Searching over 5,500,000 cases.

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.


August 20, 1968


The opinion of the court was delivered by: Robert D. Morgan, District Judge.


The complaint in this action was filed June 21, 1965*fn1 in the District Court for the Northern District of Illinois, seeking a permanent injunction against the carrying out of a plan of corporate reorganization between American Consumer Industries, Inc. (herein ACI), and Peoria Service Company, a subsidiary (herein Peoria), recision of the agreement involved and damages, expenses and attorneys' fees, on the theory that the plan as conceived, and then partially carried out, violated Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) and Rule 10(b)(5) of the rules promulgated thereunder by the Securities and Exchange Commission. It is clear and not disputed that ACI owned 90% of the outstanding stock of United States Cold Storage Corporation (herein U.S. Cold), which in turn owned 87% of Peoria at all times here material, and it is contended that this dominant position was used in violation of law and fiduciary duty to the detriment of Peoria and its minority shareholders. Issue was joined by Answer filed August 20, 1965, and, after some discovery on both sides and a preliminary pre-trial conference, the case was transferred to this court on October 25, 1966 in the interest of justice. This court, on December 21, 1967, allowed defendants' motion to dismiss the class action aspect of the complaint on the ground that plaintiff could not be "similarly situated" with any more than 40 persons owning some 7% of the shares involved, which was not a group so numerous that joinder of all would be impractical. (See Rule 23(a)(1) F.R.Civ.P.)

On January 31, 1968, this court allowed filing of motion by defendants to dismiss derivative action, which has been extensively argued and briefed by both sides. Plaintiff stated in his brief that allowance of the pending motion "would in effect dispose of the entire action," and "Plaintiff does not allege an individual action." Also, extensive answers to interrogatories and affidavits of facts have been filed herein.

On May 6, 1968, this court issued an Interlocutory Order stating the conclusion that, on the state of the record before it under Rule 12(b) F.R.C.P., the pending motion must be treated as one for summary judgment and be disposed of as provided in Rule 56 F.R.C.P. after all parties have been given reasonable opportunity to present all material made pertinent to such a motion by said Rule 56. A period of thirty days was allowed for filing of any additional sworn, factual material, argument and citation of authorities, and any request for further oral argument.

Thereafter, defendants filed a further quite comprehensive affidavit of one Earle D. Barton, and a memorandum in support of motion for summary judgment. Plaintiff filed transcript of a state court deposition of the chief executive officer of ACI, Peoria and U.S. Cold, and a memorandum in answer to that of defendants, together with a motion for oral argument;*fn2 but no affidavit disputing any factual material otherwise before the Court.


In the opinion of this court, the controlling facts are undisputed in the record through allegations of the complaint admitted in the Answer; failure of denial on requests for admission; affidavits; and sworn answers to interrogatories and to questions on deposition which are not controverted. Those facts are:

1. Defendant ACI is a large, publicly held and diversified business enterprise whose shares are listed and traded on the New York Stock Exchange. At least since 1960 it has been directly engaged in the ice manufacturing business at several plants; in the operation of cold storage warehouses; in the processing and sale of eggs; and in the sale of lumber, building materials, household appliances and furnishings, motor oil and gasoline station supplies, etc.

2. U.S. Cold at all times here material was owned about 90% by ACI and was engaged primarily in the operation of cold storage warehouses in a number of different cities, not including Peoria, Illinois.

3. Peoria was an Illinois corporation engaged for a good many years in ice manufacturing and sale and in the operation of two relatively old cold storage warehouse facilities at Peoria, Illinois. It had some 81,500 shares outstanding, over 50% of which were held by a single owner in 1961. It had paid no dividends, at least in recent years.

4. In 1961 ACI acquired the controlling interest in Peoria, through an exchange of shares by agreement with the owner of over 50% of the shares, on the basis of one share of ACI stock for each nine shares of Peoria stock. On the then published market value of ACI shares this was computed at slightly less than $3.00 per share for Peoria shares (for the controlling interest). As part of that agreement ACI also made an offer to all other Peoria share holders to buy their shares at $3.00 per share. As a result of these combined transactions, ACI acquired 80% to 87% of the outstanding Peoria shares in a short time in 1961. It, or U.S. Cold, also picked up a few more Peoria shares thereafter and never paid more than $3.00 per share.

5. At all times here material after 1961, ACI was able to, and did, in fact, elect at least a majority of the Boards of Directors of both U.S. Cold and Peoria, and Mr. Joseph S. Robinson was chief executive officer of all three companies.

6. In order to effect operating economies for Peoria, to streamline management of like businesses, and to provide Peoria with engineering and other overhead services of U.S. Cold (and possibly for other reasons which do not appear), in 1962 ACI sold its shares in Peoria to U.S. Cold for the same price it had paid in acquiring them the preceding year.

7. Between 1961 and the end of 1964 numerous efforts were made by officers of Peoria, through about ten different financial institutions and individuals, to obtain financing for Peoria to obtain for operation, on an ownership or lease basis, a new cold storage warehouse facility in the vicinity of Peoria, Illinois, without success. The uniform lenders' requirement, that performance by Peoria be guaranteed ...

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.