New-York tribune., 1899-07-16
FEDERAL STEEL SUIT BEGUN.
THE QUESTION OF DIVIDENDS ARGUED
BEFORE JUDGE THOMAS
Mr.. rR1MBLE. TREASURER OF THE COMPANY
TEsTIFIEs THAT IT is NOT MANU-
FEATURING CONCERN. But HOLDS
STOCK OF OTHER COMPANIES.


FEATURING CONCERN. But HOLDS
STOCK OF OTHER COMPANIES.
Charles MacVeagh Of counsel for the Federal
Steel Company. appeared yesterday before Judge
E 3 Thomas sitting in the United states Clr-
cult Court for the Southern District OF New
York in the Federal Building. Brooklyn. to make
a motion for the dismissal OF intunctions oo-
tanned on June 80 by Louis Schaeffer. holder OF
preferred stock and Frederick 7. Marquand
holder Of common stock restraining the Federal
Steel Company from paying dividends on either
Us preferred or common stock until the close OF
the present fiscal year.
Afidavits were submitted by Mr.. MacVeagn
from Ebert II. Gary, president. and flcharu
Trimble treasurer OF the company In these al
fdavts 1t was alleged that when these DIVIDENDS
were declared. June 16 the company hao d
fund derived from the profits amounting -
more than sufficient to pay all the dividends on
the preferred stock this year, and one dividend
on the common stock, which was declared
Richard Trmbe declared that the Federal
Steel Company is the owner Of shares OF the
capital stock OF the Minnesota Iron Company
the Illinois Steel Company and the Loran steel
Company; that the company IS not engaged and
never has been. and has present intention OF
engaging. in the business OF manufacturing or
any other except as incidental to the ownersnlps
OF the capital stocks OF other corporations PRIOR
10 June 1G 1899. dividends were declared on the
capital stock Of the corporations belonging TO the
Federal Steel Company to an amount which,
added to the interest upon cash which the said
Federal Steel Company had in hand, amounted
TO $2,9s2, 794 %"
The affidavit goes on 10 say that the Federal
Steel Company had 10 its credit on the date
mentioned the sum named as net earnings ana
that there is no possibility OF the company re-
quirng any part of the sum declared as diVl-
dends in or about its business or property II II
had the right It Furthermore says that as the
money had been earned and appropriated as be-
fore stated. the company and its officers claimed
the sum as belonging absolutely 10 the STOCK
holders.
The resolution which adopted by the dl-
rectors Of the company on June 10, when they
passed the dividends. specifies: That FUND
having been created by and from the dlNldelus
declared upon the capital stock or the Minnesota
Iron Company, the Illinois Steel Company, the
Flgin Joliet and Eastern Railway Company ana
the Loran Steel Company. held and owned oy
this company. there be set aside and held the
sum Of 81 ,JY1 $50 as a special FUND for the pay
ment Of dividend OF u per cent on the pre-
ferred capital stock OF this company amounting
= 1
ther dividend OF IL per cent on the preferred
stock amounting TO S79S,91j. payable in Janu-
ary 1900: and that this fund be used for the
payment of dividends and for no other purpose
and that further. from the fund specified there
be paid a quarterly dividend OF III per cent on
preferred stock, payable on July ~ lo99 ur
ther that from the fund above named DIVIDEND
OF IA per cent be paid on the common STOCK VI
the company on July 20 lS99
President Gary in his affidavit, says that the
Federal Steel Company has about Slivocrp IN
cash or its equivalent That included the bonds
which the company received in part payment for
the capital stock issued also, that, as the STOCK
of the Federal Steel Company is widely dlstrlp-
uted and is held 10 considerable extent IN sfnaIl
lots for purposes of investment 1T Will be a
great hardship to many people II the DIVIDENDS
already declared. and especially the dividends on
the preferred stock, are not paid
The briefs which were submitted TO the Court
covered fifty typewriter pages. Mr.. MacVeagh
urged the Court TO dismiss the inJunctions on
the following grounds:
First-That the declaring or not declaring OF
dividends is i matter OF internal management
and within the discretion Of the Board or Di-
rectors and the exercise OF that discretion sA)uld
not be interfered with unless 1t is shown that
the directors acted either fraudulently or con-
trary 10 law.
the preferred stock and the payment OF SUCH
dividend are in no wise contrary 10 the charter
Of the company or the laws under which II was
incorporated.
Tbird-That the dividends having been de-
I clared the company cannot be restrained or en-
ioined from paying them over to those stock
holders in a suit to which these stockholders are
/ not parties.
Fourth-That the complainant has not shown
anv such damage or threatened injury as en-
titles him to an Injunction.
Ex-Justice Joseph F. DAILY appeared for F T.
Marquand the holder OF the common stock. ana
George 4 Lamb and George NOss represented
Louis Schaeffer. the preferred stock holder.
Judge DAILY said that the directors OF a company
had the right to meet at the end OF year ana
/ declare dividends II was maintained that a
wear had not elapsed since the company was in
corporated: hence the officers had no right 10 de-
I clare dividends at the present time.