Court Opinion

ID: 9335978
Source: CourtListenerOpinion
Date Created: 2022-12-15 21:49:58.602887+00
Date Added: 2024-06-11T17:14:44.904668
License: Public Domain

SYMES, District Judge
(dissenting). On this record I am of the opinion that there was collusion between appellee and certain local stockholders to make a case cognizable in the federal court. For this reason alone the judgment should be reversed.
According to the plaintiff, he wrote to Attorney Malloy in the fall of 1918 in regard to taking the case This letter is not in the record, and no letter was produced showing employment. His letter of October 21, 1918, does not indicate an intention to sue on his own account, and the one of December 1st shows that the letter of November 18th, referred to in the opinion, merely authorized the use of his name as plaintiff. His own testimony, and the letter he inclosed to Malloy from a Mr. Pinney, proves that plaintiff had previously been solicited by the other parties because he was a nonresident. On cross-examination plaintiff would not say that he ever employed Malloy, but referred to the correspondence as showing what occurred. He further stated that he did not expect to pay the latter any fee.
Mr. Malloy’s testimony shows that he had been an attorney for the Straw Products Company before it was reorganized as the Hutchinson *431Box Board & Paper Company, and by reason thereof was in touch with its creditors; that during a period of two years preceding the filing of this suit he had been consulted by different stockholders, who talked with him about bringing a suit to set the contract in question aside. This was long before Van Horn was interested, as he testified he knew nothing about this contract until December, 1917, or January or February, 1918. Further, Malloy.says he met the plaintiff’s brother, and informed him that parties had solicited him in regard to a suit; that the latter said that he was going to write to his brother, who thereafter wrote Malloy that he wished to co-operate with the other parties. Malloy replied that the other parties wished to get into the federal court, but could not. Thereafter Malloy learned that the other attorneys of record here were about to bring an action in the state court, and had even gone so far as to make a written demand on the company for adjustment — a condition precedent to a suit. After he had informed them that he had a client in Colorado with sufficient investment in the company to get into the federal court, he was taken into the case.
Malloy further says that, after six or seven stockholders had talked with him, arrangements were finally made to bring the suit in Van Horn’s name in November, 1918. He then states that Van Horn, in answer to his letter, “told me that he was perfectly willing to let his name be used as plaintiff, and to proceed in the federal court, but that he didn’t want to assume all the burden of possible expense * * * to help others,” and that, if he was to be plaintiff, he would want the others to guarantee him against out of pocket expense, etc.; and according to Malloy, it was not until the other parties had agreed to this that the contract in question was prepared “between these stockholders, who had already taken steps towards the bringing of this suit, and desired it brought, and Van Horn, who desired the suit brought.” Another witness, Mr. Simmons, of the counsel for plaintiff, related that he and Malloy and the other attorneys discussed the matter of co-operation, and that they delayed until a nonresident could be found. It is alsb undisputed that no one expected to pay any thing, and Malloy says no one retained him. The case was worked up by a group of attorneys, who looked solely to a possible judgment for their fees.
The written contract, pursuant to which the plaintiff allowed his name to be used as plaintiff, goes far beyond the facts in New Albany Waterworks v. Louisville Banking Co., 122 Fed. 776, 58 C. C. A. 576. It was frankly conceded in that case that there was no violation of equity rule 94 in respect to collusion, and the court said:
“The utmost that may be inferred from the allegations * * * is that they induced the complainant to file the bill, and are contributors to the expense.”
The Cashman Case, 118 U. S. 58, 6 Sup. Ct. 926, 30 L. Ed. 72, has never been modified. The agreements in that and the instant case are very similar. Both contain the express provision not to compromise, dismiss, or settle the suit without consent of the other parties, and the Supreme Court held there was collusion, because Cashman gave up all control over his suit. The same court in the Wheeler Case, 229 *432U. S. 351, 33 Sup. Ct. 842, 57 L. Ed. 1219, distinguished the Cashman Case on this ground. The agreement and facts before us go further than any case I have 'read on collusion. Van Horn never agreed to bring a suit, but only “authorized the bringing of said suit in the federal court in his name,” a very different thing, and agreed specifically not to sell or transfer his stock, or do any act that would affect the jurisdiction without the consent of the other parties in writing, and further exacted the condition that even his expenses of attending the trial either as a party or as a witness would be repaid.
But, conceding the case to be a close one, all doubts should be resolved in favor of the jurisdiction .of the court of the state where the corporations were incorporated, carried on business, and of which all the stockholders with the exception of plaintiff, and possibly one other, were residents, and where at one time they intended to bring the suit. Otherwise, counsel fostering litigation such as this, may choose between the state and federal tribunals, regardless of the rule in the Cashman Case.