Bigelow v. Calumet & Hecla Min. Co.

• Decision Date: 12 April 1907
• Citation: 155 F. 869
• Parties: BIGELOW v. CALUMET & HECLA MINING CO. et al.
• Court: U.S. District Court — Western District of Michigan

155 F. 869

BIGELOW v. CALUMET & HECLA MINING CO. et al.

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

April 12, 1907

Angell Boynton, McMillan & Bodman and Taggart, Denison & Wilson, for complainant.

Otto Kirchner, Chadbourne & Rees, and Butterfield & Keeney, for defendant Calumet & Hecla Mining Company.

KNAPPEN District Judge.

The complainant is a citizen of Massachusetts. The defendants hereafter called, respectively, the Calumet & Hecla Company and the Osceola Company, are corporations organized under the Michigan mining law, and engaged in the manufacture and sale of copper. The complainant, who is the president of, and a substantial stockholder in, the Osceola Company, filed his bill on the 12th day of March, 1907, for the purpose of obtaining injunction, both temporary and permanent restraining the Calument & Hecla Company from voting at the annual stockholders' meeting of the Osceola Company (then appointed to be held on March 14, 1907) a large block of Osceola Company stock held by the Calumet & Hecla Company, as well as proxies for a large amount of other of such stock held by that company, upon the ground that the action of the Calumet & Hecla Company in buying and obtaining proxies for such stock constitutes an attempt to establish and maintain a monopoly of the business of mining, smelting, refining, and selling copper, contrary to the Sherman anti-trust act, the Michigan anti-monopoly law, and common-law obligations. Upon the filing of the bill, an order was issued restraining the voting of such stock in advance of the hearing of the application for temporary injunction, except to the extent of adjourning the annual meeting. Hearing upon the application for temporary injunction has been had upon the bill, answer, and testimony by way of ex parte affidavits filed on both sides.

The Calument & Hecla Company was organized in 1871, and capitalized at $2,500,000, only $1,200,000 of which has been paid in. Its operation has been highly profitable; the market value of its stock being now about $90,000,000. The Osceola Company is capitalized at $2,403,750. It likewise has been profitably operated, having for the past 20 years (except in 1903) paid dividends without interruption; those paid in 1906 aggregating 64 per cent. of the par value of the stock, whose market value is now nearly six times the par value. The two mining companies are in active competition with each other in the production and sale of copper throughout the United States and foreign countries; the mining operations of both being carried on in the upper peninsula of Michigan.

Until 1905, companies organized under the Michigan mining law had no power to own stock in other mining companies in this state, although for many years they had been authorized to own stock in companies outside the state. 2 Comp. Laws Mich. 1897, Sec. 7012. In 1903, mining companies were given authority to hold stock in companies formed under the Michigan mining law or under any other laws for refining, smelting, or manufacturing ores, minerals, or metals. Pub. Acts Mich. 1903, pp. 382, 383, No. 233. In 1905, corporations organized under the Michigan mining law were empowered to 'subscribe for, purchase, own and dispose of stock in any company organized under this act, or under any other laws, foreign or domestic, for the purpose of mining, refining, smelting or manufacturing any or all kinds of ores or minerals. ' Pub. Acts Mich. 1905, No. 105, pp. 153, 154.

The testimony tends to show that Michigan copper, which is known commercially as 'lake copper,' is of a different quality from that produced elsewhere in the United States, having superior tensile and torsional strength, ductility, and conductivity, usually bringing in the market a slightly higher price than other copper; that the best grade of lake copper, called in the bill 'prime lake copper,' has thus far been produced only by five companies, in the following amounts annually, Calumet & Hecla 100,000,000 pounds, Osceola 18,000,000, Quincy 18,000,000, Tamarack 10,000,000, and Wolverine 10,000,000; the Calumet & Hecla Company thus producing over 75 per cent. of the aggregate--defendants' testimony tending to show that at least five other Michigan mines are producing copper, aggregating over 11,000,000 pounds annually, which rightly treated would be equally good. It is undisputed that for certain purposes lake copper is preferable to any other copper, and the testimony tends to show that the United States government, in its purchases of unmixed copper for the manufacture of cartridge cases, buys only lake copper, and thus far has specified only Calumet & Hecla, Osceola, Quincy, and Tamarack. It is undisputed that of the 1,000,000,000 pounds of copper produced annually in the United States (which is considerably more than produced in all other countries) lake copper constitutes one-quarter or one-fifth, about one-half of which amount is produced by the Calumet & Hecla Company. The testimony tends further to show that since the 1905 amendment to the Michigan mining law the Calumet & Hecla Company has embarked upon a pronounced policy of expansion; that it has expended from $2,000,000 to $3,000,000 in exploring mines on lands of other companies, and several million dollars in the purchase of stocks in competing mining companies, and that it has taken options on stocks of other mining companies. The companies in which such interests have lately been acquired include the Centennial, Allouez, La Salle, Gratiot, Manitou, Frontenac, Superior, and others, some of which mines are now competitive and productive, others of which are still in the exploratory stage; the Calumet & Hecla Company owning in most of these companies a majority interest, and in one or more cases the entire. As a part of this policy of expansion, the Calumet & Hecla Company has increased its own land holdings from about 2,700 acres to about 50,000 acres; the land holdings of the companies in which interests have been acquired bringing the aggregate holdings of land to above 70,000 acres. The testimony further tends to show that within a few months before the date fixed for the 1907 annual meeting of the Osceola Company the Calumet & Hecla Company quietly bought up a large amount of Osceola stock; the management of the Osceola Company knowing nothing of such purchase until February 20th (22 days before the proposed annual meeting), on which date 20,000 shares were transferred to the Calumet & Hecla Company on the books of the Osceola Company, and the Calumet & Hecla Company also being the owner of additional holdings not of record, the amount of which is not shown, except that the answer of the defendant says that its holdings are less than a majority, which majority would be about 48,000 shares. On February 21, 1907, the Calumet & Hecla Company sent, in its own name, to all the stockholders of the Osceola Company whose names and addresses it could learn, a circular letter in which the Calumet & Hecla Company, 'as the largest stockholder of the Osceola Consolidated Mining Company,' asked that all Osceola stockholders who should be willing to intrust the management of the company to a board of directors 'the majority of whom should be selected' from a list given in the letter (who in fact were representatives of the Calumet & Hecla Company) appoint as their proxies three Calumet & Hecla representatives named therein, one of whom is the vice president of that company. The testimony tends to show that on the same 21st day of February the Calumet & Hecla Company wrote to complainant, as president of the Osceola Company, a letter stating that the Calumet & Hecla Company had become the largest shareholder of record in the Osceola Company, and expected to 'elect a majority of the directors at its annual meeting, March 14th, next,' and requesting that until such election no contract be entered into by the president, directors, or agents of the Osceola Company which by its terms was not to be performed entirely during the term of the present board of directors (which would naturally then extend but a few weeks longer), especially contracts for the sale of its copper product or for the purchase of coal, contracts with railways and mills, for the sale of lands or for the location of mills. The manifest purpose of the Calumet & Hecla Company in sending this letter was to prevent the Osceola Company from entering into any contracts, or assuming any obligations, which could conflict with the management of the Osceola Company by the Calumet & Hecla Company in case the latter should secure such expected control. The case presented fairly tends to show that the Calumet & Hecla Company bought its holdings of Osceola stock, and procured the proxies referred to, with the intention, if possible, of thereby controlling the management of this competing company, with which it had previously no connection by way of stock ownership or otherwise, and of turning out the present management of the Osceola Company; that it would have bought a controlling interest had such interest been readily acquirable on satisfactory terms; and that it has obtained enough proxies, together with its own stock holdings, to elect a controlling majority of the board of directors of the Osceola Company, and at the time the bill was filed was intending to so vote such shares and to so act.

The Kearsarge lode runs through the mines of the Calumet & Hecla Osceola, Centennial, Allouez, La Salle, and Gratiot. The testimony tends to show that the Calumet & Hecla Company proposes by combining the Osceola with its other holdings to operate that company, the Calumet & Hecla, Centennial, Allouez, and possibly other mines, by sinking through Osceola lands shafts for other mines, shafts for the...