Surowitz v. Hilton Hotels Corporation

Supreme Court of the United States · 1966 · Civil Procedure

383 U.S. 363 (1966)

Updated July 29, 2026

Civil ProcedureShareholder derivative suitsPleading and verificationFederal Rule 23(b)derivative actionverificationstrike suitssummary dismissal

Facts

Dora Surowitz, a Hilton Hotels shareholder, filed a derivative complaint alleging that corporate officers and directors defrauded the corporation through stock transactions that enriched themselves and depleted corporate funds. The complaint was signed by counsel under Rule 11 and verified by Surowitz under Rule 23(b), but at a court-ordered oral examination she showed that she did not understand the complaint's details and had relied on her son-in-law's explanation. The record also contained affidavits showing that her son-in-law, a trained investment advisor, and her lawyer had conducted a substantial investigation before filing suit. Surowitz was a Polish immigrant with limited English and little formal education, but she knew she had invested her own money in the stock, that dividends had stopped, and that her trusted son-in-law believed wrongdoing had occurred.

Issue

May a federal court summarily dismiss a shareholder derivative complaint under Rule 23(b) because the shareholder-plaintiff lacks personal knowledge or understanding of the complaint's detailed allegations, even though the complaint was verified and the record shows a careful, good-faith investigation supporting serious fraud charges? Does Rule 23(b)'s verification requirement demand such knowledgeable comprehension by the shareholder herself?

Rule

Rule 23(b)'s verification requirement is meant in part to discourage strike suits, not to bar bona fide derivative actions. A derivative suit should not be summarily dismissed merely because the shareholder-plaintiff does not personally understand the detailed allegations, where the record shows the charges are based on reasonable beliefs arising from careful investigation and there is no evidence of collusion, trickery, or nuisance-suit abuse.

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Lina Markovic, a retired factory worker in Cleveland, owns shares of North Harbor Logistics, Inc. Her lawyer and her nephew, a licensed financial analyst, spent months reviewing public filings and internal emails from a former employee before filing a derivative complaint alleging insider self-dealing. At a court-ordered examination, Lina admits she cannot explain the accounting details in the complaint and relied on her nephew's explanation before verifying it.

The directors move to dismiss before answering, arguing the verification is a sham because Lina lacks personal understanding of the complaint's specifics. How should the court rule?

Explanation. The majority held that summary dismissal is improper when the record shows serious charges resting on reasonable beliefs generated by careful investigation, even if the shareholder cannot explain technical details. The verification requirement exists in part to deter strike suits, not to bar bona fide derivative actions brought in good faith. Lina's lack of detailed comprehension alone is insufficient.