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.


February 5, 1974


The opinion of the court was delivered by: Decker, District Judge.


This action was instituted by the Trustees of the McCormick-Patterson Trust ("Trust") for a declaratory judgment to affirm their rights, as Trustees, to vote the shares of stock of the Tribune Company ("Company"), held by the Trust, in favor of certain proposed amendments to the Company's certificate of incorporation and by-laws. The defendants are two beneficiaries of the Trust who have challenged plaintiffs' right to vote for the proposals.*fn1 In a prior opinion, this court denied the beneficiaries' motion to dismiss the complaint for lack of personal jurisdiction, 374 F. Supp. 530. Defendants have now answered and submitted numerous counterclaims. Presently before the court are plaintiffs' motions for summary judgment on their complaint, and for dismissal of the counterclaims on the ground that they fail to state a claim upon which relief can be granted.


A. The McCormick-Patterson Trust

The Trust was established in Illinois in 1932, and will terminate on April 1, 1975. The Trust corpus consists of approximately 53% of the outstanding stock of the Tribune Company, a Delaware corporation.*fn2 This stock was originally owned by Joseph Medill, the Company President and publisher of the Chicago Tribune from 1874 to 1899. At his death in 1899, the stock was placed in a trust managed by three trustees — two Medill family members*fn3 and the Company's legal counsel. By the late 1920's control of that trust had devolved to Medill's two grandsons, Robert R. McCormick and Joseph Medill Patterson. Both McCormick and Patterson had been directors of the Company since 1911, and co-publishers of the Tribune since 1914.

On May 5, 1932, prior to the expiration of the Medill trust, McCormick and Patterson entered into the trust agreement which is the subject of this litigation. The following day, all the beneficiaries of the Medill trust agreed to place their Company stock in the McCormick-Patterson Trust. Upon the expiration of the former trust instrument in 1933, approximately 53% of the Company's stock, originally owned by Joseph Medill, passed into the McCormick-Patterson Trust.

Under the express terms of the agreement, McCormick and Patterson were the first Trustees and their successors, as Trustees, were to be drawn from Company personnel.*fn4 Accordingly, virtually all of the Trustees have been directors or executives of the Tribune Company or its subsidiaries, or both. At present, the Company has fourteen directors and a five-member Executive Committee. Seven of the eight Trustees are directors of the Company and hold executive positions with the Company or its wholly-owned subsidiaries;*fn5 three of the Trustees are members of the Executive Committee.*fn6

B. The Events Culminating in This Litigation

Plaintiffs allege that, as Trustees of the McCormick-Patterson Trust and as directors of the Tribune Company, they had long considered amending the Company's certificate of incorporation and by-laws. During this period, plaintiffs consulted with various experts in relevant fields with respect to appropriate changes. In late 1972, the Board of Directors unanimously recommended that the stockholders adopt the amendments now under challenge. Then, in March, 1973, a Notice of Annual Meeting of Stockholders, with a proxy statement and proxy was sent to each stockholder of the Company. These documents recited the proposed amendments, and explained their purpose and the effect their adoption would have upon control of the Company. On the same date, although not required under the Trust to do so, plaintiffs sent a letter to all beneficiaries of the Trust advising them of the proposed action and their intent to vote the Trust stock in favor of the amendments, and enclosed a copy of the amendments and proxy statement.*fn7 However, on March 30, 1973, defendants wrote the Trustees objecting to the amendments and requesting that the Trustees refrain from voting in favor of their adoption. In this correspondence, the beneficiaries claimed that the proposals would insure continuity of management, increase the Company's Delaware franchise tax, and jeopardize New York Stock Exchange listing, thus decreasing the value of the Company's stock and casting doubt upon the Trustees' conclusion that the proposals were in the best interests of the stockholders. Finally, defendants alleged that the Trustees were in a conflict of interest position and claimed that the appropriate course would be to withdraw the amendments and allow the "usual process of stockholder votes" to determine the advisability of corporate changes after the Trust's expiration.

The Trustees thereupon instituted this action and sent a letter to all Trust beneficiaries apprising them of the suit, enclosing a copy of defendants' letter, and requesting the beneficiaries' views on the amendments. This poll has revealed that beneficiaries owning 92.6% of the Trust corpus are in favor of the proposals and beneficial holders of only 3.4% of the stock are opposed.*fn8


The proposals would amend the Company's certificate of incorporation and by-laws as follows:

(1) The Board of Directors would be divided into three classes, to serve staggered three-year terms, with the term of one class expiring each year.*fn9 At the 1974 annual stockholders meeting, one class (four directors) would be elected for a one-year term, another (five directors) for two years, and the third (five directors} for three years; thereafter, one class would be elected each year for a three-year term.

(2) The Company would be prohibited from entering into any business combination with any party which directly or indirectly owned more than 10% of any class of stock of the Company unless it received the approval of 80% of the voting securities holders.

(3) The number of authorized shares of common stock would be increased from 8,000 to 20,000,000 and classified as Series A Common Stock with full voting rights, and the Board of Directors would be empowered to determine the dividend rights of any new shares issued.*fn10


Plaintiffs have moved for summary judgment as to their entitlement to vote all shares of the Tribune Company stock held in the Trust in favor of the proposed amendments. In opposing the motion, defendants repeat the charges made in their letter and characterize this as a case of conflict of interest and of self-dealing "by fiduciaries, who serve as trustees and as corporate directors and officers;" they allege that the adoption of the amendments would benefit the plaintiffs individually and would operate to the detriment of the beneficiaries and other Company stockholders.

Summary judgment under Rule 56 of the Federal Rules of Civil Procedure may be granted only where the record demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See, e.g., Kirk v. Home Indem. Co., 431 F.2d 554, 559 (7th Cir. 1970); Progress Dev. Corp. v. Mitchell, 286 F.2d 222, 234 (7th Cir. 1961). Caution must be exercised in granting summary judgment; the underlying facts are to be viewed in the light most favorable to the party opposing the motion. Adickes v. Kress & Co., 398 U.S. 144, 158-159, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Technograph Printed Circuits, Ltd. v. Methode Electronics, Inc., 356 F.2d 442, 446-447 (7th Cir.), cert. denied, 384 U.S. 950, 86 S.Ct. 1570, 16 L.Ed.2d 547 (1966); American Securit Co. v. Hamilton Glass Co., Inc., 254 F.2d 889, 892-893 (7th Cir. 1958). Nonetheless,

  "[w]ith the ever increasing burden upon the
  judiciary, persuasive reasons exist for the
  utilization of summary judgment procedure wherever
  appropriate. Therefore, while . . . courts should not
  look the other way to ignore the existence of genuine
  issues of material fact, . . . we do not deem it
  necessary in the best interest of judicial
  administration to strain to find the existence of
  such genuine issues where none exist. To do so would
  perforce have a dampening effect on the proper use of
  a salutary procedural device. . . ." Kirk v. Home
  Indemn. Co., supra 431 F.2d at 560.

A. Legality of the Proposed Amendments

There can be no doubt as to the validity of the proposed amendments under Delaware law as such provisions are expressly authorized by the corporation laws of that state, see 8 Del.C. § 151(a) and § 242(a)(3) (increase of authorized stock, reclassification, and authorization of directors to issue additional series of stock), id. § 216 (80% shareholder voting requirement for certain business combinations), id. § 141(d) (classification and staggered election of directors), and have been adopted by a number of large corporations. See, e.g., Elgin Nat'l Industries, Inc. v. Chemetron Corp., 299 F. Supp. 367 (D.Del. 1969); McDonough v. Copeland Refrig. Corp., 277 F. Supp. 6 (E.D.Mich. 1967); Stockholders Comm. for Better Mgmt. v. Erie Tech. Prods., 248 ...

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.