Stern v. South Chester Tube Company

• Decision Date: 21 March 1966
• Docket Number: Civ. A. No. 31033.
• Citation: 252 F. Supp. 329
• Parties: J. David STERN et al. v. SOUTH CHESTER TUBE COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

252 F. Supp. 329

J. David STERN et al. v. SOUTH CHESTER TUBE COMPANY.

Civ. A. No. 31033.

United States District Court E. D. Pennsylvania.

March 21, 1966.

David Freeman, Philadelphia, Pa., Richard H. Wels, New York City, for plaintiffs.

Ralph Earle, II, Richard P. Brown, Jr., W. James MacIntosh, Gregory M. Harvey, Morgan, Lewis & Bockius, Philadelphia, Pa., for defendant.

DAVIS, District Judge.

The plaintiff stockholders have instituted this diversity action solely to compel the corporate defendant to permit them "to examine its share register, its books of account and records, the records of the proceedings of its shareholders and directors, and the books and records of account of its subsidiary corporation."

The matter now before the court is the defendant's motion to dismiss the complaint for lack of jurisdiction over the subject matter. The defendant contends first of all that the United States District Court has no power to grant relief solely in the nature of a Writ of Mandamus and secondly that the matter in controversy does not exceed the jurisdictional amount of $10,000. Because of the court's decision on the first ground, it will be unnecessary to reach the second.

Since the early years of our Republic, the United States Supreme Court and the inferior federal courts have interpreted the jurisdictional statute, now 28 U.S.C. § 1332¹ and the All Writs Act now 28 U.S.C. § 1651,² as denying to what are now the Federal District Courts the right to issue a writ of mandamus or a writ in the nature of mandamus unless it is ancillary to some other relief sought. Knapp v. Lake Shore & Michigan Southern Railway Co., 197 U.S. 536, 25 S.Ct. 538, 49 L.Ed. 870 (1905); Rosenbaum v. Bauer, 120 U.S. 450, 7 S.Ct. 633, 30 L.Ed. 743 (1887); McClung v. Silliman, 19 U.S. (6 Wheat.) 598, 5 L.Ed. 340 (1821); McIntire v. Wood, 11 U.S. (7 Cranch) 504, 3 L.Ed. 420 (1813); Marshall v. Crotty et al., 185 F.2d 622 (1st Cir. 1950); Fineran et al. v. Bailey, 2 F.2d 363 (5th Cir. 1924); Newark Morning Ledger Co. v. Republican Co., 188 F.Supp. 813 (D.Mass.1960); People of United States ex rel. Barmore v. Miles, 177 F.Supp. 172 (W.D.Mich.1959); Robert Hawthorne, Inc. v. United States Department of Interior, 160 F.Supp. 417 (E.D.Pa.1958); Rosen v. Alleghany Corp., 133 F.Supp. 858 (S.D.N.Y.1955). See "Mandatory Injunctions as Substitutes for Writs of Mandamus in the Federal District Courts; A Study in Procedural Manipulation", 38 Colum.L.Rev. 903 (1938).

In McClung v. Silliman, 19 U.S. (6 Wheat.) 598, 5 L.Ed. 340 (1821), the plaintiff brought a diversity action for a writ of mandamus against a register of the United States land office in Ohio to compel him to deliver certain documents of title. Although the plaintiff argued that the existence of diversity of citizenship was sufficient to allow the adjudication of the suit in federal court, the decision of the Supreme Court was to the contrary. It held that the trial court had no power over a pure mandamus proceeding because the writ of mandamus was not "necessary for the exercise of its jurisdiction" under the All Writs Act and could not be used as a basis to obtain jurisdiction not already possessed. The Court asserted:

"It cannot be denied, that the exercise of this power is necessary to the exercise of jurisdiction in the court below, but why is it necessary? Not because that court possesses jurisdiction, but because it does not possess it. It must exercise this power, and compel the emanation of the legal document, or the execution of the legal act by the register of the land office, or the party cannot sue.

"The All Writs Act could only have been intended to vest the power now contended for, in cases where the jurisdiction already exists and now where it is to be courted or acquired, by means of the writ proposed to be sued out."

In Rosenbaum v. Bauer, 120 U.S. 450, 456-457, 7 S.Ct. 633, 636-637 (1887), a diversity case where the right of action rested on a state statute as in the case at bar, the Supreme Court specifically asserted that the All Writs Act restricted the federal trial court's diversity jurisdiction over "all suits of a civil nature, at common law or in equity" by "operating to prevent original cognizance * * * of a proceeding by mandamus not necessary for the exercise of a jurisdiction which had previously otherwise attached." See also Knapp v. Lake Shore & Michigan Southern Railway Co., 197 U.S. 536, 541-542, 25 S.Ct. 538 (1905); McIntire v. Wood, 11 U.S. (7 Cranch) 504, 3 L.Ed. 420 (1813). Although 28 U.S.C. § 1332(a) now reads that the district courts have jurisdiction of "all civil actions" with certain exceptions not relevant here, these words were merely substituted for the earlier wording in order to conform to the language of Rule 2 of the Federal Rules of Civil Procedure. They do not in any way change the meaning of the earlier phraseology. Rosen v. Alleghany Corp., 133 F.Supp. 858 (S.D.N.Y.1955).

Whether the relief sought is in the nature of a writ of mandamus must depend on the historical use of the writ at the time of the enactment of the jurisdictional statute and the All Writs Act and not on the particular appellation given to the remedy or relief afforded by the state law which would otherwise apply to the case. The federal statutes restrict the mandamus power of the district courts and a state's characterization of the form of the cause of action or relief can hardly expand or limit the courts' jurisdiction. See Rosenbaum v. Bauer, McClung v. Silliman, McIntire v. Wood, supra. In any event, the question here is moot since both the Pennsylvania and the general common law remedy to compel the inspection of corporate records is mandamus. Spang v. Wertz Engineering Company, 382 Pa. 48, 51, 114 A.2d 143 (1955); Taylor v. Eden Cemetery Co., 337 Pa. 203, 10 A.2d 573 (1940); Hodder v. George Hogg Co., 223 Pa. 196, 72 A. 553 (1909); 5 Fletcher, Cyclopedia Corporations §§ 2250-2252 (Rev. ed. 1952).

Whatever the merits or demerits of the interpretation given to statutes 28 U.S.C. § 1332 and the All Writs Act, the courts have adhered to this restriction on their power even though one decision characterized it as "an outworn technicality." Marshall v. Crotty, 185 F.2d 622, 627 (1st Cir. 1950). In 1962, the Congress took cognizance of this recognized limitation³ and passed a statute, 28 U.S.C. § 1361, providing the district courts with jurisdiction in mandamus actions against officials of the United States government. However, it did not broaden the act to include such actions against private persons or corporate officers and to this extent the previous decisional law stands.

A number of relatively recent cases which have faced the identical issue now before this court have held that the federal district courts do not have the power to compel a defendant corporation to allow a shareholder to examine its books and records since the relief sought is in the nature of mandamus. Newark Morning Ledger Co. v. Republican Co., 188 F. Supp. 813, 814 (D.Mass.1960); Selman v. Colborn, 143 F.Supp. 112, 113 (S.D. N.Y.1956); Breswick & Co. v. Briggs, 136 F.Supp. 301, 303-304 (S.D.N.Y. 1955); Rosen v. Alleghany Corp., 133 F. Supp. 858, 864-865 (S.D.N.Y.1955). These cases are controlling of the instant action.

Nevertheless, the plaintiff relies on Hertz v. Record Publishing Company, 219 F.2d 397 (3d Cir. 1955); cert. denied 349 U.S. 912, 75 S.Ct. 601, 99 L.Ed. 1247 for the proposition that the federal district courts have such jurisdiction. In that case, one plaintiff had sold 150 shares of stock of the defendant corporation to the other plaintiff. They brought suit to compel the defendant to issue a stock certificate to the plaintiff vendee, an act which the defendant had refused to perform on the ground that the plaintiff vendor had not been the owner of the stock and thus could not transfer what he did not own. The corporation made the argument that the court lacked jurisdiction...