20 F.R.D. 4 | D. Del. | 1956
This is a derivative shareholder’s suit for treble damages predicated upon a violation of the Clayton Act.
Defendant, Sehenley Industries, Inc., (hereinafter referred to as Sehenley) became the majority shareholder of the nominal defendant, Park & Tilford Distillers Corporation (hereinafter referred to as Park & Tilford) by acquiring 88 percent of the issued and outstanding capital stock of Park & Tilford. As a result of the stock acquisitions and subsequent actions taken by Sehenley, as the majority shareholder of Park & Til-ford, it is alleged Park & Tilford lost a number of valuable franchises
The defendant, Schenley, has moved for judgment on the pleadings. The motion raises the question of whether plaintiff, a minority shareholder of Park & Tilford, may maintain a derivative suit for treble damages under the Clayton Act.
Prior to the adoption of the Federal Rules of Civil Procedure,
Whether the adoption of the Federal Rules of Civil Procedure altered the effect of the earlier decisions of the Supreme Court was first considered in the case of Fanchon & Marco, Inc., v. Paramount Pictures, S.D.N.Y.1952, 107 F.Supp. 532. The District Court in that case held the Federal Rules of Civil Procedure did not change the result.
The right of a shareholder to maintain a derivative action for violation of the anti-trust laws has never been denied by the Supreme Court. In fact, the court conceded such a right did exist, but denied enforcement of the right because of
“No doubt there are cases in which the nature of the right asserted for the company, or the failure of the defendants concerned to insist upon their rights, or a different state system, has led to the whole matter being disposed of in equity; but * * * when a penalty of triple damages is sought to be inflicted, the statute should not be read as attempting to authorize liability to be enforced otherwise than through the verdict of a jury in a court of common law * *.”13
Justice Brandéis, speaking for the court in United Copper Securities Co. v. Amalgamated Copper Co.
“But even if the circumstances were such as to justify individual stockholders in seeking the aid of the court to enforce rights of the corporation, it is clear that their remedy is not at law. The particular equitable relief sought in Fleitmann v. Welsbach Street Lighting Co., 240 U.S. 27, 36 S.Ct. 233, 60 L.Ed. 505, was denied; but this denial affords no reason for assuming that the long-settled rule under which stockholders may seek such relief only in a court of equity will be departed from because the cause of action involved arises under the Sherman Law.” United Copper Securities Co. v. Amalgamated Copper Co., supra, 244 U.S. at pages 264-265, 37 S.Ct. at page 511.
The procedural distinctions between actions at law and in equity ceased to exist upon the adoption of the Federal Rules of Civil Procedure. Rule 2 of the Federal Rules of Civil Procedure
Defendant’s motion for judgment on the pleadings is denied.
An order in accordance herewith may be submitted.
. 38 Stat. 731 (1914), 15 U.S.C.A. § 15, re-enacting 26 Stat. 210 (1890).
. An enumeration of the lost franchises are: Yat 69 Scotch Whiskey, Martel’s Cognac Brandy, Harveys Port, Sherry and other wines, Booth’s Gin, Veille Cure French Liqueur, M.A.B. Cordials and Heidsieck & Co. Dry Monopole Champagne.
. 15 U.S.C.A. § 18 provides in pertinent part:
“No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”
15 U.S.C.A. § 15 provides:
“Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court
. Federal Rules of Civil Procedure, 28 U.S.C. (1946) following § 723c, Act of June 19, 1934.
. United Copper Securities Co. v. Amalgamated Copper Co., 1917, 244 U.S. 261, 37 S.Ct. 509, 61 L.Ed. 1119 (alternative holding); Fleitmann v. Welsbach Street Lighting Co., 1916, 240 U.S. 27, 36 S.Ct. 233, 60 L.Ed. 505; Corey v. Independent Ice Co., D.C.D.Mass.1913, 207 F. 459.
. Fleitmann v. Welsbach Street Lighting Co., 1916, 240 U.S. 27, 36 S.Ct. 233, 60 L.Ed. 505.
. United Copper Securities Co. v. Amalgamated Copper Co., 1917, 244 U.S. 261, 37 S.Ct. 509, 61 L.Ed. 1119 (alternative holding).
. Fanchon & Marco, Inc., v. Paramount Pictures, S.D.N.Y.1952, 107 F.Supp. 532 at page 541.
“The new Federal Rules of Civil Procedure, which went into effect in September 1938, have not set aside the two Supreme Court decisions. The new Rules bave abolished some of the procedural distinctions between law and equity as well as distinctions in forms of action. [Oiting cases.] A single form of action is provided for in Rule 2, F.R. O.P., 28 U.S.O.A., but the basic difference between law and equity has not been changed. [Citing cases.]
“The question we deal with here is one of substance rather than procedure. The derivative nature of the stockholder’s suit requires that it be brought in equity.- The stockholder sues not on his own right, but he seeks to enforce a right of the corporation. Although a corporation may maintain an action for treble damages at law, a stockholder suing derivately may not do so because the Supreme Court has interpreted the anti-trust laws as limiting the recovery of the treble damages to those recoverable ‘through the verdict of a jury in a court of common law’. [240 U.S. 27, 36 S.Ct. 234.] The fact that the new Federal Rules permit the joinder in one action of legal and equitable claims, Ring v. Spina, 2 Cir., 166 F.2d 546, a matter of procedure, does not alter the principles laid down by the Supreme Court in the Fleitmann and United Copper Co. cases.”
. Comment, 52 Col.L.R. 1069.
. Fanchon & Marco, Inc., v. Paramount Pictures, 2 Cir., 1953, 202 F.2d 731.
. 1916, 240 U.S. 27, 36 S.Ct. 233, 60 L.Ed. 505.
. 15 U.S.C.A. § 1 et seq.
. Fleitmann v. Welsbach Street Lighting Co. supra, 240 U.S. at pages 28-29, 36 S.Ct. at page 234.
. 1917, 244 U.S. 261, 37 S.Ct. 509, 510, 61 L.Ed. 1119.
. There was no allegation in the United Copper Securities Co. v. Amalgamated Copper Co. case, that United Copper Co. was in control of the alleged wrongdoer or that the directors of United Copper Co. had been guilty of any misconduct whatsoever, nor that their action in refusing to bring the suit was unwise.
. F.R.C.P., 28 U.S.C.
. Equitable and legal relief have been combined in anti-trust cases, Sablosky v. Paramount Films Distributing Corp., D.C.1952, 13 F.R.D. 138.
. Fanchon & Marco, Inc. v. Paramount Pictures, supra.