McFaddin Express, Inc. v. Adley Corporation
Decision Date | 07 January 1965 |
Docket Number | Civ. 10763. |
Citation | 240 F. Supp. 791 |
Court | U.S. District Court — District of Connecticut |
Parties | McFADDIN EXPRESS, INCORPORATED, L & L Leasing Corporation, and Louis DeBeradinis, Jr. v. The ADLEY CORPORATION, Michael L. Adley, Donald A. Adley, Ralph J. Adley, Daniel J. Adley, and United States of America. |
Tobias Weiss, Stamford, Conn., for plaintiff.
Joseph P. Cooney, Cooney & Scully, Hartford, Conn., William C. Baskin, Jr., Wiggin & Dana, Jon O. Newman, U. S. Atty., Howard T. Owens, Jr., Asst. U. S. Atty., New Haven, Conn., for defendants.
This is an action for an accounting and damages allegedly caused by the defendants' mismanagement of the business, property and affairs of the plaintiff corporations by the defendants from April 20, 1959, and thereafter.
Plaintiff, McFaddin Express, Incorporated, (hereinafter McFaddin) was a motor carrier of freight, authorized by the ICC to engage in that business over certain routes between points in Connecticut and New York City, eight New Jersey counties and over certain New England routes. Plaintiff, Louis DeBeradinis, Jr., was the sole shareholder of McFaddin and of L & L Leasing Corporation (hereinafter L & L). About 1/5th of McFaddin's rolling stock was leased from L & L.
Defendant, Adley Corporation (hereinafter Adley), is also a motor carrier of freight authorized by the ICC. It operates over a larger network of routes which includes the area of McFaddin's operations. The plaintiff corporations had been in financial straits for a considerable time before 1959.
A "contract of sale" for the sale of all of the stock in McFaddin and L & L to Adley was executed as of April 20, 1959. The parties agreed that the liabilities of the corporations equalled the value of the tangible assets and that $125,000 was the value of the intangible assets, subject to reduction in the event that an annexed consolidated balance sheet turned out to be inaccurate. Contemporaneously the parties also entered into a "management contract" under which complete control was to be immediately relinquished to Adley, who thereupon undertook to carry on both businesses.
The contract to buy the stock was expressly conditioned upon approval by the ICC, whose consent to a merger is required. See 49 U.S.C. § 5. An application for such approval was filed on May 7, 1959. To effectuate the objective of the separate management contract, an application under the Interstate Commerce Act § 210a(b) (49 U.S.C. § 310a (b)) for approval of temporary authority for Adley to operate McFaddin was filed on May 1st. This was treated by the ICC as concurrently filed with the application for authority to merge under § 5 of the act and was immediately granted.
Shortly thereafter, the assessment of tax delinquencies and penalties, followed by collection procedures of the Internal Revenue Service imposed so much additional stress upon the already strained financial condition of McFaddin that it could not survive. Both corporations were dissolved by forfeiture on November 30, 1962, for failure to file statutory reports in accordance with Connecticut's law. Adley refused to comply with its agreement to purchase the stock from DeBeradinis. This lawsuit followed.
The action was begun by a writ of summons and a writ of attachment which were issued as a matter of course upon application to the clerk. In addition to the garnishment of several bank accounts, most of Adley's rolling stock then engaged in transportation of freight was attached. Before the marshal's return was filed, the parties allegedly reached a settlement. The attachments on the trucks were released. The plaintiffs allegedly then asserted additional settlement demands and threatened to re-attach the defendant's trucks. This precipated an ex parte application on December 17, 1964, for a temporary injunction against further attachment of the defendant's property. Upon the defendant's offer to furnish a bond in lieu of attachment for an amount in excess of the amount of the settlement allegedly agreed upon, a temporary restraining order was issued pending a hearing on the application. See Landis v. North American Co., 299 U.S. 248, 254-255, 57 S.Ct. 163, 81 L.Ed. 153 (1936). At the hearing on December 22, 1964, on the issues thus presented, the defendants raised for the first time the threshold question of this court's jurisdiction over the subject matter of the plaintiffs' claim and, therefore, of the court's power to issue a writ of attachment.
It is conceded that diversity jurisdiction does not exist. All parties are citizens of Connecticut. The other major category of cases which the federal courts have authority to hear are cases arising under the Constitution, laws and treaties of the United States; these are called "Federal Questions." In any event, the jurisdiction of federal courts lies within the power of Congress to regulate. If Congress has given this court power to entertain jurisdiction, it may do so, but not otherwise. Turner v. Bank of North America, 4 U.S. (4 Dall.), 8, 10, n. 1, 1 L.Ed. 718 (1799). With specific reference to inferior federal courts, Justice Grier said flatly: "Courts created by statute can have no jurisdiction but such as the statute confers." Sheldon v. Sill, 49 U.S. (8 How.) 441, 449, 12 L.Ed. 1147 (1850). Therefore, unless a statutory basis for jurisdiction exists, persons do not have any right to proceed, or be proceeded against, in the first instance in a federal rather than a state court.
This court's jurisdiction over the subject matter of this case is asserted on the following statutory jurisdictional grounds:
I.
II.
No citation of examples of the wide scope of congressional legislation under the Commerce Clause, nor of the willingness of the Supreme Court to uphold it, is pertinent, for the jurisdiction of this court is not co-extensive with the power of Congress. For a matter in controversy to "arises under laws of Congress regulating commerce" so as to enable this court to exercise jurisdiction over it, there must, at the very least, first be such "laws."
Among the 133 separate paragraphs in the plaintiffs' 33 page complaint, it is not possible to find one which advises the parties defendant what is...
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