535 Opinion of the Court. sue in the courts of New York by reason of that statute nevertheless could be enforced in the federal court in a diversity suit. The Court said, 225 U. S. p. 500, "The State could not prescribe the qualifications of suitors in the courts of the United States, and could not deprive of their privileges those who were entitled under the Constitution and laws of the United States to resort to the Federal courts for the enforcement of a valid contract." We said in Angel v. Bullington that the case of Lupton's Sons had become "obsolete" insofar as it was "based on a view of diversity jurisdiction which came to an end with Erie Railroad v. Tompkins, 304 U. S. 64." 330 U. S. p. 192. Bullington had sued Angel in a North Carolina court for a deficiency judgment on the sale of realty under a deed of trust. The Supreme Court of North Carolina dismissed the action because of a North Carolina statute which disallowed a deficiency judgment in such a case and which the North Carolina Supreme Court construed to be "a limitation of the jurisdiction of the courts of this State." 220 N. C. 18, 20, 16 S. E. 2d 411, 412. Thereafter Bullington sued in the federal court of North Carolina by reason of diversity of citizenship. We held that that suit could not be maintained because (1) the prior suit was res judicata; and (2) the policy of Erie R. Co. v. Tompkins precluded maintenance in the federal court in diversity cases of suits to which the State had closed its courts. The Court of Appeals concluded that the latter reason was argumentatory, the real basis of the decision being that Bullington was denied recovery on the doctrine of res judicata. But where a decision rests on two or more grounds, none can be relegated to the category of obiter dictum. United States v. Title Ins. Co., 265 U. S. 472, 486; Massachusetts v. United States, 333 U. S. 611, 623. JACKSON, J., dissenting. 337 U.S. Angel v. Bullington in its alternative ground followed the view of Guaranty Trust Co. v. York, 326 U. S. 99, 108, that for purposes of diversity jurisdiction a federal court is, "in effect, only another court of the State In that case we required the federal court in a diversity case to apply the statute of limitations of the State in equity actions and thus to follow local law, as had previously been done in cases involving burden of proof (Cities Service Co. v. Dunlap, 308 U. S. 208; cf. Stoner v. New York Life Ins. Co., 311 U. S. 464); contributory negligence (Palmer v. Hoffman, 318 U. S. 109, 117); conflict of laws (Klaxon Co. v. Stentor Co., 313 U. S. 487; Griffin v. McCoach, 313 U. S. 498); and accrual of the cause of action (West v. American Tel. & T. Co., 311 U. S. 223). The York case was premised on the theory that a right which local law creates but which it does not supply with a remedy is no right at all for purposes of enforcement in a federal court in a diversity case; that where in such cases one is barred from recovery in the state court, he should likewise be barred in the federal court. The contrary result would create discriminations against citizens of the State in favor of those authorized to invoke the diversity jurisdiction of the federal courts. It was that element of discrimination that Erie R. Co. v. Tompkins was designed to eliminate. Reversed. MR. JUSTICE RUTLEDGE dissents. See his dissenting opinion in Nos. 442 and 512, Cohen v. Beneficial Industrial Loan Corp., post, p. 557. MR. JUSTICE JACKSON, dissenting. Erie R. Co. v. Tompkins, 304 U. S. 64, required federal courts in diversity cases to apply state decisional law as the Rules of Decision Act required them to apply state statutes. 535 case. JACKSON, J., dissenting. That is what the Court of Appeals tried to do in this The State of Mississippi has a statute which says that if a corporation does not qualify to do business within the State it "shall not be permitted to bring or maintain any action or suit in any of the courts of this state," (Emphasis supplied.) The Court of Appeals reviewed state court decisions, some of which are not free from ambiguity, and found that the law of Mississippi intends to go no farther than to withhold the aid of statemaintained courts from a noncomplying corporation and that the state law does not deprive contracts of their validity or intend to foreclose foreign corporations from resort to federal courts or to any self-enforcing remedies they may have. This Court refuses to give the statute that limited effect. I understand it to rule that Mississippi cannot enact a law closing its own courts to such foreign corporations without also closing the federal courts. In this we seem to be doing the very thing we profess to avoid; that is, giving the state law a different meaning in federal court than the state courts have given it. The Mississippi statute follows a pattern general among the states in requiring qualification and payment of fees by foreign corporations. State courts have generally held such Acts to do no more than to withhold state help from the noncomplying corporation but to leave their rights otherwise unimpaired. This interpretation left such corporations a basis on which to get the help of any other court-federal or state that could otherwise take jurisdiction, and free to resort to pledged property, offset and various other methods of self-help. The state statute as now interpreted by this Court is a harsh, capricious and vindictive measure. It either refuses to entertain a cause of action, not impaired by state law, or it holds it invalid with unknown effects on JACKSON, J., dissenting. 337 U.S. amounts already collected. In either case the amount of this punishment bears no relation to the amount of wrong done the State in failure to qualify and pay its taxes. The penalty thus suffered does not go to the State, which sustained the injury, but results in unjust enrichment of the debtor, who has suffered no injury from the creditors' default in qualification. If the state court had held its statute to have this effect, I should agree that federal courts should so apply it; but the whole basis of our decision is contrary to that of the state courts. I think the Court's action in refusing to accept the state court's determination of the effect of its own statute is a perversion of the Erie R. Co. v. Tompkins doctrine. I would affirm the court below. MR. JUSTICE RUTLEDGE and MR. JUSTICE BURTON join in this opinion. Syllabus. COHEN, EXECUTRIX, ET AL. v. BENEFICIAL INDUSTRIAL LOAN CORP. ET AL. NO. 442. CERTIORARI TO THE UNITED STATES COURT OF Argued April 18, 1949.--Decided June 20, 1949. 1. Under 28 U. S. C. § 1291, appeal may be taken from an order of a Federal District Court denying a corporation's motion that the plaintiff in a stockholder's derivative action be required, pursuant to a state statute, to give security for reasonable expenses of the defendants, in connection with the action. Pp. 545-547. (a) The matters embraced in such an order are not of such an interlocutory nature as to affect, or to be affected by, a decision on the merits. P. 546. (b) The order is appealable because it is a final disposition of a claimed right which is not an ingredient of the cause of action and does not require consideration with it. Pp. 546–547. 2. A state statute providing that, in any stockholder's derivative action pending at the time of its enactment or thereafter brought, in which the plaintiff's interest as a shareholder is less than 5% of the value of all outstanding shares and has a market value of less than $50,000, he may be required at any stage of the proceeding to give security for the reasonable expenses, including counsel fees, which the corporation may incur or for which it may become iiable, does not violate the Federal Constitution. Pp. 547-555. (a) The Federal Constitution does not oblige a state to place its litigating and adjudicating processes at the disposal of a plaintiff in a stockholder's derivative suit, at least without imposing standards of responsibility, liability and accountability which it considers will protect the interests he elects himself to represent. Pp. 547-551. (b) The statute here involved does not violate the Contract Clause of the Constitution. P. 551. (c) For a state to close its courts to this type of litigation if the condition of reasonable security is not met does not violate the Due Process Clause. Pp. 551–552. *Together with No. 512, Beneficial Industrial Loan Corp. v. Smith, United States District Judge, et al., also on certiorari to the same Court. |