Martin v. Morgan Drive Away, Inc.

• Decision Date: 11 January 1982
• Docket Number: No. 80-3371,80-3371
• Citation: 665 F.2d 598
• Parties: 1982-1 Trade Cases 64,456 Harry MARTIN, et al., Plaintiffs, Zarnoff O. Samford and Martin Trailer Toters, Inc., Plaintiffs-Appellants, v. MORGAN DRIVE AWAY, INC., et al., Defendants-Appellees. . Unit A *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 598

665 F.2d 598

1982-1 Trade Cases 64,456

Harry MARTIN, et al., Plaintiffs Zarnoff O. Samford and Martin Trailer Toters, Inc. Plaintiffs-Appellants, v. MORGAN DRIVE AWAY, INC., et al., Defendants-Appellees.

No. 80-3371.

United States Court of Appeals Fifth Circuit.

Unit A ^*

Jan. 11, 1982.

Jacques F. Bezou, New Orleans, La., for plaintiffs-appellants.

Montgomery, Barnett, Brown & Read, Daniel Lund, New Orleans, La., for National Trailer Convoy, Inc.

Hope S. Foster, Washington, D.C., for Transit Homes.

John C. Christie, Jr., Lucinda O. McConathy, R. T. Colman, Robert G. Abrams, Washington, D.C., for Morgan Drive Away, Inc.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY, RANDALL and SAM D. JOHNSON, Circuit Judges.

RANDALL, Circuit Judge:

Plaintiffs Zarnoff Samford and Martin Trailer Toters, Inc. ("MTTI") appeal the district court's determination that Samford had no standing to pursue an antitrust claim against defendants because his right to sue on behalf of MTTI was based upon an assignment which was invalid under the ancient and little used doctrine of champerty. Plaintiffs also claim that MTTI's suit against defendants was also improperly dismissed. We vacate the district court's judgment and remand for further proceedings.

Martin Trailer Toters, Inc. is a Louisiana corporation begun in 1962 as a sole proprietorship by Harry Martin. Martin later incorporated the business, and in 1967, he transferred one share of the corporation's stock to his son-in-law, plaintiff Zarnoff Samford, and one share to Samford's brother, Shirkee Samford. On February 26, 1973, Zarnoff Samford ended his ownership in MTTI by selling his stock to his brother Shirkee. Shirkee thereby became the sole owner of MTTI. At about this time Zarnoff Samford ended his employment relationship with MTTI.

Shirkee Samford filed for bankruptcy three years later on January 26, 1976, and in the course of the bankruptcy proceedings in the spring of 1976, his MTTI stock became the property of the Washington Bank and Trust Company of Bogalusa, ("Washington Bank"), one of Shirkee Samford's creditors.

On March 6, 1976, while the bankruptcy proceedings were ongoing, Zarnoff Samford, Shirkee Samford, and Harry Martin, in their individual capacities as former or then-present owners of MTTI, brought an antitrust action in federal district court against defendants Morgan Drive Away, Inc., National Trailer Convoy, Inc., and Transit Homes, Inc. The complaint alleged violations by defendants of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The plaintiffs sought injunctive relief as well as damages for injuries to MTTI allegedly caused by defendants' practices. Defendants moved to dismiss on the ground that the plaintiffs as shareholders had no standing to file an action for injuries sustained by the corporation. On April 23, 1976, plaintiffs amended their complaint by adding MTTI as a plaintiff.

On June 14, 1976, plaintiffs filed a "Second Amending Complaint" which stated that on January 16, 1976 (two months prior to the original complaint and ten days before Shirkee Samford filed for bankruptcy), MTTI had assigned its claim against defendants to Zarnoff Samford. Because this allegation, if true, would have made Zarnoff Samford the only proper party plaintiff, Samford did not oppose defendant's motion for dismissal as to Shirkee Samford and Harry Martin. On June 23, 1976, Zarnoff Samford filed a "Third Amending Complaint" that eliminated these original parties, and they were subsequently dismissed by the court.

After Samford had filed his "Third Amending Complaint," defendants sought and obtained permission to engage in discovery to ascertain who the proper party plaintiffs, if any, were in this case. Two years later, on June 9, 1978, defendants filed a supplemental memorandum in support of their motion to dismiss. Defendants now argued that the assignment of MTTI's claim to Zarnoff Samford was a conveyance in fraud of Shirkee Samford's creditors; therefore the conveyance was void and Zarnoff Samford had no standing to seek recovery.

Zarnoff Samford responded to the motion to dismiss by alleging that on May 8, 1978, he entered into an agreement with Washington Bank by which he purchased all of MTTI's stock. Under the terms of the agreement Samford paid Washington Bank $1,000 immediately, promised to pay $4,000 more within three months, and promised to pay Washington Bank "other valuable consideration" out of the proceeds of the suit with defendants as follows:

NOW, therefore, it is understood and agreed by and between the parties hereto that the other valuable consideration contained in the sale of the Martin Trailer Toters, Inc. stock unto Zarnoff O. Samford is to be payment of the remaining indebtedness of FIFTY-NINE THOUSAND, NINE HUNDRED AND THIRTEEN AND NO/100 ($59,913.00 DOLLARS), owed to the Washington Bank and Trust by Martin Trailer Toters, Inc. at the completion of the above mentioned lawsuit and after the completion of said lawsuit out of the proceeds, if any, received by way of settlement or judgment.

IT IS FURTHER UNDERSTOOD that the said Zarnoff O. Samford is prosecuting and controlling the aforementioned antitrust claim against the named defendants above mentioned and is to be responsible for all costs of litigation.

II. Rec. 262-63.

Samford now asserted that, as sole owner of MTTI, he had the right to sue on its behalf. He also asserted the right to bring the lawsuit in his individual capacity. Defendants argued in response that the agreement with MTTI was champertous on its face and therefore void, and that Samford could not sue on behalf of MTTI. Defendants also argued that Samford had not established a personal injury which would permit him to sue in an individual capacity.

The trial court denied defendants' motion to dismiss on March 9, 1979, and gave Samford time to amend his complaint to state the grounds upon which he based his individual claim of injury for violations of the anti-trust laws. Samford made no amendments, and on April 18, 1980, the trial court dismissed the plaintiffs' complaint against defendants. It held that the agreement with Washington Bank was champertous and void and that Samford could not use the agreement to maintain his suit; the court also held that Samford had not stated sufficiently a theory upon which he could sue in an individual capacity. The trial court did not mention MTTI as a plaintiff or MTTI's suit when the court dismissed defendants. Samford and MTTI appeal from this dismissal of their suits.

We make two observations before beginning our analysis of this case. First, we note that Zarnoff Samford has abandoned his claim that he has individual standing to prosecute this law suit. In a supplemental memorandum filed on March 6, 1979, Samford stated that

there is no longer any need for him as an individual to proceed, consequently, this plaintiff in his individual capacity does not object to his dismissal as an individual without prejudice. Although this plaintiff agrees with the Court that he has an individual claim, he does not wish to assert it because such a claim may cause confusing proof of damage problems to the jury all of which may unduly complicate the case and prolong this litigation. (emphasis in original)

Because Samford has abandoned his individual claim, we do not consider whether the trial court's later dismissal for lack of individual standing was proper. We are thus left with the question only of whether Samford has standing as owner of MTTI or as an assignee of MTTI's claims against defendants.

Second, the parties made all of their arguments to this court and the trial court below in terms of whether Samford has standing to litigate MTTI's claim. The trial court also apparently accepted this characterization, as it dismissed the suit against defendants on the grounds that the fact that the agreement with Washington Bank was champertous left Samford with no standing to prosecute his claim. Our view of the matter is that the problems presented here are better described as involving the question of whether Samford is the real party in interest in this litigation under Rule 17(a). Although the defendants have not raised the real party in interest claim in this litigation, the standing issue was raised from the very beginning, and in the circumstances of this case, where Samford has no individual claim, we are convinced that he has standing only if he is the real party in interest by virtue of ownership of MTTI or an assignment therefrom. See Piambino v. Bailey, 610 F.2d 1306 (5th Cir.), cert. denied, 449 U.S. 1011, 101 S.Ct. 568, 66 L.Ed.2d 469 (1980); Audio-Visual Marketing Corp. v. Omni Corp., 545 F.2d 715 (10th Cir. 1976); United States v. 936.71 Acres of Land, More or Less, in Brevard County, State of Florida, 418 F.2d 551 (5th Cir. 1969). Hence the analysis which follows will focus upon whether Samford is the real party in interest to this lawsuit.

These preliminary considerations aside, our view of the case, simply stated, is that the trial court erred in not holding an evidentiary hearing on the issue of Samford's standing to prosecute this action. As discussed infra, Samford's standing or its absence is based upon several disputed issues of fact. Thus a summary disposition of the type made by the trial court was inappropriate. ¹

The first problem concerns the alleged January 16, 1976 assignment of MTTI's claim to Zarnoff Samford. The trial court made no mention of this assignment in its dismissal of Samford's claim, discussing only Samford's lack of individual standing and his lack of standing as assignee based upon the allegedly champertous Washington Bank agreement. However, if the January 16, 1976 assignment was a valid one, lack of individual standing and the invalidity of the Washington Bank agreement would be irrelevant, for the 1976 assignment by itself would have given Samford...