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TOSE v. FIRST PENNSYLVANIA BANK

May 28, 1980

Leonard H. TOSE et al.
v.
FIRST PENNSYLVANIA BANK et al.



The opinion of the court was delivered by: GREEN

MEMORANDUM

Pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, Leonard H. Tose, The Philadelphia Eagles Football Club and Tose, Inc., have brought this treble damages action for alleged violations of the federal antitrust laws. Plaintiffs claim that defendants, First Pennsylvania Bank, its former Chairman, John R. Bunting, its Vice Chairman, John C. Pemberton, Provident National Bank, The Chase Manhattan Bank, Girard Bank, The Philadelphia National Bank and Sidney Forstater, entered into conspiracies to unreasonably restrain trade in violation of Sections 1 and 2 of the Sherman Act. The alleged purposes of the conspiracies were: 1) to form a "banking boycott" which would deny plaintiffs access to the credit market in the Philadelphia area and 2) to fix the prime interest rate so that all defendant banks would charge a "uniform non-competitive prime rate". In addition, plaintiffs allege that the defendants' activities constitute malicious interference and conspiracy to interfere with advantageous contractual relations and business prospects under Pennsylvania law. As to the First Pennsylvania Bank defendants alone, there is an allegation that a provision of the Bank Holding Company Act Amendments of 1970, 12 U.S.C. § 1972(1)(C), has been violated.

 I. FACTUAL HISTORY

 The factual history of this litigation is rather involved; however, I will summarize the events as briefly as possible. The present dispute between Leonard Tose (Tose) and the defendants dates back to 1969 when defendant First Pennsylvania Bank (FPB) loaned Mr. Tose ten million five hundred thousand dollars ($ 10,500,000) so that he could buy the Philadelphia Eagles Football Club (Eagles). *fn2" In addition to the money advanced by FPB, a group of investors loaned some four million dollars ($ 4,000,000) to Tose to help finance his purchase of the Eagles. Tose acquired the assets of the football club in his name and then transferred them to a limited partnership. Under the terms of this partnership agreement, Tose was to be the sole general partner and the various individual investors who had loaned Tose $ 4,000,000 were to be limited partners. (RA# 2, Exh. 3)

 The Eagles Partnership formed by Tose soon encountered problems. First, several of the investors rejected the limited partnership proposal and brought suit in the Court of Common Pleas of Philadelphia County against Tose claiming that they had lent the money with the understanding that they would become general partners. Although the Court rejected their claims in 1972, Tose borrowed an additional $ 2,678,000 from FPB in order to repay the disgruntled investors.

 In 1973, investor/limited partner Solomon Katz requested Tose to return his investment. In order to repay Katz, Tose borrowed $ 1,240,000 from Herbert Barness, another limited partner in the Eagles, and as forgiveness of the loan, Barness received Katz's share in the Eagles Partnership. On or about July 16, 1973, Tose and Barness executed an agreement whereby each agreed to purchase the interest of the other for the amount of their original investment should one die, retire, go bankrupt or be adjudicated insane or incompetent. (RA# 2, Exh. 9)

 By the end of 1974, the Eagles limited partnership consisted of Tose, as sole general partner, Barness, Anne Firestone, as the Executrix of the Estate of Roger Firestone, John Firestone and Walter Leventhal. (RA# 2, Exh. 38). In October of 1975, Tose purchased the Firestone Estate's 9.813% limited partnership interest; his offer to buy John Firestone's 6% share was rejected because Firestone thought the offering price was inadequate. (RA# 2, Exh. 41)

 Also, by the end of the 1974 season, due to such factors as high interest rates, a players' strike, a poor pre-season attendance, the Eagles had a negative cash flow. *fn3" As a result of these financial problems, the Eagles could not make their June 30, 1974 amortization payment of $ 750,000 to FPB. Accordingly, on November 1, 1975, Amendment No. 1 was added to the Eagles Restated Loan Agreement with FPB. (RA# 2, Exh. 44) This provision adjusted the amortization schedule and set $ 60,000 as the maximum amount of money which Tose could take from the Eagles as salary and expenses during unprofitable years. *fn4" Also, in June of 1976, Tose and Barness entered into another agreement which included, inter alia, provisions giving each man the right of first refusal should the other decide to sell his interest in the Eagles.

 During 1976, relations among the remaining members of the Eagles partnership soured. After much wrangling, in December of 1976, Tose and Firestone were finally able to agree on terms for the sale of the Firestone interest to Tose. By the end of that year, Barness, for reasons which are in dispute, wanted to sell his approximate 29% share of the partnership. Moreover, when the Comptroller of the Currency reviewed the loan portfolio of FPB at the end of December, 1976, he graded the bank's loan to the Eagles as "substandard".

 B contends that as a result of this poor rating, during the early part of 1977, FPB began to reassess its loan to Tose and the Eagles. *fn5" In March of 1977, Gerald Hayes, the supervising loan officer, wrote two memoranda, one to Cameron S. Clark, Executive Vice President, and one to John R. Bunting, then Chairman of FPB, recommending changes in the loan agreement with Tose. (RA# 2, Exhs. 134, 141). One of Hayes' suggestions was that Tose be required to give up financial control of the Eagles. However, in a meeting attended by Hayes, Bunting, Tose and his lawyer, Edwin Rome, on March 25, 1977, FPB took a much softer line. Although Bunting got Tose to agree to the need for tighter control of expenditures by the Eagles, he also responded favorably to Tose's suggestion that FPB loan additional funds to Tose so that he could purchase Barness' share in the football club. (Rome deposition, 7/14/78, p. 38-41). Also, during March of 1977, Firestone, claiming that Tose had defaulted on their Agreement of Sale and Security Agreement, invoked the acceleration clause and demanded payment in full for his interest in the Eagles. (RA# 2, Exhs. 138-145).

 Throughout the spring and early summer of 1977, FPB and Tose continued to negotiate regarding reorganization of the management of the Eagles as well as about the additional loan to Tose.

 Although the parties dispute who and what caused the breakdown, negotiations between Tose and FPB had ceased by July 22, 1977. (RA# 2, Exh. 258). The plaintiffs and FPB defendants also give differing accounts of a meeting attended by Tose, Rome, Bunting and Pemberton which took place on July 28, 1977. Plaintiffs maintain that Bunting and Pemberton called FPB's six million dollar loan to the Eagles, giving Tose approximately sixteen hours to come up with alternative financing. Also, they claim that Bunting stated that he would make sure that no Pennsylvania bank would provide this financing. The FPB defendants deny making such threats. It is undisputed, however, that on July 29, 1977, FPB made Sidney Forstater, another defendant in this case, the Chief Financial Officer of the Eagles. (RA# 2, Exh. 265). Forstater's management of the club lasted until August 10, 1977, when Tose was able to obtain a six month "bridge loan" from a Detroit bank so he could pay off the FPB loan.

 II. ANALYSIS

 A. COUNT I THE CONSPIRACY TO ENGAGE IN A BANKING BOYCOTT

 It is settled that summary judgment should be used sparingly in complex antitrust cases involving questions of motive and intent. Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S. Ct. 486, 491, 7 L. Ed. 2d 458 (1962). Moreover, since direct proof of a conspiracy is rare, a plaintiff attempting to prove a conspiracy in violation of the Sherman Act must usually rely on the inferences that can be drawn from circumstantial evidence. Milgram v. Loew's Inc., 192 F.2d 579, 583 (3d Cir. 1951). At the summary judgment stage, I must determine whether or not the record provides evidence from which an inference of conspiracy could reasonably be drawn. Lamb's Patio Theatre v. Universal Film Exchanges, 582 F.2d 1068, 1069 (7th Cir. 1978). Summary judgment is appropriate in those antitrust cases where plaintiffs, after having engaged in significant discovery, fail to produce "significant probative evidence" in support of the allegations in their complaint. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 389-90, 88 S. Ct. 1575, 1592-93, 20 L. ...


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