517 F.2d 555 (7th Cir. 1975), 74-1430, Swanson v. American Consumer Industries, Inc.

Docket Nº:74-1430, 74-1434.
Citation:517 F.2d 555
Party Name:Knute SWANSON, on behalf of Peoria Service Company, and on behalf of all shareholders of Peoria Service Company similarly situated, Plaintiff-Appellant, v. AMERICAN CONSUMER INDUSTRIES, INC., a New Jersey Corporation, et al., Defendants-Appellees.
Case Date:May 29, 1975
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 555

517 F.2d 555 (7th Cir. 1975)

Knute SWANSON, on behalf of Peoria Service Company, and on

behalf of all shareholders of Peoria Service

Company similarly situated, Plaintiff-Appellant,



Corporation, et al., Defendants-Appellees.

Nos. 74-1430, 74-1434.

United States Court of Appeals, Seventh Circuit

May 29, 1975

Argued Feb. 11, 1975.

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[Copyrighted Material Omitted]

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Richard Orlikoff, John N. Tierney, Chicago, Ill., Thomas V. Cassidy, Peoria,

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Ill., Arthur T. Susman, Chicago, Ill., for plaintiff-appellant.

Frank O. Wetmore II, Chicago, Ill., for defendants-appellees.

Before PELL and TONE, Circuit Judges, and JAMESON, Senior District Judge. [*]

TONE, Circuit Judge.

In this derivative and class action, the minority shareholders of Peoria Service Company (Peoria) have sought rescission of sale of the corporate assets and damages. On the only issue properly before the court on this third appeal, the measure of attorneys' fees to be paid to plaintiffs' attorneys, we reverse the order of the District Court which allowed fees of $21,336.00, holding that amount inadequate in the circumstances of this case, and increase the amount to $40,000.00.

The case has been in the federal courts for ten years, having been filed in 1965 to challenge a proposed reorganization plan calling for the transfer of substantially all of Peoria's assets to American Consumer Industries, Inc. (ACI), in exchange for shares of ACI stock, and the liquidation of Peoria. The complaint asserted that the proxy statement issued in connection with the Peoria shareholder vote on the proposed plan was materially misleading in that it failed to inform the shareholders of the actual value of the corporate assets in violation of Section 10(b) of the Securities Exchange Act (15 U.S.C. § 78j(b)) and Rule 10b-5 of the Securities Exchange Commission regulations. At the time the proxy statement and the plan were under consideration, ACI, through its 90% subsidiary United States Cold Storage Corporation (U.S. Cold), owned 87% of the outstanding shares of Peoria and controlled its board of directors.

In August 1968, the District Court entered summary judgment for defendants. 288 F.Supp. 60 (S.D.Ill.1968). This court reversed and remanded for trial. 415 F.2d 1326 (7th Cir. 1969). After trial, the District Court again entered judgment for defendants. 328 F.Supp. 797 (S.D.Ill.1971). This court again reversed, holding that "plaintiff shareholders have proven all the elements required to impress liability on defendants under Section 10(b) . . . and . . . Rule 10b-5 for loss of their informed ability to exercise their statutory appraisal rights." 475 F.2d 516, 521 (7 Cir. 1973). Our mandate directed as follows:

"ACI must offer to each Peoria shareholder $3.55, the market value attributed to Peoria stock in the reorganization plan, for each share of Peoria stock held by such shareholder on March 31, 1965, together with legal interest from that date to the date judgment is entered by the district court. Any minority shareholders who exchanged Peoria shares must, of course, return an equivalent number of ACI shares exchanged in order to receive the cash. Plaintiff is also entitled to reimbursement of reasonable attorneys' fees in an amount to be fixed by the district court, of course taking into consideration the modest recovery achieved, but cognizant that pecuniary benefit is not the sole criterion for the award of attorneys' fees. (Citing Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970), and other cases.) " 475 F.2d at 521.

On September 4, 1973, the District Court entered a judgment order pursuant to the mandate requiring ACI to make available to "plaintiff shareholders" (defined as those who had not exchanged their Peoria shares for ACI shares or, having exchanged, retained their ACI shares and stock dividends thereon) $3.55 per share of Peoria held on March 31, 1965 with interest thereon at 6 per cent; providing a procedure for notifying shareholders entitled to participate and payment of those electing to receive payments; assessing costs against defendant ACI; and retaining jurisdiction to make any further orders necessary to carry out this court's mandate,

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including the determination and award of attorneys' fees. The judgment order also provided:

"Any Peoria shareholder on March 31, 1965 who can make a showing to this court within ninety (90) days after the date hereof that his or her liquidation of either Peoria or ACI shares here involved causes inequitable treatment hereunder, by exclusion from the term 'plaintiff shareholder,' may receive special consideration on a ratable basis." (Judgment Order, Sept. 4, 1973, pp. 2-3.)

Notice of the terms of the order, however, was sent only to those defined in the order as "plaintiff shareholder."

No notice of appeal was ever filed from the judgment order of September 4, 1973. In an order entered April 4, 1974 the District Court allowed attorneys' fees in the total amount of $21,336, and ordered ACI, as Peoria's successor, to pay those fees.

Two notices of appeal were thereupon filed, both purporting to appeal from the April 4, 1974 order. The first was filed by plaintiffs' attorney Richard Orlikoff solely, on his own behalf. The second was filed by plaintiffs' other attorney Arthur Susman on behalf of both himself and plaintiffs. The attorneys have filed separate briefs in this court. Only Mr. Orlikoff seeks to challenge the September 4th order, which he contends erroneously excluded from the redemption opportunity shareholders who exchanged in 1965 and then sold their ACI stock. Mr. Susman limits his argument to the amount of the attorneys' fees.

Defendants argue that because the Orlikoff notice of appeal states that only he, and not his clients, appeals, and he is the only one who seeks to challenge the September 4th order on behalf of former Peoria ACI shareholders, there had been no appeal by plaintiffs themselves from the September 4th order. This would be correct, if it were not for the Susman notice of appeal, which is on behalf of plaintiffs as well as Mr. Susman himself. Plaintiffs are entitled to the benefit of the latter notice of appeal.

Defendants also argue that the final judgment in the case was the September 4th order and that since plaintiffs failed to appeal from that order within 30 days they have lost their right to challenge it. We agree.


We begin our analysis with the venerable Supreme Court case that sets forth the basic principle of finality:

". . . a decree is final . . . when it terminates the litigation between the parties on the merits of the case, and leaves nothing to be done but to enforce by execution...

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