Shareholders Management Company v. Fred F. Gregory

Appellants Shareholders Management Company (“Shareholders”) and others brought a declaratory relief action in the district court seeking an adjudication of the validity of a claimed federal defense to an action in a state court in California filed against them by the ap-pellees. In the state court action, appel-lees sued appellants, claiming that appellants had interfered with the performance of a contract between appellees and appellant Sprinkel, former president of Shareholders, whereby Sprinkel agreed to sell to appellees stock in Shareholders that Sprinkel had acquired by exercising an option Sprinkel had obtained from Shareholders. In the federal suit, appellants averred that Shareholders was justified in refusing to issue stock to enable the contract between Sprinkel and the appellees to be performed because the issuance would have violated certain rules of the National Association of Securities Dealers, Inc. (“NASD”) which, appellants say, have the force and effect of law pursuant to the Securities Exchange Act of 1934. Upon motion of the appellees, the district court dismissed the declaratory relief action for want of federal jurisdiction.

We perceive no jurisdictional…