Angoff v. Goldfine

• Decision Date: 10 September 1959
• Docket Number: No. 5472,5473.,5472
• Citation: 270 F.2d 185
• Parties: Jules E. ANGOFF et al., Appellants, v. Bernard GOLDFINE et al., Appellees. Harold BROWN et al., Appellants, v. Bernard GOLDFINE et al., Appellees.
• Court: U.S. Court of Appeals — First Circuit

270 F.2d 185 (1959)

Jules E. ANGOFF et al., Appellants, v. Bernard GOLDFINE et al., Appellees.

Harold BROWN et al., Appellants, v. Bernard GOLDFINE et al., Appellees.

Nos. 5472, 5473.

United States Court of Appeals First Circuit.

Heard April 10, 1959.

Decided September 10, 1959.

Abraham L. Pomerantz, New York City, with whom Jules E. Angoff, Boston, Mass., William E. Haudek, New York City, and Irvin M. Davis, Boston, Mass., were on the brief, for Angoff and others, appellants.

Harold Brown, Boston, Mass., with whom Arnold M. Marrow, Boston, Mass., was on the brief, for Harold Brown and others, appellants.

Henry E. Foley, Boston, Mass., with whom Laurence S. Fordham and Foley, Hoag & Eliot, Boston, Mass., were on the brief, for East Boston Co. and Boston Port Development Co., appellees.

Before MAGRUDER, Chief Judge, and WOODBURY and HARTIGAN, Circuit Judges.

WOODBURY, Chief Judge.

These are appeals by counsel for the original plaintiff and counsel for intervening plaintiffs in a minority stockholder's derivative action from so much of a substitute judgment approving a stipulation of settlement of the action as awarded the appellants counsel fees and expenses. The assertion is that the court below based its awards on incorrect legal principles and that the awards are grossly inadequate.

The facts essential for federal jurisdiction over the main cause of action based on the diversity of the citizenship of the parties thereto and the amount in controversy between them, Title 28 U.S.C. § 1332(a)(1), are clear and not in dispute. And, although we have found no case discussing the point, we think it clear that jurisdiction over the main cause of action necessarily carries with it jurisdiction, in the exercise of the "historic equity jurisdiction of the federal courts," Sprague v. Ticonic Nat. Bank, 1939, 307 U.S. 161, 164, 59 S.Ct. 777, 779, 83 L.Ed. 1184, to award fees and expenses in appropriate situations to counsel for a successful plaintiff. It was taken for granted in Meddaugh v. Wilson, 1894, 151 U.S. 333, 14 S.Ct. 356, 38 L.Ed. 183, and in Singer v. General Motors Corp., 2 Cir., 1943, 136 F.2d 905, and so do we, that counsel may himself take an appeal from an award of his fees and expenses, and in Trustees v. Greenough, 1881, 105 U.S. 527, 531, 26 L.Ed. 1157, it was held that an order fixing counsel fees, though incidental and collateral to the main cause, is so far independent of it and so finally dispositive of a particular matter "as to make the decision as to counsel fees substantially a final decree for the purposes of an appeal." See also Sprague v. Ticonic Nat. Bank, supra, 307 U.S. 168, 169, 59 S.Ct. 780, 781; and Cohen v. Beneficial Industrial Loan Corp., 1949, 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528. We therefore conclude that this court has appellate jurisdiction under Title 28 U.S.C. § 1291.

With the question of federal jurisdiction and the question of appellate jurisdiction which we mentioned but were not required to decide in In re Heddendorf, 1 Cir., 1959, 263 F.2d 887, out of the way, we turn to the merits.

The facts appear to some extent in the above opinion of this court and in detail in the opinion and supplemental opinion of the District Court respectively disapproving the first and approving the second compromise settlement, so-called, of the original stockholder's derivative action. Heddendorf for Benefit of East Boston Co. v. Goldfine, D.C.1958, 167 F. Supp. 915. For present purposes they can be summarized:

The appellants, Jules E. Angoff and Irvin M. Davis, both members of the Massachusetts bar, in conjunction with the New York law firm of Pomerantz, Levy & Haudek, all of whom may be conveniently referred to collectively as the Pomerantz group, representing one George B. Heddendorf, a citizen of Maine, filed a complaint in the court below on April 26, 1956, against the East Boston Company, as Massachusetts corporation in which Heddendorf had held shares since August 1, 1949, and also against Bernard Goldfine, the largest stockholder therein, and other individual defendants, shareholders of East Boston and officers and directors of its subsidiary, Boston Port Development Company, another Massachusetts corporation, all of whom were citizens of Massachusetts, charging them, speaking generally, with various acts of mismanagement of corporate affairs to their own pecuniary benefit and to the detriment of the corporations and the minority shareholders in East Boston.

The original plaintiff, Heddendorf, who was employed by and owned 20% of the stock of Fayette Associates, Inc., a Maine corporation engaged in "management consultant" services, began to investigate the affairs of East Boston and Boston Port in the fall of 1951. His investigation was hampered by the unwillingness of Goldfine to permit access to the books and records of the corporations and by the failure of the corporations to file either income tax returns or the reports required by the Securities Exchange Act of 1934, 15 U.S.C.A. § 78a et seq. In 1952 Angoff and Davis were retained by Heddendorf and in December of that year mandamus proceedings were initiated in the courts of the Commonwealth of Massachusetts to obtain access to the books and records of the corporations. It is not necessary to rehearse the ups and downs of this protracted ancillary litigation which terminated in dismissal late in 1956. It is enough to say that Heddendorf's counsel claim that under the threat of this disclosure proceeding, but before the main action in the court below was commenced, the "defendants rectified two of their more glaring misdeeds" by paying Boston Port some $180,000 in back interest on a mortgage held by that corporation on a business property in Boston called the Little Building, and by cancelling a $50,000 mortgage held by Mrs. Goldfine on two pieces of property it owned on Boylston Street.

In 1956 Abraham Pomerantz of the firm of Pomerantz, Levy & Haudek, an attorney of large experience in handling stockholders' derivative actions, became counsel for Heddendorf and assumed the leadership of his group of attorneys. He engaged the New York accounting firm of David Berdon & Co. to provide investigative services and in April of that year the present action was brought in the court below.

Lengthy proceedings followed in the District Court, including many motions of one kind or another, the taking of a number of depositions and the filing of several interrogatories and answers thereto. In March, 1958, after the case had many times been set for hearing but postponed at the request of all counsel, the parties of record submitted a stipulation settling the action and moved for judgment approving the same in accordance with Rule 23(c), F.R.Civ.P., 28 U.S. C.A., which provides: "A class action shall not be dismissed or compromised without the approval of the court." Hearings on this motion were held on April 16, 29 and 30, 1958, during which the appellant Galdi, an accountant and shareholder in East Boston since 1952, represented by his counsel, the appellant Harold Brown of the Massachusetts bar, appeared in opposition to the settlement and was allowed to intervene. At the same time other persons represented by Brown, some of whom had acquired their stock in East Boston prior to 1946, were also granted leave to intervene in opposition to the settlement.

In essence this proposed settlement provided that over a two-year period Goldfine would pay $400,000 to the subsidiary, Boston Port, that two parcels of real property standing in the name of a straw would be conveyed to Boston Port, that Boston Port would be declared to have no valid claim, other than its mortgage of record, to the business property in Boston known as the Little Building which Goldfine had acquired in 1946, that Goldfine's payments would constitute full settlement of all claims with respect to any transaction alleged in the complaint and that the action would be dismissed with full prejudice. On May 16, 1958, the District Court entered an order rejecting this settlement and appointing a permanent receiver of all the properties of both corporations. The basis for the court's action denying the motion for leave to settle the action, as expressed in its memorandum opinion of even date, was that the settlement made insufficient allowance for Boston Port's claim to the Little Building, and made no provision for the appointment of a receiver of the corporations, as the plaintiff had demanded in his complaint, and thus failed to assure an end to corporate mismanagement. Four days later, on May 20, 1958, the court revoked its order appointing a receiver, and on June 18, 1958, following further negotiations between counsel and after due notice to stockholders, a hearing was held on a second proposed settlement. This hearing was continued on September 22, 1958, at which time it was modified, and still further amendments were made in open court at another hearing on November 3, 1958.

By the terms of this second proposed settlement, as amended, Goldfine was to pay Boston Port $325,000 in full settlement of all claims other than its claim to the Little Building, the Little Building claim was to be settled by Goldfine's payment of $337,500, pro rata to the minority stockholders of East Boston, the two other parcels of Boston business property, as provided in the first stipulation for settlement, were to be conveyed to Boston Port by the straws in whose names the properties stood, both East Boston and Boston Port were to be liquidated, the defendants were not actively to participate further in their management, and Boston Port was to pay all allowances made by the court for expenses including counsel and accounting fees. After withholding approval of this proposed settlement pending further disclosures by the principal defendant, Goldfine, the court entered an order on December 10, 1958, approving it. And on the same day the court ordered that on December 29 it...