## Facts

- Bangor Punta, through a wholly owned subsidiary, acquired about 98.3% of Bangor & Aroostook Railroad Company (BAR) stock in 1964 and controlled BAR for several years.
- In 1969, Bangor Punta sold its BAR stock to Amoskeag Company, which assumed control and later increased its ownership to about 99% of BAR’s stock.
- In 1971, BAR and a wholly owned subsidiary (then controlled by Amoskeag) sued Bangor Punta and its subsidiary for alleged corporate mismanagement during the earlier control period.
- The suit asserted federal claims under Clayton Act § 10 and Securities Exchange Act § 10(b), as well as claims under Maine statute and common law.
- Amoskeag’s purchase price was treated as fair and as reflecting BAR’s condition at the time; there was no claim that the sale was fraudulent.

## Issues

1. Whether equitable principles bar a corporation from recovering against a former controlling shareholder for alleged pre-sale mismanagement when a later purchaser bought substantially all shares at a fair price and would receive any recovery.
2. Whether the contemporaneous ownership concept underlying Fed. R. Civ. P. 23.1 and similar state rules may be circumvented by having the corporation sue rather than the later purchaser suing derivatively.
3. Whether federal antitrust and securities statutes displace traditional equitable defenses in this setting.

## Decision

- The Supreme Court reversed the Court of Appeals and reinstated dismissal of the action.
- The Court held that equity barred the suit because any recovery would operate as a windfall to Amoskeag, which bought after the alleged misconduct at a price reflecting the corporation’s condition.
- The Court treated Amoskeag as the real party in interest and refused to allow the corporate form to be used to obtain indirectly what Amoskeag could not obtain directly.
- The Court held that neither the Clayton Act nor the Securities Exchange Act evidenced congressional intent to eliminate these equitable limits.
- The Court rejected the view that BAR’s public or quasi-public character justified allowing an otherwise inequitable recovery.

## Legal Principles

- A purchaser who acquires all or substantially all of a corporation’s shares from a seller at a fair price generally may not have the corporation recover from that seller for alleged prior mismanagement when the purchaser’s benefit would be non-compensatory.
- Courts may disregard the corporate entity when equity requires, including to identify the real party in interest and prevent circumvention of shareholder-standing limits.
- Equity will not permit a later shareholder to bypass the contemporaneous ownership requirement associated with derivative suits by deploying a corporate action that yields the same forbidden result.
- Traditional equitable defenses may apply to federal statutory corporate claims absent clear legislative direction to the contrary.
- The absence of fraud in the stock sale is material; where the buyer paid a fair price, prior mismanagement is treated as reflected in the purchase price.

## Conclusion

The Court held that BAR could not pursue damages for alleged pre-sale mismanagement because the suit would effectively transfer value to Amoskeag—an after-acquiring shareholder—despite Amoskeag having paid a fair price that already accounted for the alleged injury, and neither federal statutes nor the corporation’s public role displaced the equitable bar.


Bangor Punta Operations, Inc. v. Bangor & Aroostook R.R., 417 U.S. 703 (1974)