Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

IN RE THE PITTSBURGH & LAKE ERIE RR CO. SECS. & AN

June 27, 1974

IN RE: THE PITTSBURGH AND LAKE ERIE RR CO. Securities And Antitrust Litigation

Gorbey, J.


The opinion of the court was delivered by: GORBEY

GORBEY, J.

 The defendants National City Bank, John N. Eustice, Thomas F. Harvey, Edward G. Seaman and John L. Mennell (hereinafter referred to as "National City Bank defendants") have moved to dismiss the amended complaint for the reason that neither the amended complaint nor any of the four counts thereof state a claim on which relief can be granted.

 The question whether the amended complaint states a stockholder's derivative cause of action has been considered in the light of the reasons given by Judge Thomas in his memorandum and order of July 30, 1973, and order entered thereon, dated September 6, 1973, in which he dismissed without prejudice the derivative action.

 On page 4 of the memorandum which includes the text of paragraphs 1, 2, 3 and 4 of Section 10 of the Clayton Act, it is stated by the court:

 
"The first [paragraph of § 10 of the Clayton Act] imposes its duty on any interlocked corporation that deals with a common carrier without competitive bidding. The fourth paragraph makes criminal violation of the first paragraph by a common carrier, its directors, officers and agents. Reading the second paragraph as necessarily dependent upon the first it makes criminal participation in a transaction without competitive bidding by a common carrier and an interlocked corporation by any person who shall directly or indirectly do or attempt to do anything to prevent anyone from bidding or shall do any act to prevent free and fair competition among the bidders or those desiring to bid . . ." [Emphasis added.]

 Judge Thomas then states that:

 
"An element is added by the fourth paragraph, whose criminal sanction is incorporated into the second paragraph. For any person to criminally or civilly violate the second paragraph of § 10, the prevention or interference with the bidding required by the first paragraph of § 10 must be knowing or intentional." Supra, pages 5 and 6.

 The court determined that the complaint did not state a cause of action because it omits the essential allegation that competitive bidding was not undertaken for the purchase of the railroad cars and that this omission was known or intentional. Supra, pages 6 and 14.

 The judge then pointed out that the National City Bank defendants are not charged under the second paragraph of § 10 of the Clayton Act (i.e., they are not charged with knowingly or intentionally preventing "bidding . . . or free and fair competition among the bidders or those desiring to bid"). Supra, pages 6 and 7.

 Since there was not in the original complaint an allegation that competitive bidding was omitted, and no allegation under the second paragraph of § 10 of the Clayton Act, the court logically held that a cause of action had not been stated.

 In the amended complaint there is no allegation with respect to the first paragraph of § 10 of the Clayton Act that competitive bidding was omitted (i.e., no allegation that bids had not been solicited).

 As to count 1, there is the allegation that defendants "knowingly and intentionally interfered with and prevented competitive bidding", and in count 2, it is alleged that defendants conspired to prevent competitive bidding in connection with the purchase of the cars in question. In count 3 there is the allegation that defendants "knowingly and intentionally prevented free and fair competition among the bidder and those desiring to bid", and in count 4 there is the allegation that defendants with divers unknown persons conspired "to prevent free and fair competition among the bidder and those desiring to bid".

 The conclusion of this court is that the facts alleged by the plaintiffs with respect to "a direct interference with and prevention of competitive bidding" under count 1, and the facts alleged with respect to a conspiracy to interfere with and prevent competitive bidding under count 2, if proved, would not support the contention that free and fair competition among the bidders was prevented. The facts alleged merely relate to the formulation of a bid submitted by Harvey and Seaman pursuant to a solicitation of bids by the interlocked, P&LE Railroad. The alleged circumstances with respect to the bid in question would not, whether known to potential bidders or not, prevent them from bidding or constitute an interference with their bidding. If all the facts alleged by plaintiffs were known to prospective bidders, any who desired to bid could have done so and without any interference from the defendants. Accordingly, counts 1 and 2 of the amended complaint do not state a cause of action and are dismissed with prejudice.

 Counts 3 and 4 allege violation of the second paragraph of § 10 of the Clayton Act, relying upon the alleged facts relating to counts 1 and 2, plus other alleged facts relating to advanced arrangements for the necessary financing of the transaction between National City Bank defendants and Penn Central, which resulted in adequate time to submit the bid in question, but which "prevented free and fair competition among the bidder and those desiring to bid", and which it alleged was the object of a conspiracy.

 It thus appears that the theory of the plaintiffs' case with respect to the derivative action in counts 3 and 4 is that a pro forma compliance with the first paragraph of § 10 of the Clayton Act does not of itself constitute compliance with the statute, and that paragraph 2 of § 10 of the Clayton Act is ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.