Mr. Justice Jackson
delivered the opinion of the Court.
The ultimate question here is whether a federal court, having jurisdiction of a stockholder's derivative action only because the parties are of diverse citizenship, must apply a statute of the forum state which makes the plaintiff, if unsuccessful,, liable for the reasonable expenses, including attorney's fees, of the defense and entitles the corporation to require security for their payment.
Petitioners' decedent, as plaintiff, brought in the United States District Court. for New Jersey an action 'in the right of the Beneficial Industrial Loan Corporation, a Delaware corporation doing business in New Jersey. The defendants were the corporation and certain of its managers and directors. The complaint alleged generally that since 1929 the individual defendants engaged in a continuing and. successful conspiracy to enrich themselves at the expense of the corporation. Specific charges of mismanagement and fraud extended over a period of eighteen years and the assets allegedly wasted or diverted thereby were said to exceed $100,000,000. The stockholder had demanded that the corporation institute proceedings for its recovery but, by their control of the corporation, the individual defendants prevented it from doing so. This stockholder, therefore, sought to assert the right of the corporation. One of 16,000 stockholders, he owned 100 of its more than two million shares, so that his holdings, together with 150 shares held by the intervenor, approximated 0.0125% of the outstanding stock and had a market value that had never exceeded $9,000.
The action was brought in 1943, and various proceedings had been taken therein when, in 1945, New Jersey enacted the statute which is here involved. Its general effect is to make a plaintiff having so small an interest liable for the reasonable expenses and attorney's fees of the defense if he fails to make good his complaint and to entitle the corporation to indemnity before the case can be prosecuted. These conditions are made applicable to pending actions. The corporate defendant therefore moved to require security, pointed to its by-laws by which it might be required to indemnify the individual defendants, and averred that a bond of $125,000. would be appropriate.
The District Court was of the opinion that the state enactment is not applicable to such an action- when pending in a federal court, 7 F. R. D. 352. The Court of Appeals was of a contrary opinion and reversed, 170 F. 2d 44, and we granted certiorari. 336 U. S. 917.
Appealability.
At the threshold we are met with the question whether the District Court's order refusing to apply the statute was an appealable one. Title 28 U. S. C. § 1291 provides, as did its predecessors, for appeal only "from all final decisions of the district courts," except when direct appeal to this Court is provided. Section 1292 allows appeals also from certain interlocutory orders, decrees and'judgments, not material to this case except as they indicate the purpose to allow appeals from orders other than final judgments when they have a final and irreparable effect on the rights of the parties. It is obvious that, if . Congress had . allowed appeals only from those final judgments which terminate an action, this order would not be appealable.
The effect of the statute is to disallow appeal-from any decision which is tentative', informal or incomplete. Appeal gives the upper court a power of review, not one of intervention. So long as the matter remains open, unfinished or inconclusive, there may be no intrusion by appeal. But the District Court's action upon this application was concluded and closed and its decision final in that sense before the appeal was taken.
Nor does the Statute permit appeals, even from fully consummated decisions, where they are but steps towards final judgment in which they will merge. The . purpose is to combine in one review all stages of the proceeding that effectively may be reviewed and corrécted if and when final judgment results. But this order of the District Court did not make any step toward final disposition of the merits of the case and will not be merged in final judgment. When that time comes, it will be too late effectively to review the present order, and the rights conferred by the statute, if ít is applicable, will have been lost, probably irreparably. We conclude that the matters embraced in the decision appealed from are not of such an interlocutory-nature as to affect, or to be affected by, decision of the merits of this .case.
This decision appears to fall in that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole, case is adjudicated. ' The Court has long given this provision of the statute this practical rather than a technical construction. Bank of Columbia v. Sweeny, 1 Pet. 567, 569; United States v. River Rouge Co., 269 U. S. 411, 414; Cobbledick v. United States, 309 U. S. 323, 328.
We hold this order appealable because it is a final disposition of a claimed right which is not an ingredient of the cause of action and does not require consideration with it. But we do not mean that every order fixing security is subject to appeal. Here it is the right to security that presents a serious and unsettled question. If the right were admitted or clear and ,the order involved only an exercise of discretion as to the amount of security, a matter the statute makes subject to reconsideration from time to time, appealability would present a different question.
Since this order may be reviewed on appeal, the petition in No. 512, whereby the corporation asserts the right to compel security by mandamus, is dismissed.
Constitutionality.
Petitioners deny the validity of the statute under the Federal Constitution and the New. Jersey Constitution. The latter question is ultimately for the state courts, and since they have made no contrary determination^ we shall presume in the circumstances of this case that the statute conforms with the state constitution.
Federal constitutional questions we must consider, because a federal court would not give effect, in either a diversity or nondiversity case, to a state statute'that violates the Constitution of the United States.
The background of stockholder litigation with which this statute deals requires no more than general notice. As business enterprise increasingly sought the advantages of incorporation, management became vested with almost uncontrolled discretion in handling other people's money. .The- vast aggregate of funds committed to corporate control came to be drawn to a considerable extent from numerous and scattered holders of small interests. The director was not subject to an effective accountability. That created strong temptation for managers to profit personally at expense of their trust. Thé business code became all too tolerant of such practices. Corporate laws were lax and were not sélf-enforcing, and stockholders, in face of gravest abuses, were singularly impotent in obtaining redress of abuses of trust.
Equity came to the relief of the stockholder, who had no standing to bring civil action at law against faithless directors and managers. . Equity, however, allowed him to step into the corporation's shoes and to seek in its right the restitution he could not demand in his own. It required him first to demand that the corporation vindicate its own rights, but when, as was usual, -those who perpetrated the wrongs also were able to obstruct any remedy, equity would hear and adjudge the corporation's cause through its stockholder with the corporation as a defendant, albeit a rather nominal one. This remedy, born of stockholder helplessness, was long the chief regulator of corporate management and has afforded no small incentive to avoid at least grosser forms of betrayal of stockholders' interests. It is argited, and not without reason, that without it there would be little practical check on such abuses.
Unfortunately, the remedy itself provided opportunity for abuse, which was not neglected. Suits sometimes were brought- not to. redress real wrongs, but to realize upon their nuisance value. . They were bought off by secret settlements in which any wrongs to the general body of share owners were compounded by the suing stockholder, who was. mollified by payments from corporate assets. These litigations were aptly characterized in professional slang as "strike suits."- And it- was said that these suits were more commonly brought by small -and irresponsible than by large stockholders, because the former put less to risk and a small interest was more often within the capacity and, readiness of management to compromise than a large one.
We need not determine the measure of these abuses or the evils they produced on the one hand or prevented" and redressed on the other. The Legislature of New Jersey, like that of other states, considered them sufficient to warrant some remedial measures.
The, very nature of the stockholder's derivative action makes it one in the regulation of which the legislature of a state has wide powers. Whatever theory one may hold as to the nature of the corporate entity, it remains a wholly artificial creation whose internal relations between management and stockholders are dependent upon state law and may be subject to most complete and penetrating regulation, either by public authority or by some form of stockholder action. Directors and managers, if not technically trustees, occupy positions of a fiduciary nature, and nothing in the Federal Constitution prohibits a state from imposing on them the strictest measure of responsibility, liability and accountability, either as a condition of assuming office or as a consequence of holding it.
Likewise, a stockholder who brings suit on a cause' of action derived from the corporation assumes a position, not technically as a trustee perhaps, but one of a fiduciary character. He sues, not for himself alone, but as representative of a class comprising all who are similarly situated. The interests of all in the redress of the wrongs are taken into his hands, dependent upon his diligence, wisdom and integrity. And while the stockholders have chosen the corporate director or manager, they have no such election as to a plaintiff who steps forward to represent them. He is a self-chosen representative and a volunteer champion. The Federal Constitution does not oblige the state to place its litigating and adjudicating processes at the disposal of such a representative, at least without imposing standards of responsibility, liability and accountability which it considers will protect the interests he elects himself to represent. It is not without significance that this Court has found it necessary long ago in the Equity Rules and how in the Federal Rules of Civil Procedure to impose procedural regulations of the class action not applicable to any other. We conclude that the state has plenary power over this type of litigation. ,
In considering specific objections to the way in which the state has exercised its power in this particular statute, it should be unnecessary to say that we are concerned only with objections which go to constitutionality. The wisdom and the policy of this and similar statutes are involved in controversies amply debated in legal literature but not for us to judge, and hence not for us to remark upon. The Federal Constitution does not invalidate state legislation because it fails to embody the highest wisdom or .provide the best conceivable remedies. Nor can legislation be set aside by courts because of the-fact, if it be such, that'it has been sponsored and promoted by those who advantage from it. In dealing with such difficult and controversial subjects, only experience will verify or disclose weaknesses and defects of any policy and teach lessons which may be applied by amendment. Within the area of constitutionality, the states should not be restrained from devising experiments, even those we might think dubious, in the effort to preserve the maximum good which equity sought in creating the derivative stockholder's action and at the same time to eliminate as much as possible its defects and evils.
It is said that this statute transgresses the Due Process Clause by being "arbitrary, capricious and unreasonable"; the Equal Protection Clause by singling out small stockholders to burden most heavily; that it violates the Contract Clause; and that its application to pending litigation renders it unconstitutionally retroactive.
The contention that this statute violates the Contract Clause of the Constitution is one in which we see not the slightest merit. Plaintiff's suit is entertainéd by equity largely because he had no contract rights on which to base an action at law, and hence none which is impaired by this legislation.
In considering whether the statute offends the Due Process Clause we can judge it only by its own terms, for it has had no interpretation or application as yet. It imposes liability and requires security for "the reasonable expenses, including counsel fees, which may be incurred" (emphasis supplied) by the corporation and by other parties defendant. The amount of security is subject to increase if the progress of the litigation reveals that it is inadequate, or to decrease if it is proved to be excessive. A state may set the terms on which it will permit litigations in its courts. No type of litigation is more susceptible of regulation than that of a fiduciary nature. And it cannot seriously be said that a state makes such unreasonable use of its power as to violate the Constitution when it provides liability and security for payment of reasonable expenses if a litigation of this character is adjudged to be tmsustainable. It is urged that such a requirement will foreclose resort by most stockholders to the only available judicial remedy for the protection of their rights. Of course, to require security for the payment of any kind of costs, or the necessity for bearing any kind of expense of litigation, has a deterring effect. But we deal with power, not wisdom; and we think, notwithstanding this tendency, it is within the power of a state to close its courts to this type of litigation if the condition of reasonable security is not met.
The contention that the statute denies equal protection of the laws is based upon the fact that it enables a stockholder who owns 5% of a corporation's outstanding shares, or $50,000 in market value, to proceed without either security or liability and imposes both upon those who elect to proceed with a smaller interest. We do not think the state is forbidden to use the amount of one's financial, interest, which measures his individual injury from the misconduct to be redressed, as some measure of the good faith and responsibility of one who seeks at his own election to act a's custodian of the interests of all stockholders, and'as an indication that he volunteers for the large burdens of the litigation from a real sense of grievance and is not putting forward a claim to capitalize personally on its harassment value. These may not be the best ways of precluding "strike lawsuits," but we are unable to say that a classification for these pur poses, based upon the percentage or market value of the stock alleged to be injured by the wrongs, is an unconstitutional one. Where any classification is based on a percentage or an amount, it is necessarily somewhat arbitrary. It is difficult to say of many lines drawn by legislation that they give those just above and those just below the line a perfectly equal protection. A taxpayer with $10,000.01 of income does not think it is equality to tax him at a different rate than one who has $9,999.99, or to require returns from one just above and not from one just below a certain figure. It is difficult to say that a stockholder who has 49.99% of a company's stock should be unable to elect any representative to its Board of Directors"while one who owns 50.01% may name the entire Board. If there is power, as we think there is, to draw a line based on considerations of proportion or amount, it is a rare case, of which this is not one, that a constitutional objection may be made to the particular point which the legislature has chosen.
The contention also, is made that the provision which applies this statute to actions pending upon its enactment, in which no final judgment has been entered, renders it void under the Due Process Clause for retro-activity. While by its terms the statute applies to pending cases, it does not provide the manner of application; nor do. the New Jersey courts appear to have settled what its effect is to be. Its terms do not appear to require an interpretation that it creates new liability against the plaintiff for expenses incurred by the defense previous to its enactment. The statute would admit of a construction that plaintiff's liability begins only from the time when the Act was passed or perhaps when the corporation's application for security is granted and that security for expenses and counsel fees which "may be incurred" does not include those which have been in curred before one or the other of these periods. We would, not, for the purpose of considering constitutionality, construe the statute in absence of a state decision as imposing liability for events before its enactment. On this basis its alleged retroactivity amounts only to a stay of further proceedings unless and until security is furnished for expense incurred in the future, and does not extend either to destruction of an existing cause of action or to creation of a new liability for past events.
The mere fact that a statute applies to a civil action retrospectively does not render it unconstitutional. Blount v. Windley, 95 U. S. 173, 180; Western Union Telegraph Co. v. L. & N. R. Co., 258 U. S. 13; Chase Securities Corp. v. Donaldson, 325 U. S. 304. Looking upon the statute as we haye indicated, its retroactive effect, if any, is certainly less drastic and prejudicial than that held not to be unconstitutional in these decisions. We do not find in the bare statute any such retroactive effect as renders it unconstitutional under the Due Process Clause, and of course we express, no opinion as to the effect of an application other than we have indicated;
It is also contended that this statute may not be applied in this case because the cause of action derives from a Delaware corporation and hence' Delaware law governs it. But it is the plaintiff who has brought the case in New Jersey. The. trial will very likely involve questions of conflict of laws as to which the law of New Jersey will apply, Klaxon Co. v. Stentor Co., 313 U. S. 487; Griffin v. McCoach, 313 U. S. 498, and perhaps questions of full faith and credit. These are not before us now. A plaintiff cannot avail himself of the New Jersey forum and at the same time escape the terms on which it is made available, if the law is applicable to a federal court sitting in that State, which we later consider.
We conclude, therefore, that, so far as the Federal Constitution is concerned, New Jersey's security statute is a valid law of that State and the question remains as to whether it must be applied by federal courts in that State to suits brought therein on diversity grounds.
Applicability in Federal Court.
The Rules of Decision Act, in effect since the First Congress of the United States and now found at 28 U. S. C. § 1652, provides: "Thedaws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be-regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply." This Court in Erie R. Co. v. Tompkins, 304 U. S. 64, held that judicial decisions are laws of the states within its meaning. But Erie R. Co. v. Tompkins and its progeny have wrought a more far-reaching change in the relation of state and federal courts and the application of state law in the latter whereby in diversity cases the federal court administers the state system of law in all except details related to its own conduct of business. Guaranty Trust Co. v. York, 326 U. S. 99. The oniy substantial argument that this New Jersey statute is not applicable here is that its provisions are mere rules of procedure rather than rules of substantive law.
Even if we were to agree that the New Jersey statute is procedural, it would not determine that it is not applicable. Rules which lawyers call procedural do not always exhaust their effect by regulating procedure. But this statute is not merely a regulation of procedure. With it or without it the main action takes the same course. However, it creates a new liability where none existed before, for it makes a stockholder who institutes a derivative action liable for the expense to which he puts the corporation and other defendants, if he does not make good his claims. Such liability is not usual and it goes beyond payment of what we know as "costs." If all the Act did was to create this liability, it would clearly be substantive. But this new liability would be without meaning and value in many cases if it resulted in nothing but a judgment for expenses at or after the end of the case. Therefore, a procedure is prescribed by which the liability is insured by entitling the corporate defendant to a bond of indemnity before the outlay is incurred. We dp not think a statute which so conditions the stockholder's action can be disregarded by the federal court as a mere procedural device.
It is urged, however, that Federal Rule of Civil Procedure No. 23 deals with plaintiff's right to maintain such an action in federal court and that therefore the subject is recognized as procedural and the federal rule alone prevails. Rule 23 requires the stockholder's complaint to be verified by oath and-to show that the plaintiff was a stockholder at the time of the transaction of which he complains or that his share thereafter devolved upon him by operation of law. In other words, the federal court will not permit itself to be used to litigate a purchased grievance or become a party to speculation in wrongs done to corporations. It also requires a showing that an action is not a collusive one to confer jurisdiction and to set forth the facts showing that the plaintiff has endeavored to obtain his remedy through the corporation itself. It further provides^that the class action shall not be dismissed .or compromised without approval of the court, with notice to the members^ of the class. These provisions neither create nor exempt from liabilities, but require complete disclosure to the court and notice to the parties in interest. None conflict with the statute in question and all may be observed by a federal court, even if not applicable in state court.
We see no reason why the policy stated m Guaranty Trust Co. v. York, 326 U. S. 99, should not apply.
We hold that the New Jersey statute applies in federal courts and that the District Court erred in declining to fix the amount of indemnity reasonably to be exacted as a condition of further prosecution of the suit.
The judgment of the Court of Appeals is
Affirmed.
Chapter 131, New Jersey Laws of 1945, provides in pertinent part as follows:
"1. In any action instituted or maintained in the'right of any domestic or foreign corporation by the holder or holders of shares, or of voting trust certificates representing shares, of such corporation having a total par value or Stated capital value of less than five per centum (5%) of the aggregate par value or stated capital value of all the outstanding shares of such corporation's stock of every class . . . unless the shares or voting trust certificates held by such holder or holders have a market value in excess of fifty thousand dollars ($50,000.00), the corporation in whose right such action is brought shall be entitled, at any stage of the proceeding before final judgment, to require the complainant or complainants to give security for the reasonable expenses, including counsel fees, which may be. incurred by it in connection with such action and by the other parties defendant'in connection therewith for which it may become subject pursuant to law, its certificate of incorporation, its by-laws or under equitable principles, to which the- corporation shall have recourse in such amount as the court having -jurisdiction shall determine upon the termination' of such action. The amount of such security may thereafter, from time to time, be increased or decreased in-the discretion of the court having jurisdiction of sucli action upon showing that the security provided has or may become inadequate or is excessive.
"2. In any action, suit or proceeding brought or maintained in the right of a domestic or foreign corporation by- the holder or holders • of shares, or of voting trust certificates representing shares, of such corporation, it must be made to appear that the complainant was a shareholder - or the holder of a voting trust certificate at the time of the transaction of which he complains or that his share or voting trust certificate thereafter devolved upon him by operation of law.
"3. 'This act shall take effect immediately and shall apply to all such actions, suits or proceedings now pending in which no final judgment has been entered, • and to all future actions, suits and proceedings."
See New York General Corporation Law, § 61 — b; 12 Pa. Stat. Ann. § 1322; Laws of Maryland, 1945, c. 989; Wisconsin Stat. §180.13 (1945).
Old Equity Rule 94, 104 U. S. ix; Equity Rule 27, 226 U. S. 649,656.
Rule 23 (b).
See Hornstein, Problems of Procedure in Stockholder's Derivative Suits, 42 Col. L. R. 574; Hornstein, Directors' Expenses in Stockholders' Suits, 43 id. 301; Koessler, The Stockholder's Suit: A Comparative View, 46 id. 238; Hornstein, New Aspects of Stockholders' Derivative Suits, 47 id. 1; Carson, Current Phases of Derivative Actions Against Directors, 40 Mich. L. R. 1125; P. E. Jackson, Reorganization of the Corporate Concept And the Effect of Section 61-b of the New York General Corporation Law, A5 Am. Bankr. Rev. 323; Carson, Further Phases of Derivative Actions Against Director's, 29 Cornell L. Q. 431; House, Stockholders' Suits And the Coudert-Mitchell Laws, 20 N. Y. U. L. Q. Rev. 377; Hornstein, The Death Knell of Stockholders' Derivative Suits in New York, 32 California L. R. 123; Zlinkoff, The American Investor And the Constitutionality of Section 61-b of the New York General Corporation Law, 54 Yale E. J. 352. See Douglas, Directors Who Do Not Direct, 47 Harv. L. R. 1305.
Daniel v. Family Insurance Co., 336 U. S. 220.