Tryforos v. Icarian Development Co., S.A.
| Decision Date | 05 September 1975 |
| Docket Number | 74-1591 and 74-1676,Nos. 74-1590,s. 74-1590 |
| Citation | 518 F.2d 1258 |
| Parties | Nicholas J. P. TRYFOROS and Bebe Spanos Ikaris, Plaintiffs-Appellants, and Vasillios G. Spanos, Appellant, v. ICARIAN DEVELOPMENT COMPANY, S. A., et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Eugene Gressman, Washington, D. C., Sean M. O'Hara, Los Angeles, Cal., for plaintiffs-appellants.
Seymour F. Simon, H. Reed Harris, Chicago, Ill., for defendants-appellees.
Before PELL, STEVENS and DOYLE, * Circuit Judges.
These consolidated appeals seek reversal of orders dismissing a shareholder derivative action with prejudice and awarding defendants a judgment of $92,500 for their attorneys' fees.The three appellants include two former shareholders of Icarian Development Company, S.A.("Icarian"), a Panamanian corporation, who initiated this action back in 1968, and Vasillios G. Spanos, a resident of Greece, who, on March 11, 1974, responded to a notice to shareholders for the purpose of objecting to the proposed dismissal of the action.1We must consider (1)the appellants' standing; (2) whether it was proper for the dismissal to be with prejudice; and (3) whether, as a matter of Illinois law, the district court's findings support the award of fees.
The complaint filed by appellants Tryforos and Ikaris 2 on April 8, 1968, alleged that the 13 defendants, 3 other than Icarian, had misappropriated $285,000 in corporate assets.Process was purportedly served on Icarian by delivering a copy of the summons to the wife of Icarian's president at his residence.No attorney ever entered an appearance on behalf of Icarian.All other defendants did appear and have been represented by the same counsel throughout the bitter and protracted pretrial proceedings.4
Plaintiffs however, changed their attorneys frequently, 5 and thereby, according to the district court's findings, added to the complexity of the matter unnecessarily, prolonged the action, and increased the time which defendants' counsel were required to spend.6The extensive discovery and preparation culminated in the entry of a 77-page Final Pretrial Order on February 20, 1973.7The court found, however, that plaintiffs deliberately sought to avoid a trial on the merits in the Northern District of Illinois, having determined some time in 1972 that it would be more advantageous to litigate in another forum.8
On November 8, 1973, plaintiffs advised the court that they had disposed of their stock in Icarian.After requiring them to submit evidence that a bona fide sale had been made, the court concluded that plaintiffs could not maintain the derivative action on behalf of the corporation and directed the clerk to mail a written notice of a proposed dismissal with prejudice to all shareholders or persons claiming to be shareholders.Such a notice was sent to appellantVasillios G. Spanos.The notice stated that any person desiring to appear on behalf of Icarian should so indicate in writing on or before March 4, 1974, and appear in person or by counsel in open court on March 11, 1974.9The notice made no reference to the procedure to follow if a shareholder merely wanted to object to the form of the dismissal.
On March 11, 1974, Sean M. O'Hara, a member of the California Bar, who represented that he was counsel for Vasillios G. Spanos, an Icarian shareholder, appeared before the district court10 and tendered written objections to the proposed dismissal with prejudice.He asserted that the record disclosed that Icarian had never been made a party to the litigation and therefore that it would be improper to dismiss the action with prejudice.The district court authorized O'Hara to appear on behalf of Mr. Spanos and granted him leave to make the objections a part of the record.11He stated, however, that he wanted Spanos "to subject himself to the jurisdiction of the court individually so that if there is anything in the way of contempt or otherwise growing out of this, he will be subject to the jurisdiction of this court," and directed that within two weeks he file a petition unambiguously stating that he was not a participant in pending New York litigation or in any way in collusion with the plaintiffs.12After further colloquy, the judge stated that he would deny O'Hara's right to appear, 13 that he wanted further evidence of Spanos' stock ownership, and that he was denying Spanos' objections.14
Subsequently, on March 25, 1974, a member of the local Bar who did not enter a formal appearance for Spanos, tendered another set of written objections prepared by O'Hara; he again relied on the failure to serve Icarian as a reason for not dismissing the action with prejudice.He also tendered the affidavit of Vassilike G. Spanos, wife of V. G. Spanos, which stated that her husband was a shareholder of Icarian but was unable to file a personal affidavit within the time limits set by the court because he was residing in Greece.Two days later, on March 27, 1974, the district court ordered the appearance of O'Hara stricken from the files of the court15 and granted defendants' motion to deny O'Hara leave to file the further objections of V. G. Spanos.The order stated that filing was denied because O'Hara was not a member of the Bar of the State of Illinois or of the district court and because O'Hara had failed to file a petition signed by V. G. Spanos himself as ordered by the court.16
Thereafter, on March 27, 1974, the case was dismissed with prejudice for failure of the plaintiffs to prosecute.17Jurisdiction was retained for the purpose of assessing attorneys' fees, which were awarded the defendants on April 10, 1974, in the amount of $92,500.
O'Hara filed a notice of appeal on April 25, 1974, from the two district court orders on behalf of the two plaintiffs and V. G. Spanos(No. 74-1591).In response to defendants' motion, the district court on May 7, 1974, quashed this notice of appeal, ruling that O'Hara was not an attorney of record for any of the three appellants, that he had not filed the affidavit required by District Court Rule 39, 18 and that appellants were not represented by counsel having an office within the district.19In response, Tryforos and Ikaris filed a pro se notice of appeal on May 10, 1974 from the dismissal with prejudice and award of attorneys' fees (No. 74-1590), and O'Hara filed a notice of appeal on June 4, 1974, from the order quashing his first notice (No. 74-1676).
Before this court all three appellants contend that the district court erred in entering the dismissal with prejudice because the court lacked in personam jurisdiction over Icarian, an indispensable party to the derivative action.They allege that Icarian was never served with process and never appeared to submit itself to the court's jurisdiction.Tryforos and Ikaris also challenge the lower court's jurisdiction and authority to award the attorneys' fees.
Although all three appellants challenge the district court's jurisdiction because of the alleged failure to obtain in personam jurisdiction over Icarian, their interests in the appeal are quite different.Appellants Tryforos and Ikaris are, of course, vitally interested in the judgment awarding $92,500 in fees to the defendants.Since they have sold their Icarian stock, however, they have no interest in the judgment dismissing Icarian's claim with prejudice unless that action was a necessary predicate to the fee award.We think it plain, however, that the character of the dismissal as either with or without prejudice is irrelevant to the question whether the fee award was proper.20We conclude that appellants Tryforos and Ikaris have standing to attack the judgment for fees but no standing to challenge the dismissal with prejudice.
On the other hand, appellant Spanos has no personal stake in the fee award, but as a shareholder of Icarian does have an interest in the character of the dismissal.21His standing is questionable not because of his lack of interest but rather because it is unclear, as a matter of procedure, that he sufficiently subjected himself to the jurisdiction of the district court to entitle him to prosecute this appeal.22That question is not an easy one.
The question breaks into two parts: whether Spanos complied with the conditions imposed by the district court for filing objections to the proposed dismissal, and whether those conditions were appropriate.The district court found Spanos' objections unacceptable because (a) no member of the local Bar had entered an appearance on his behalf, and (b) the objections were not supported by a sworn "petition" executed by Spanos himself.The court's reasons for insisting on such conditions were the expressed desire to be able to hold Spanos accountable for costs or contemptuous conduct if such should thereafter occur.In addition, the district court wanted assurance that Spanos was not merely trying to protect the ability of other interests further to pursue their claim in another forum.
If Spanos had requested leave to appear for the purpose of further prosecuting the litigation on behalf of Icarian, there could be no question about the reasonableness of the conditions imposed by the court.In view of the unstable and transitory character of the representation of the interests of Icarian shareholders throughout the litigation, the court was understandably concerned about the quality of a Greek shareholder's representation by California counsel in Chicago litigation involving an inactive Panamanian corporation.The objection which Spanos sought to raise, however, merely went to the form of the dismissal and did not raise the possibility of further protracted proceedings before the district court.Spanos' attorney merely endeavored to direct the court's attention to a defect in the record which, as he argued, made it inappropriate to dismiss...
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