Niles-Bement-Pond Co. v. Iron Molders' Union, Local No. 68

• Decision Date: 09 October 1917
• Citation: 246 F. 851
• Parties: NILES-BEMENT-POND CO. v. IRON MOLDERS' UNION, LOCAL NO. 68, et al.
• Court: U.S. District Court — Southern District of Ohio

246 F. 851

NILES-BEMENT-POND CO. v. IRON MOLDERS' UNION, LOCAL NO. 68, et al.

United States District Court, S.D. Ohio, Western Division.

October 9, 1917

[Copyrighted Material Omitted]

Allen Andrews and W. C. Shepherd, both of Hamilton, Ohio, and Murray Seasongood, of Cincinnati, Ohio, for plaintiff.

William B. Rubin, of Milwaukee, Wis., and R. J. Shank, of Hamilton Ohio, for defendants.

SATER District Judge.

The members of the Iron Molders' Union, Local No. 68 numbering about 115, and working for the Niles Tool Company, an Ohio corporation, at Hamilton, Ohio, struck on May 24th. Aside from other orders taken by the Tool Company, it was then under obligation to the plaintiff to fill a number of large contracts for heavy and urgently needed machines, which plaintiff had agreed to deliver at an early date to the United States, and which are required by the United States as war necessities for use in machine shops, ship and naval yards, and naval gun factories. The contracts of that character aggregate about $3,000,000, and, under section 120 of the National Defense Act of June 3, 1916 (39 Stat. 213, c. 134 (Comp. St. 1916, Secs. 3115f, 3115g, 3115h)), are given priority over other contracts. It is impracticable for the plaintiff to have manufactured elsewhere the articles which it has sold to the government.

The plaintiff's principal place of business is in New Jersey, under whose laws it is duly organized and incorporated. It owns all of the common stock of the Tool Company and enough of its preferred stock to give it a controlling interest. A large amount of the Tool Company's preferred stock is, however, held by various individuals throughout the country. The president and one of the vice presidents of the plaintiff are respectively the president and vice president of the Tool Company. The secretaries of the two companies are different. The plaintiff has nine directors; the Tool Company five, of whom three are directors of the plaintiff company. On February 6, 1900, the plaintiff and the Tool Company entered into a working agreement in which the plaintiff is characterized (improperly, I think) as the Tool Company's general sales agent, and by which it is to receive a so-called commission of 10 per cent. on the contract price of goods purchased of the plaintiff by any customer or customers and manufactured by the Tool Company, out of which per cent. the plaintiff is to pay all expenses incurred in advertising and effecting sales. About 5 per cent. of the orders taken in Ohio are placed directly with the Tool Company; the residue of its output is produced for the plaintiff. The plaintiff enters into contracts for the delivery of manufactured articles. Whatever profit the Tool Company makes on contracts sublet to it by plaintiff is, after the allowance of 10 per cent. from plaintiff's contract price, the property of such company. The plaintiff's president usually fixes the price specified in all contracts made by it, although some of the smaller ones are wrought out in plaintiff's office without coming to his attention. In fixing such price, the plaintiff necessarily fixes, also, the price the Tool Company will receive for any work which it may do for plaintiff. Both companies are interested in the adjustment of the strike. The plaintiff demanded of the Tool Company, which has taken no action regarding this suit, the fulfillment of the contracts which plaintiff has placed with it.

The defendants claim that in fact the real and substantial plaintiff and party in interest is the Tool Company and not the plaintiff; that the suit is brought by plaintiff against the Tool Company and its codefendants, all of whom are citizens of Ohio, for the purpose of conferring an apparent jurisdiction on the United States court; that the Tool Company has an interest in the subject-matter of the bill which will properly align it with plaintiff, in consequence of which there appears a controversy on each side of which are citizens of Ohio (Helm v. Zarecor, 222 U.S. 32, 32 Sup.Ct. 10, 56 L.Ed. 77, and cases therein cited); that, within the meaning of section 37 of the Judicial Code, the plaintiff and the Tool Company have attempted improperly and collusively to make a party plaintiff simply for the purpose of creating a case cognizable by a federal court, when in reality the only parties in interest are citizens of Ohio; and that therefore the case must be dismissed for want of jurisdiction. To sustain this contention reliance is had on Southern Investment Realty Co. v. Walker, 211 U.S. 603, 29 Sup.Ct. 211, 53 L.Ed. 346, Miller & Lux v. East Side Canal & Irrigation Co., 211 U.S. 293, 29 Sup.Ct. 111, 53 L.Ed. 189, Lehigh Min. & Mfg. Co. v. Kelly, 160 U.S. 327, 16 Sup.Ct. 307, 40 L.Ed. 444, and Phoenix-Buttes Gold Min. Co. v. Winstead (D.C.) 226 F. 855. The instant case, however, in its facts, is unlike any of those above mentioned.

The contract between the plaintiff and the Tool Company characterizes the former as the latter's general sales agent. Whatever may have been the status of the two companies at the time the contract was made, agency cannot now be imputed to the plaintiff. A sales agent is:

'One who sells goods which another person has delivered to him for that purpose and receives compensation for his services by a commission or otherwise. ' Ommen v. Talcott, 188 F. 401, 403, 112 C.C.A. 239, 241 (C.C.A. 2).

The goods manufactured by the Tool Company are not delivered to the plaintiff for sale. On the contrary, the plaintiff sells goods to be manufactured and delivered. It then permits the Tool Company, by virtue of its contract with it, to produce for it the goods so to be delivered. The Tool Company is in the nature of, if not in fact, a subsidiary company of the plaintiff. It owns none of the plaintiff's stock, and cannot control it; but the plaintiff, as the owner of a majority of the stock of the Tool Company, has the mastery and control of that corporation, and may dictate its policy. United States v. Northern Securities Co. (C.C.) 120 F. 721, 725, 726; Id., 193 U.S. 197, 326, 24 Sup.Ct. 436, 48 L.Ed. 679. Should the plaintiff permit the Tool Company to manufacture the articles which plaintiff has agreed to deliver, it receives, not only its established percentage on the contract price, but, as the owner of a majority of the stock of the Tool Company, the greater part also of the profit made by the latter company, if it manufactures the articles at a profit. The Tool Company, however, cannot compel the plaintiff to permit it to manufacture any article which plaintiff has sold and obligated itself to deliver.

In Carroll v. C. & O. Coal Agency Co., 124 F. 305, 61 C.C.A. (C.C.A. 4), on which this case is bottomed, there was no interlocking 49 of directors, nor did the plaintiff own any of the stock of any of the defendant companies. In that case the plaintiff was engaged in the business of selling coal and coke. It had contracts with the defendant coal companies by which it was to take and pay for all their product at the mines, to furnish transportation, and to sell the same at prices fixed by the companies, receiving a stipulated sum per ton for its services. By the terms of such contracts the defendant companies were not liable for damages for failing to furnish coal or coke to the plaintiff, where such failure was caused by strikes. In reliance on such contracts, the plaintiff made contracts for the sale of large quantities of coal and coke, which could only be supplied from the mines of the defendant companies. The latter were prevented from furnishing the same by the wrongful and illegal acts of individual defendants, who were conducting a strike among the miners, and who by intimidation and threats prevented others from working in the mines. It was held that on such a state of facts the plaintiff had such an interest as entitled it to maintain the suit in its own right for its protection, independently of the coal companies, which, although properly made defendants, could not be aligned with the plaintiff to defeat the jurisdiction of the federal court; their interests, although perhaps not adverse, being based on different rights. The reasoning of that case is so peculiarly applicable to the case at bar, and withal is so sound that it is here adopted, in so far as pertinent, without repetition. Jurisdiction is not wanting.

At the conclusion of the evidence the announcement was made that the facts warranted the granting of an injunction, and that counsel need argue only two questions-- that above mentioned relating to jurisdiction, and the further question as to what defendants should be enjoined. The evidence coming from the witnesses for the defense, most of whom were reluctant and unwilling, and some of whom as to important matters were incredible, discloses a situation requiring regulation, and, reinforced by the evidence submitted by the plaintiff, makes clear the duty of the court to stay further lawlessness. If the granting of relief depended on the occurrences of July 8th and 9th alone, the delay in bringing the suit would require a denial of relief; but the incidents that then transpired so reflect on the attitude of the strikers and their active sympathizers, and their conduct on those occasions is so akin to that which was exhibited on September 10th and 11th, immediately preceding the filing of the bill, that those incidents, as well as others appearing in the record, enter into and form a part of the history of the strike.

The light thrown by the record upon the situation as it existed between May 24th and July 8th shows, in view of the subsequent events, an abnormal condition in the city of Hamilton, which demanded the careful watchfulness and regulation of the officials, municipal and county,...