Findings of Fact
1. In the Spring of 1974 Judice expressed an interest in purchasing the dealership assets of Crest Pontiac, Inc., Oaklyn, New Jersey, which were then available for sale. Since Judice did not have sufficient capital to finance the dealership, he contacted Motors Holding Division, General Motors (hereinafter "Motors Holding"), which provides capital financing to prospective dealers who do not otherwise have access to the capital necessary to begin a dealership. Early in July a proposal was put together by Judice and the Zone Manager, Philadelphia Zone, Pontiac Motor Division, whereby Judice would form a dealership corporation to replace Crest Pontiac. This proposal was forwarded to the Pontiac Centeral Office in Michigan on July 18, 1974. Judice's Sunshine Pontiac, Inc. was incorporated as a Delaware corporation on August 19, 1974. On August 26, 1974 the proposal was tentatively approved by Pontiac Motor Division, subject to an investigation by Motors Holding. Subsequently Judice was notified of Motors Holding's approval. On September 19, 1974 a Pontiac Dealer Sale and Service Agreement was entered into between Sunshine Pontiac and Pontiac Motor Division. Sunshine Pontiac is located at 1200 White Horse Pike, Oaklyn, New Jersey.
2. Judice is President, chief operating officer and a member of the Board of Directors of Sunshine Pontiac. As President of Sunshine Pontiac Judice is charged with the responsibility of running the day-to-day operations of the dealership.
3. When General Motors invests capital in dealerships its investment is channeled through the Motors Holding Dealer Investment Plan. The basic scheme of the Plan is that the dealer will invest all his available commercial investment funds, run the day-to-day operation of the dealership and buy out General Motors within a reasonable period of time, thus assuming sole ownership of the dealership.
4. Motors Holding invested $120,3000 in Sunshine Pontiac. This investment consisted of $60,4000 in Class A voting shares and $60,5000 in a loan taking an unsecured promissory note bearing 6% simple interest. Judice invested $40,6000 in Class B non-voting shares. This investment consisted of $7,7000 of Judice's personal funds and $33,8000 borrowed from Progress Venture Capital Corporation, an investment corporation organized to assist minority persons, such as Judice, a Puerto Rican, in business ventures.
5. By virtue of its exclusive control of the Class A voting stock, General Motors has selected the Board of Directors of Sunshine Pontiac. The members of the Board are W. S. Gonne, Branch Manager, Motors Holding, D.J. Ritter, Regional Manager, Motors Holding, and Judice.
6. Through its complete ownership of Sunshine Pontiac's voting stock and its effective control over the Board of Directors, General Motors seeks to and does in fact secure and preserve its substantial investment in Sunshine Pontiac.
7. Pursuant to the Motors Holding Dealer Investment Plan an Option Agreement was entered into between Judice and General Motors on September 18, 1974. Judice retains the right under the Option Agreement to purchase all the Class A voting stock owned by General Motors out of stock dividends and bonuses received from Sunshine Pontiac.
8. Judice, acting individually and on behalf of Sunshine Pontiac, commenced this action and engaged counsel to represent him and Sunshine Pontiac. Such action was taken without notice to or consent by Gonne and Ritter, General Motors' representatives on the Board of Directors of Sunshine Pontiac.
9. Plaintiffs' original complaint was filed on June 30, 1975 by the law firm of Pickett and Jennings, Newark, New Jersey. An Amended Complaint was filed by David Berger, P.A., Philadelphia, Pennsylvania, and Pickett and Jennings on September 19, 1975. David Berger, P.A., carries the major responsibility for the litigation of plaintiffs' claims.
10. Prior to the filing of the Amended Complaint a Fee Agreement was entered into between David Berger, P.A., and Judice, individually and on behalf of Sunshine Pontiac, on September 2, 1975. A copy of the Fee Agreement has been supplied to the court, but not to opposing counsel.
11. On October 24, 1975 Gonne delivered to Judice Notice of a Special Meeting of the Board of Directors to be held on October 29, 1975. The purpose of this meeting was to review and act with respect to the filing of this lawsuit, the retention of counsel to prosecute the lawsuit and the disbursement of Sunshine Pontiac's funds, to counsel or otherwise, in connection with the litigation.
12. Judice requested a postponement of the Special Meeting, which was refused. He then moved before the court on October 28, 1975 for a temporary restraining order. The court did not issue such an order. However, it did set the matter down for a hearing on Judice's application for a preliminary injunction, which hearing was held on November 25, 1975. Pending the decision of the court on the instant application, General Motors has held the calling of the Special Meeting in abeyance.
13. If the Special Meeting is held, Gonne and Ritter would vote to terminate the lawsuit on behalf of Sunshine Pontiac, to remove David Berger, P.A., as counsel for Sunshine Pontiac and to refuse to disburse any corporate funds in connection with the prosecution of the lawsuit.
14. Although Article VIII of the Option Agreement provides that General Motors may use its absolute voting power to remove Judice as President and as a director of Sunshine Pontiac, General Motors, through its General Manager, Motors Holding, has represented that it has no present intention to remove Judice.
15. With respect to the present financial condition of Sunshine Pontiac, the court makes no Finding of Fact.
Conclusions of Law
Several factors may be considered on an application for a preliminary injunction: first, whether the moving party has made a strong showing that it is likely to prevail on the merits of the controversy; second, whether the movant has demonstrated that it would be irreparably harmed if preliminary injunctive relief is not granted; third, whether the grant of a preliminary injunction would substantially harm other parties interested in the controversy; and fourth, whether the public interest would be served by the granting of a preliminary injunction. A. O. Smith Corp. v. F.T.C., 530 F.2d 515, 525 (3rd Cir. 1976); Winkleman v. New York Stock Exchange, 445 F.2d 786, 789 (3rd Cir. 1971); Ammond v. McGahn, 532 F.2d 325, 329 (3rd Cir. 1976); Wuillamey v. Werblin, 364 F. Supp. 237, 241 (D.N.J. 1973); Helmsley v. Borough of Fort Lee, 362 F. Supp. 581, 587 (D.N.J. 1973).
It cannot be gainsaid that private enforcement of the antitrust laws is deemed to be in the public interest. Milsen Co. v. Southland Corp., 454 F.2d 363, 366 (7th Cir. 1971); see Hawaii v. Standard Oil Co., 405 U.S. 251, 262, 31 L. Ed. 2d 184, 92 S. Ct. 885 (1972); Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1346 (3rd Cir. 1975). Plaintiff's concern to maintain his dealership pendente lite warrants judicial recognition. Cf. Milsen Co., supra at 367. Underlying the application for a preliminary injunction are these legitimate public concerns. Notwithstanding the substantial public interest in private enforcement of the antitrust laws, the central question remains: will Judice suffer irreparable harm if General Motors is not preliminarily restrained?
The moving party bears the burden of demonstrating irreparable harm. A. O. Smith Corp., supra; Joseph Bancroft & Sons Co. v. Shelley Knitting Mills, 268 F.2d 569, 574 (3rd Cir. 1959). It is an ". . . elementary principle that a preliminary injunction shall not issue except upon a showing of irreparable injury." A. O. Smith Corp., supra quoting National Land & Investment Co. v. Specter, 428 F.2d 91, 97 (3rd Cir. 1970). Because the moving party carries such a heavy burden, it is proper to deny relief solely upon a finding that irreparable harm has not been demonstrated. Oburn v. Shapp, 521 F.2d 142, 151 (3rd Cir. 1975), citing Commonwealth of Pennsylvania ex rel. Creamer v. United States Dept. of Agriculture, 469 F.2d 1387, 1388 (3rd Cir. 1972); see Skehan v. Board of Trustees of Bloomsburg State College, 353 F. Supp. 542, 543 (M.D. Pa. 1973). Irreparable injury is "substantial injury to a material degree coupled with the inadequacy of money damages." Tully v. Mott Supermarkets, Inc., 337 F. Supp. 834, 850 (D.N.J. 1972); accord, Scott v. Multi-Amp Corp., 386 F. Supp. 44, 57 n. 14 (D.N.J. 1974).
Judice seeks in part (a) of the application to restrain General Motors from removing him from the Board of Directors and as President and chief operating officer of Sunshine Pontiac. William Harvey, III, General Manager of Motors Holding, which controls the entire voting stock of Sunshine Pontiac, has made the following representation:
Motors Holding has no present plans to vote its shares or take any other action to remove Mr. Judice as a director or President of Judice's Sunshine Pontiac, Inc. (Affidavit, para. 14).
The Harvey Affidavit stands uncontradicted. Manifestly Judice has made "no clear showing of immediate irreparable injury" such as would warrant the exercise of "the delicate power of injunctive relief." Ammond v. McGahn, supra.18
The threatened harm which plaintiffs
seek to restrain in parts (b) and (c) of the application is General Motors' interference in this litigation. Specifically Judice fears that General Motors will use its influence in and control over Sunshine Pontiac to terminate David Berger, P.A., as plaintiffs' counsel and the continued payment by Sunshine Pontiac of costs, including counsel fees. The probability that General Motors will take the threatened action and act to remove Sunshine Pontiac as a party plaintiff is great.
Indeed the central focus of General Motors vigorous opposition to plaintiffs' application is the argument that Judice acted in a patently illegal manner when he committed the resources of Sunshine Pontiac to this lawsuit without authorization by its Board of Directors.
Notwithstanding the high probability that General Motors will take the threatened action the question remains whether the termination of Sunshine Pontiac as a party plaintiff would constitute irreparable harm.
Necessarily involved in the resolution of this issue is Judice's ability to maintain this litigation himself or in a derivative action, since if he is able to do so he will suffer no irreparable harm.
Generally a stockholder of a corporation lacks standing to proceed individually, in his own right, for injuries suffered by the corporation resulting from antitrust violations. Pitchford v. Pepi, Inc., 531 F.2d 92, 96-98 (3rd Cir. 1975), cert. denied, 426 U. S. 935, 96 S. Ct. 2649, 49 L. Ed. 2d 387, 44 U.S.L.W. 3714 ( U.S. June 14, 1976). Deaktor v. Fox Grocery Co., 475 F.2d 1112, 1115 (3rd Cir.), cert. denied, 414 U.S. 867, 38 L. Ed. 2d 86, 94 S. Ct. 65 (1973); Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 732 (3rd Cir. 1970), cert. denied, 401 U.S. 974, 28 L. Ed. 2d 323, 91 S. Ct. 1190 (1971); Vincel v. White Motor Corp., 521 F.2d 1113, 1119 (2nd Cir. 1975); Schaffer v. Universal Rundle Corp., 397 F.2d 893, 896 (5th Cir. 1968); Korn v. Merrill, 403 F. Supp. 377, 384 (S.D.N.Y. 1975); Commercial Credit Development Corp. v. Scottish Inns of America, Inc., 69 F.R.D. 110, 116-17 (E.D. Tenn. 1975). But the injured stockholder is not without a remedy, since he may proceed by way of a derivative action. Fanchon & Marco, Inc. v. Paramount Pictures, 202 F.2d 731, 733-35 (2nd Cir. 1953); Pitchford, supra; Kauffman, supra at 734; Schaffer, supra; Korn, supra; Commercial Credit Development Corp., supra; see generally Comment, "Federal Antitrust Law-Stockholders' Remedies for Corporate Injury Resulting from Antitrust Violations: Derivative Antitrust Suit and Fiduciary Duty Action," 59 Mich. L. Rev. 904 (1961); Fletcher, 13 Cyclopedia of the Law of Private Corporations (hereinafter Law of Private Corporations) § 5929.
A derivative action is a suit to assert the claim of a corporation against an alleged wrongdoer. Papilsky v. Berndt, 466 F.2d 251, 255 (2nd Cir.), cert. denied, 409 U.S. 1077, 34 L. Ed. 2d 665, 93 S. Ct. 689 (1972); Sweet v. Bermingham, 65 F.R.D. 551, 553-54 (S.D. N. Y. 1975); see generally, 13 Law of Private Corporations § 5911; Smith v. Sperling, 354 U.S. 91, 99, 1 L. Ed. 2d 1205, 77 S. Ct. 1112 (1957) (Frankfurter, J., dissenting). Fed. R. Civ. P. 23.1 provides the procedural mechanism whereby a derivative action may be brought in federal court.
In this case the gravamen of the complaint lies in General Motors' attempt to drive Sunshine Pontiac, a corporate entity organized under the laws of the State of Delaware, out of business in violation of the antitrust laws. The cause of action, at least on the antitrust claims, would seem to lie with Sunshine Pontiac. But it is obvious (and indeed understandable) that Gonne and Ritter, the controlling directors, will not assert the corporation's claim against General Motors, their employer. This case seems appropriate for the employment of the derivative remedy. Koster v. (American) Lumbermens Mutual Casualty Co., 330 U.S. 518, 522, 91 L. Ed. 1067, 67 S. Ct. 828 (1947); accord, Fanchon & Marco, Inc., supra at 734; Ross v. Bernhard, 396 U.S. 531, 534, 24 L. Ed. 2d 729, 90 S. Ct. 733 (1970); Kenrich Corp. v. Miller, 377 F.2d 312, 314 (3rd Cir. 1967); Sterling Industries, Inc. v. Ball Bearing Pen Corp., 298 N. Y. 483, 491-92, 84 N.E.2d 790, 793 (1949); Papilsky, supra at 255-56; Motor Terminals v. National Car Co., 92 F. Supp. 155, 162 (D. Del. 1949).
The foregoing discussion suggests that Judice's proper remedy for the alleged antitrust violations lies in a derivative action. However, one court has held that an automobile dealer, who is in the process of gradually acquiring complete ownership of the franchise stock, has an individual antitrust remedy against the automobile manufacturer. Kolb v. Chrysler Corp., 357 F. Supp. 504, 506-07 (E.D. Wis. 1973). The Kolb Court stated:
The plaintiff's position in this case is sufficiently different from that of an ordinary stockholder in a corporation for him to maintain this action. The agreement between the parties, which led to this controversy, involved more than just the exchange of money for shares of stock. Among other things, defendants promised plaintiff that he could gradually acquire complete ownership of the franchise by buying more stock with his share of the profits. Since plaintiff was the manager, his reputation, as well as his livelihood, was bound up with the success of the franchise. To hold that antitrust violations which injure the franchise cannot be attacked by the franchisee would subvert the remedial purpose of the antitrust laws.