Leh v. General Petroleum Corporation

• Decision Date: 15 September 1958
• Docket Number: No. 20531.,20531.
• Citation: 165 F. Supp. 933
• Court: U.S. District Court — Southern District of California
• Parties: Marc D. LEH, individually, and The Progress Company, a copartnership composed of Marc D. Leh and David Brown, copartners, Plaintiffs, v. GENERAL PETROLEUM CORPORATION, a corporation, Standard Oil Company of California, a corporation, The Texas Company, a corporation, Richfield Oil Corporation, a corporation, Union Oil Company of California, a corporation, Tidewater Oil Company, a corporation, Olympic Refining Company, a corporation, Defendants.

165 F. Supp. 933

Marc D. LEH, individually, and The Progress Company, a copartnership composed of Marc D. Leh and David Brown, copartners, Plaintiffs, v. GENERAL PETROLEUM CORPORATION, a corporation, Standard Oil Company of California, a corporation, The Texas Company, a corporation, Richfield Oil Corporation, a corporation, Union Oil Company of California, a corporation, Tidewater Oil Company, a corporation, Olympic Refining Company, a corporation, Defendants.

No. 20531.

United States District Court S. D. California, Central Division.

September 15, 1958.

Richard G. Harris, Los Angeles, Cal., for plaintiffs.

P. E. Bermingham, Sims Hamilton and Howard Painter, Los Angeles, Cal., for defendant General Petroleum Corp.

Marshall P. Madison, Francis R. Kirkham, William E. Mussman and Pillsbury, Madison & Sutro, San Francisco, Cal., Lawler, Felix & Hall and John M. Hall, Los Angeles, Cal., for defendant Standard Oil Co. of California.

George W. Jansen, New York City, J. A. Tucker, James O. Sullivan, and Beardsley, Hufstedler & Kemble, Los Angeles, Cal., for defendant The Texas Co.

Wm. J. De Martini and William H. Powell, Los Angeles, Cal., for defendant Richfield Oil Co. L. A. Gibbons, Douglas C. Gregg and A. Andrew Hauk, Los Angeles, Cal., Brobeck, Phleger & Harrison and Moses Lasky, San Francisco, Cal., for defendant Union Oil Co. of California.

W. F. Kiessig, Edmund D. Buckley, San Francisco, Cal., Overton, Lyman & Prince and Wayne H. Knight, Los Angeles, Cal., for defendant Tidewater Oil Co.

Joseph L. Alioto, San Francisco, Cal., for defendant Olympic Refining Co.

MATHES, District Judge.

This is a private antitrust action, brought pursuant to § 4 of the Clayton Act, 38 Stat. 731 (1914) 15 U.S.C.A. § 15, wherein plaintiffs seek treble damages for injuries allegedly sustained by reason of claimed violations of §§ 1 and 2 of the Sherman Antitrust Act, 26 Stat. 209 (1890), as amended 15 U.S.C.A. §§ 1 and 2. Jurisdiction of this Court is invoked under § 4 of the Clayton Act and 28 U.S.C. § 1337.

Defendants have not as yet answered the complaint, but have interposed three motions now before the Court:

"(1) For a judgment dismissing the action as far as it purports to be brought by The Progress Company, a partnership;

"(2) In the alternative, for an order dismissing this action as against sic The Progress Company, a partnership, for failure to join an indispensable party, to wit, David Brown;

"(3) For an order and judgment of dismissal against plaintiff Marc D. Leh."

The ground of the alternative motion as to the partnership is that Brown, an equal partner with Leh, has not joined as a party plaintiff to this action but, to the contrary, has stated by deposition that he would favor dismissing it and, defendants say, one of two general partners cannot cause suit to be brought by the partnership without the consent of the other.

The ground of the motion as to plaintiff Leh individually is that the only claim asserted in the complaint is in favor of the partnership, and one partner cannot sue for his aliquot share of a partnership claim or even sue individually on behalf of the partnership. Cf. Vinal v. West Virginia Oil & Oil Land Co., 1884, 110 U.S. 215, 4 S.Ct. 4, 28 L.Ed. 124. Defendants further contend that insofar as the complaint may allege a claim on behalf of Leh individually, it is shown beyond issue by Leh's own deposition that he has suffered no damage separate from that of the partnership.

Inasmuch as numerous affidavits and other "matters outside the pleadings" have been presented to and considered by the Court, the motions, except that to dismiss for failure to join an indispensable party, will be treated as motions for summary judgment under Rule 56. Fed.R.Civ.P. 12(b), 28 U.S.C.

It is admitted that prior to the commencement of this action the partnership plaintiff, The Progress Company, was dissolved by written agreement of the partners Leh and Brown, and the affairs of this California partnership are now in the process of winding up. See West's Ann.Cal.Corp.Code, §§ 15029, 15030.

Rule 17(b) of the Federal Rules of Civil Procedure provides that "a partnership * * * which has no such capacity to sue or be sued by the law of such state where the district court is held, may sue or be sued in its common name for the purpose of enforcing for or against it a substantive right existing under the Constitution or laws of the United States * * *."

At oral argument the defendants conceded that the partnership has capacity to sue in this action in the partnership name. All parties agree then that the problem now pressed upon the Court is not one of procedure, but one of substantive law. Specifically, the question presented is whether one of two partners of a California partnership that has been dissolved may, as a part of winding up the affairs of the partnership, bring a suit in the partnership name in a federal court on a federally-created claim for violation of a federal statute.

Or, to state the problem in the language of the Uniform Partnership Act (which has been adopted in California), is the prosecution of a suit for damages to a partnership caused by alleged violations of the Federal antitrust laws an "act appropriate for winding up partnership affairs" so that one partner has authority to bind the partnership by instituting such a suit. See West's Ann.Cal. Corp.Code, § 15035, identical with § 35 of the Uniform Partnership Act.

At first blush it would seem proper to refer to the law of California to determine whether this action may be maintained by the partnership. Defendants have done just that and contend that under California partnership law, as codified in the Uniform Partnership Act West's Ann.Cal.Corp.Code, § 15001 et seq., one partner may not maintain a suit for the benefit of the partnership without the consent and approval of all the partners, and that this is so after dissolution as well as before.

Unlike some other states such as New York see N.Y.Civil Practice Act, § 222-a, California apparently still follows the common law rule that a partnership cannot sue in its common or firm name, that to enforce a partnership claim all those associated as partners must join individually as plaintiffs. Lewis v. Hayes, 1918, 177 Cal. 587, 171 P. 293; Ginsberg Tile Co. v. Faraone, 1929, 99 Cal.App. 381, 278 P. 866; Holden v. Mensinger, 1917, 175 Cal. 300, 303, 165 P. 950, 951 (dictum); Heinfelt v. Arth, 1933, 135 Cal.App. 445, 447, 27 P.2d 420, 421 (dictum); see Case v. Kadota Fig Ass'n of Producers, 1950, 35 Cal.2d 596, 602, 220 P.2d 912, 916; Kadota Fig Ass'n of Producers v. Case-Swayne Co., 1946, 73 Cal.App.2d 796, 167 P.2d 518; cf. West's Ann.Cal.Code Civil Proc. § 388, allowing a partnership to be sued in the common name. But see De Franco v. United States, D.C.S.D.Cal.1955 18 F.R. D. 156, 159.

So it is that under California practice a suit brought in the common name of the partnership or brought by fewer than all the partners is demurrable on either of the equally appropriate grounds of lack of plaintiff's legal capacity to sue or of defect or non-joinder of parties plaintiff. Ginsberg Tile Co. v. Faraone, supra, 99 Cal.App. at pages 384-386, 278 P. at pages 867-868. But such an objection must be interposed by demurrer at the very outset of the action or it is considered waived. Ibid; see also Engineering Service Corp. v. Longridge Investment Co., 1957, 153 Cal.App. 2d 404, 421, 314 P.2d 563, 573-574.

It thus appears that the substantive problem at bar cannot be answered by reference to California law because California practice and procedure effectively prevent this problem from ever arising, for under California rules of party joinder (or capacity to sue), a suit on a partnership claim can never be prosecuted either in the common name of the partnership or by fewer than all the partners.

So necessity and policy combine to dictate that the question whether this federal court action on a federally-created partnership claim can be maintained be decided on the basis of "federal law * * fashioned from the policy of our national antitrust laws." Textile Workers Union v. Lincoln Mills, 1957, 353 U.S. 448, 456, 77 S.Ct. 912, 918, 1 L.Ed.2d 972. This follows not only because the law of the State in which the partnership was created and transacted business can be of no aid, but also because the problem here concerns the enforcement in a federal court of a right created by the Congress; and federal law, not state law, must control in determining the rules governing enforcement in federal courts of rights and remedies created by federal statutes. Holmberg v. Armbrecht, 1946, 327 U.S. 392, 66 S.Ct. 582, 90 L.Ed. 743; Sola Elec. Co. v. Jefferson Elec. Co., 1942, 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165; Local 19, Warehouse Union v. Buckeye Cotton Oil Co., 6 Cir., 1956, 236 F.2d 776, 780-781, certiorari denied, 1957, 354 U.S. 910, 77 S.Ct. 1293, 1 L.Ed.2d 1428; see Textile Workers Union v. Lincoln Mills, supra, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972.

"It is familiar doctrine that the prohibition of a federal statute may not be set at naught, or its benefits denied, by state statutes or state common law rules. * * * When a federal statute condemns an act as unlawful the extent and nature of the legal consequences of the condemnation, though left by the statute to judicial determination, are nevertheless federal questions, the answers to which are to be derived from the statute and the federal policy which it has adopted. To the federal statute and policy, conflicting state law and policy must yield." Sola Elec. Co. v. Jefferson Elec. Co., supra, 317 U.S. at page 176, 63 S.Ct. at page 173, 87 L.Ed. 165.

Jurisdictions where procedurally a partnership cause of action can be enforced by suit in the partnership name provide a dearth of authority to guide decision of the specific problem here. But see Rosen v. Texas Co., D.C.S.D.N.Y. 1958, 161 F.Supp. 55, 59; Henson v. First Security &...