Ripley v. International Railways of Central America
| Decision Date | 06 June 1932 |
| Citation | 227 N.Y.S.2d 64,16 A.D.2d 260 |
| Parties | Charles B. RIPLEY, Ernesto Ayulo, John A. Bonaudi, Maria Louisa Pardo De Fellner, John C. Hefferon, Executors of the Estate of Vincent Hale, Deceased, Lehigh & Baldwin Company, Inc., Donald M. Liddell, Jr., William K. McKittrick, Alfonso P. Gonzales, Maurice P. Weller, Paul C. Conder, Richard O. Innes, A. Marie Kroemer, Spencer Peets, Stowell Rounds, Alma Sweeney, Charles L. Livingston, Jr., William Van A. Waterman, Morris Gross, Anne T. Smith and Laura G. T. Robinson, as Executrices of the Estate of Peter G. Thomson, Jr., Deceased, Witham Smith, Trustee U/D of Trust made by Peter G. Thomson, Jr., dated |
| Court | New York Supreme Court — Appellate Division |
Simon H. Rifkind, New York City, of counsel (Edward N. Costikyan, New York City, on the brief; Abraham K. Weber, New York City, attorney) for International Railways of Central America, defendant-appellant-respondent.
Bernard E. Singer, New York City, of counsel (Paul Bauman, New York City, attorney) for claimants Tachna, Pinkussohn & Bauman and Nathaniel A. Devine, appellants-respondents, and pro se.
Stanley J. Dorman, New York City, for appellant-respondent Henry P. de Vries.
Frank A. Celentano, New York City (Winthrop D. Thies, New York City, on the brief), for claimant-appellant-respondent Estate of Walter A. Blasing.
Porter R. Chandler, New York City, of counsel (Ralph M. Carson, New York City, on the brief; Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, attorneys) for defendant-appellant-respondent United Fruit Co.
T. Roland Berner, New York City (Aaron Lewittes, Julian S. Bush, M. Victor Leventritt, Shirley D. Brinsfield and Sidney Bender, New York City, on the brief) pro se and General Counsel for plaintiffs and plaintiffs-intervenors-appellants-respondents.
Herman A. Bayless, Cincinnati, Ohio (Waite, Schindel, Bayless & Schneider, Cincinnati, Ohio, of counsel) pro se and for claimant Estate of Peter G. Thomson, Jr., respondent, plaintiffs-intervenors Anne T. Smith and Laura G. T. Robinson, as Executors of Estate of Peter G. Thomson, Jr., Deceased, respondents.
Harry Bijur, New York City, of counsel (Bijur & Herts, New York City, attorneys), for plaintiff-appellant-respondent John A. Bonaudi, claimant-appellant Bernard Winkler & Co., and pro se.
Louis H. O. Fischman, New York City, pro se and for plaintiff-intervenor Morris Gross, appellant-respondent.
Alexander Kahan, New York City, pro se.
M. Victor Leventritt, New York City, for claimant Frederick E. Lyford, appellant-respondent, claimant Estate of Vincent Hale, appellant, and claimants Thomas D. Geoghegan, Joel Dean and Philip J. Maggio, respondents.
Before BOTEIN, P. J., and BREITEL, VALENTE, McNALLY and STEVENS, JJ.
A recovery in a substantial amount was obtained in this stockholders' derivative action on behalf of International Railways of Central America ('IRCA') against United Fruit Company. The judgment was affirmed by this Court (Ripley v. International Rys. of Cent. Amer., 8 A.D.2d 310, 188 N.Y.S.2d 62) and by the Court of Appeals (8 N.Y.2d 430, 209 N.Y.S.2d 289, 171 N.E.2d 443). The present appeals and cross-appeals are from an order and supplemental judgment entered upon a decision of a Special Referee which granted to attorneys and experts allowances covering fees and disbursements in the total amount of $4,778,538.79.
Primarily, there can be no dispute that any award for compensation should depend, in a large measure, on the benefits derived by the corporation from the successful efforts of the applicants on its behalf (Marine Midland Trust Co. of New York v. 40 Wall St. Corp., 13 A.D.2d 118, 213 N.Y.S.2d 689, aff'd 11 N.Y.2d 679, 225 N.Y.S.2d 755, 180 N.E.2d 909). The Referee found that the total benefit obtained by the applicants for IRCA was more than $21,000,000. That figure was arrived at by including (approximate figures are used here): (1) $3,000,000 resulting from increases in transportation rates as a result of a change in contracts in 1948--before the stockholders' action was begun; (2) $1,200,000 for additional benefits by a change in transportation rates in 1952--while the action was pending; (3) $7,500,000 for probable future payments for the period from March, 1961, to December, 1967; (4) $1,300,000, representing interest paid by United Fruit Company for the period from the date of the entry of the judgment in the main action; and (5) $8,000,000, recovered and paid on the judgment.
On this appeal, IRCA and United Fruit Company contended that all the benefits and prospective benefits which the Referee considered in making the awards should be eliminated except the $8,000,000 actually recovered and paid in the action. In our opinion, the Referee should not have given any weight to the item of interest or to the increase in rates in 1948 in arriving at the reasonable compensation of the claimants.
However, in perceiving that the probable future benefits can be causally attributed to the suit, it is not necessary to assign the same percentage ratio of compensation to that factor as to the indisputable recovery of $8,000,000 paid under the judgment. Nor is it necessary to fix any exact value to the speculative future benefits which the Referee estimated at $7,500,000. It is sufficient to recognize the existence of some probable future benefits resulting from the stockholders' action as an additional factor in the assessment of the compensation to the claimants.
We can, however, see no basis for compensating attorneys in a stockholders' derivative action for interest which accrues on a judgment ultimately paid by the defendant.
Nor do we conceive that, under the circumstances of this case, the Referee should have assigned any weight--in determining the allowances--to the $3,000,000 which the corporation obtained as a result of the increase in carload rates in 1948. The Referee found that the purpose behind the increase was the forestalling of an action by a stockholder, then represented by Mr. Berner.
At the outset, it is apparent that only Berner could make any claim with respect to that increase, since all the other lawyers and experts were not in the matter at the time. However, even as to Berner, the inclusion of the $3,000,000 as a factor in determining an allowance was improvident. The Referee's reliance on Angoff v. Goldfine, 1 Cir., 270 F.2d 185, is misplaced since that case involved an ancillary proceeding in aid of the main action, while here there was no proceeding brought to obtain the 1948 increase. The most that can be said is that as a result of inquiries made by Berner in 1948, management took action which benefited the corporation. It would be unwise to authorize compensation to counsel for a stockholder whenever management took action beneficial to the corporation as a result of a request or demand by a stockholder. That management moved in order to forestall a derivative action is immaterial. The requirement that a stockholder make a demand is to afford the corporation an opportunity to act, and if the corporation does act it makes further proceedings on the part of a stockholder unnecessary. Hence, from a policy standpoint, the...
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...without actually instituting litigation constitutes an "action" for the purposes of section 626(e).2 In Ripley v. International Rys. of Cent. Am., 16 A.D.2d 260, 227 N.Y.S.2d 64, aff'd, 12 N.Y.2d 814, 236 N.Y.S.2d 64, 187 N.E.2d 131 (1962), the court addressed this very question. The shareh......
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