American Optometric Ass'n v. Ritholz

• Citation: 101 F.2d 883
• Decision Date: 21 March 1939
• Docket Number: No. 6615.,6615.
• Parties: AMERICAN OPTOMETRIC ASS'N v. RITHOLZ et al.
• Court: U.S. Court of Appeals — Seventh Circuit

101 F.2d 883 (1939)

AMERICAN OPTOMETRIC ASS'N v. RITHOLZ et al.

No. 6615.

Circuit Court of Appeals, Seventh Circuit.

February 10, 1939.

Rehearing Denied March 21, 1939.

Clarence T. Morse, of Chicago, Ill. for appellants.

John J. Yowell and Ross Langdon, both of Chicago, Ill., and Harold Kohn, of New York City, for appellee.

Before SPARKS and TREANOR, Circuit Judges, and LINDLEY, District Judge.

TREANOR, Circuit Judge.

Plaintiff-appellee brought this suit in the District Court to enjoin defendants, appellants here, from prosecuting allegedly vexatious actions at law and suits in equity. The prayer was for an injunction and general relief. The trial court made findings of fact supporting substantially all the allegations of the complaint and entered a perpetual injunction against the defendants and rendered judgment in favor of the plaintiff and against defendants for damages in the sum of $4,000. The defendants-appellants have appealed from the order of injunction and the judgment for damages.

The plaintiff is a non-profit association of optometrists incorporated in the state of Ohio. State associations of optometrists in 47 states are affiliated with it and its total membership numbers about 6,000 individuals. The purposes of plaintiff, as set forth in its articles of incorporation are "uniting the reputable optometrists; to improve the science and art of optometry; to elevate its standards; and eventually to restrict the practice of optometry to properly qualified optometrists."

The defendants herein are engaged in the business of selling optical goods, and they operate under numerous trade names. Each defendant is a citizen of Illinois and the present action is based jurisdictionally on diversity of citizenship.

The plaintiff, from time to time, has assisted governmental agencies in their efforts to investigate practices of the defendants. In 1921 the Federal Trade Commission issued an order to defendant Benjamin Ritholz to cease and desist from certain fraudulent representations. In 1921, 1922, 1923, and 1928 the United States Postoffice Department charged the defendants with using the mails to defraud and on each occasion an agreement was entered into for cessation of such conduct. In 1930 the Federal Trade Commission entered another cease and desist order against four of the six defendants, and in 1932 and 1934 the Postoffice Department took administrative steps against defendants for mail fraud. In 1934 the Federal Trade Commission took proceedings against defendants and found that defendants made guarantees which they habitually refused to perform; that in proceedings by the United States Postoffice Department it was learned that there were 7,000 claims based on defendants' guarantee of refunding the purchase price which were rejected; that certain spectacles sold by defendants were gravely injurious to the eyes; that a substantial number of the lenses sold by defendants were ground from window glass, though satisfactory lenses can be ground only from "crown glass." The Federal Trade Commission issued another cease and desist order on the basis of the foregoing findings.

In 1935 the Postmaster General issued an order finding that defendants, under 19 trade names, were engaged in a scheme to obtain money by fraudulent use of the mail. In 1937 the Federal Trade Commission filed a complaint charging defendants with false representations and this matter was pending at the time of the filing of the instant suit.

The foregoing facts are material to plaintiff's cause for the reason that its bill in equity alleges that the defendants, finding their unlawful activities constantly thwarted by federal and state action in which plaintiff cooperated, are engaged in a plan and conspiracy to unlawfully, maliciously, and fraudulently vex and harass the plaintiff by bringing a multitude of groundless actions in different jurisdictions against plaintiff.

It is undisputed that defendants filed seven suits against plaintiff, its officials, affiliates and members in the state courts of Indiana, Illinois, and Nebraska, in the federal courts of Nebraska, Minnesota and in Canada. The gravamen of all of these actions was that the present plaintiff was seeking to ruin defendants' business by unlawful acts, such as libeling defendants, intimidating employees, "unlawfully employing detectives and snoopers," intimidating and unlawfully inducing newspapers and radio stations not to accept defendants' advertising, and by other similar acts. The total of damages claimed by defendants in such actions aggregated $450,000.

The plaintiff's evidence in the instant case amounts to a categorical denial of the defendants' charges of unlawful acts upon which the foregoing suits of the defendants are predicated.

In addition to the above seven actions the defendants filed an action seeking to enjoin plaintiff from doing business in Illinois, alleging in part that by lobbying, litigation, and propaganda the present plaintiff was seeking to impede or destroy defendants' business in violation of plaintiff's charter. The defendants filed another action against plaintiff's president charging that a certain company, not a party to the suit, was manufacturing and selling a certain massaging device, at the suggestion of plaintiff's president, and that, on grounds not disclosed, the manufacture and sale of same was in violation of law.

Also the defendants issued and served numerous notices of depositions to be taken and caused to be issued and served numerous subpoenas duces tecum.

In 1937, 19 years after plaintiff's incorporation, a company was incorporated in Illinois having the same identical name as plaintiff, having the same stated objects, and the first 24 words of the stated objects were identical with those of plaintiff. The named incorporators were three employees of the defendants; the articles were sworn to before an employee of defendants, and the address of the corporation was the address of defendants' attorney. Plaintiff produced two of the three incorporators at the trial below, being unable to find the third, and the two were ignorant of the affairs of the new corporation other than that they knew that they had signed the articles of incorporation.

The District Court found that defendants caused the aforesaid corporation to be organized as a colorable imitation of plaintiff for the purpose of deception and fraud on the public and on optometrists, and to injure and defraud and damage plaintiff. The court also found that all of the actions instituted by defendants against plaintiff were groundless, were not brought in good faith, were wilful, vexatious and malicious and for the purpose of vexing, harassing and injuring plaintiff.

The decree enjoining further prosecution of the actions followed the findings; and the judgment for $4,000 followed the finding of the court that plaintiff had been required to pay out that sum in defending the actions enjoined.

The grounds relied upon for reversal are as follows:

1. The evidence does not support the finding.

2. Federal jurisdiction did not exist because the amount in controversy, exclusive of interest and cost, did not exceed $3,000.

3. Section 265 of the Judicial Code, 28 U.S.C.A. § 379, precluded the enjoining of actions in state courts.

4. The money decree of $4,000 damages was improper.

With regard to the sufficiency of the evidence we are of the opinion that it cannot be said that there was no substantial evidence to support finding No. 19 upon which the order of injunction rests.¹ Evidence introduced on behalf of plaintiff negatived the truth of the charges made by defendants in their various suits and disclosed facts which were sufficient to justify the inference that the defendants were actuated by malice. The credibility of plaintiff's evidence and the weight to be given circumstantial or indirect evidence was a matter for the fact finding tribunal. The circumstances of defendants' appropriation of plaintiff's name and objects and the fact that plaintiff could have been proceeded against in one suit in Ohio, the state of its incorporation, cannot be said to have been without significance.

Defendants urge that they have satisfactorily explained the reason for not bringing a single action in Ohio against the plaintiff on the ground that they could not obtain service on the other parties associated with defendants, and point out that in some instances they brought actions where the plaintiff was holding a convention so that they might get service on the delegates. As against this it appears that when the Federal District Court in Minnesota quashed a service as to the present plaintiff the case was dismissed as to all co-defendants of the present plaintiff. This conduct tended to indicate that it was the plaintiff association which was the object of defendants' suits. The activities of the plaintiff corporation necessarily were carried on through its officers and members; but any objectionable conduct could be reached in one suit for injunction and damages against the plaintiff alone. Defendants' explanation is not sufficient to destroy probative value of the circumstances which, the plaintiff contends, support the inference that these various suits were brought in different jurisdictions for the purpose of harassing the plaintiff and destroying its effectiveness. The circumstances strongly tend to show that a part of the plan of the defendants was to weaken the plaintiff association by discouraging support of its members by threatening to make, and by actually making, them parties to law suits.

It is our opinion that the evidence is sufficient to justify the court's finding of facts.

Defendants urge that plaintiff did not establish that the loss which would follow if plaintiff did not obtain injunctive relief would exceed $3,000. The present case is a suit to enjoin the defendants from prosecuting malicious and groundless actions which are alleged to have...