proposition that a shareholder vote is not limited to the alternatives of ratification or disaffirmance. Aldecress does say that, even where the wrong was not ratifiable, there may well be situations requiring the presentation of the facts to the shareholders. In fact, as noted earlier in this opinion, there are various practical reasons why this is a sensible approach. Nevertheless, Aldecress does not say that once the shares vote not to sue plaintiff is barred.
In determining whether a stockholder vote not to sue is an exercise of business judgment or an attempt to ratify an allegedly illegal act, we must examine the facts alleged in that regard in the complaint under attack. For criticism of the Massachusetts rule, see Carroll v. New York, New Haven and Hartford Railroad, D.C.D.Mass.1956, 141 F.Supp. 456. and Pomerantz v. Clark, D.C.D.Mass.1951, 101 F.Supp. 341. Also see discussion of this troublesome problem in the Harvard Law Review article noted above. In that article the author suggests the existence of a rebuttable presumption that a vote not to sue amounts to ratification. The difficulty with this detailed factual approach is the impracticality of clearly determining just why the stockholders voted as they did. There may be as many reasons as there are stockholders. Add to this the unlikely situation that any particular shareholder would be willing to admit he voted as he did because he liked the idea of violating the antitrust laws, or that he disliked the minority shareholder who is bringing this suit. These are but sample illustrations of the problems such an approach would create.
At any rate, a careful consideration of the complaint herein leads to no other conclusion than that the vote of the shareholders was an attempt at ratification of the alleged wrong. This is so because the complaint alleges a continuation into the future of the violation of the antitrust acts complained of as having occurred in the past, and because of the election by this vote as new directors, of the very directors who carried on this conduct in the past. This shows the evident acquiescence of the voting stockholders allegedly unlawful activities in the future. allegedly unlawful activities in the future. More specifically, the complaint, in section 26, alleges 'a continuing combination, conspiracy and agreement to restrain and monopolize interstate trade and commerce.' It says that this conspiracy included the acquisition by Canco of the M & T common stock, so that thereafter M & T would operate either as a wholly owned subsidiary of Canco or as one of its divisions. This had apparently not yet taken place when the complaint was filed. The complaint also alleges that the individual defendants would as M & T's directors and officers insure to Canco its future entrenchment as the principal supplier of M & T's tin plate scrap. It further alleges that Canco and the individual defendants would use M & T to fix the price of tin plate scrap in the several market areas in the United States. The complaint finally charges not only that Canco controlled the M & T directors, but that the above mentioned conspiracy was aimed to bring about in essence a merger of M & T into Canco, for the benefit of Canco and in contravention of the antitrust laws.
All these allegations of the complaint clearly indicate the illegal action of the defendants, including the M & T directors, in the past. Thus when the stockholders voted to reelect these same directors, they essentially voted, as the complaint alleges, to have these same illegal acts carried out in the future. Obviously this vote was not one as in Solomont, simply that it was unbusinesslike to sue for past damages and thus involve M & T in a long continued and exceptionally complicated litigation. It was a vote that the stockholders not only approved of the allegedly illegal acts of their own directors with Canco, but that the stockholders wanted these same methods to be continued in the future by these reelected director defendants.
Since the shareholder vote is equivalent to an attempted ratification of these alleged antitrust violations, and was not purely an expression of business judgment, the vote will not serve as a bar to the bringing of the present suit. Siegman, supra; Gottesman, supra; Continental Securities Co. v. Belmont, supra. It would be unthinkable to allow the ratification of violations of Federal law to serve as a bar to a suit for redress of the injuries sustained thereby where Congress by specific enactments has provided for such redress as a matter of public policy.
At the oral argument defendants raised some additional points which should be disposed of. First, the case of Goldlawr, Inc. v. Shubert, et al., 3 Cir., 1960, 276 F.2d 614 is cited for the principle that the stockholders of a corporation cannot conspire with that corporation. There the stockholder owned 100% Of the stock and managed the corporation. In essence he was the corporation. Here defendant Canco owns but approximately 20% Of the stock of M & T. Furthermore, the conspiracy complained of here was between individual directors of M & T and Canco, with M & T being brought into the picture against its will. Nor is this a case of a parent and a subsidiary involved in a conspiracy. See Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 1951, 340 U.S. 211, 71 S. Ct. 259, 95 L. Ed. 219. Goldlawr has no application to the instant case.
Second, defendants contend that if ratification resulted from the continuance of the wrong, at least that portion of such conduct that occurred prior to the complaint and for which treble damages are sought, should be dismissed, since the vote not to sue was as to those past acts purely a matter of business judgment. This argument overlooks the fact that the wrongs complained of are not separable by periods of time, but are in the form of a continuing policy. The injurious acts prior to the filing of the complaint, continuing up to and presumably past such filing, are one and inseparable. It would be unrealistic to say that the shareholders voted on the one hand as purely a matter of business judgment not to sue for conduct up to the time of the vote, and on the other hand, and in the same breath, voted to ratify the continuance of that conduct in the future. It is hard to imagine that the shareholders were not ratifying at the same time identical acts that occurred five minutes before and five minutes after their vote. There was but one vote, not two.
It might be will to note that this case is not a 'strike suit.' Here the plaintiff is a substantial stockholder of M & T. Thus the usual forebodings as to such suits are not present.
Defendants' motion to dismiss, and for summary judgment, is denied. An order may be entered accordingly.