Jablow v. Agnew

• Decision Date: 05 January 1940
• Citation: 30 F. Supp. 718
• Parties: JABLOW et al. v. AGNEW et al.
• Court: U.S. District Court — Southern District of New York

30 F. Supp. 718

JABLOW et al. v. AGNEW et al.

District Court, S. D. New York.

January 5, 1940.

Joseph Nemerov, of New York City (Joseph Nemerov, Maurice J. Dix, Henry Schwartz, and Solomon Herman, all of New York City, of counsel), for plaintiffs.

Simpson, Thacher & Bartlett, of New York City (Albert C. Bickford, Richard H. Demuth, and Delmar Karlen, all of New York City, of counsel), for defendants Agnew, Balaban, Callaghan, Gibson, Harris, Johnston, Keough, Luce, McClintock, Newton, Otterson, Weisl, and Zukor.

Louis Phillips, of New York City, for defendants Paramount Pictures, Inc., and Paramount Theatres Service Corporation.

Larkin, Rathbone & Perry, of New York City, for defendant William S. Gray, Jr.

John H. Ray, of New York City, for defendant American Telephone & Telegraph Co.

T. Brooke Price, of New York City, for defendant Western Electric Company, Inc.

Hurd, Hamlin & Hubbell and Homer H. Breland, all of New York City (George F. Hurd and Vincent W. Farley, both of New York City, of counsel), for defendant Electrical Research Products, Inc.

CONGER, District Judge.

Motions of defendants American Telephone and Telegraph Company, Western Electric Company, Incorporated, and Electrical Research Products, Inc., and motions of the individual defendants Agnew, Balaban, Callaghan, Gibson, Harris, Johnston, Keough, Luce, McClintock, Newton, Otterson, Weisl, Zukor, and the Paramount Pictures, Inc., and Paramount Theatres Service Corporation, although made separately, are practically the same, and will be considered together.

The motions of these defendants to dismiss the amended complaint because of plaintiffs' failure to comply with Rule 23(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, or in the alternative directing the plaintiffs to serve a further amended complaint, in that they shall aver that such is a fact that they were shareholders of defendant Paramount Pictures, Inc., at the time of the transactions of which they complain, or that their shares devolved on them by operation of law, is denied.

The action herein was begun in the Supreme Court of the State of New York and removed by the defendants to this Court solely on the ground of a federal question. It has been held in this District that Equity Rule 27, 28 U.S.C.A. following section 723, which is the source of Rule 23(b) of the Federal Rules of Civil Procedure, did not apply to cases removed from the State Court on the grounds of a federal question. See Lindsley v. Natural Carbonic Gas Co., C.C., 162 F. 954; Hand v. Kansas City Southern Ry. Co., D.C., 55 F.2d 712. As was pointed out by Judge Knox in Jacobson v. General Motors Corporation, D.C., 22 F.Supp. 255, this holding necessitated an apparently anomalous distinction between cases removed on the grounds of diversity of citizenship, to which Equity Rule 27 was held applicable, and cases removed on the ground of a federal question. Defendants argue, however, that this distinction no longer exists because Rule 81(c) of the Federal Rules of Civil Procedure makes Rule 23(b) applicable to all removed cases and it is asserted that persistence in the exception laid down by the old cases would amount to judicial legislation in contravention of the mandate of the Supreme Court.

So far as I am able to ascertain, the wording of Rule 23(b) is identical with that of old Equity Rule 27, and the cases arising under former Equity Rule 27 should be precedents for the application of Rule 23(b) of the new Federal Rules of Civil Procedure, unless it can be said that Rule 81(c) compels a contrary course. I do not think that it does.

The defendants claim that in the first cause of action there are at least four separate and distinct causes of action, and that they should be separately stated and numbered.

The plaintiffs claim that the first cause of action is a separate cause of action consisting of various charges against the defendants who are jointly and severally charged with committing wrongful acts; that this constitutes one complete cause of action; that the various allegations of wrongful acts may be joined together to constitute one cause of action. I have come to the conclusion, in said first cause of action, that there are set forth two distinct and separate causes of action, which should be separately stated and numbered as follows:

(1) A cause of action against the defendants American Telephone and Telegraph Company, Western Electric Company, Incorporated, Electrical Research Products, Inc., Hilles, Leake, Richardson and Otterson (Paragraphs 10-47, and 50).

(2) A cause of action against the defendant directors and officers of Paramount Pictures, Inc. (Paragraphs 48, 49, 51-56, 57).

The parties involved are apparently separate and distinct. The claim against the officers and directors of Paramount has no connection with the transaction in which Electrical Research Products, Inc., et al. is charged. In what I regard as the second claim in the first cause of action, there are several different transactions, but I agree with the plaintiffs that the various acts and transactions charged to them may be included in one cause of action.

The allegations of misconduct of Electrical Research Products, Inc., et al., with the Trustees of Paramount Publix Corporation, should be separated from the acts and conduct of the directors and officers of Paramount Pictures, Inc. The duties of the directors and officers of Paramount Pictures, Inc., are entirely different from the duty of the trustees in the bankruptcy and reorganization...