FORMER STOCKHOLD. OF BARR RUB. PROD. CO. v. McNeil Corp., Civ. No. C69-742

• Citation: 325 F. Supp. 917
• Decision Date: 20 March 1970
• Docket Number: Civ. No. C69-742,C69-743.
• Parties: FORMER STOCKHOLDERS OF BARR RUBBER PRODUCTS COMPANY, represented by Richard R. Kruse, Plaintiffs, v. The McNEIL CORPORATION and the Sun Corporation, Defendants. FORMER STOCKHOLDERS OF BARR RUBBER PRODUCTS COMPANY, represented by Richard R. Kruse, Plaintiffs, v. The B. F. GOODRICH COMPANY, the McNeil Corporation and the Sun Corporation, Defendants.
• Court: U.S. District Court — Northern District of Ohio

325 F. Supp. 917

FORMER STOCKHOLDERS OF BARR RUBBER PRODUCTS COMPANY, represented by Richard R. Kruse, Plaintiffs, v. The McNEIL CORPORATION and the Sun Corporation, Defendants.

FORMER STOCKHOLDERS OF BARR RUBBER PRODUCTS COMPANY, represented by Richard R. Kruse, Plaintiffs, v. The B. F. GOODRICH COMPANY, the McNeil Corporation and the Sun Corporation, Defendants.

Civ. Nos. C69-742, C69-743.

United States District Court, N. D. Ohio, E. D.

March 20, 1970.

Albert L. Ely, Jr., Ely, Golrick & Flynn, Cleveland, Ohio, Flynn, Py & Kruse, Sandusky, Ohio, for plaintiffs.

James C. Davis, Squire, Sanders & Dempsey, Cleveland, Ohio, for B. F. Goodrich Co.

Richard E. Guster, Wise, Roetzel, Maxon, Kelly & Andress, Akron, Ohio, for McNeil Corp.

E. R. Hamilton, Akron, Ohio, Pennie, Edmonds, Morton, Taylor & Adams, New York City, for Sun Corp.

MEMORANDUM AND ORDER RE: MOTIONS TO DISMISS

KALBFLEISCH, District Judge.

Before the Court for consideration are motions to dismiss filed by all defendants in two related cases arising out of the same series of transactions and occurrences. Both cases seek treble damages under 15 U.S.C. § 15 for alleged antitrust violations by the defendants. There is but one legal question raised in all the motions: Do the plaintiffs have standing to sue upon the claims asserted in the complaints?

The allegations of both complaints involve the same occurrences except that the complaint in case No. C69-743 goes beyond that of case No. C69-742 in describing the involvement of defendant B. F. Goodrich Company in the alleged wrongful activity. Thus, no distinction will be made in the discussion here between the two cases unless relevant to the issues involved.

Plaintiff Richard R. Kruse proposes to represent a class consisting of himself and all other former stockholders of the Barr Rubber Products Company (hereinafter "Barr") who owned Barr stock as of September 30, 1965. Plaintiffs aver in detail an intricate course of conduct on the part of the defendants involving allegedly improper patent acquisition, maintenance and manipulation, unfair competition, and fraud. As a result of the alleged misconduct, plaintiffs claim that the market value of Barr stock dropped and that they sold their stock at the depressed value. The damages claimed consist of the loss to each plaintiff from the sale of his or her Barr stock at a price substantially less than that at which it could have been sold but for the wrongful conduct of the defendants.

Defendants assert that the complaint in each case alleges misconduct directed against Barr and its business and, in such a case, the stockholders of Barr have no standing to assert such misconduct as a basis for recouping the loss occasioned by a drop in the market value of their stock. Plaintiffs counter by arguing that the rule of law relied upon by the defendants is not strictly enforced in recent decisions; further, plaintiffs assert that the allegations in the complaint fall outside the scope of the rule which denies stockholders redress for wrongs against the business and property of the corporation.

A careful review of the decisions on the issue as well as a scrutiny of the complaint in each case reveal that the motions to dismiss are well taken.

There is no question that the courts have consistently held that a stockholder has no right of action for loss in value of his stock due to antitrust violations against the business and property of the corporation. Loeb v. Eastman Kodak Co., 183 F. 704 (3rd Cir. 1910); Walker Distributing Co. v. Lucky Lager Brewing Co., 323 F.2d 1 (9th Cir. 1963); Data Digests, Inc. v. Standard & Poor's Corporation, 43 F.R.D. 386 (S.D.N.Y.1967), and cases cited therein. The plaintiffs' claim that the rule has been eroded in recent years is without merit. They have not cited, nor can the Court discover any case wherein a stockholder was permitted to sue for stock depreciation resulting from antitrust violations directed only against the corporation. The general language of the United States Supreme Court in Radiant Burners Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 81 S.Ct. 365, 15 L.Ed.2d 358 (1961), though capable of an interpretation which might indict the specific rule formulated and applied by the lower courts, is of little weight since the questions of "directness" of injury to the plaintiff and his standing to sue were not at issue in the case.

Further, the cases cited by the plaintiffs do not show a deviation from the rule, but merely a determination by the court that the antitrust violations in a particular case had been directed against the stockholder himself, as opposed to the corporation's business or property, or had resulted in damages other than the coincidental depression of stock value. The case of Peter v. Western Newspaper Union, 200 F.2d 867 (5th Cir. 1953), relied upon by the plaintiffs, held that the plaintiff-stockholders had no standing to sue for the loss at which they were forced to sell their stock. By way of dicta, the...