Source: https://casetext.com/case/stadin-v-union-electric-company
Timestamp: 2020-02-26 04:01:49
Document Index: 707651858

Matched Legal Cases: ['§ 1292', '§ 4', '§ 15', '§ 1', '§ 1', '§ 24', '§ 24', '§ 597', '§ 597', '§ 5970']

Stadin v. Union Electric Company, 309 F.2d 912 | Casetext
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Full title:Harry J. STADIN, Appellant, v. UNION ELECTRIC COMPANY et al., Appellees
Date published: Dec 26, 1962
concluding that all well-pleaded nonconclusory allegations must be taken as true, and that a court may take notice of uncontroverted facts in pleadings and affidavits opposing intervention
Summary of this case from Southwest Ctr. for Biological Diversity v. Berg
November 15, 1962. Rehearing Denied December 26, 1962.
Alan C. Kohn, St. Louis, Mo., for appellees Union Electric, Missouri Power Light Co. and Missouri Edison Co.; John A. Woodbridge, Coburn, Croft Cook, Thomas L. Croft, Peter W. Herzog, Jr., St. Louis, Mo., on the brief.
This is an appeal arising out of the district court's denials of Harry J. Stadin's motions to intervene as a party plaintiff in two civil antitrust cases in which Union Electric Company is an original plaintiff.
The district court initially denied Stadin leave to intervene in the first of these cases by an order expressing the opinion required by 28 U.S.C. § 1292(b) as a condition of this court's discretionary allowance of an appeal from an order not otherwise appealable under that section. We denied Stadin permission to take that appeal but did so without prejudice to any rights he may otherwise have.
On December 26, 1961, Union instituted the first of the two present actions. It is brought under § 4 of the Clayton Act, 15 U.S.C. § 15, for a claimed violation of § 1 of the Sherman Act, 15 U.S.C. § 1, and is against Westinghouse and General Electric. By it Union seeks threefold damages allegedly resulting from overcharges in the sales of turbine-generators to Union by the respective defendants. On January 31, 1962, Union and Missouri Power Light Company and Missouri Edison Company, which also are utilities engaged in the business of generating and furnishing electricity, instituted the second action. This is brought under the same sections of the Clayton and Sherman Acts and is against Westinghouse, General Electric and Sangamo for threefold damages allegedly resulting from overcharges in sales by the respective defendants to the plaintiffs and their predecessors of watt-hour and rate-of-demand meters.
Stadin's motions to intervene followed in February and March. His motion in the second case is directed only to Union's count in that action. Stadin rests each motion on the grounds that Union's representation of his interest is or may be inadequate and that he is or may be bound by a judgment in the action, within the meaning of Rule 24(a)(2), F.R. Cv.P., having to do with intervention of right, and that his claims and Union's have questions of law and fact in common, within the meaning of Rule 24(b)(2), having to do with permissive intervention.
b. In February 1961 Stadin submitted to Union's directors, for their action and for action by Union's shareholders at their annual meeting the following April, a proposed resolution that Union "take appropriate steps" against its electrical equipment suppliers who had been convicted in the federal criminal actions in Pennsylvania.
"Resolved, that the Company take appropriate steps in pursuit of all its legal rights, including its right to triple damages under the Clayton Act, against any of those of its electrical equipment suppliers who were recently convicted of antitrust law violations by U.S. District Judge J. Cullen Ganey, in Philadelphia, so as to achieve for the Company reimbursement of the difference between the illegal price it paid such suppliers for electrical equipment sold to it, and the fair market value of such equipment at the time it was bought."
Stadin's argument here, as we read his briefs, is that the conditions for his intervention as a matter of right under Rule 24(a)(2) have been met and the denial of intervention is reversible error; that the conditions for his permissive intervention under Rule 24(b)(2) have also been met and the denial of intervention is an abuse of discretion; that the recent case of Rogers v. American Can Co., 3 Cir., 1962, 305 F.2d 297, is authority for the right of a minority shareholder, in the face of a contrary vote by the majority, to institute a shareholder's derivative suit for threefold damages under the Clayton Act; and that the Rogers case governs the present appeal.
We cited, in support of this, Otis Elevator Co. v. Standard Constr. Co., D.Minn., 1950, 10 F.R.D. 404, 406; Kaufman v. Wolfson, S.D.N.Y., 1956, 137 F. Supp. 479, 481; Clark v. Sandusky, 7 Cir., 1953, 205 F.2d 915, 918; and Dalva v. Bailey, S.D.N.Y., 1957, 158 F. Supp. 204, 207.
Our quoted language, however, does not mean that, for the purposes described, all statements in pleadings of this kind are to be accepted as true irrespective of their nature or content. The situation is somewhat akin to that presented on a motion for summary judgment or on a motion to dismiss, namely, that only matters well pleaded (as the Otis and Clark opinions specifically state) are entitled to the preferential status of assumed truth. Conclusory statements are not. See 4 Moore's Federal Practice § 24.14; Pacific States Box Basket Co. v. White, 1935, 296 U.S. 176, 185, 56 S. Ct. 159, 80 L.Ed. 138; Straus v. Foxworth, 1913, 231 U.S. 162, 168, 34 S.Ct. 42, 58 L.Ed. 168; Dyer v. Gallagher, 6 Cir., 1953, 203 F.2d 477, 479. Further, our language does not imply that the district court and this court may not consider allegations in pleadings and affidavits of the opponents to intervention to the extent that they, too, are well pleaded and supply uncontroverted and material facts. When so limited, this is not trial by affidavit. Stadin in effect acknowledges this by indulging in the filing of his own responsive affidavit.
a. What Stadin seeks is the institution of litigation in the eleven remaining categories of equipment. He would accomplish this by the addition, through intervention, of new causes of action in the two pending suits. This is in contrast with the more common situation where intervention is sought on existing counts.
See as to this, under Rule 24(b), Kind v. Markham, S.D.N.Y., 1945, 7 F.R.D. 265, 266; Owen v. Paramount Productions, S.D.Cal., 1941, 41 F. Supp. 557, 561.
1. Intervention of right — the effect of the judgment. That an applicant for intervention of right under Rule 24(a)(2) "is or may be bound by a judgment in the action" is an obvious prerequisite. This is apparent from the very language of the Rule. We have heretofore so held. Kozak v. Wells, supra, pp. 108-109 of 278 F.2d; Pennington v. Missouri Pac. R.R., 8 Cir., 1956, 239 F.2d 332, 334.
We had occasion in Kozak v. Wells, supra, to consider the significance of the language in Rule 24(a)(2). We there concluded, pp. 110-111 of 278 F.2d, that we preferred to give the word "bound" a utilitarian and realistic interpretation and not a narrow one, that the words "may be" in the Rule indicate the judgment need not always operate as res judicata, that the Rule generally was to be given a liberal interpretation, and that "perhaps each case is to be decided and explained largely on its own facts". Cf. International Mortgage Investment Corp. v. Von Clemm, 2 Cir., 1962, 301 F.2d 857, 861-862.
2. Intervention of right — adequacy of representation. That representation of the intervention applicant's interest "by existing parties is or may be inadequate" is another obvious prerequisite for intervention of right under Rule 24(a)(2). This also is apparent from the very language of the Rule. Again, we have heretofore so held. Kozak v. Wells, supra, pp. 108-109 of 278 F.2d; Pennington v. Missouri Pac. R.R., supra, p. 334 of 239 F.2d. If the representation "may be" inadequate, that itself is enough. Ford Motor Co. v. Bisanz Bros., 8 Cir., 1957, 249 F.2d 22, 28.
The representation, the adequacy of which is to be determined here, is that of Union viz-a-viz the interest of Stadin as a shareholder of Union. Two leading commentators on federal practice have said that inadequacy of representation is or may be shown by proof of collusion between the representative and an opposing party, by the representative having or representing an interest adverse to the intervener, or by the failure of the representative in the fulfillment of his duty. 4 Moore's Federal Practice § 24.08, pp. 38-39; 2 Barron Holtzoff, Federal Practice and Procedure (Wright Revision), § 597, pp. 381-82. See also Farmland Irrigation Co. v. Dopplmaier, 9 Cir., 1955, 220 F.2d 247, 248-249; Bisanz Bros. Inc. v. Chicago-Milwaukee-St. Paul P.R.R., D.Minn., 1957, 20 F.R.D. 353, 354, vacated on other grounds, Ford Motor Co. v. Bisanz Bros., supra, 249 F.2d 22; S.C. Johnson Son v. Boe, E.D.Pa., 1960, 187 F. Supp. 517, 519; Kind v. Markham, supra, S.D.N.Y., 1945, 7 F.R.D. 265, 266.
On the factor of unfriendliness of counsel our attention is called, with emphasis, to United States v. C.M. Lane Lifeboat Co., E.D.N.Y., 1938, 25 F. Supp. 410. This was an action by the government to recover, from its supplier and the latter's performance bond surety, damages which the government had been compelled to pay for infringement of a patent embodied in the goods supplied. An officer of the supplier sought to intervene. He alleged that he and another officer, as a condition precedent to the surety's issuance of the bond, executed an indemnity agreement in favor of the surety. The petition to intervene disclosed that the supplier and the surety retained the same attorney and alleged that the intervener and that attorney were not on friendly terms. The court observed that any judgment rendered against the surety would enable it to proceed against the intervener indemnitor and that the judgment, though not directly binding the intervener, would do so indirectly. This is the heart and the significance of the case. The court did go on to observe, p. 411 of 25 F. Supp.,
We recognize that the Lifeboat case has been said to be authority for intervention based upon unfriendliness of counsel of record. See, for example, 2 Barron Holtzoff, Federal Practice and Procedure (Wright Revision), § 597, p. 381, and Farmland Irrigation Co. v. Dopplmaier, supra, p. 249 of 220 F.2d. These are mere references, however, and we suspect they overstate the authority of the Lifeboat case.
3. Permissive intervention. Having reached this conclusion as to intervention of right we need not tarry long with the district court's denial of permissive intervention under Rule 24(b)(2). It has been indicated that an order denying permissive intervention is not appealable unless there is abuse of discretion. Brotherhood of Railroad Trainmen v. Baltimore O.R.R., 1947, 331 U.S. 519, 524-525, 67 S.Ct. 1387, 91 L.Ed. 1646. This court has commented upon this approach in Pennington v. Missouri Pac. R.R., supra, p. 335 of 239 F.2d, and particularly in Ford Motor Co. v. Bisanz Bros., supra, pp. 26-27 of 249 F.2d. In any event, the Rule itself directs that in the exercise of its discretion the court "shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties."
It seems unquestionably clear to us from the pleadings of the intervener that his desired incorporation in the main actions of the several additional equipment categories will bring into these lawsuits added complexity; the inevitable problems attendant upon additional witnesses, interrogatories and depositions; expanded pretrial activity; greater length of trial; and elements of confusion. These in themselves suggest delay and the clouding of the issues involved in the original causes of action. More than one trial court has observed that "Additional parties always take additional time" and that "they are the source of additional questions, objections, briefs, arguments, motions and the like which tend to make the proceeding a Donnybrook Fair." Crosby Steam Gauge Valve Co. v. Manning, Maxwell Moore, D.Mass., 1943, 51 F. Supp. 972, 973; First Congressional Church, etc. v. Evangelical and Reformed Church, S.D.N.Y., 1958, 21 F.R.D. 325, 327-328; Wilson v. Illinois Central R.R. Co., N.D.Ill., 1957, 21 F.R.D. 588, 589.
We cannot hold that the district court's denial of permissive intervention here was an abuse of the discretion possessed by the court under Rule 24(b)(2). Compare Sutphen Estates v. United States, 1951, 342 U.S. 19, 23, 72 S.Ct. 14, 96 L.Ed. 19.
These conditions are several in number but Rule 23(b) itself clearly embraces four which are applicable to the situation here: (a) that the corporation possess rights which it may properly assert and enforce; (b) that the plaintiff shareholder make a demand upon the corporation to enforce those rights; (c) that the corporation refuses so to do; and (d) that the plaintiff's complaints set forth with particularity his efforts to secure corporate action and the reasons for his failure so to obtain such action or for not making such effort. See Quirke v. St. Louis-San Francisco Ry., 8 Cir., 1960, 277 F.2d 705, 707-708, cert. den. 363 U.S. 845, 80 S.Ct. 1615, 4 L.Ed. 2d 1728, and 13 Fletcher, Private Corporations (1961 Revision) §§ 5970, 6008. A fifth condition, which Stadin in his brief concedes still to be "the sine qua non of the stockholder's derivative right to sue", is that management be guilty of conduct equivalent to bad faith or breach of trust. United Copper Sec. Co. v. Amalgamated Copper Co., 1917, 244 U.S. 261, 263-264, 37 S.Ct. 509, 61 L. Ed. 1119; Ashwander v. Tennessee Valley Authority, 1936, 297 U.S. 288, 319, 343, 56 S.Ct. 466, 80 L.Ed. 688; Hawes v. Oakland, 1881, 104 U.S. 450, 460-461, 26 L.Ed. 827; Heinz v. National Bank of Commerce, 8 Cir., 1916, 237 F. 942, 948-949. Otherwise management possesses a wide discretion in determining a corporation's business policies and the methods of executing them. This discretion extends to litigation and to a decision to sue or not to sue. Merrill v. Davis, 1950, 359 Mo. 1191, 225 S.W.2d 763, 768. See Swanson v. Traer, 7 Cir., 1957, 249 F.2d 854, 858-859. It extends even to the settling of an antitrust claim. Post v. Buck's Stove Range Co., 8 Cir., 1912, 200 F. 918, 920. See Sam Fox Publishing Co. v. United States, supra, p. 689 of 366 U.S., p. 1313 of 81 S.Ct.
Except in an extreme and unusual situation of that kind, we do not interpret Rogers as denying the authority of United Copper and its companion cases and, indeed, the language we have quoted so indicates. Neither do we regard the case as indicative of a new and nation-wide public policy, as Stadin argues.
The district court's denials of the motions to intervene were not improper. So far as its order pertains to intervention under Rule 24(a)(2), it is affirmed. So far as it concerns intervention under Rule 24(b)(2), the appeal therefrom is dismissed.
denying motion to intervene brought by minority stockholder
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