Weiss v. Doyle

• Decision Date: 18 November 1959
• Parties: Milton WEISS and Sarah Betty Weiss, suing on behalf of themselves and all other stockholders of Canadian Javelin Limited similarly situated, and on behalf of the said Canadian Javelin Limited, Plaintiffs, v. John Christopher DOYLE, Harold LeBrock, Maurice Lachmann, Thomas E. Bradley, Charles O. Finley, John Gaido, Joseph M. McDaniel, Jr., Henry Metz, Jr., Joseph Scialabba, Roy A. Young and Canadian Javelin Limited, Defendants.
• Court: U.S. District Court — Southern District of New York

178 F. Supp. 566

Milton WEISS and Sarah Betty Weiss, suing on behalf of themselves and all other stockholders of Canadian Javelin Limited similarly situated, and on behalf of the said Canadian Javelin Limited, Plaintiffs, v. John Christopher DOYLE, Harold LeBrock, Maurice Lachmann, Thomas E. Bradley, Charles O. Finley, John Gaido, Joseph M. McDaniel, Jr., Henry Metz, Jr., Joseph Scialabba, Roy A. Young and Canadian Javelin Limited, Defendants.

United States District Court S. D. New York.

November 18, 1959.

Rosenman, Goldmark, Colin & Kaye, New York City, for plaintiffs, Ambrose Doskow, New York City, of counsel.

Gallop, Climenko & Gould, New York City, for defendant Canadian Javelin Ltd., Milton S. Gould, New York City, of counsel.

Diamond & Golomb, New York City, for defendants Harold LeBrock, John Gaido, Maurice Lachmann, Joseph Scialabba and Thomas E. Bradley; Irving L. Golomb, New York City, of counsel.

Christy, Perkins & Christy, New York City, for defendant, John C. Doyle, Arthur H. Christy, New York City, of counsel.

EDWARD WEINFELD, District Judge.

Canadian Javelin Limited, the defendant on whose behalf this derivative action is brought by the plaintiff stockholders, moves to stay all proceedings pending the further order of this Court. Six individual defendants join in the motion.

Canadian Javelin Limited is a Canadian corporation, the stock of which was widely sold and distributed in the United States.

The conduct of its affairs has brought a plethora of law suits in this and the New York state courts. All seek to redress the wrong allegedly perpetrated upon the corporation by faithless officers and directors. There are pending in this Court six actions, including the instant one. Of these, five are brought by separate stockholder plaintiffs; the sixth was commenced by two directors who themselves are named as defendants in a number of derivative actions.

Nine additional separate actions are pending in the state Supreme Court. Eight are derivative actions filed by eight separate stockholder plaintiffs; the ninth action was commenced by the corporation. In the latter action which is referred to hereafter as the "corporate action", Canadian Javelin Limited, the plaintiff, is represented by counsel, who also appear for it in this and in all other derivative actions wherein it is a nominal defendant. These attorneys have moved to stay the instant action.

The attorneys for the plaintiffs in this action who oppose the motion, are also the attorneys for different plaintiffs in one of the state court actions referred to as "state court action # 2". They also represent the two plaintiff directors who commenced one of the actions pending in this Court. Parenthetically, it is noted that the same two directors are also named as defendants in this action.

The causes of action which are alleged in the various suits, federal and state, whether by stockholders, directors, or the corporation, are substantially the same and center about the same transactions; the relief sought in each is the same—to compel corporate fiduciaries to account for breach of duty. With few exceptions, the same defendants are named in all actions. In a number of instances, the same stockholder plaintiffs, represented by the same attorneys, have commenced actions in both the federal and state courts.

To place the matter in proper perspective, it is desirable to note the present status of the state court actions and then to consider the basis of opposition by plaintiffs' attorneys to the requested stay.

On motion of the corporate defendant, the eight separate state court derivative actions were ordered consolidated and a general counsel designated to conduct all proceedings on behalf of the respective plaintiffs. All plaintiffs' counsel appeared to be in accord as to the desirability of consolidation. However, they parted company on the question of who should be designated as general counsel. Counsel for the plaintiffs herein, representing the stockholder plaintiffs in the state court action # 2 opposed consolidation unless they were appointed general counsel.¹

The state Supreme Court Justice found that although they (as well as other counsel who sought the designation) were highly qualified—which indeed they are —they were disqualified to serve as general counsel in a consolidated action. The basis of this disqualification was that one of the plaintiffs represented by them in action # 2 was a defendant in another derivative action as well as in the corporate action and further, that this plaintiff was allegedly a partner or close associate of one who had been named as a defendant in one or more of the other actions.

The state court, after appraising the qualifications of various counsel, designated as general counsel the attorneys who represented the stockholder plaintiffs in action # 7. Admittedly, they are attorneys with extensive experience in this field of litigation. The order of consolidation provides they are to initiate all discovery proceedings and to conduct the litigation on behalf of the stockholder plaintiffs. Other counsel representing the respective plaintiffs in the derivative actions are permitted to participate in the pre-trial proceedings as well as in the trial proper, as provided in the order. Seemingly, this would afford the corporation an appropriate remedy for the prosecution of its claims. Nonetheless, plaintiffs urge the need for the prosecution of this suit as well. Plaintiffs point to the order which permits the consolidated action and the corporate action to proceed apace, requires that the depositions in both actions are to be taken at the same time, and that the counsel in each action shall notify the other of all discovery proceedings, motions and "litigative" steps he proposes to take. Plaintiffs say the end result of this procedure is that there is a single action in which general counsel in the consolidated derivative suit acts jointly with the attorney in the corporate suit. The plaintiffs then charge that counsel for the corporation was selected by Doyle, the President and Chairman of the Board of Directors of Canadian Javelin Limited, who is a principal defendant in all actions; that a majority of the board was, and is, under his domination. Accordingly, they contend that for general counsel to act in cooperation with counsel for Canadian Javelin Limited will prevent vigorous prosecution of the action; that the effectiveness of the general counsel will necessarily be impaired and hence, there is imperative need for an entirely independent stockholders' action. In turn, counsel for the corporation denies he is, or ever was, counsel for Doyle or under his domination; he contends that on the contrary, it was he, who on behalf of the corporation, unearthed the basic facts which form the subject matter of the charges against Doyle and others. Further, the independence of plaintiffs' counsel in this action is questioned; they are charged with being in the rather anomalous situation of representing two directors² as plaintiffs in their action against the corporation who are named as defendants in this very action. It is unnecessary to consider the charges and countercharges. No charge is advanced against the general counsel appointed by the state court in the consolidated action.

The fundamental question, it seems to this Court, is whether an adequate forum is available where the charges of overreaching of this corporation will be heard and prosecuted against the alleged wrongdoers in good faith and with ability and determination, or, putting it conversely, whether a stay of this action would be detrimental to the corporate...