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GORDON v. LOEW'S INC.

December 14, 1956

Frank L. GORDON and Marion V. Gordon, Plaintiffs,
v.
LOEW'S INCORPORATED, a Delaware corporation; Paramount Film Distributing Corporation, a Delaware corporation; Paramount Pictures, Inc., a New York corporation; RKO Radio Pictures, Inc., a Delaware corporation; Twentieth Century-Fox Film Corporation, a New York corporation; Twentieth Century-Fox Film Corporation, a Delaware corporation; Warner Bros. Pictures Distributing Corporation, a New York corporation; Columbia Pictures Corporation, a New York corporation; Universal Film Exchanges, Inc., a Delaware corporation; and United Artists Corporation, a Delaware corporation, Defendants. Francis J. CURTIS, Trustee in Bankruptcy of B.P.R. Corporation, an Illinois corporation, Plaintiff, v. LOEW'S INCORPORATIONED, etc., et al., Defendants. John C. GORDON, Helen Gordon, and Joseph Gordon, Plaintiffs, v. LOEW'S INCORPORATED, etc., et al., Defendants



The opinion of the court was delivered by: WORTENDYKE

Each of these cases is an action for treble damages under Section 4 of the Clayton Act, 15 U.S.C.A. 15. In No. 202-55, the plaintiffs are alleged to have been the holders of all of the outstanding stock of The Northwest Theater Company, a corporation organized under the laws of Illinois, which had operated the Wicker Park motion picture theater in Chicago from April 15, 1929 to May 14, 1949, but which was dissolved on February 16, 1950. The plaintiffs in No. 204-55 claim to have been owners of all the stock of another Illinois corporation, known as Gordon Brothers Theater Company, which operated another motion picture theater (Chopin Theater) from September 1, 1922 to January 1, 1947, in Chicago, and which was dissolved on January 25, 1949. Civil action No. 203-55 is brought by the Trustee in Bankruptcy of B.P.R. Corporation, a body corporate of the State of Illinois, which had been the lessee and operator of three motion picture theaters in Chicago for periods of time between March 1, 1944 and June 10, 1951. Defendants in all three actions were originally the same.

Paramount Pictures, Inc. and Paramount Film Distributing Corporation (hereinafter respectively referred to as Paramount Pictures and Paramount Film), Warner Bros. Picture Distributing Corporation (hereinafter referred to as Warner), RKO Radio Pictures Inc. (hereinafter referred to as RKO), Twentieth Century-Fox Film Corp. (N.Y.) and Twentieth Century-Fox Film Corp. (Delaware) (hereinafter respectively referred to as Fox-N.Y. and Fox-Del.), Loew's Incorporated (hereinafter referred to as Loew's), Columbia Pictures Corp. (hereinafter referred to as Columbia), and Universal Film Exchanges, Inc. (hereinafter referred to as Universal), are charged as distributors and producers of motion pictures, while United Artists Corp. (hereinafter referred to as U.A.), is charged as a distributor thereof. These defendants are collectively referred to in each complaint as 'defendant distributors'. It is also alleged that Paramount Pictures was dissolved January 1, 1950 and that its production and distribution facilities were transferred to Paramount Film, which is accordingly charged as a successor corporation to Paramount Pictures. Similarly, Fox-N.Y. is alleged to have been dissolved in September 1952, and the complaint charges that its production and distribution facilities were transferred to Fox-Del., which is charged as a successor corporation to Fox-N.Y. Four other corporations, viz. Balaban & Katz Corp., Warner Bros. Theaters, Inc., Warner Bros. Circuit Management Corp. and Essaness Theaters Corporation, although not made parties defendant to any of these actions, are alleged in the complaint in each to have been co-conspirators with the named defendants.

 In cases numbered 202-55 and 204-55 (hereinafter referred to as the Gordon cases), the relationship of the plaintiffs to the causes of action which are alleged to have accrued to the respective now-dissolved theater corporations in which they were stockholders is set forth in each complaint in the following language:

 'By reason of the unlawful acts of defendants herein complained of,' (the dissolved theater corporation) 'and the plaintiffs were subject to great loss and damage during the period from' (January 1, 1935 to May 14, 1949 in C-202-55, and January 1, 1935 to January 1, 1947 in C-204-55) 'both in loss of revenue from the operation of' (named theater) 'and in the diminution of the value of the leasehold interest which' (the theater company held in the premises) 'and in the diminution of the value of other capital assets of' (the theater company). 'Plaintiffs are unable to determine the full extent of the loss of revenue suffered by' (the theater company 'and themselves at the present time, but plaintiffs will be able to ascertain such damage after an examination of the books and records of the defendants and their co-conspirators. Plaintiffs are entitled, under the laws of the United States, to recover from the defendants threefold the actual damage suffered by them.'

 The corresponding allegations of the complaint in C-203-55 (the case brought by Curtis, Trustee) charge that, by reason of the unlawful acts complained of, the bankrupt corporation suffered damage from March 1, 1944 to June 10, 1951 in loss of revenue from the operation of the three theaters which it had operated and in the diminution of the value of its other capital assets; such losses exceeding $ 300,000 in amount. It is therefore charged that the plaintiff Trustee in bankruptcy 'is entitled, under the laws of the United States, to recover from the defendants threefold the actual damages suffered by the B.P.R. Corporation.' I must conclude that the phrase 'laws of the United States' used in each of the complaints as supporting the alleged right of recovery, refers to Section 4 of the Clayton Act, 15 U.S.C.A. § 15, which reads as follows:

 ' § 15. Suits by persons injured;

 amount of recovery.

 'Any person who shall be injured in his business or property by reason of anything forbidden in the anti-trust 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.'

 Upon the respective motions of the defendants Fox-N.Y. and Paramount Pictures, each of the actions was dismissed as to those defendants for improper venue. This Court has jurisdiction over the remaining defendants, all of whom have filed answers in each of the actions.

 In the Gordon cases, all of the presently remaining defendants in each action have moved for summary judgment in their favor upon the ground that the claims set forth by the plaintiffs in their complaints have abated. In all hree of the captioned actions, motions for summary judgment have been made by the defendants Paramount Film and RKO upon the asserted ground that all of the claims set forth in each of the complaints which accrued prior to March 4, 1949, have been barred by the Statute of Limitations of the State of Illinois, or, in the event that this Court holds that the illinois statute does not govern, that these claims are barred by the New Jersey Statute of Limitations. Finally, Fox-Del. has moved, in all three of the captioned actions, for judgment on the pleadings, upon the ground that Fox-Del. has only been in existence since 1952, a date substantially subsequent to the last date upon which any of the alleged anti-trust violations were committed by any of the defendants.

 Motion for Summary Judgment Grounded upon Alleged Abatement in Gordon Actions (202-55 and 204-55).

 Defendants in 202-55 and 204-55 move for summary judgment, pursuant to Rule 56(b), Fed.Rules Civ.Proc., 28 U.S.C.A., upon the stated ground that the claims asserted in the complaint in each case have abated. This contention is erected upon the provisions of Section 157.94 of Chapter 32 of the Illinois Revised Statutes 1955 which provides:

 'The dissolution of a corporation either (1) by the issuance of a certificate of dissolution by the Secretary of State, or (2) by the decree of a court of equity when the court has not liquidated the assets and business of the corporation, or (3) by expiration of its period of duration, shall not take away or impair any remedy available to or against such corporation, its directors, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution if action or other proceeding thereon is commenced within two years after the date of such dissolution. Any such action or proceeding by or against the corporation may be prosecuted or defended by the corporation in its corporate name.'

 Each of the corporations of which the plaintiffs in these two cases were stockholders was a creature of the laws of the State of Illinois, and the respective rights of the corporation and its stockholders in each instance are governed by the same laws. Chicago Title & Trust Co. v. Forty-One Thirty-Six Wilcox Bldg. Corp., 302 U.S. 120, 58 S. Ct. 125, 82 L. Ed. 147. Each of these cases was commenced on March 3, 1955 by the filing of the complaint in this Court, which date was more than two years after the date of dissolution of each of the Illinois corporations to which the alleged cause of action originally accrued. Defendants therefore contend that neither of the corporations, nor the shareholders thereof, may maintain these actions because each cause of action alleged, whether it be considered derivative from the corporation or acquired as a chose in action by the shareholders from the corporation, had abated by reason of the failure to commence the action within two years after the date of the dissolution of the corporation. While all parties concede that each of these actions would be barred if brought in the State of Illinois, by reason of the two-year Statute of Limitations of that State, defendants contend that the above-quoted section of the Illinois corporation laws is not a statute of limitations but rather a deferment or modification of the common law abatement which, in the absence of such a statute, would preclude the assertion, after dissolution, by the corporation or its shareholders, of a cause of action which had accrued to the corporation before dissolution. In this connection, movants emphasize particularly what they assert is the plain language of the section to the effect that the dissolution of a corporation shall not impair any remedy available to its shareholders for any right or claim existing prior to the dissolution provided an action thereon is commenced within two years after the date of the dissolution.

 Neither of the original complaints in the Gordon actions expressly sets forth the manner in which the cause or causes of action alleged was acquired by the (individual) plaintiffs. However, in the briefs submitted and upon the oral argument upon the present motions, the plaintiffs asserted that their causes of action were derived either by operation of law, in consequence of their status as sole stockholders of the dissolved corporation, or by assignment from the corporation. During the argument the Court suggested that the complaints be amended to set forth either or both of the foregoing theories, and leave was accordingly granted for that purpose. Meanwhile, the argument was heard and the briefs considered upon the assumption that the complaints had already included the suggested particularization. With respect to the theory of assignment of the cause of action alleged to have accrued prior to its dissolution from the theater corporation to the holders of all of its stock, defendants concede that such a cause of action would be assignable. See Momand v. Universal Film Exchange, 1 Cir., 1948, 172 F.2d 37.

 Pursuant to leave granted, each of the complaints in the two Gordon cases has been amended to set forth with greater particularity the relationship of the plaintiffs in the case to their dissolved theater corporation and to the alleged cause of action for treble damages which accrued thereto. In each complaint paragraph 2 is amended to allege (a) that by operation of Illinois law plaintiffs became the owners and holders of all of the assets, including causes of action, which their theater corporation owned on the date of its dissolution; and (b) that plaintiffs have succeeded by assignment to the said causes of action which their theater corporation owned on the date of its dissolution. The amendment to paragraph 60 of the complaint in each case substitutes for the original language thereof the allegation that the plaintiffs have become entitled to the damages sought 'as the successors to and the assignees of the assets, claims, and causes of action' which their theater corporation owned on the date of its dissolution.

 We are therefore required to determine plaintiffs' right to maintain these actions by construing section 157.94 (hereinafter called 94) of the Illinois statute. As was pointed out in Chicago Title & Trust Co. v. Forty-One Thirty-Six Wilcox Bldg. Corp., 302 U.S. 120, at page 127, 58 S. Ct. 125, at page 128, 82 L. Ed. 147:

 'How long and upon what terms a state-created corporation may continue to exist is a matter exclusively of state power (citing cases.) The circumstances under which the power shall be exercised and the extent to which it shall be carried are matters of state policy, to be decided by the state Legislature. There is nothing in the Federal Constitution which operates to restrain a state from terminating absolutely and unconditionally the existence of a state-created corporation, if that be authorized by the statute under which the corporation has been organized. * * * The power to take the long step of putting an end to the corporate existence of a state-created corporation without limitation, connotes the power to take the shorter one of putting an end to it with such limitations as the Legislature sees fit to annex. * * * The state law permits such proceedings to be instituted on behalf of a dissolved corporation within two years; * * *. After two years, no proceeding may be initiated on behalf of the corporation in either state or federal courts, but such proceedings as have been instituted during that period in any of these courts may be prosecuted to completion. (Citing Singer & Talcott (Stone) Co. v. Hutchinson, 176 Ill. 48, 51 N.E. 622.) The right of resort to the courts of the state, and to those of the nation having jurisdiction, both in respect to the initiation of proceedings and the completion of proceedings already initiated, so far as Illinois law is concerned, stands upon an exact parity.'

 It is apparent from the foregoing language that this Court must turn to the decisions of the Courts of Illinois for an interpretation of the meaning and effect of the statutory section invoked by movants in these cases. United States v. United States Vanadium Corporation, 10 Cir., 230 F.2d 646. The Supreme Court has accepted the rule expressed in American Exchange Bank v. Mitchell, 179 Ill.App. 612, that, 'after a corporation is dissolved, it is incapable of maintaining an action; and that all such actions pending at the time of dissolution abate, in the absence of a statute to the contrary.' Oklahoma Natural Gas Co. v. State of Oklahoma, 273 U.S. 257, 259, 47 S. Ct. 391, 71 L. Ed. 634. While 'a time-honored feature of the corporate device is that a corporate entity may be utterly dead for most purposes, yet have enough life remaining to litigate its actions' if a statute of the State of its incorporation so provides, nevertheless 'unless the statutory terms are observed, * * * the consequences of total dissolution attach, and * * * the actions abate.' Defense Supplies Corp. v. Lawrence Warehouse Co., 336 U.S. 631, 69 S. Ct. 762, 763, 93 L. Ed. 931; United States v. P. E. Collier & Son Corp., 7 Cir., 208 F.2d 936, 40 A.L.R.2d 1389. I therefore conclude that, upon the expiration of two years next succeeding the date of dissolution of each of the theater corporations in which the plaintiffs were stockholders, the remedy, if any, which had been available to that corporation for treble damages under the anti-trust laws abated. Such an abatement would obviously operate upon any right of action which might have accrued to the corporation before, but which its stockholders might attempt to assert in its behalf more than two years after its dissolution. Plaintiffs, however, claim that their rights of action in these cases were acquired by operation of law or through assignment contemporaneously with or prior to the dissolution of the corporation in which they were stockholders. Assuming such a method and time of acquisition, how long does the remedy for such a cause of action persist in the plaintiffs in view of the language of section 94?

 In the Chicago Title case, supra, which was decided in 1937, the Supreme Court was construing sections 14 and 79 of the Illinois Business Corporation Act of 1919. These two sections will be found in the footnote. *fn1" In the opinion in 302 U.S. at page 125, 58 S. Ct. at page 127, Mr. Justice Sutherland, speaking for the Court, says:

 'Sections 14 and 79 of the Illinois statute (Smith-Hurd Ill.Stats. c. 32, § 157.94 note) seem plain enough on their face; but, if any doubt as to their meaning and effect would otherwise exist, that doubt has been set at rest by the decisions of the Illinois appellate courts.'

 He adds that, before these sections were enacted, it was the general rule that, following its dissolution, a corporation was incapable of maintaining an action and that all such actions pending at the time of dissolution abated in the absence of a statute to the ...


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