation is in antagonistic hands. Doctor v. Harrington, 196 U.S. 579, 25 S.Ct. 355, 49 L.Ed. 606.” 330 U.S. at page 523, 67 S.Ct. at page 831. It would seem ad extremum that there can be no fixed rule for alignment of the parties in every case; that at most the binding precedents establish a test by which the court may properly determine when not to ali