Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-06
F. H. SMITH CO.'S
MOTION IS DENIED
New York Supreme Judge Re-
fuses to Restrain Steps
of Stockholders.

The F. H. Smith Co., Inc, lost its
first important legal skirmish in New
York City today when State Supreme
Court judge Abraham J. Levy, in a
strong opinion, refuses. 20 restrain the
committee of stock and bond holders
from acting in concert against the COM
pany in the interests of the security
holders.
One of the principal allegations of the
parties instituting this action in behalf
of the company was that false and
misleading" advertisements had been
published by the committee, charging in
effect that the interests of the bond and
stock holders were jeopardized by the
pooi financial condition of the Smith
company. With regard to this charge,
Judge Levy said:
cit seems to me that the motion for
a temporary restraining order must, be
denied upon its merits. On the papers
presented I am by no means convinced
that the defendants have disseminated
false information, or that their activi-
ties have been prompted by anything
other than an honest desire to protect
the interests of the stockholders Of the
company in question and those who
dealt with it"
Motion Seeking Receiver.
Immediately after announcement of
this decision, Lewis Landes, of counsel
for the stockholders committee, filed a
motion with Judge WoC~<ey of the United
States Court southern district of New
York. calling upon the smith company
to show cause why received should
not be appointed forthwith to take over
the company's assets. At the same time
a subpoena duces tecum was served on
Theodore Weed. newly elected president
of the company, to produce in court the
firms records at the hearing on the
motion February IL.
Mr.. LandeS announced that he will
send copies of Judge Levy's decision
to the 5000 Smith Co. stockholders
Nhose names he has. Copies also will
mailed other stockholders as their
James are furnished him.
The action for a temporary restrain
ing order was brought by Walter j. |
Pichert of New York, who identified |
himself as a stock and bond holder of !
the Smith Co. He was joined In his |
petition by others similarly situated.
:, The substance of his complaint was |
that the stock and bond holders COM |
m1ttees were not acting in good faith |
and that the interests of all stock and |
bond holders were threatened by the i
allegedly unjustifled attacks on the |
company by the committees.
The defense was that the affairs of |
the Smith Co. had come to such a !
crisis that concerted action on the part |
OF security holders was necessary sud |
that the committees were formed for |
this purpose only.
Judge Levy said in his decision:
This is an application for ar order
pendente lite restraining the defend
ants from organizing or attempting to
organize groups or committees of bond
holders or stockholders of the F. H.
Smith Co. 1t is also sought to enjoin
the defendant from publishing mislead-
ing information concerning that COM
pany and from disseminating state
mentS. advertisements and notices
which may be calculated to induce
action by bondholders or stockholders
prejudicial to the interests of the COM
Pany. The action was brought by one
Pichert, who alleges he is owner of
bonds issued by the Smith Co. He sues
on behalf OF himself and all others
similarly situated.
The moving affidavit of William r.
Baum, manager of the company, dis
closes, however, that it never issued
any bonds whatsoever, but merely sold
|
rowing corporations and individuals
indeed the very affidavit of the plaintiff
himself states that his bonds were
sold to him by the F. H. Smith Co.,
Inc. Assuming that an action of this
character may properly be brought by
bondholders of a company rather than
by the corporation itself, it strikes me
that one who has merely purchased
from it bonds of other concerns may
not be heard to complain that the con-
duct Of others has undermined con-
fldence in the affairs of the company.
While this point does not appear to be
urged by those opposing this applica-
ton, the question nevertheless occurs,
what interest has such a purchaser in
the corporation proper? The fact that
some of the moving affidavits are made
by stockholders does not improve the
situation from the standpoint of the
plaintiff since the latter is merely a
purchaser and the words Others sim
ilarly situated can only have reference
to other bondholders"