Williamson v. Columbia Gas & Electric Corporation

• Decision Date: 12 April 1939
• Parties: WILLIAMSON v. COLUMBIA GAS & ELECTRIC CORPORATION.
• Court: U.S. District Court — District of Delaware

27 F. Supp. 198

WILLIAMSON v. COLUMBIA GAS & ELECTRIC CORPORATION.

District Court, D. Delaware.

April 12, 1939.

Arthur G. Logan (of Marvel, Morford & Logan), all of Wilmington, Del., for plaintiffs.

Clarence A. Southerland (of Ward & Gray), all of Wilmington, Del., and Douglas M. Moffat and William D. Whitney (of Cravath deGersdorf, Swaine & Wood), all of New York City, for defendant.

NIELDS, District Judge.

This is an action brought under section 4 of the Clayton Act, 15 U.S.C.A. § 15, to recover treble damages for injuries sustained by Inland Gas Corporation to its business and property by reason of acts of Columbia Gas & Electric Corporation forbidden in the anti-trust laws of the United States and in violation of section 7 of the Clayton Act, 15 U.S.C.A. § 18.

The affirmative defense of "Statute of Limitations" was heard pursuant to stipulation, upon motion to dismiss instead of by answer.

Defendant filed its motion

"To dismiss the complaint herein for failure to state a claim upon which relief can be granted on the ground that the cause of action, if any, alleged therein against the defendant did not accrue within a period of three years prior to the commencement of this action."

The parties stipulated:

"(1) The motion of the defendant above recited shall be heard and determined by the court prior to the filing herein by the defendant of any responsive pleading with the same effect as though the said motion presented a defense falling within the terms of Rule 12-B of the `Rules of Civil Procedure for the District Courts of the United States'.

"(2) The parties agree that the alleged right of action sued upon in this cause accrued not later than January 1, 1931, and if, upon hearing the said motion, the court shall be of the opinion that the said action is barred by any applicable statute of limitations, the said motion shall be granted; otherwise, it is expressly agreed that the defendant may file its answer or any further motion in the cause which it may desire to make, and the time within which the defendant shall file its answer or any such motion shall be fixed by the court."

Section 7 of the Clayton Act, 15 U.S. C.A. § 18, forbids the acquisition of the capital stock of a competitor under certain circumstances: "No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another corporation engaged also in commerce, where the effect of such acquisition may be to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition, or to restrain such commerce in any section or community, or tend to create a monopoly of any line of commerce".

Section 4 of the Clayton Act, 15 U.S. C.A. § 15, authorizes suits for damages under the federal anti-trust laws: "Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee".

Section 721, U.S.R.S., 28 U.S.C.A. § 725, makes the Delaware statute of limitations applicable to a suit brought under section 4 of the Clayton Act. It provides: "The laws of the several States, except where the Constitution, treaties, or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply."

The Delaware statute of limitations, Revised Code of Delaware, 1935, section 5129, provides: "No action of trespass, no action of replevin, no action of detinue, no action of debt not found upon a record or specialty, no action of account, no action of assumpsit, and no action upon the case shall be brought after the expiration of three years from the accruing of the cause of such action; subject however, to the provisions of the four next following sections."

Complaint.

The complaint alleges:

That on November 6, 1930, Columbia Gas & Electric Corporation (hereinafter referred to as "Columbia") while engaged in the production, transmission, distribution and sale of natural gas in interstate commerce, acquired indirectly a majority of the outstanding common stock of Inland Gas Corporation (hereinafter referred to as "Inland") also engaged in such commerce. That the effect of the acquisition was to lessen competition between Inland and Columbia and create a monopoly in violation of section 7 of the Clayton Act. Like allegations are made respecting Kentucky Fuel Gas Corporation (hereinafter referred to as "Kentucky Fuel").

That the principal activities of Columbia are in the states of Indiana, Ohio, West Virginia, Kentucky, Pennsylvania and New York. It controls through its subsidiaries 25% of the total mileage of natural gas pipe lines operating within the United States. It has transported and sold 42% of the natural gas produced in the eastern part of the United States. September 17, 1930, Columbia acquired control of Panhandle Eastern Pipe Line Company. In 1936 Columbia through a subsidiary built an extension of the Panhandle Eastern Pipe Line Company to the city of Detroit and arranged for the sale of gas therein.

That on March 30, 1927, Inland was incorporated. It acquired the property and business of two companies engaged in the production and sale of natural gas and secured gas reserves in eastern Kentucky. In order to have sufficient gas reserves to justify building a natural gas transmission line from eastern Kentucky to Ashland, a distance of 110 miles, Inland had assigned to it contracts for the purchase of natural gas from reserves in eastern Kentucky owned by other corporations. These assignments were:

(1) December 15, 1927, there was assigned to Inland a contract dated November 15, 1927, between Hamilton Gas Company (hereinafter referred to as "Hamilton") and Howe Oil & Gas Company. The contract provided that Hamilton would sell and Howe would buy natural gas produced from certain properties controlled by Hamilton in eastern Kentucky for a period of 10 years starting June 1, 1928, and so long thereafter as gas could be produced from Hamilton properties in commercial quantities.

(2) There was also assigned to Inland a contract dated November 5, 1927, between Piney Oil & Gas Company (hereinafter referred to as "Piney"). This contract provided that Piney would sell and the vendee would purchase from properties controlled by Piney in eastern Kentucky 4,000,000 cubic feet per day of natural gas until a certain contract had terminated and thereafter 10,000,000 cubic feet per day. This contract was for a period of 20 years from June 1, 1928, and so long thereafter as gas was produced from properties of Piney in commercial quantities.

(3) There was also assigned to Inland a contract dated October 12, 1927, between United Carbon Company and Alfred Howell. This contract provided that United Carbon Company would sell and the vendee would buy from properties controlled by United Carbon Company in eastern Kentucky 8,000,000 cubic feet of natural gas per day and at vendee's option all of United Carbon Company's production in excess of 8,000,000 cubic feet per day and up to 12,000,000 cubic feet per day. Carbreath Gas Company (hereinafter referred to as "Carbreath") succeeded by mesne assignments to all the rights of United Carbon Company as vendor in said contract.

That to acquire the properties and build transmission lines and have working capital, Inland issued $4,400,000 of first mortgage bonds, $1,500,000 debentures and $400,000 of notes. The bonds and debentures were sold to the general public. The notes were sold to American Fuel and Power Company (hereinafter referred to as "American"). Inland has outstanding $4,254,700 in bonds plus interest from June 1, 1930; $1,450,000 of debentures plus interest from June 1, 1930; and $400,000 of notes plus interest from July 2, 1930.

In 1928 the 110 mile pipe line was completed and Inland took deliveries from Hamilton, Piney and Carbreath in accordance with the above mentioned contracts but failed to earn its fixed charges in either 1928 or 1929.

That on July 17, 1928, the owners of the stock of Inland and Kentucky Fuel caused American to be incorporated and transferred to it all of the common stock of Inland and Kentucky Fuel in exchange for its common stock. American has held said shares of Inland and Kentucky Fuel at all times since the transfer thereof to it. In 1928 Inland had a net loss of $491,598.74 and in 1929 a net loss of $434,951.13.

In the Spring of 1929 American issued $2,000,000 of notes and arranged for the issuance of an additional $2,000,000. With the proceeds of these notes American made loans to Inland and Kentucky Fuel, acquired additional natural gas acreage and paid the cost of building a gas transmission line from Ashland, Kentucky, to Huntington, West Virginia. After American had issued the $2,000,000 of notes the bankers refused to purchase the $2,000,000 additional.

That prior to 1930 Hope Engineering Company had managed the properties of Inland and Kentucky Fuel and other subsidiaries of American. Hope employed an organization to secure contracts in the city of Detroit for the sale of gas. These contracts were contingent upon obtaining sufficient consumer contracts to an amount of 70,000,000 cubic feet per day upon an annual basis. Hope calculated that sufficient gas could be sold in Detroit to justify a large pipe line being built from Kentucky to Detroit to transmit gas produced and controlled by Inland and Kentucky Fuel. Hope formed a syndicate consisting of Hope and others for the purpose of acquiring control of American and its subsidiaries and constructing a major natural gas...