In Russell v. Todd, 309 U.S. 280, 294, 60 S.Ct. 527, 534, 84 L.Ed. 754, we had 'no occasion to consider the extent to which federal courts, in the exercise of the authority conferred upon them by Congress to administer equitable remedies, are bound to follow state statutes and decisions affecting those remedies.' The question thus carefully left open in Russell v. Todd is now before us. It arises under the following circumstances.
In May, 1930, Van Sweringen Corporation issued notes to the amount of $30,000,000. Under an indenture of the same date, petitioner, Guaranty Trust Co., was named trustee with power and obligations to enforce the rights of the noteholders in the assets of the Corporation and of the Van Sweringen brothers. In October, 1930, petitioner, with other banks, made large advances to companies affiliated with the Corporation and wholly controlled by the Van Sweringens. In October, 1931, when it was apparent that the Corporation could not meet its obligations, Guaranty co-operated in a plan for the purchase of the outstanding notes on the basis of cash for 50% of the face value of the notes and twenty sha es of Van Sweringen Corporation's stock for each $1,000 note. This exchange offer remained open until December 15, 1931.
Respondent York received $6,000 of the notes as a gift in 1934, her donor not having accepted the offer of exchange. In April, 1940, three accepting noteholders began suit against petitioner, charging fraud and misrepresentation. Respondent's application to intervene in that suit was denied, Hackner v. Guaranty Trust Co., 2 Cir., 117 F.2d 95, and summary judgment in favor of Guaranty was affirmed. Hackner v. Morgan, 2 Cir., 130 F.2d 300. After her dismissal from the Hackner litigation, respondent, on January 22, 1942, began the present proceedings.
The suit, instituted as a class action on behalf of non-accepting noteholders and brought in a federal court solely because of diversity of citizenship, is based on an alleged breach of trust by Guaranty in that it failed to protect the interests of the noteholders in assenting to the exchange offer and failed to disclose its self-interest when sponsoring the offer. Petitioner moved for summary judgment, which was granted, upon the authority of the Hackner case. On appeal, the Circuit Court of Appeals, one Judge dissenting, found that the Hackner decision did not foreclose this suit, and held that in a suit brought on the equity side of a federal district court that court is not required to apply the State statute of limitations that would govern like suits in the courts of a State where the federal court is sitting even though the exclusive basis of federal jurisdiction is diversity of citizenship. 2 Cir., 143 F.2d 503. The importance of the question for the disposition of litigation in the federal courts led us to bring the case here. 323 U.S. 693, 65 S.Ct. 60.
In view of the basis of the decision below, it is not for us to consider whether the New York statute would actually bar this suit were it brought in a State court. Our only concern is with the holding that the federal courts in a suit like this are not bound by local law.
We put to one side the considerations relevant in disposing of questions that arise when a federal court is adjudicating a claim based on a federal law. See, for instance, Board of Com'rs v. United States, 308 U.S. 343, 60 S.Ct. 285, 84 L.Ed. 313; Deitrick v. Greaney, 309 U.S. 190, 60 S.Ct. 480, 84 L.Ed. 694; D'Oench, Duhme & Co. v. F.D.I.C., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956; Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838; O'Brien v. Western Union Telegraph Co., 1 Cir., 113 F.2d 539. Our problem only touches transactions for which rights and obligations are created by one of the States, and for the assertion of which, in case of diversity of the citizenship of the parties, Congress has made a federal court another available forum.