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HIRSHHORN v. MINE SAFETY APPLIANCES CO.

December 12, 1951

HIRSHHORN
v.
MINE SAFETY APPLIANCES CO. et al.



The opinion of the court was delivered by: STEWART

Plaintiff, a stockholder in Carbon Monoxide Eliminator Corporation, brought this action on his own behalf and on behalf of other stockholders of Carbon Monoxide Eliminator Corporation to require an accounting of profits allegedly diverted from Carbon Monoxide Eliminator Corporation and Catalyst Research Corporation to the Mine Safety Appliances Company. The named defendants are various participants in this alleged diversion of profits. By reason of the ownership by Carbon Monoxide Eliminator Corporation of stock in Catalyst Research Company, this action constitutes a double derivative stockholders' action in addition to an ordinary single derivative action. It has been so treated by both parties. In fact, the defendants moved to dismiss the complaint on the ground that the plaintiff does not have sufficient interest in Catalyst Research Corporation by reason of his ownership of stock in Carbon Monoxide Eliminator Corporation to maintain this action on behalf of Catalyst Research Corporation. In denying this motion to dismiss, Judge Schoonmaker held that this double derivative action may be maintained since the affairs of the parent and subsidiary were so interwoven as to dictate penetration of the corporate veil, stating that it is the element of control which determines the double derivative right. D.C. 1944, 54 F.Supp. 588.

The original complaint was filed on December 7, 1943. Shortly thereafter, the answers of the defendants were filed. Finally, after numerous proceedings, this Court on January 12, 1951 set the trial for September 18, 1951. On August 30, 1951, plaintiff presented a motion for leave to amend the original complaint in certain particulars. Defendants have objected to some of the amendments requested. In addition, Vladimir Behr and Anne Livingston Behr have presented a motion for reconsideration of their motion filed January 31, 1951 and of their amended motion filed February 23, 1951 for leave to intervene; both of which were denied. These two motions- the motion to amend the complaint and the motion for leave to intervene- constitute the matters now before the Court for disposition.

 A responsive pleading has been filed so that we must determine whether justice requires that leave to amend be granted. Numerous cases under this rule have made it clear that the right to amend a pleading is addressed to the discretion of the Court and that great liberality in the allowance of amendments is desired where it is necessary to bring about a furtherance of justice. U.S. v. Koike, 9 Cir., 1947, 164 F.2d 155; Frank Adam Electric Co. v. Westinghouse Electric & Mfg. Co., 8 Cir., 1945, 146 F.2d 165; Wilson v. Lamberton, 3 Cir., 1939, 102 F.2d 506; Snyder v. Dravo Corporation, D.C.W.D. Pa. 1947, 6 F.R.D. 546. This is especially true where the presentation of the merits will be subserved and where it is not shown that the allowance of the amendment would prejudice the opposing party. McDowall v. Orr Felt & Blanket Co., 6 Cir., 1944, 146 F.2d 136; Tahir Erk v. Glenn L. Martin Co., 4 Cir., 1941, 116 F.2d 865; Snyder v. Dravo Corp., supra; Overfield v. Pennroad Corporation, D.C.E.D. Pa. 1941, 39 F.Supp. 482.

 Another factor which has been considered by the courts in ruling on a motion to amend is the timeliness of the motion. Frank Adam Electric Co. v. Westinghouse Electric & Mfg. Co., supra; Canister Co. v. National Can Corporation, D.C.D. Del. 1946, 6 F.R.D. 613. No time is prescribed in Rule 15a for amendments by leave of court so that the question of timeliness of the motion to amend and laches of the moving party are merely elements to be considered by the court in the exercise of its discretion. See 1 Barron & Holtzoff, Federal Practice and Procedure § 446 (Rules Ed. 1950). The primary question is whether or not the allowance of the amendment will work injustice upon any of the parties.

 Defendants object to the amendments sought with respect to paragraphs 15 and 22(i) of the complaint. No objection is made to any of the other amendments requested. Plaintiff seeks leave to amend paragraphs 15 and 22(i) so that the words of the following paragraphs which are underlined are inserted and so that the words enclosed in parentheses are deleted:

 'Paragraph 15-

 Since its organization, defendant Carbon Monoxide has been engaged in research for the development of catalysts for the treatment of exhaust gases from internal combustion engines and Catalyst Corporation has been so engaged in the development of catalysts and chemical ingredients and compounds for use in breathing apparatus to be used at sea and in high altitudes, and other uses, and, as a result of such research, both said corporations have (has) become the owners (owner) of various patents in connection with apparatus for the treatment of such exhaust gases and various patents in connection with said breathing apparatus, and other kindred patents.'

 'Paragraph 22(i)-

 In or about June, 1939, wrongfully induced Dr. Carey B. Jackson to assign to defendant Mine Safety a device invented by said Jackson during the time he was employed by defendant Catalyst Corporation (carbon Monoxide), which device is used in breathing apparatus used at sea and at high altitudes, and which device defendant Mine Safety has used in performing contracts with the United States Government which have resulted in huge profits to defendant Mine Safety which actually belong to defendant Catalyst Corporation (Carbon Monoxide).'

 Defendants urge that the plaintiff's motion should be denied for three reasons: (1) it is not timely; (2) defendants will be prejudiced if the amendment is allowed; and (3) the amended pleading is legally insufficient to state a claim for relief insofar as plaintiff's claim as amended is barred by laches.

 It seems to us that the amendments objected to add little, if anything, to the claim as originally stated. Paragraph 16 of the original complaint reads as follows: '16. Since its organization, defendant Catalyst Corporation has been engaged in similar research for industrial, military, and marine safety devices, and has become the owner of various patents in connection therewith.'

 The research outlined in paragraph 15 is incorporated into paragraph 16 by the words 'similar research'. Although it may be contended that these words are ambiguous and do not incorporate all of the research outlined in paragraph 15, we are of the opinion that a construction that they do so incorporate all is a possible one. That is sufficient. Certainly a clarification of the complaint will not prejudice the defendants. See Anderson v. Abbott, D.C.W.D. Ky. 1945, 61 F.Supp. 888. This reasoning is equally applicable to the proposed amendment to paragraph 15 with respect to the ownership of patents. Paragraph 16 alleges that Catalyst Research Corporation has become the owner of various patents in connection with ...


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