Ross was a shareholder who was
involved in a derivative suit in
which the shareholders of a corporation alleged that Bernhard had beached
a contract with the corporation.
In a derivative suit, the corporation is the one with the claim. As
a shareholder, Ross only has standing to sue because he will be damaged
as a result of the corporation being damaged. That's why this is a derivative suit. It's a form of a class-action lawsuit.
There was a question as to
whether this should be heard as an equity claim or a law claim. This was important because legal claims were traditionally brought in a law
court, where you have the right to a jury trial. On the other hand, equity courts do not have a right to a jury trial.
Derivative suits were traditionally brought in equity courts
because shareholders didn't have standing to sue in a law court.
However, the claim here
would have clearly been a legal claim if the suit was brought by the
corporation itself.
By this time, the court systems
had been merged and the Trial Court had no idea whether to use a jury or not.
The US Supreme Court found
that the two pieces of the case should be decoupled. The
first part, when determining whether Ross had standing to sue could be
handled as an equity claim, decided
by a judge, but once the case went to trial, it would be considered a law claim and there would be a right to a jury
trial.
"The historical rule of
preventing a court of law from entertaining a shareholder's suit on
behalf of the corporation is obsolete; it is no longer tenable for a district
court, administering both law and equity in the same action, to deny
legal remedies to a corporation, merely because the corporation's
spokesmen are its shareholders rather than its directors."
In a dissent, it was argued
that the "legal nature" of an issue should be determined by
considering:
The pre-merger custom with
reference to such questions,
The remedy sought, and
The practical abilities and
limitation of juries.
This was a very
controversial statement. It was basically saying that if the question was
complicated, it may be beyond the capabilities of a jury to decide!
There were a lot of citations to this dissent by people who were trying
to not have a jury trial. However, it has pretty much been struck down
by the courts.
