Rawlings v. Heckler

Appellants, minority shareholders of Pacific Guardian Life Insurance Company, seek review of the district courts Fed.R.Civ.P. 12(c) dismissal of portions of their class action for failure to state a cause of action under Hawaii law. Jurisdiction in the federal district court existed by virtue of diversity of citizenship. 28 U.S.C. § 1332 (1976). Appellants assert that the dismissed portions of their complaint rested on two valid principles of the law of the State of Hawaii. The first is that minority shareholders can assert a direct cause of action against the purchaser of a control block of shares for recovery of a sum equal to any premium paid to the seller. The second is that minority shareholders can assert a direct cause of action against the majority shareholder for a diversion of corporate assets by the corporation. The district court, applying Hawaii law, rejected both contentions. We affirm and remand.