Shearman v. Missouri Pacific Railroad Company

• Decision Date: 20 December 1957
• Docket Number: No. 15784.,15784.
• Citation: 250 F.2d 191
• Parties: Thomas B. SHEARMAN, Irvin Fane, Joseph J. Kelly, Jr., and Robert P. Lyons, Appellants, v. MISSOURI PACIFIC RAILROAD COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

250 F.2d 191 (1957)

Thomas B. SHEARMAN, Irvin Fane, Joseph J. Kelly, Jr., and Robert P. Lyons, Appellants, v. MISSOURI PACIFIC RAILROAD COMPANY, Appellee.

No. 15784.

United States Court of Appeals Eighth Circuit.

December 20, 1957.

George S. Roudebush, St. Louis, Mo. (Grand, Peper, Martin & Roudebush and Spencer, Fane, Britt & Browne, St. Louis, Mo., on the brief), for appellants.

Charles M. Spence, St. Louis, Mo. (James M. Douglas, St. Louis, Mo., J. Richard Skouby, Belle, Mo., Geo. W. Holmes, and Thompson, Mitchell, Thompson & Douglas, St. Louis, Mo., on the brief), for appellee.

Before SANBORN, JOHNSEN and VOGEL, Circuit Judges.

SANBORN, Circuit Judge.

This is an appeal from an order of the District Court granting a preliminary injunction in an action ancillary to the Proceedings for the Reorganization of the Missouri Pacific Railroad Company. The action was brought by the Company on April 19, 1957, to permanently enjoin the appellants from prosecuting an action in the Circuit Court of Jackson County, Missouri, brought by Thomas B. Shearman on or about April 16, 1957, against the directors of the Missouri Pacific Railroad Company and the Company itself, to secure a declaration (1) that its By-Laws in so far as they provided that one-third of its directors shall be elected annually are unlawful; (2) that the terms of office of all persons presently acting as directors will expire no later than the date of the next annual meeting of the shareholders fixed by the By-Laws for May 14, 1957; and (3) that the defendants are under a duty to take all steps necessary to assure that the full membership of the Board of Directors shall be elected at the May 14, 1957, meeting of shareholders. Shearman in his state court action also prayed (1) for a permanent injunction against the defendants to prevent the solicitation of proxies for, and their participation in, any shareholders' meeting for the election of directors at which less than all of the directors shall be elected, and (2) for a temporary injunction to the same effect and an order restraining the holding of the annual meeting of shareholders of the Missouri Pacific on May 14, 1957, pending final determination of the state court action.

On April 16, 1957, the state court issued an order requiring the defendants to show cause on April 25, 1957, why the temporary injunction prayed for in Shearman's complaint should not be granted. On April 19, 1957, the instant action was brought in the federal District Court to enjoin Shearman and his counsel from prosecuting the state court action. The federal court, on April 19, 1957, issued an order restraining Shearman, et al., for ten days from further prosecution of that action, and requiring them to show cause on April 25, 1957, why the preliminary injunction prayed for by the plaintiff in the federal court action should not be granted. On April 25, 1957, the defendants filed a motion to dissolve the restraining order for lack of jurisdiction and insufficiency of the complaint and of the order. They also filed on that day a response to the order to show cause, asking that the action be dismissed. After a hearing upon its order to show cause, the federal District Court, on April 29, 1957, granted the preliminary injunction restraining the defendants from further prosecution of their state court action pending the determination of the instant action or until the further order of the court.

The District Court found that by its order of February 25, 1955, the court had approved the Plan of Reorganization of the Missouri Pacific Railroad Company; that the order became final on September 19, 1955; that in its Consummation Order and Final Decree of March 1, 1956, in the Reorganization Proceedings, the court had reserved jurisdiction "To take such further action as may be necessary to put into effect and carry out this Order and the Plan and all other orders relative thereto heretofore entered by this Court and to prevent interference therewith"; that the Plan of Reorganization approved and confirmed by the court provided as follows with respect to the first Board of Directors of the reorganized company:

"Board of Directors. — The board of directors of the new company shall consist of 15 members who shall initially be selected as follows and thereafter elected by the stockholders: The reorganization trustee shall name 14 of said directors, of whom one shall be selected from the nominee or nominees of the debtor, Missouri Pacific, one from the nominee or nominees of the protective committee for holders of preferred stock of Missouri Pacific, three from the nominees of any of the creditor parties in interest to these proceedings, and, of the remaining nine to be so named, not less than seven shall be well-known citizens who are residents of the states served by the Missouri Pacific system. The fifteenth member shall be the president of the new company.

* * * * * *

"Five members of the first board of directors shall serve for one year, five shall serve for two years, and five shall serve for three years. All members elected to serve upon the expiration of the term for which the members of the first board of directors are chosen shall be elected for a term of three years. The reorganization trustee, with the approval of the court, shall determine the classification of the tenure of the first board of directors."

The District Court also found that the court in its...