Walder v. Paramount Publix Corporation

• Decision Date: 24 June 1955
• Citation: 132 F. Supp. 912
• Parties: Charles WALDER et al., Plaintiffs, v. PARAMOUNT PUBLIX CORPORATION et al., Defendants.
• Court: U.S. District Court — Southern District of New York

132 F. Supp. 912

Charles WALDER et al., Plaintiffs, v. PARAMOUNT PUBLIX CORPORATION et al., Defendants.

United States District Court S. D. New York.

June 24, 1955.

COPYRIGHT MATERIAL OMITTED

Henry Pearlman, New York City, Philip Handelman, New York City, of counsel, for plaintiffs.

E. Compton Timberlake, New York City, of counsel, for all defendants.

Louis Phillips, New York City, for defendants Paramount Pictures, Inc. (in dissolution), Paramount Pictures Corp., Paramount Film Distributing Corp.

J. Miller Walker, New York City, for defendant RKO Radio Pictures, Inc.

Robert W. Perkins, New York City, for defendant Warner Bros. Pictures Distributing Corp.

Herbert B. Lazarus, New York City, for defendant American Broadcasting-Paramount Theatres, Inc. (formerly named as referred to in complaint as United Paramount Theatres, Inc.)

Dwight, Royall, Harris, Koegel & Caskey, New York City, for defendant Twentieth Century-Fox Film Corp., a New York corporation (in dissolution).

Schwartz & Frohlich, New York City, for defendant Columbia Pictures Corp.

WEINFELD, District Judge.

This is an action for treble damages and injunctive relief for alleged violations of the anti-trust laws, 15 U.S.C.A. § 1 et seq. The defendants move for summary judgment on a number of grounds.

The action was brought by: (1) Charles, Ethel, Alvin and Lester Walder, individually; and (2) as trustees of Tivoli Theatre, Inc., dissolved (referred to herein as Tivoli); (3) Charles and Ethel Walder as trustees of Tivoli Operating Corporation, dissolved (referred to herein as Operating); (4) Tivoli Amusement Company, Inc. (referred to herein as Amusement); (5) The Walwal Corporation (referred to herein as Walwal). The four individual plaintiffs were the sole stockholders, officers and directors of Tivoli, Walwal and Amusement, and Charles and Ethel Walder were members of the last board of directors of Operating.

The action centers about the Tivoli Theatre, a motion picture house in Miami, Florida which at various times from 1928 to date was owned or operated by one or another of the corporate plaintiffs.

In 1928 Tivoli, a Florida corporation, became the owner and operator of the Tivoli Theatre. In 1931 it transferred the fee to Walwal but continued to operate the theatre as lessee until 1937. Operating was organized in 1936 and in 1937 became the lessee of the theatre and continued to operate it until 1947. Since 1947 the theatre has been operated by Amusement as lessee. This action was commenced September 4, 1951.

In substance the plaintiffs claim that from 1928 to date the defendants, who are motion picture distributors, conspired among themselves and with Paramount Enterprises, Inc., an exhibitor operating in Miami, to prevent the Tivoli Theatre from exhibiting pictures on a "first run" and from obtaining subsequent runs on a competitive basis; that this conspiratorial action coerced the individual plaintiffs into agreeing to the formation of Operating, in which Paramount Enterprises, Inc. received a 50% stock interest, and the plaintiff Walwal the other 50%; further that in 1937 Walwal as owner and Tivoli as lessee or operator of the Tivoli Theatre, and the individual plaintiffs as stockholders of the two corporations, were coerced into substituting Operating as lessee in place and stead of Tivoli; that plaintiffs were further coerced into surrendering to several of the co-conspirators over half the proceeds of the theatre during the period when Operating was the lessee. The complaint incorporates by reference the decrees entered against the defendants¹ in United States v. Paramount Pictures, Inc.²

The defendants' motion, which seeks summary judgment or, in the alternative, partial summary judgment in favor of some of the defendants against all of the plaintiffs, is based on various distinct grounds, each directed against one or more plaintiffs.

First, it is urged that the individual plaintiffs have no standing to sue. The plea must be upheld. The individual plaintiffs neither owned nor operated the Tivoli Theatre. They were stockholders in Walwal and Tivoli which either owned or operated the theatre until 1937, when Operating took over. The plaintiffs concede that as such stockholders they cannot maintain an action for treble damages for an injury sustained by the corporation but they contend they sustained individual damages to their business or property by reason of the defendants' conduct separate and distinct from the damages caused to the corporation. They claim first that the defendants' actions forced them to cause Walwal to replace Tivoli as the lessee of the theatre with Operating, in which defendant Paramount Enterprises acquired half the stock — thus in effect requiring them to surrender 50% of the leasehold. Second, they claim they were deprived of the opportunity to earn management fees or other income as individuals which, but for the defendants' control of Operating would have been available to them. No breach of any contract of employment is alleged.

Patently the first claim is based on the alleged impairment of plaintiffs' stock in either Walwal or Tivoli and the second claim is clearly based upon alleged deprivation of salary anticipated as an incident of their relationship to the corporation. Neither of these claims may be pressed for "a stockholder cannot recover for the impairment of his stock by combination in restraint of trade; a creditor cannot recover for impairment of the corporate debtor's ability to pay an indebtedness in an action against a third party for treble damages for violation of the Anti-Trust laws, and finally, neither loss of corporate office and salary incident thereto, nor injuries to a corporate officer's general creditor are injuries to his business or property within the meaning and intent of the Anti-Trust laws."³ Finally, if as plaintiff contends Operating is entitled to recover the 50% stock interest held by Paramount Enterprises, as well as any dividends received thereunder, the individual plaintiffs as the sole stockholders of Walwal would in any event be made whole.

This branch of the motion is granted.

Second, the defendants seek summary judgment against Walwal and Charles and Ethel Walder as individuals based upon a general release executed by them August 17, 1948, in favor of Paramount Enterprises, Inc. They contend that since Paramount Enterprises is named as a co-conspirator the release, which contained no reservation of rights, also operated to release all other joint tort feasors named as defendants herein with respect to all claims which accrued on or before August 17, 1948.

There are general clauses in the release sufficiently broad to bar the plaintiffs' present claims. However, the first "whereas" clause suggests a narrower scope. It states that the parties have had dealings and transactions relating to the "Tivoli Theatre and its equipment" and that disputes have arisen "with reference thereto and otherwise". The defendants, in addition to the general clauses rely on the words "and otherwise", but the "whereas" clause read as a whole appears to imply a more limited scope than that for which they contend.⁴ Whether the release was limited to the claims relating to equipment and repairs or was sufficiently broad to encompass all claims arising out of the operation of the theatre including antitrust violations, is not altogether clear from the face of the document. In view of this ambiguity the intention of the parties becomes relevant.⁵ Thus a substantial issue of fact exists which requires the denial of the motion for summary judgment.⁶

The defendants next urge that the causes of action asserted on behalf of Tivoli and Operating have wholly abated because suit was not brought within three years of their dissolution as required by the Florida statute. Tivoli was dissolved more than 14 years prior to the commencement of suit and Operating was dissolved in 1948, the exact date being in dispute. The actions are brought on behalf of the corporations by the individuals constituting the last board of directors "as trustees".

At common law, the dissolution of a corporation is analogous to the death of an individual. All pending actions are abated and no further actions can be brought by or against the corporation. However, a dissolution statute may artificially continue the existence of the corporation for the stated period to permit it to prosecute or continue suits either in its own name or in the name of trustees.

The conditions of corporate dissolution are "not procedural or controlled by the rules of the court in which the litigation pends",⁷ rather they are matters which rest wholly with the State of incorporation, and over which the Federal Government has no control.⁸ Consequently, if a corporation lacks capacity to sue by reason of dissolution under State law, it cannot sue in the Federal courts even on a federally created right.⁹ Nor can the pendency of United States v. Paramount Pictures affect the dissolution provisions of Florida law under section 5 of the Clayton Act, 15 U.S. C.A. § 16, tolling statutes of limitation during the pendency of government antitrust actions. Once the statutory period has expired the corporation, absent special saving provisions, is defunct for all purposes and the corporation or trustees may not thereafter maintain suit. And the fact that the statutory period of grace is less than the remaining period of any statute of limitations applicable to a chose of action existing in favor of the corporation does not matter. The corporation by its voluntary action has curtailed its own existence and an incident of its action is the contraction of the period within which to bring suit.¹⁰

The fundamental difference between the parties is whether after dissolution a three year period, as defendants contend, or a twenty year period as plaintiffs urge, governs. In any event, with regard to Operating, an issue of fact defeats the motion...