Opinion ID: 1483191
Heading Depth: 1
Heading Rank: 8

Heading: Anti-Trust Action.

Text: As to statutory damages from claimed violation of the Clayton Act, 38 Stat. 730, and, possibly, the Sherman Anti-Trust Act, 49 U.S.C.A. §§ 1-7, 15 note, the Commission stated that Any such cause of action might prove to be a valuable asset affecting permissible capitalization, and perhaps the distribution of reorganization securities. The Commission then examined the evidence, as well as its own previous proceedings in other matters, to ascertain whether, as matter of law, there seemed any basis for a cause of action under the anti-trust law and concluded there was no substantial basis in the evidence upon which to found such an action. How thoroughly the Commission examined this and related contentions of Mr. Meyer may be surmised from the situation that, out of about 140 pages (as printed in this record) which it devoted to discussion of the contentions of all of the parties, approximately one-half had to do with these matters. The balance of the other half was devoted to other contentions of Mr. Meyer except about ten pages. The United States has, by leave, filed a brief as amicus curiæ bearing upon this Anti-Trust action issue and counsel were heard orally. The concern of counsel is as to the proper construction of the federal statutes forbidding restraints of trade and monopolization of interstate commerce. The contentions of the Government are stated as follows: The reorganization plan submitted by the Commission and approved by the district court involved an implicit assumption that the control of the debtor by the Kansas City Southern Railway was not unlawful. The United States contends that such control was clearly unlawful, under the applicable provisions of the antitrust laws. If such control was unlawful, then the plan of reorganization submitted by the Commission and approved by the district court is unfair and unequitable in failing to recognize that the debtor had a valuable cause of action for triple damages under the antitrust laws which it was prevented from bringing during its subsequent control by Southern Pacific. Assuming the existence of such a cause of action against Kansas City Southern which was known to Southern Pacific, the latter's refusal to permit the debtor to realize upon it, because inaction better served the interests of Southern Pacific, was a breach of trust which Southern Pacific is bound to account for in this reorganization proceeding. Such a breach of trust should result in the subordination of Southern Pacific's claims to those of the minority stockholders injured by Southern Pacific's wrongful conduct. Taylor v. Standard Gas Co., 1939, 306 U.S. 307, 322, 59 S.Ct. 543, 83 L.Ed. 669; Pepper v. Litton, 308 U.S. 295, 306 (1939); In re American Fuel & Power Co., 6 Cir., 1941, 122 F.2d 223. The Commission apparently decided that, because it did not find the existence of any `conspiracy,' there was no cause of action which in the reorganization plan should be reserved and vested in a trustee for the purpose of bringing suit. The United States contends that upon a correct construction of the anti-trust laws the control of debtor by Kansas City Southern was illegal per se. No `conspiracy,' wrongful intent, or specific frauds, irregularities, misconduct or mismanagement, was a condition precedent to the existence of debtor's cause of action against Kansas City Southern. The mere fact of control in and of itself gave rise to a cause of action. By failing to construe the antitrust laws correctly, and by failing to give effect in the reorganization plan to the consequences of the violations of those statutes, the Commission in effect approved the wrongful control of debtor by Kansas City Southern, even though the Commission has stated that it regards the question of whether this control violated the antitrust laws as an undecided question which need not be determined in this proceeding. However, it has, in effect, determined the question by approving a plan of reorganization which may not be regarded as fair and equitable if this control was illegal.