Weeks v. American Dredging Co.

• Decision Date: 09 February 1978
• Docket Number: Civ. A. No. 78-199.
• Citation: 451 F. Supp. 464
• Parties: Richard N. WEEKS v. AMERICAN DREDGING COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

451 F. Supp. 464

Richard N. WEEKS v. AMERICAN DREDGING COMPANY.

Civ. A. No. 78-199.

United States District Court, E. D. Pennsylvania.

February 9, 1978.

Dechert, Price & Rhodes, George J. Miller, Richard L. Berkman, Stephen E. Godsall-Myers, Philadelphia, Pa., for plaintiff.

Cohen, Shapiro, Polisher, Shiekman & Cohen, Patrick W. Kittredge, Alan M. Lerner, Howard J. Kaufman, Joseph M. Donley, Philadelphia, Pa., for defendant.

MEMORANDUM AND ORDER

NEWCOMER, District Judge.

The plaintiff, Richard N. Weeks, is a shareholder of the defendant company, American Dredging Company. The plaintiff is also the Vice President of Weeks Dredging & Contracting, Inc. (Weeks Dredging). Weeks Dredging presently is attempting to take over American Dredging Company. To aid Weeks Dredging in its takeover effort, the plaintiff sought from the defendant a shareholder list. After defendant refused plaintiff's request for a shareholder list, plaintiff brought this action seeking a judicial order that would require the defendant to give the plaintiff access to the information he sought. A hearing on plaintiff's motion for a preliminary injunction was scheduled for Thursday, January 26, 1978. Prior to the commencement of the hearing, the defendant filed a motion to dismiss plaintiff's complaint contending that the Court did not have subject matter jurisdiction over this action. As such a motion should be considered prior to reaching the merits in the case, the Court, in accordance with Rule 12(d) of the Federal Rules of Civil Procedure allowed a preliminary hearing to be held on defendant's motion. After argument and testimony were presented, the Court concluded that the motion to dismiss should be granted. This memorandum is written so that the parties clearly understand the Court's reasons for granting the defendant's motion.

Plaintiff brought this action in federal court alleging jurisdiction under 28 U.S.C. § 1332, the diversity of citizenship provision. Plaintiff claimed that under the Pennsylvania Business Corporation Law the plaintiff, as a shareholder, was entitled to the defendant's shareholder list. Part B of Section 308 of the Pennsylvania Business Corporation Law, 15 Pa.Stat.Ann. § 1308 (Supp.1977), provides in pertinent part,

B. Every shareholder shall, upon written demand under oath stating the purpose thereof, have a right to examine in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books, or records of account, and records of the proceedings of the shareholders and directors, and make copies or extract therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a shareholder.

Plaintiff claimed that as he made written demand upon the defendant and his demand was refused, he had a right to seek redress under the Pennsylvania Business Corporation Law for defendant's wrongful refusal to comply with Part B of Section 308. Under Part C of Section 308, if the corporation refuses to permit an inspection, a shareholder may apply to the court of common pleas for an order to compel such inspection.

While the defendant assuredly would have contested plaintiff's claim to the shareholder list, this issue was never reached. Defendant in its motion to dismiss claimed that the plaintiff had not satisfied the requirements for subject matter jurisdiction. In order to invoke the court's jurisdiction pursuant to 28 U.S.C. § 1332, it is incumbent on the plaintiff to establish (1) that the plaintiff and the defendant are citizens of different states and (2) that the amount in controversy exceeds $10,000, exclusive of interest and costs. Clearly the plaintiff satisfied the first requirement; the plaintiff is a citizen of New Jersey and the defendant is a Pennsylvania corporation. However, it is the second requirement of the diversity provision which the defendant asserted the plaintiff failed to satisfy; defendant claimed that the plaintiff could not show that the requisite amount was in controversy.

The real issue in this case is determining the "amount of the controversy." As has been stated, the controversy in this case involved defendant's obligation to supply plaintiff with the defendant's shareholder list. Valuing this controversy seems abstract, yet necessary, if one is to determine whether the jurisdictional prerequisites of the diversity statute are met.

At least two different approaches have been adopted by the courts to analyze this problem. Under the first approach, it is assumed that it is impossible to value the right to a shareholders' list and, therefore, the courts that follow this analysis hold that the amount in controversy requirement can never be met. Whitney v. American Shipbuilding Co., 197 F. 777 (N.D.Ohio 1911). The second approach, and the one employed more recently by the courts, measures the amount in controversy by the value of the plaintiff's shares. If the value of the plaintiff's shares exceeds the jurisdictional amount, then jurisdiction may be taken under 28 U.S.C. § 1332. Rosen v. Allegheny Corp., 133 F.Supp. 858 (S.D.N.Y. 1955); Textron, Inc. v. American Woolen Co., 122 F.Supp. 305 (D.Mass.1954); Susquehanna Corporation v. General Refractories Co., 250 F.Supp. 797 (E.D.Pa.1966).

The plaintiff asked that this Court employ yet another approach to determine the amount in controversy. Plaintiff urged that to compute the amount in controversy the Court look to the value of the tender offer. Plaintiff argued that as it was seeking the shareholder list to aid him in mounting his company's takeover effort, the tender offer's value was really the amount in controversy.

However, after considering the question presented, this Court found that the second approach was to be followed. Not only did the weight of authority favor adopting the second approach, but this Court found that the second approach was more consistent with the general rules of valuation used in injunctive relief cases. The traditional rule of valuation in injunctive relief cases is that the jurisdictional amount is measured by the value of the property right which the plaintiff seeks to have protected...