Sable v. WATSON-WILSON TRANSPORTATION SYSTEM, INC.
| Decision Date | 07 June 1968 |
| Docket Number | No. 16824-2.,16824-2. |
| Citation | 285 F. Supp. 351 |
| Parties | Donald E. SABLE, Plaintiff, v. WATSON-WILSON TRANSPORTATION SYSTEM, INC.; Yellow Transit Freight Lines, Inc.; George E. Powell; George E. Powell, Jr.; and Lester H. Brickman, Defendants. |
| Court | U.S. District Court — Western District of Missouri |
Brady, Drake & Wilson, Dallas, Tex., Lathrop, Righter, Gordon & Parker, Kansas City, Mo., for plaintiff.
Swanson, Midgley, Jones, Eager & Gangwere, Kansas City, Mo., for defendant.
A detailed summary of the pleadings in this case is necessary to an understanding of the unique problem presented to the Court. The plaintiff's petition alleges that the plaintiff is a minority stockholder in the defendant Watson-Wilson Transportation System; that the individual defendants are both directors of this corporation and of the other corporate defendant, Yellow Transit Freight Lines, Inc. Jurisdiction is based upon diversity and the requisite jurisdictional amount.
The petition makes the following allegations:
That on February 2, 1965, Yellow Transit entered into a contract with the majority shareholders of Watson-Wilson to acquire the controlling interest and to obtain authority from the Interstate Commerce Commission to control Watson-Wilson; that both these corporate defendants are licensed common carriers; that the defendants other than Watson-Wilson represented (to whom is not alleged) that there would be no merger of the two companies for at least two years after permanent control was approved; that on March 2, 1965, the Commission granted temporary control and on June 24, 1966, permanent control was permitted; shortly after temporary control was granted the individual defendants became the directors of Watson-Wilson; on September 16, 1966, these directors called a stockholders meeting of Watson-Wilson to vote on merging with Yellow Transit, and by virtue of controlling over 90% of the stock the merger was approved on a stock exchange basis, over plaintiff's objections.
Plaintiff further alleges that after Yellow Transit assumed temporary control the policies introduced by their chosen directors were designed to, and did, reduce the value of Watson-Wilson assets; that this was done by a number of changes made in both fiscal and operating policies; that these changes resulted in substantial sums of money being unlawfully diverted from Watson-Wilson to Yellow, and that, after request by the plaintiff, the directors of Watson-Wilson have refused to take any action to recover such money.
Plaintiff further alleges that by these actions the directors have breached their fiduciary duties to the stockholders of the Watson-Wilson company and have conspired to defraud that corporation and its minority stockholders in an overall scheme to present false and distorted information to the Commission in the proceedings before it to approve the merger.
The above is a very brief summary of the principal allegations of the petition. The plaintiff prays for an order requiring a true and accurate accounting of all revenues between the two corporations since temporary control was granted, and for a money judgment of $3,250,000.00 in favor of Watson-Wilson against the other defendants; that Yellow Transit and the directors of Watson-Wilson be ordered to provide new accounting information to the Commission to enable it to make a fair and true appraisal of the value of the minority stockholders' stocks in the merger proceeding; that the directors of Yellow Transit be enjoined from continuing to divert revenues from Watson-Wilson and from making excessive charges for management fees and other charges, from furnishing further information to the Commission based on such previous diversion of revenues, and from continuing to refuse to pay dividends to stockholders of Watson-Wilson. The plaintiff further prays that a receiver be appointed to take control of Watson-Wilson and operate the company and take all necessary steps to correct the alleged damage already done, and cause new accounting information to be prepared and supplied to the Commission; and further prays for attorney fees.
The defendants have filed a motion for summary judgment or, in the alternative, to dismiss this suit. This motion is supported by a very lengthy exhibit of all the proceedings before the Commission, commencing with the order granting permanent control. This exhibit reveals that the Hearing Examiner has held an evidentiary hearing, at which the plaintiff appeared and was represented by counsel, and has filed his report and order recommending the merger and fixing the value of the dissenting stockholders' stocks. The plaintiff and other minority stockholders filed exceptions to this recommended report and have filed two supplemental petitions for further hearing, the last being filed on March 14, 1968. In this last petition, which is denominated "Supplemental Petition of Minority Stockholders For Further Hearing," the plaintiff sets out that he has filed this suit and requests that no further hearing date be fixed before the Commission until this Court acts upon the requested appointment of a receiver, and that, if a receiver is appointed, no hearing be held until the receiver has completed an accounting.
No action has been taken by the Commission upon the Examiner's recommended report and order of November 13, 1967.
In the briefs filed by the parties it is agreed that § 5 of the Interstate Commerce Act (49...
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