Hastie, Chief Judge, and McLaughlin and Van Dusen, Circuit Judges.
This appeal is from an order of the District Court granting defendants-appellees' motions to dismiss a derivative stockholder suit for lack of jurisdiction. See Suffin v. Pennsylvania Railroad Company, 276 F. Supp. 549 (D.Del.1967), where the background facts and motions are accurately summarized. The appellant brought her derivative suit, seeking damages for breach of fiduciary duty, as related to the exchange, over a ten-year period, of convertible debentures issued by Norfolk and Western Railway Company (N & W) for N & W common stock held by The Pennsylvania Company, a wholly-owned subsidiary of The Pennsylvania Railroad Company (together, PRR).
Even though the complaint alleges that PRR dominated and controlled N & W through stock ownership and an interlocking directorship at the time of the initial "memorandum of agreement" setting the terms of the challenged exchange (September 22, 1964), the complaint also concedes that all PRR officers and directors had resigned from the N & W Board by September 16, 1964. The record further shows that on October 13, 1964, PRR had deposited all its shares of N & W in three, I.C.C.-approved, independent voting trusts pursuant to the Interstate Commerce Commission (I.C.C.) "merger" decision of June 24, 1964, which established certain preconditions for a railroad merger, 324 I.C.C. 1, 48-49 (1964). The transaction was approved again by the N & W directors on September 28, 1965 (328 I.C.C. at 885) and the agreement (dated as of December 31, 1965) was submitted for I.C.C. approval on February 28, 1966. The "securities" decision of April 13, 1966, approving the contemplated exchange, 328 I.C.C. 884 (1966), makes specific reference to the earlier merger decision and to its required PRR divestiture of N & W stock, and we note, as did the District Court, that in its "merger" decision the I.C.C. explicitly "[retained] jurisdiction for the purpose, among others, of insuring an orderly divestiture within the 10-year period * * *" 324 I.C.C. at 48.*fn1
The District Court concluded that the I.C.C. had approved the challenged securities transaction and, in doing so, acted pursuant to statutory authority that allowed, in the particular circumstances of the suit at bar, a determination that the terms of the securities transaction were "just and reasonable"*fn2 to private interests. Consequently, the District Court decided that the I.C.C., in approving the transaction, had passed on the gravamen of appellant's complaint and that her suit, therefore, constituted a challenge to an I.C.C. determination that had to be brought before a three-judge District Court pursuant to 28 U.S.C. §§ 2321-2325. Accordingly, the motions to dismiss were granted.
Our own examination of the two I.C.C. decisions involved, 324 I.C.C. 1 (1964) and 328 I.C.C. 844 (1966), and particularly our consideration of the detailed discussion of the divestiture required, 324 I.C.C. at 24-28, and the explicit I.C.C. finding that the exchange "is in the best interest of the * * * security holders," 328 I.C.C. at 891, convinces us that the District Court reached the proper result.*fn3 The appellant's statutory argument must be rejected in view of the inter-relationship between the abovementioned I.C.C. "merger" and later "securities" decisions, 276 F. Supp. at 552. The District Court was entirely correct in concluding that Otis & Co. v. Pennsylvania R. Co., 61 F. Supp. 905 (E.D.Pa.1945), aff'd 155 F.2d 522 (3rd Cir. 1946), was inapposite ...