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HIGBIE v. KOPY-KAT

March 24, 1975

STEPHEN B. HIGBIE
v.
KOPY-KAT, INC. and JOHN LESLIE, JR.



The opinion of the court was delivered by: GORBEY

 GORBEY, District Judge.

 The corporate defendant Kopy-Kat, Inc. has moved for dismissal of Counts I through IV and Count XI of the complaint.

 Defendant John J. Leslie, Jr., has moved for an order dismissing the complaint or for summary judgment, based upon an affidavit and supporting documents.

 In response thereto plaintiff has filed a memorandum of law in opposition thereto with a two page argument by plaintiff's counsel, improperly labeled as an affidavit, and an attached exhibit.

 Counts I to IV, inclusive, allege violations of § 1 of the Act of Congress of July 2, 1890, c. 647, 26 Stat. 209, as amended, 15 U.S.C. § 1 (Sec. 1 of the Sherman Act). Count XI alleges a violation of the Act of Congress of May 27, 1933, Sec. 5, 48 Stat. 77, Sec. 17, 48 Stat. 84, 15 U.S.C. §§ 77e and 77q (Secs. 5 and 17 of the Securities Act of 1933). Jurisdiction of the court is based upon 28 U.S.C. § 1337, 15 U.S.C. §§ 15 and 26 and 15 U.S.C. § 77b. Counts V to X, inclusive, allege state law causes of action for breach of contract and fraud.

 The effect of the plaintiff's allegations in the first four Counts is to charge the corporate defendant and the individual defendant, the present corporate president, with anti-trust violations, including conspiracy. While "it is settled law that if a corporation chooses to conduct part of its business through subsidiary or affiliated corporations, and conspires with them to do something that independent entities cannot conspire to do under § 1 of the Sherman Act, it is no defense that the corporations are, in reality a single economic entity", however "on the other hand, it has been held that a 'corporation cannot conspire with its officers or agents to violate the anti-trust laws'". JOSEPH E. SEAGRAM & SONS, INC. v. HAWAIIAN OKE & LIQUORS LTD., 416 F.2d 71, at 82 (9th Cir. 1969), cert. den., 396 U.S. 1062, 90 S. Ct. 752, 24 L. Ed. 2d 755; GOLDLAWR, INCORPORATED v. SHUBERT, 276 F.2d 614 (3d Cir. 1960); NELSON RADIO & SUPPLY CO. v. MOTOROLA, 200 F.2d 911 (5th Cir. 1952), cert. den., 345 U.S. 925, 97 L. Ed. 1356, 73 S. Ct. 783 (1952). Accordingly, the allegation charging conspiracy will be stricken from Count IV.

 However, § 1 of the Sherman Anti-Trust Act is not limited to situations involving a conspiracy. Section 1 of the statute (15 U.S.C.A. § 1) provides:

 
"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal . . ."

 Counts I through IV of the complaint are based upon the contention that the Franchise Agreement required the plaintiff to enter into an illegal tie-in arrangement, a per se violation of the statute. FORTNER ENTER., INC. v. UNITED STATES STEEL CORP., 394 U.S. 495, 89 S. Ct. 1252, 22 L. Ed. 2d 495 (1969); SIEGEL v. CHICKEN DELIGHT, INC., 311 F. Supp. 847 (N.D. Cal. 1970); SUSSER v. CARVEL CORP., 332 F.2d 505 (2d Cir. 1964).

 Also, other violations of the Act, not involving conspiracy, are involved in the first four Counts, including price control agreement which is per se illegal. UNITED STATES v. SEALY, INC., 388 U.S. 350, 18 L. Ed. 2d 1238, 87 S. Ct. 1847 (1967); UNITED STATES v. BAUSCH & LOMB OPTICAL CO., 321 U.S. 707, 88 L. Ed. 1024, 64 S. Ct. 805 (1944).

 It is also well established that a corporate officer or director can be held personally liable for damages arising out of an anti-trust violation where he participated in the unlawful acts, or where he has acquiesced or ratified the actions of other officers or agents of the corporation which were in violation of the anti-trust law. COTT BEVERAGE CORPORATION v. CANADA DRY GINGER ALE, 146 F. Supp. 300 (S.D. N.Y. 1956); PHELPS DODGE REFINING CORP. v. FEDERAL TRADE COM'N., 139 F.2d 393 (2d Cir. 1943).

 The effect of the affidavit of the defendant John Leslie, Jr., is to deny plaintiff's allegations as to his participation in the allegedly illegal acts, and the exhibit attached to the so-called affidavit of plaintiff's counsel indicates, at least indirectly, the contrary.

 Accordingly, since the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which under applicable principles of substantive law entitle him to a judgment as a matter of law, it appears logical the motion of the defendant John Leslie, Jr. for summary judgment as to Counts I to IV, inclusive, should be held in abeyance until after discovery. The motion of the corporate defendant to dismiss Counts I through IV, or for summary judgment is denied. See also: SARTOR v. ARKANSAS NATURAL GAS CORPORATION, 321 U.S. 620, 627, 88 L. Ed. 967, 64 S. Ct. 724 (1944). "Rule 56 authorizes summary judgment only . . . where it is quite clear what the truth is . ...


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