Cordova v. Bache & Co.

• Decision Date: 09 December 1970
• Docket Number: No. 70 Civ. 3152.,70 Civ. 3152.
• Parties: Sam CORDOVA, President of the American Association of Securities Representatives, et al., Plaintiffs, v. BACHE & CO., Inc., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

321 F. Supp. 600

Sam CORDOVA, President of the American Association of Securities Representatives, et al., Plaintiffs, v. BACHE & CO., Inc., et al., Defendants.

No. 70 Civ. 3152.

United States District Court, S. D. New York.

December 9, 1970.

Abraham E. Freedman, New York City, for plaintiffs; Charles Sovel, New York City, of counsel.

Sullivan & Cromwell, New York City, for defendants Bache & Co., Inc., Hornblower & Weeks-Hemphill, Noyes, Kidder, Peabody & Co., Inc., The First Boston Corp., Dean Witter & Co. and Smith, Barney & Co., Inc.; Michael M. Maney, New York City, of counsel.

Breed, Abbott & Morgan, New York City, for defendants Walston & Co., Inc. and Orvis Brothers & Co.; Robert A. Bicks, New York City, of counsel.

Reavis & McGrath, New York City, for defendant Association of Stock Exchange Firms; James P. Durante and Lawrence W. Boes, New York City, of counsel.

Milbank, Tweed, Hadley & McCloy, New York City, for defendant The New York Stock Exchange; William E. Jackson, Isaac Shapiro, and Russell E. Brooks, New York City, of counsel.

Cahill, Gordon, Sonnett, Reindel & Ohl, New York City, for defendants E. F. Hutton & Co., Inc. and Loeb, Rhoades & Co.; David R. Hyde, New York City, of counsel.

Hall, McNicol, Marett & Hamilton, New York City, for defendant Thomson & McKinnon Auchincloss, Inc.; Donald G. McCabe, New York City, of counsel.

Simpson, Thacher & Bartlett, New York City, for defendants Lehman Brothers and Tucker, Anthony & R. L. Day; James J. Hagan, New York City, of counsel.

A. George Saks, New York City, for defendant Blair & Co., Inc.

Baer & Marks, New York City, for defendant Hentz & Co.; Stephen F. Selig, New York City, of counsel.

Blanc, Thomas & Mitchell, New York City, for defendant Delafield & Delafield; Eugene Blanc, and James A. Thomas, Jr., New York City, of counsel.

Clare & Whitehead, New York City, for defendant Goodbody & Co.; William F. Clare, Jr., and Leonard B. Boehner, New York City, of counsel.

Guggenheimer & Untermyer, New York City, for defendants Hirsch & Co. and Oppenheimer & Co.; Leon H. Tykulsker, New York City, of counsel.

Gifford, Woody, Carter & Hays, New York City, for defendant Harris, Upham & Co., Inc.; Donald C. Hays, New York City, of counsel.

Monaghan & Walsh, New York City, for defendant Dominick & Dominick, Inc.; John F. Walsh, New York City, of counsel.

Parker, Chapin & Flattau, New York City, for defendant Shearson, Hammill & Co., Inc.; Alvin M. Stein, and Barry J. Brett, New York City, of counsel.

G. Raymond Empson, New York City, for defendant Halle & Stieglitz, Inc.

Weil, Gotshal & Manges, New York City, for defendant Dempsey Tegler & Co., Inc.; Peter Gruenberger, New York City, of counsel.

Llewellyn P. Young, New York City, for defendants F. I. DuPont, Glore Forgan & Co., sued as Francis 1. DuPont & Co., and duPont Glore Forgan Inc. sued as Glore-Forgan-William R. Staats, Inc.

LeBoeuf, Lamb & MacRae, New York City, for defendant A. G. Edwards & Sons, Inc.; H. Richard Wachtel, and A. R. Van Doren, New York City, of counsel.

Spear & Hill, New York City, for defendant Reynolds & Co.; Eliot H. Lumbard and Lawrence Grosberg, New York City, of counsel.

Winthrop, Stimson, Putnam & Roberts, New York City, for defendants Bear, Stearns & Co. and R. W. Pressprich & Co., Inc.; Stephen Weiner, New York City, of counsel.

Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for defendant Shields & Co.; Leonard Joseph and Russell H. Beatie, Jr., New York City, of counsel.

Mudge, Rose, Guthrie & Alexander, New York City, for defendant Stone & Webster Securities Corp.; Gerard A. Dupuis, New York City, of counsel.

Shearman & Sterling, New York City, for defendant W. E. Hutton; George J. Wade, New York City, of counsel.

Seward & Kissel, New York City, for defendant Rauscher Pierce Securities Corp.; Eugene P. Souther and Walter Parrs, Jr., New York City, of counsel.

Moses & Singer, New York City, for defendant L. F. Rothschild & Co.; Felix A. Fishman, New York City, of counsel.

Beekman & Bogue, New York City, for defendant Paine, Webber, Jackson & Curtis; L. S. Weeks, Jr., New York City, of counsel.

Patricia A. O'Brien, New York City, for defendant Scheinman, Hochstin & Trotta, Inc.

Bressler, Meislin, Tauber & Bressler, New York City, for defendant Pressman Frolich & Frost, Inc.; Burton R. Tauber, New York City, of counsel.

Golenbock & Barell, New York City, for defendant Newburger, Loeb & Co.; Arthur Silverman, New York City, of counsel.

Nathan Leventon, New York City, for defendant Steiner, Rouse & Co., Inc.

E. Michael Growney, Jr., New York City, for defendant Spencer Trask & Co., Inc.

Brown, Wood, Fuller, Caldwell & Ivey, New York City, for defendant Merrill Lynch, Pierce, Fenner & Smith, Inc.; Walter G. McNeill, New York City, of counsel.

MANSFIELD, District Judge.

In this suit purportedly brought on behalf of securities representatives ("representatives" herein) charging their employers (some 42 leading stock exchange brokerage firms and the New York Stock Exchange) with conspiracy to reduce commissions paid to representatives in violation of the Sherman Act, defendants have moved to dismiss the complaint pursuant to Rules 12(b) (1) and (6), F.R.Civ.P.

Plaintiff is the President of the American Association of Securities Representatives, which is affiliated with the National Maritime Union. Securities representatives are employed by stock brokerage firms to handle for such firms and their customers the purchase and sale of securities on public exchanges and over-the-counter. For his services in handling a securities transaction a representative receives a commission based upon a percentage of the commission received by his employer for the transaction.

Plaintiff here, although purporting to sue on behalf of approximately 20,000 representatives throughout the United States, does not claim that he himself is employed as a securities representative. He simply alleges that the Association of which he is President has as its membership more than 5,000 such representatives.

The gravamen of plaintiff's claim is that beginning in September 1969 defendants entered into a conspiracy in violation of §§ 1 and 2 of the Sherman Act to restrain trade by reducing the commission rates to be paid to the representatives employed by them. It is charged that pursuant to the alleged conspiracy defendants, from September 1969 to the present, have reduced the commission rates paid to their representatives by amounts ranging from 5% to 10% of their former commission rates; more specifically, that prior to September 1969 representatives employed by defendants were paid rates ranging from 34% to 37% of the commission received by the employer from a purchase or sale, and that thereafter these rates were reduced to approximately 30% to 33% of the employer's commission. Plaintiff alleges that the effect of the conspiracy has been to reduce competition in the hiring of representatives and in the compensation paid to them, causing them irreparable injury and damages. As pendent claims (Second and Third Causes of Action), plaintiff alleges that defendants' conduct violated § 340 of the General Business Law of New York, McKinney's Consol.Laws, c. 20, State Antitrust and Anti-Blacklisting statutes, and state common law.

A further separate antitrust claim against all defendants (Fourth Cause of Action) alleges that since March 1970 the New York Stock Exchange, on behalf of its members (including the other defendants) has imposed a surcharge in the form of a service fee in the sum of $15 or 50% of the applicable commission, whichever is lesser, on orders of 1,000 shares or less, and that pursuant to the alleged conspiracy to restrain trade and competition in the hiring of, and in the compensation to be paid to, representatives, defendants have refused to pay to the latter any commission on the amount of the surcharge fee. Following his established pattern with respect to the First Cause of Action, plaintiff further claims (Fifth and Sixth Causes of Action) that this conduct violated the New York General Business Law, New York Antitrust and Anti-Blacklisting statutes, and common law.

At the outset we are confronted with the undisputed fact that plaintiff is not an employee of any of the defendants and that neither he individually nor the Association claims that their property, business or earnings have been adversely affected in any way by the alleged conduct of the defendants. Having no stake in the outcome plaintiff therefore lacks standing to assert an antitrust claim under the Clayton Act, which permits such a suit to be brought only by a "person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws." Clayton Act § 4, 15 U.S.C. § 15. Allegation and proof of such injury is essential to the maintenance of a private suit under the Sherman Act for enforcement of rights arising out of alleged violations of the Sherman Act. Bookout v. Schine Chain Theatres Inc., 253 F.2d 292, 295 (2d Cir. 1958); SCM Corp. v. Radio Corp. of America, 407 F.2d 166 (2d Cir. 1969), affirming 276 F.Supp. 373 (S.D.N.Y. 1967), cert. denied, 395 U.S. 943, 89 S. Ct. 2014, 23 L.Ed.2d 461 (1969); see Perma Life Mufflers Inc. v. International Parts Corp., 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968).

The fact that plaintiff sues as the President of the American Association of Securities Representatives does not provide him with standing or cure the fatal deficiency, since an association has no standing to assert the rights of its members under the antitrust laws. Northern Cal. Monument Dealers Assn. v. Interment Association, 120 F.Supp. 93, 94 (N.D.Calif.1954); Carroll v. Associated Musicians of Greater New York, 206 F.Supp. 462, 471-472 (S.D.N.Y. 1962), affd., 316 F.2d 574 (2d Cir. 1963). Lacking standing to sue individually, plaintiff cannot sue on behalf of a class of representatives, since only a member of the class is...