Healey v. RJ Reynolds Tobacco Co.
| Decision Date | 11 December 1942 |
| Docket Number | No. 122 Civ.,122 Civ. |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | HEALEY v. R. J. REYNOLDS TOBACCO CO. et al. |
Tillett & Campbell, of Charlotte, N. C., James W. Stites, of Louisville, Ky., and Warren & McGroddy, of New York City, for plaintiff.
Womble, Carlyle, Martin & Sandridge, of Winston-Salem, N. C., and James D. Carpenter, Jr., of Jersey City, N. J., for defendant R. J. Reynolds Tobacco Co.
Josiah Stryker, of Newark, N. J., for individual defendants.
Womble, Carlyle, Martin & Sandridge, of Winston-Salem, N.C., for defendant Wachovia Bank & Trust Co., Trustee under the respective wills of Bowman Gray, C. A. Kent, D. Rich, and Robert D. Shore.
Ratcliff, Vaughn, Hudson & Ferrell, of Winston-Salem, N. C., for defendant Wachovia Bank & Trust Co., Trustee under the respective wills of Carl W. Harris and Joseph L. Graham.
This is a suit brought by the plaintiff as a stockholder of R. J. Reynolds Tobacco Co. in behalf of herself and all other similarly situated stockholders, against R. J. Reynolds Tobacco Co. and its officers and directors and also the Wachovia Bank and Trust Co. as trustee under the wills of several former directors who are now deceased. It is alleged that the plaintiff is a citizen and resident of the state of New York; that R. J. Reynolds Tobacco Co. is a corporation, duly organized and existing under and by virtue of the laws of the state of New Jersey and is duly qualified to do business in the state of North Carolina; that its operating offices and the greater part of its manufacturing properties are located in Winston Salem, North Carolina; and it is also alleged that the other defendants are residents and citizens of the Middle District of North Carolina. The amount in controversy exclusive of interest and costs, exceeds $3,000.00. Plaintiff is the owner and registered holder of 38 shares of the new Class B. Common stock of the corporation and has been the owner and holder of five shares of New Class B. Common stock of the corporation since January 17, 1927, having acquired her remaining 33 shares as follows:
February 23, 1928 6 shares. March 2, 1929 11 shares. ex. for 27½ ½ purchase. November 1, 1932 10 shares.
This action is a stockholders' derivative suit to recover from the directors and officers the damages which they caused the corporation to suffer by unlawfully distributing a portion of the corporation's profits for the years 1912 to date.
It is alleged that the by-law of the corporation adopted in 1911 and under which the directors professed to act, was illegal, invalid and ultra vires and that if it was valid that the same has been improperly interpreted and acted upon by the directors.
The relief sought is:
1. Enjoining any further distribution of profits to the officers or employees pending the termination of this action.
2. Adjudging the by-law illegal and ultra vires.
3. In the alternative, construing said by-law and adjudging that in computing the corporation's annual profits, the $90,000,000 of New Class B. Common Stock should be included in its capital base.
4. Requiring the individual defendants to account for and restore to the corporation the amount of the damage which they have caused.
The defendants have filed a motion to dismiss on the ground that it appears from the complaint that this is a suit to regulate the internal affairs of a foreign corporation and upon the further ground that another suit was pending in the state court of New Jersey, the domicile of the corporation by other stockholders (derivative suit) against the same parties and for the same purpose.
Plaintiff filed an affidavit tending to show that the corporation had no factual existence in the state of New Jersey; that the affiant made diligent search for its offices or place of business and was unable to find one, other than a mere warehouse, and that its main offices, records and officers were at Winston Salem, North Carolina. A counter-affidavit was filed on behalf of the defendants to the effect that the corporation did maintain offices in New Jersey, that the stockholders' meetings were held there and that the by-law in question was adopted there and that the corporation is licensed to do business in many states in addition to North Carolina.
The defendants in their motion to dismiss ask, in the event of its denial, for a stay in this suit until the termination of the suit in New Jersey.
For all legal purposes the defendant is a corporation and citizen of New Jersey. This fact is alleged in the complaint. If the determination of the place for trial of this type of case depended upon the mere proposition of convenience, this court would unhesitatingly hold that this jurisdiction would be more convenient than the state of New Jersey, due to the fact that the officers and directors live here, and its records are here. In determining whether a court ought to entertain jurisdiction of a suit whose primary purpose is to deal with the internal affairs, especially the management, of a foreign corporation the convenience of the litigants is an important element, but it does not exclude other factors. When the management involves an interpretation of the statutes of the state of the corporation's creation, or the law of that state in the interpretation of its by-laws—not previously interpreted by the courts of that state—a foreign court ought to decline jurisdiction in the absence of a definite showing that the due administration of justice will be unduly delayed or probably thwarted. This the plaintiff has failed to establish. This case in most of its material features is identical with Rogers v. Guaranty Trust Co., 288 U.S. 123, 53 S.Ct. 295, 77 L.Ed. 652, 89 A.L.R. 720. The attack here on the conduct of the corporate officials, the lack of alleged authority, and the relief sought, fit into the mold of the Rogers case. Here, however, we have an added reason why this court should exercise its discretion and grant a dismissal—a prior suit, on the same grounds and seeking the same relief, had been pending in the court of New Jersey for nearly a year before this suit was instituted. The plaintiff asks this court to adopt the reasoning contained in the able dissenting opinions in the Rogers case but manifestly a trial court is not at liberty to disregard the majority opinion and follow the minority.
Plaintiff urges the view that the defendant here is in reality a North Carolina corporation but the same status was substantially true with the American Tobacco Co. in the above case. The considerations so well stated in that case why jurisdiction should be denied prevail here and are augmented by the pendency of a prior similar suit in the court of the corporation's domicile seeking the same relief.
The plaintiff assails the soundness of the law decided in the Rogers case, citing Cohen v. American Window Glass Co., 2 Cir., 126 F.2d 111, but we are not at liberty to disregard it. Again, plaintiff urges the doctrine that where the court has...
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