Bigelow v. Calumet & Hecla Mining Co.

• Decision Date: 03 October 1908
• Citation: 167 F. 704
• Parties: BIGELOW v. CALUMET & HECLA MINING CO. et al. (two cases).
• Court: U.S. District Court — Western District of Michigan

167 F. 704

BIGELOW v. CALUMET & HECLA MINING CO. et al. (two cases).

United States Circuit Court, W.D. Michigan, Northern Division.

October 3, 1908

[Copyrighted Material Omitted]

Herbert E. Boynton and Arthur C. Denison, for plaintiff.

Allen F. Rees and Otto Kirchner, for defendant Calumet & Hecla Mining Co.

John E More, for defendant Osceola Consol. Min. Co.

KNAPPEN District Judge.

In the opinion filed by this court upon the application for a preliminary injunction in the case first above entitled (Bigelow v. Calumet & Hecla Mining Company (C.C.) 155 F. 869), the claims on the complainant presented in that cause, as well as the conclusions reached upon the various legal questions there raised, are fully stated. The bill of complaint in the second cause contains, so far as material to this opinion, substantially the same allegations of fact and legal deductions therefrom as the bill in the first cause except in certain respects to which attention is especially called in this opinion. Briefly summarized, both bills allege in substance that the purchase by the Calumet & Hecla Company of 22,671 shares of stock in the Osceola Company, and the obtaining of proxies in the interest of the Calumet & Hecla Company, for the voting of the stock of other shareholders in the Osceola Company, is an attempt on the part of the Calumet & Hecla Company to monopolize, in part, interstate commerce, in violation of the Sherman act of July 2, 1890, c. 647, 26 Stat. 209 (U.S. Comp. St. 1901, p. 3200), to effect a combination for the purpose and with the intent of establishing and maintaining a monopoly of the business of mining, manufacturing, and selling copper, contrary to the Michigan statute against trusts and monopolies, and in violation of the common law relating to monopoly; that such action is part of the general plan of the Calumet & Hecla Company to secure control of practically the entire output of so-called 'Lake copper,' and thereby to secure a complete and absolute monopoly of such copper throughout the United States; that, in pursuance of said alleged unlawful plan, the Calumet & Hecla Company had also acquired a control of the stock in the Allouez and Centennial Companies (both alleged to be actively competing companies), and of stock interests in a large number of other companies, and was seeking to acquire further controlling holdings of stock in still other actively competing mining companies, notably the Tamarack, Ahmeek, and Isle Royale, which are operated in connection with the Osceola under complainant's management; that the action of the Calumet & Hecla Company in making such stock purchases and in procuring such proxies was ultra vires, illegal, and void; that the Calumet & Hecla Company has obtained and is holding lands greatly in excess of the 50,000 acres allowed by the mining law in force when the bills were filed; that if the Calumet & Hecla Company shall secure the attempted control of the Osceola Company by the election of a board of directors, it can and will control the Osceola Company in the interest of the Calumet & Hecla Company, and not in the interest of complainant and other stockholders in the Osceola Company.

The bill in the first case (which was filed by complainant in virtue of his stockholding in the Osceola Company) asks an injunction against the voting, at the annual stockholders' meeting, on the part or behalf of the Calumet & Hecla Company, of the Osceola stock held by it, as well as the proxies held in its interest.

The bill in the second case (filed in virtue of complainant's ownership of a small amount of stock in the Calumet & Hecla Company, purchased after the commencement of the first suit, and for the purpose of protecting complainant's interest as an Osceola stockholder) asks a decree declaring the purchases of lands by the Calumet & Hecla Company in excess of 50,000 acres to be illegal, and that such excessive purchases be vacated; that the purchases made of stocks in other mining companies be declared illegal, and that steps be taken for the vacating of the same; that the Calumet & Hecla Company be enjoined from carrying out options and from paying assessments upon, and from purchasing or voting stock in, any other mining company, as well as from soliciting stock proxies in any competing mining company, and from voting stock or proxies before obtained in any such company, as part of a plan for acquiring the management and control of such company; and from buying or carrying out options for the purchase of further lands; and from arranging for joint operations between the Calumet & Hecla, Allouez, Centennial, and Osceola mines, including joint use of shafts; and from hauling, crushing, or smelting the products thereof by the railroads, stamp mills, or smelters of the Calumet & Hecla Company.

This court held, upon the motion for preliminary injunction in the first case, that the 1905 amendment to the Michigan mining law (Pub. Acts Mich. 1905, pp. 153, 154, No. 105) empowered the Cal met & Hecla Company to purchase stock in the Osceola and other companies, subject to the restriction that such purchase be not made with the intent and for the purpose of restraining trade or creating a monopoly; but that a control by way of stock purchase and proxies, if made for that purpose and with that intent, was a violation of the state and federal statutes, which were held broad enough to cover any means purposely adopted for, and manifestly adapted to, the accomplishment of the unlawful purpose; and that the prima facie case presented by the bill, and evidence by way of ex parte affidavits, justified preserving the existing status until full and final hearing upon the merits. The motion for injunction in the second case was never heard.

The conclusion heretofore reached as to the power of the Calumet & Hecla Company to make the stock purchases in question, except so far as prohibited by the anti-trust and anti-monopoly laws, state or federal, must be adhered to. It is, however, urged by complainant that the exercise by the Calumet & Hecla Company of the power to purchase stock in other mining companies, given by the 1905 amendment to the mining act (Pub. Acts Mich. 1905, p. 153, No. 105), violates the contract between the Calumet & Hecla stockholders as expressed in their articles of incorporation, which do not in terms include such power. Assuming (but not holding) that complainant is entitled to raise the question, the proposition is not, in my judgment, sustainable. The power to make the statutory amendment in question is directly given by section 1, art. 15, of the Constitution of Michigan, which provides for the formation of corporations under general laws, and that 'all laws passed pursuant to this section may be amended, altered or repealed. ' The stockholders are as much bound by this provision as if it had been contained in their articles of incorporation. Attorney General v. Looker, 111 Mich. 498, 69 N.W. 929; Looker v. Maynard, 179 U.S. 46, 21 Sup.Ct. 21, 45 L.Ed. 79; Polk v. Mutual Reserve Fund Life Association, 207 U.S. 310, 28 Sup.Ct. 65, 52 L.Ed. 222. It is doubtful whether this power to purchase stock in another corporation engaged in the same business was such a substantial departure from the purposes of the corporation as expressed in its articles as to require the express acceptance of the amendment by the corporation. Louisville Trust Company v. Louisville, New Albany & Chicago Railway Company, 22 C.C.A. 378, 75 F. 433, 448. But if such acceptance was necessary it was, in my judgment, sufficiently expressed by the adoption, after due notice, of a by-law conferring such power upon the directors, by corporate action had thereunder, in the purchase of the stock, and by the subsequent ratification thereof by the stockholders after due notice. Zabriskie v. Cleveland, Columbus & Cincinnati Railway Company, 23 How. 381, 396, 16 L.Ed. 488; Louisville Trust Company v. Louisville, New Albany & Chicago Railway Company, 75 F. 488, 22 C.C.A. 378; Venner v. Atchison, Topeka & Santa Fe Railway Company (C.C.) 28 F. 581, 587, 589.

It is further urged that the statute should be constructed as authorizing stock purchases for investment only, and not for control. Except so far as this proposition involves the question of conflict with anti-trust and anti-monopoly laws, it is without apparent force. Not only does the statute contain no express limitation to purchases for investment, but the object of the provision, which is apparently to further the active and profitable prosecution of the business of the purchasing corporation by way of holding interests in other corporations carrying on the same or a directly allied business, seems more consistent with the right of active participation in the affairs of the corporation whose stock is purchased than with a mere right of investment without such active participation. The right to vote the stock so purchased is expressly given by the Michigan mining act (2 Comp.Laws Mich. § 7002), and such right is incidental to the ownership of the stock. Rogers v. Nashville, Chattanooga & St. Louis Railway Company, 33 C.C.A. 517, 91 F. 312; Taylor v. Southern Pacific Railway Company (C.C.) 122 F. 147, 151.

The contention that the acquiring and holding of the stock proxies in the interest of the Calumet & Hecla Company is beyond the power of that company cannot be sustained. The mining act (2 Comp. Laws Mich. Sec. 7002) expressly provides that 'stockholders may appear and vote in person, or by proxy duly filed, or by their duly constituted attorney ' No question of the right of the Calumet & Hecla Company to act as the attorney for a stockholder in the Osceola Company is involved, for the corporation does not attempt to so act. But no reason is apparent...