Schmidt v. United States
| Decision Date | 06 August 1952 |
| Docket Number | No. 10581.,10581. |
| Citation | 198 F.2d 32 |
| Parties | SCHMIDT v. UNITED STATES et al. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Jay E. Darlington, Hammond, Ind., John R. Jeffers, Chicago, Ill., for appellant.
Otto Kerner, Jr., U. S. Atty., John Peter Lulinski, Asst. U. S. Atty., Chicago, Ill., for appellee.
Before DUFFY, FINNEGAN and LINDLEY, Circuit Judges.
Appellant seeks to reverse an order of the District Court which dismissed his action against the United States brought under the Federal Tort Claims Act.
The complaint alleges that the plaintiff-appellant is a citizen, resident and inhabitant of the United States within the Northern District of Illinois, Eastern Division, and that he is and was at the time of the happenings and events complained of the owner and holder of 1,000 shares of the capital stock, Class A, of the Tucker Corporation, which he purchased from said corporation on the date of its issue. He charges that he begins and prosecutes the proceedings as a derivative stockholder's action because said corporation, and those in charge of its affairs, have been and are unwilling and unable to do so. He alleges that the action is not collusive.
The Tucker Corporation is alleged to be a corporation for profit, having its principal office and place of business in Chicago, Illinois, within said district.
It is charged that the Securities and Exchange Commission is an agency of the United States of America.
Upon information and belief plaintiff-appellant alleges that in the spring and summer of 1948, Tucker Corporation was preparing to start "mass production of a new type, rear-engine automobile, which would compete in interstate commerce with the products of other automobile manufacturers." It is also charged on information and belief that the said corporation was then "particularly vulnerable to the type of interference and injury hereinafter described," because, in preparation for production, it had invested "most of its original cash capital in tangible and intangible assets, including machinery and equipment, inventory of material, engineering and advertising expenses, and rental." Said corporation, it is said, was then lessee and occupant of a large plant and had started the initial production of parts, and "pilot-type" models of its automobile. Its cash was running low, but it had 2,000 dealers and distributors owing a balance of nearly $4,000,000 on their franchise notes; it enjoyed good commercial and financial relations with concerns doing business with it, and it is said that it had good business relations with the automobile buying public from the sale of its accessories; that it could, and, in the normal course of events, would have succeeded in going forward with the mass production of its automobile.
It is then charged, again on information and belief, that from the summer of 1948, up to and until March 3, 1949, the Securities and Exchange Commission, and "the members and agents thereof, engaged in a course of conduct toward said corporation which was of such character that in the normal course of events it would have and did interfere with and injure and destroy said corporation's business." It is alleged that said course of conduct consisted, among other things, of the following: (1) That they gave out surreptitiously, or caused or permitted to be given out, to a radio broadcaster, the statement that said corporation was about to be investigated, knowing that the statement would be broadcast on a nationwide hookup; (2) that in the summer of 1948, they began and carried forward an inquisition against said corporation, its business and its product, in the course of which they interfered with and interrupted the corporation's use of its records and files; they intimidated the persons and dealers doing business with the corporation; they caused to be propagated a rumor that the corporation was tainted with fraud and illegality; (3) that about March 1, 1949, one of the members of the Commission surreptitiously took from its files "a supposedly secret report" of said inquisition and turned it over to the representative of a Detroit newspaper who publicized the contents thereof.
The complaint then continues:
"It is presently impossible for this plaintiff to describe in more detail the aforesaid course of conduct referred to in this paragraph (b), because the facts constituting the same are peculiarly within the knowledge and possession of the defendant and its said agency and agents."
The complaint then goes on to allege alternatively, and still upon information and belief, that the tortuous acts in question were committed by the Commission, its members and agents, or by them in concert with other agencies of the United States, including the Department of Justice, or by them in concert with persons and "concerns" not connected with the Government, who desired the destruction of said corporation's business.
The complaint then charges, still on information and belief, that said course of conduct was entered into and carried out with intent to destroy said corporation in its business; and with intent to prevent the manufacture and competition of its product in interstate commerce, and with wilful and wanton disregard of the consequences which would and did result therefrom.
Damages were then claimed in the sum of $50,000,000. The complaint asserts that "there has been inflicted upon said corporation: (1) The common law tort of injuring and destroying its business; (2) the statutory tort of preventing the manufacture and sale of its product in interstate commerce, contrary to federal anti-trust laws, but this action seeks only compensatory and not punitive damages for this latter tort."
The complaint then alleges in division 5 thereof:
"(a) This cause of action has been abandoned in fact and in law by the corporation\'s trustee to the corporation on and since February 20, 1951, and has thereby reverted to the corporation, and said abandonment was in fact made by the trustee with the approval of the court."
Relative to the inability of the corporate management to sue, the complaint alleges in division 5(b) that shortly after the trustee abandoned this cause of action to the corporation, the plaintiff stockholder informed all the available officers and directors of the corporation of the trustee's abandonment and of the existence of this cause of action. He made demand on them to have the corporation sue upon it before it became outlawed and lost, but they took no action.
It then charges:
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