General Inv. Co. v. New York Cent. R. Co.

• Decision Date: 04 January 1928
• Parties: GENERAL INV. CO. v. NEW YORK CENT. R. CO.
• Court: U.S. Court of Appeals — Sixth Circuit

23 F.2d 822 (1928)

GENERAL INV. CO. v. NEW YORK CENT. R. CO.

Circuit Court of Appeals, Sixth Circuit.

January 4, 1928.

Frederick A. Henry, of Cleveland, Ohio (Snyder, Henry, Thomsen, Ford & Seagrave, of Cleveland, Ohio, on the brief), for appellant.

S. H. West, of Cleveland, Ohio, for appellee.

Before DENISON, MACK, and MOORMAN, Circuit Judges.

MACK, Circuit Judge.

Plaintiff, appellant, is a Maine corporation; defendant is a corporation organized under the railroad consolidation laws of New York, Ohio, Pennsylvania, Indiana, Michigan, and Illinois, pursuant to a consolidation agreement between the New York Central & Hudson River Railroad Company and the Lake Shore & Michigan Southern Railway Company. Plaintiff owned a small fraction of 1 per cent. of the stock of each of these component corporations; a part of it acquired after the consolidation had become imminent. A controlling interest in the capital stock of the Michigan Central Railroad was owned before the consolidation by the New York Central & Hudson River Railroad Company; in the Big Four and the Toledo & Ohio Central by the Lake Shore & Michigan Southern Railway Company, and in the Cincinnati Northern by the Big Four. Through the consolidation, this stock of the Michigan Central, Big Four, and Ohio Central, is owned, and that of the Cincinnati Northern is now controlled, by defendant.

On December 8, 1914, plaintiff filed a bill in an Ohio state court against the New York Central & Hudson River Railroad Company and the Lake Shore & Michigan Southern Railway Company, to restrain the then pending consolidation of these two companies on the ground that, if completed, it would endanger plaintiff's interest as a stockholder in each of them substantially as set forth in the present bill. The consolidated company was nevertheless formed December 22, 1914; thereafter the suit was removed to the federal court. The bill was there dismissed on the ground that the New York Central & Hudson River Railroad Company had not been properly served with summons, and that the relief prayed for against all the defendants by virtue of the federal statutes regulating commerce was available to private persons, if at all, only under the Clayton Act, § 16 (38 Stat. 737 15 USCA § 26), which act it was held did not permit suit to be begun in a state court. Because the District Court, for the reasons stated, was without jurisdiction, the Supreme Court (General Investment Co. v. Lake Shore & M. S. R. Co., 260 U. S. 261, 43 S. Ct. 106, 67 L. Ed. 244), modified the decree of dismissal so as to specify that it was without prejudice as to all parts of the bill.

Nearly two years thereafter, the present bill was filed in the District Court on behalf of plaintiff and of all other stockholders of defendant similarly situated. It alleges the foregoing facts, and charges that defendant's domination of four parallel and potentially competing roads, through the above-recited stock ownership or control, is in violation of the federal acts to regulate commerce and the law of the states to whose jurisdiction the defendant is amenable; that thereby defendant is exposing itself to fines and forfeitures and thus wrongfully injuring itself and its stockholders, including plaintiff. The prayer is for a decree that defendant's acquisition and continued control over the four subsidiary railroads be enjoined as illegal and void, that defendant be enjoined from voting the stock of these railroads or permitting any community of directors, officers, and agents between it and the four, and that receivers for each of the four lines be appointed to proceed with a speedy sale of such stock to new and independent owners.

On motion, this bill was dismissed for want of jurisdiction over the subject-matter. On appeal, the decree was reversed and the cause remanded. 271 U. S. 228, 46 S. Ct. 496, 70 L. Ed. 920. "* * * The plaintiff attempts," said the Supreme Court, "to set forth a continuing violation of the Sherman Anti-Trust Act 15 USCA §§ 1-7, 15 and the Clayton Act 38 Stat. 730. * * * Such a suit is essentially one arising under the laws of the United States, and, as the requisite jurisdictional amount is involved, is one of which the District Courts are given jurisdiction. By jurisdiction we mean power to entertain the suit, consider the merits and render a binding decision thereon; and by merits we mean the various elements which enter into or qualify the plaintiff's right to the relief sought. There may be jurisdiction and yet an absence of merits, * * * as where the plaintiff seeks preventive relief against a threatened violation of law of which he has no right to complain, either because it will not injure him or because the right to invoke such relief is lodged exclusively in an agency charged with the duty of representing the public in the matter."

Thereafter a motion to dismiss for want of equity was granted in the District Court. The opinion states substantially the same reasons given for the earlier dismissal, namely, that, as to the federal anti-trust statutes, Congress had not given private suitors a remedy in court in cases where, as here, the Interstate Commerce Commission had supervisory jurisdiction; and, as to the state anti-trust laws, so far as these laws authorized injunctions against interstate railroads, they were an improper interference with interstate commerce, since Congress had indicated an intent that there should not be injunction proceedings by private suitors in such cases. The case is before us on appeal from this decree of dismissal.

Although a bill to enjoin assessment or collection of an allegedly illegal federal tax will not lie, a stockholder's bill to enjoin his corporation from paying such a tax has been held maintainable. Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, 15 S. Ct. 673, 39 L. Ed. 759; Brushaber v. Union Pacific R. R., 240 U. S. 1, 36 S. Ct. 236, 60 L. Ed. 493. Therefore, argues plaintiff, while it has been settled that, before and but for the right granted by section 16 of the Clayton Act, a private suitor cannot sue to enjoin violations of the Sherman Anti-Trust Act (Paine Lumber Co. v. Neal, 244 U. S. 459, 37 S. Ct. 718, 61 L. Ed. 1256), nevertheless, in analogy to the tax cases, a stockholder could have maintained such a bill against his own corporation. We cannot assent to the argument. It...