CORPORATIONS - LIABILITY OF DIRECTORS FOR FAILURE TO ENFORCE CORPORATE RIGHT BY SECTION 16B OF SECURITIES EXCHANGE ACT

Plaintiff brought a stockholder's derivative suit against the directors of X corporation, alleging that they wilfully failed to demand short term profits made in the sale of the corporation's securities by an officer of the corporation. These profits were recoverable by the corporation pursuant to section 16B of the Securities Exchange Act of 1934. Plaintiff further alleged that as a result of the directors' failure to sue, the statute of limitations barred recovery of these profits, giving rise to a common law action against the directors for waste. Defendants moved to dismiss.

Held, motion granted. Directors were not liable for failure to bring suit on behalf of the corporation within the two year statutory period. Truncale v. Universal Pictures Co., (D.C. N.Y. 1948) 76 F. Supp. 465.