Clarkson Co. Ltd. v. Shaheen
| Decision Date | 27 July 1982 |
| Docket Number | No. 76 Civ. 1373.,76 Civ. 1373. |
| Citation | 544 F. Supp. 117 |
| Parties | The CLARKSON COMPANY LIMITED, et al., Plaintiffs, v. John M. SHAHEEN, et al., Defendants. The CLARKSON COMPANY LIMITED, etc., Petitioners, v. SHAHEEN NATURAL RESOURCES CO., etc., Respondents, Spengler, Carlson, Gubar, Brodsky & Rosenthal, Cowan, Liebowitz & Latman, P. C., etc., Additional Respondents. |
| Court | U.S. District Court — Southern District of New York |
White & Case, New York City, for plaintiff/petitioner The Clarkson Co. Ltd.; Jeffrey Barist, Allan L. Gropper, Kevin Ashley, New York City, of counsel.
Saxe, Bacon & Bolan, P. C., New York City, for defendants/respondents John M. Shaheen, Shaheen Natural Resources Co., Inc., Founders Corp.; Thomas A. Andrews, Filip L. Tiffenberg, New York City, of counsel.
Joseph S. Siegel, New York City, for defendants/respondents Imafina S. A. and Hubert Hendrickx.
Pryor, Cashman, Sherman & Flynn, New York City, for defendants/respondents Macmillan Ring-Free Oil Co.; Gideon Cashman, James A. Janowitz, Donald S. Zakarin, Arthur Engoron, New York City, of counsel.
Petitioner, The Clarkson Company Limited ("Clarkson"), seeks a preliminary injunction voiding a purchase agreement dated December 3, 1981, between Imafina S. A. ("Imafina") and Macmillan Ring-Free Oil Company, Inc. ("Macmillan"), a public company engaged in the refining of petroleum products. Under the agreement in question, Macmillan agreed to transfer a quantity of its shares to Imafina in exchange for $1.8 million dollars (the "Imafina transaction"). Based upon the evidence adduced at a hearing held on January 14 and 18, 1982, I hereby grant the injunctive relief sought by petitioner and declare the Imafina transaction void.
In July, 1980, following a jury verdict, judgments were entered in favor of Clarkson against John M. Shaheen for approximately $46 million, against Shaheen Natural Resources ("SNR") for approximately $46 million, and against Founders Corporation ("Founders") for approximately $550,000. Since that time, Clarkson has diligently endeavored to enforce those judgments.
The principal asset of all three judgment debtors is Shaheen's controlling stock interest in Macmillan via his 100% ownership of SNR and his 55% ownership interest in Founders, see The Clarkson Company Ltd. v. Shaheen, 533 F.Supp. 905 (S.D.N.Y.1982). In order to recover on this combined asset, Clarkson commenced special proceedings.
In substance, the Court has already ordered that "substantial blocks totalling forty-two percent of the outstanding Macmillan common stock owned by the three judgment debtors — control shares — be turned over to or for the benefit of Clarkson." But for the Imafina transaction, these shares, which total 728,458 shares of Macmillan common stock, would constitute the control shares of the company. The Imafina transaction, had it gone as planned, would have reduced Clarkson's holdings from 42% to 30%, destroyed its control status, and placed 26% of Macmillan's stock in Imafina's hands.
On March 12 and 31, 1981, I issued orders protecting Clarkson's holdings in Macmillan which in pertinent part prohibited Macmillan from transferring "any property ... to ... Shaheen, SNR, or Founders, except pursuant to an order of the court."
Against this background, Macmillan entered into a transaction in December, 1981 whereby 627,178 shares of authorized but unissued shares of Macmillan common stock were sold to Imafina, a Swiss corporation wholly owned by one Hubert Hendrickx ("Hendrickx").
On December 14, 1981, I issued a further order prohibiting Macmillan from taking any action which would devalue Clarkson's holdings in it. Although I recount the specifies of this transaction in greater detail below, I note at this time that Macmillan and Imafina have agreed to "rollback" the portion of the purchase agreement pertaining to 227,178 shares of Macmillan which were transferred to Imafina, as the proof showed, in surreptitious, brazen and knowing violation of this Court's order of December 14, 1981. Today, therefore I need only consider whether the Imafina transaction violated the earlier March 12 and 31 court orders. Because I find that the transaction did in fact violate those orders as well, Clarkson's motion is granted.
I decline to recount again here the long contentious history of this action. Familiarity with that history is presumed. See Clarkson Co. Ltd. v. Shaheen, 660 F.2d 506, 508 (2d Cir. 1981); Clarkson Co. Ltd. v. Shaheen, 533 F.Supp. 905, 917, 931 (S.D.N. Y.1982); Clarkson Co. Ltd. v. Shaheen, 525 F.Supp. 625, 630 (S.D.N.Y.1981).
I turn first to certain preliminary legal questions raised by respondent's papers.
Macmillan, in the first instance, contends that this court lacks jurisdiction either to enjoin it from transferring its securities to a third party or to undo such a transfer once it has been consummated. In these terms, Macmillan's argument today repeats a legal theory which it first proffered before the Court of Appeals in its petition for a writ of mandamus dated December 24, 1981. Macmillan urges that this court lacks jurisdiction to enter such an injunction (1) because Hubert Hendrickx ("Hendrickx"), the sole owner of Imafina, and Imafina are not parties to this action, and (2) because Clarkson has failed to commence an independent plenary proceeding against those parties. Macmillan unfortunately has framed the issue before us in this proceeding in a way which clouds the real inquiry.
The issue now before the court, in Macmillan's view, constitutes a proceeding to recover property of a judgment debtor in the hands of third party. That view, however, ignores the contentious history of the Clarkson-Shaheen relationship. Rather than being part of a new action, today's proceedings are only another step by Clarkson in a long series of steps to protect its judgment against Shaheen's efforts to frustrate it or destroy its value. At root, what is really before me today is whether this court has the power to support and sustain its earlier decisions. When considered in this appropriate way, nothing could be clearer than this court's jurisdiction.1
Macmillan next contends that both Hendrickx and Imafina are indispensable parties and that this action must be dismissed in their absence pursuant to Rule 19(b). That rule states that where a person who should be joined if feasible, "cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable." Without doubt both Hendrickx and Imafina should be joined if feasible. However, I note that the joinder of either of these two parties would deprive this court of subject matter jurisdiction2 and is therefore not required under Rule 19(a). See Dassigienis v. Cosmos Carriers & Trading Corp., 442 F.2d 1016 (2d Cir. 1977); Karakatsanis v. Conquestador Cia. Nav. S. A., 247 F.Supp. 423 (S.D.N.Y.1965). I am thus constrained to consider the application of Rule 19(b) to our facts.
Rule 19(b) sets forth four criteria for a court to consider in deciding whether to dismiss an action because of the absence of a person:
first, to what extent a judgment rendered in the person's absence might be prejudicial to him or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
Having considered these as well as the court's interest in the effective, expeditious resolution of this suit, I conclude that neither Hendrickx nor Imafina is indispensable to the resolution of this dispute. I note particularly that the rescission of the purchase agreement will merely restore both Hendrickx and Imafina to the status quo ante December 3, 1981. Dr. Hendrickx simply will not be prejudiced by this result. In fact, pursuant to the express terms of the agreement, he will not even bear the burden of paying legal fees to his counsel on the issue before me.
On March 31, 1981, this order was confirmed by order to show cause. By consent of the parties, the order remains in effect as to Macmillan.
While the Imafina transaction is cleverly — and curiously — constructed, I have little hesitancy, on the record before me, in concluding that the March, 1981 orders prohibit it as a transfer by Macmillan to Shaheen's nominee at Shaheen's instigation for the purpose of perpetuating Shaheen's control of Macmillan at a time when Shaheen faced the imminent loss of that control due to the operation of the earlier judgments. Not incidentally, the transaction would also sharply diminish the value of these heretofore control shares.
The court, of course, does not come to the Imafina transaction as an isolated incident. Faced with the loss of corporate control on earlier occasions, Shaheen has not hesitated to use fraudulent devices as a means of attempting to perpetuate control. See Clarkson Co. Ltd. v. Shaheen, 660 F.2d 506, 508 (2d Cir. 1981); Clarkson Co. Ltd. v. Shaheen, 533 F.Supp. 905, 917, 931 (S.D.N. Y.1982); Clarkson Co. Ltd. v. Shaheen, 525 F.Supp. 625, 630 (S.D.N.Y.1981).
Upon analysis of the testimony and documentary evidence...
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