A Stitch in Time

THE SUPREME COURT

Trouble was the last thing Dora Surowitz expected when she invested a hard-earned $2,000 in Hilton Hotels Corp. Trouble was the last thing Hilton expected from Mrs. Surowitz, a Brooklyn seamstress and Polish immigrant who had as little knowledge of stocks as she did of English. Yet last week the U.S. Supreme Court indignantly upheld Mrs. Surowitz's right to find out whether Hilton is, as she claims, hiding a multimillion-dollar fraud against its stockholders.

A Failure at Questions. The whole thing started in 1957 when Mrs. Surowitz sought an expert to hatch her little nest egg. Proudly, she turned to her son-in-law, Irving Brilliant, a Phi Beta Kappa, Columbia-trained economist and a Harvard Law School graduate. Brilliant recommended Hilton; so doggedly did he handle Mrs. Surowitz's cash and some of his own that by 1960 their combined Hilton investment totaled $45,000 in common stock, plus a $10,000 debenture. Then, in 1962, Mrs. Surowitz received a curious letter from Hilton: the company was offering to buy 300,000 shares of its own stock from Hilton stockholders at slightly above market price. Mystified, Brilliant began investigating.

By 1963, Brilliant had investigated sufficiently to become convinced that Hilton's top brass had rigged the market price prior to the offer in order to sell 101,000 of their own shares to the company at a fat personal profit. After that, the price of Hilton stock plunged downward, and the company passed its usual dividend.

All this was Greek to Mrs. Surowitz, but she readily agreed to act as plaintiff in a shareholder's suit alleging fraud. Since Rule 23 (b) of the Federal Rules of Civil Procedure requires that "the complaint shall be verified by oath," she swore to her belief in the truth of its contents before a notary public. Skeptical, Hilton's lawyers forced Mrs. Surowitz to take the stand in a Chicago federal district court to prove her understanding of all the details in her 60-page complaint. Naturally, she flunked the quiz. Calling it "a sham," the judge dismissed the suit. Because Mrs. Surowitz was "wholly ignorant," a higher court upheld the dismissal.

A Need for Answers. Speaking for the Supreme Court in a 7-to-0 decision last week, Justice Hugo Black scorned the lower courts' apparent notion "that a woman like Mrs. Surowitz, who is uneducated generally and illiterate in economic matters, could never under any circumstances be a plaintiff in a derivative suit brought in the federal courts to protect her stock interests." Whatever its technicalities, said Black, Rule 23 (b) "was written to further, not defeat, the ends of justice." Added he: "It has now been practically three years since the complaint was filed, and as yet not one of the defendants has even been compelled to admit or deny the wrongdoings charged. They should be."

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