Stott v. United States

• Decision Date: 27 August 1957
• Citation: 154 F. Supp. 389
• Parties: Gordon D. STOTT and Paul W. Zeckhausen, a Protective Committee for Minority Stockholders of The Nashville, Chattanooga and St. Louis Railway, Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Louisville and Nashville Railroad Company and The Nashville, Chattanooga and St. Louis Railway, Intervening Defendants.
• Court: U.S. District Court — Southern District of New York

154 F. Supp. 389

Gordon D. STOTT and Paul W. Zeckhausen, a Protective Committee for Minority Stockholders of The Nashville, Chattanooga and St. Louis Railway, Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants and Louisville and Nashville Railroad Company and The Nashville, Chattanooga and St. Louis Railway, Intervening Defendants.

United States District Court S. D. New York.

August 27, 1957.

Fennelly, Eagan, Nager & Lage, New York City, Newell Blair, Washington, D. C., Charles Nager, New York City, of counsel, for plaintiffs.

Paul W. Williams, U. S. Atty., New York City, Southern District of New York, Harold J. Raby, Asst. U. S. Atty., New York City, of counsel, for defendants United States of America and Interstate Commerce Commission.

Cravath, Swaine & Moore, New York City, W. L. Grubbs, R. W. Henriott, Joseph L. Lenihan, Louisville, Ky., William H. Swiggart, Nashville, Tenn., Bruce Bromley, W. L. Grubbs, Louisville, Ky., of counsel, for intervening defendants.

FREDERICK VAN PELT BRYAN, District Judge.

Plaintiffs, alleging that they constitute a protective committee for minority stockholders of the Nashville, Chattanooga and St. Louis Railway, sue to enjoin and set aside an order of the Interstate Commerce Commission authorizing the merger of the Nashville, Chattanooga and St. Louis Railway with the Louisville and Nashville Railroad Company. They seek the designation of a three judge court to hear and determine the action pursuant to 28 U.S.C. §§ 2325 and 2284, a temporary restraining order staying the merger order pending hearing by the three judge court, a preliminary injunction by the three judge court pending its final determination, and a permanent injunction against enforcement of the merger order.

The plaintiffs' attack on the merger order is directed to the provision of the order which sets the exchange ratio of the common stock of the merging companies at one and one-half shares of Louisville and Nashville for one share of Nashville, Chattanooga. Plaintiffs assert that this exchange ratio is unjust to the Nashville, Chattanooga stockholders and unreasonable, and is not supported by, and, indeed, is contrary to the evidence in the record before the Commission. They further assert that the Commission improperly excluded relevant and material evidence bearing on the exchange ratio issue. They claim that the ratio should be two to one instead of one and one-half to one, as the merger order provides.

Defendants United States and Interstate Commerce Commission have appeared in the action and the merging railroads have been permitted to intervene as parties defendant by order of this court, and have filed an answer to the complaint.

Plaintiffs now have brought on before me, by a somewhat inartistically drawn notice of motion, an application which I shall treat as one for a preliminary injunction to restrain the defendants from putting the merger order into effect pending final determination and for the designation of a three judge court to hear and determine such motion and presumably to determine the suit. Plaintiffs also seek an order temporarily restraining the execution and enforcement of the Commission's merger order pending hearing by the three judge court to prevent alleged irreparable damage to their interests.

On the argument of the motion before me counsel for the defendants and for the intervening defendant railroads, both conceded that the plaintiffs were entitled to have a three judge court designated under 28 U.S.C. § 2325. This section provides that an interlocutory or permanent injunction restraining the enforcement operation or execution of an order of the Interstate Commerce Commission shall not be granted unless the application is heard and determined by a three judge court under Section 2284. The suit is plainly one which comes within the purview of Section 2325. While the intervening defendants refer to the "dubious" status of the plaintiffs and their "doubtful" capacity to sue, this point has not been pressed, and no motion has been made to dismiss on this ground. Cf. Moffat Tunnel League v. United States, 289 U.S. 113, 53 S.Ct. 543, 77 L.Ed. 1069; Alleghany Corp. v. Breswick & Co., 353 U.S. 151, 173, 77 S.Ct. 763, 1 L.Ed.2d 726. It appears that plaintiffs are entitled to have a three judge court designated to hear and determine their application.

I have therefore notified the Chief Judge of this Circuit of plaintiffs' application as provided by Section 2284(1) and the Chief Judge by order dated August 21, 1957, has designated the two other judges who, with the district judge to whom the application was presented, will constitute the three judge court.

This leaves for consideration plaintiffs' application for an order temporarily restraining defendants from putting the merger order into effect pending hearing by the three judge court.

Plaintiffs allege that if the merger order, now effective as of August 15, 1957, is permitted to go into effect, and steps to accomplish the merger are taken thereunder, the stockholders whom they represent will suffer irreparable damage.

The intervening defendants, on the other hand, assert that no irreparable damage can result to the minority, that the Louisville and Nashville will suffer irreparable damage if a restraining order is issued, and that, in any event, plaintiffs are not entitled to this relief because of their failure to pursue available remedies with diligence. Counsel for the Commission and the Government have taken no position on this portion of plaintiffs' application except to call to the attention of the court facts which they deemed significant.

Under Subdivision 3 of Section 2284 the district judge, to whom an application is made for an interlocutory injunction required to be heard by a three judge court, may grant a temporary restraining order to prevent irreparable damage. Subdivision 3 goes on to provide that such order

"shall contain a specific finding, based upon evidence submitted, to such judge and identified by reference thereto, that specified irreparable damage will result if the order is not granted."

A temporary restraining order against the enforcement of the order of a governmental agency is a drastic remedy and will not be granted except upon a strong showing of necessity and desirability. Plaintiffs must show that specific, probable and irreparable damage will result if a stay is not granted. The court in exercising its discretion as to whether to grant such relief, will take into account all the circumstances, including possible injury to the opposing parties were a stay granted. Youngstown Sheet & Tube Co. v. Sawyer, D.C.D.C., 103 F. Supp. 978, 980; Ohio Oil Co. v. Conway, 279 U.S. 813, 815, 49 S.Ct. 256, 73 L.Ed. 972; Mayo v. Lakeland Highlands Canning Co., 309 U.S. 310, 60 S.Ct. 517, 84 L. Ed. 774; Public Service Commission v. Wycoff Co., 344 U.S. 237, 241, 73 S.Ct. 236, 97 L.Ed. 291; Schwabacher v. United States, D.C.E.D.Va., 72 F.Supp. 560, reversed on other grounds 334 U.S. 182, 68 S.Ct. 958, 92 L.Ed. 1305; Id., D.C., 104 F.Supp. 875.

On this application plaintiffs have not presented any convincing evidence that irreparable damage will result to them if a restraining order is not granted, and certainly have not shown enough to support the specific finding to that effect required by Section 2284(3). Moreover, other facts and circumstances present here militate against granting of relief to the plaintiffs at this...