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TASNER v. U.S. INDUSTRIES

May 29, 1974

FRED P. TASNER AND HARRY FOX, PLAINTIFFS,
v.
U.S. INDUSTRIES, INC. AND I. JOHN BILLERA, DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

This cause comes on the plaintiffs' motion for an order remanding this cause to the Circuit Court of Cook County, Illinois, on the ground that the cause was improperly removed therefrom in that this cause is not within the original jurisdiction of this Court.

On February 7, 1974 an action was commenced in the Circuit Court of Cook County, Illinois, Law Division entitled Fred P. Tasner and Harry Fox v. U.S. Industries, Inc. and I. John Billera, case no. 74 L 2124. The plaintiffs who have allegedly been U.S. Industries, Inc. ("U.S.I.") stockholders for more than six months, brought the state court action for a writ of mandamus to enforce their rights under Section 45 of the Illinois Business Corporation Act, Ch. 32 Ill. Rev.Stat. § 157.45, to inspect U.S.I.'s shareholder list and books, records of account and minutes and to make extracts therefrom and copies thereof. Due demand has allegedly been made on defendants and defendants have allegedly refused to permit such inspection and copying. Plaintiffs further sought the penalty of 10% of the value of their U.S.I. stock for which defendants have, pursuant to Section 45 of the Illinois Business Corporation Act, allegedly become liable because of their alleged unreasonable and unlawful refusal to permit appropriate inspection of U.S.I.'s list of shareholders, books, records of accounts and minutes.

On February 14, 1974 the defendants petitioned for removal of the state court action to this Court because the action was allegedly one over which this Court has original jurisdiction pursuant to the provisions of 28 U.S.C. § 1332 (diversity of citizenship) and is one which may be removed to this Court under the provisions of 28 U.S.C. § 1441 in that it is a civil action wherein the matter in controversy exceeds the sum or value of $10,000 exclusive of interest and costs, and is between citizens of different states.

Plaintiff Tasner is a citizen of the state of Illinois and a resident of Lake County. Plaintiff Tasner is and at all times since July, 1969, has allegedly been the legal and equitable owner, and the holder of record, of 34,100 shares of Special Preference Stock (Series L) of defendant U.S.I. The shares of Special Preference Stock (Series L) owned by plaintiff Tasner have at all times relevant been convertible into a total of 108,779 shares of the common stock of defendant U.S.I. and have at all such times allegedly had a total value of not less than $815,000. Plaintiff Fox is a citizen of the state of Illinois and a resident of Cook County. Plaintiff Fox is and at all times since April, 1969 allegedly has been the legal and equitable owner of not less than 59,850 shares of the common stock of defendant U.S.I., which shares of stock have at all times relevant allegedly had a value of not less than $448,000.

Defendant U.S.I. is a corporation organized and existing under the laws of the state of Delaware, having its chief executive offices in New York, New York. Defendant U.S.I. is a diversified company with major operations in Cook County and elsewhere in the state of Illinois, and is duly licensed and qualified to do business in the state of Illinois. Defendant Billera is and has been since 1964 an officer and member of the Board of Directors of defendant U.S.I. At all times relevant herein, defendant Billera has been Chairman of Board of Directors, Chief Executive Officer and President of defendant U.S.I. and has at all such times dominated the management, business and affairs of defendant U.S.I. At all such times access to and inspection and copying of the shareholder list, books, records and minutes of defendant U.S.I. has been subject to the control and direction of defendant Billera. Defendant Billera has allegedly solicited and accepted election as an officer and director of defendant U.S.I. at times when, and with knowledge that, defendant U.S.I. was licensed and qualified to do business in the state of Illinois, and has intentionally refused to accord plaintiff U.S.I. shareholders the rights provided them by Section 45 of the Illinois Business Corporation Act.

The plaintiffs in support of their motion to remand contend that:

  1. This Federal District Court lacks jurisdiction to
     enforce the penalty which is provided for under
     Section 45 of the Illinois Business Corporation
     Act.
  2. Plaintiffs' complaint for mandamus is not within
     the original jurisdiction of a Federal District
     Court.

The defendants in opposition to the instant motion contend that:

  1. Since plaintiffs could have brought an original
     action in this Court seeking a mandatory
     injunction ordering defendants to permit
     inspection and copying of U.S.I.'s books and
     records (exactly the relief

     that plaintiffs seek), the fact that this relief
     is formally styled a "peremptory writ of mandamus"
     in the state but not the federal courts cannot
     defeat removal.
  2. Even though the relief sought of 10% of the value
     of plaintiffs' stock is a "penalty" in the sense
     of not compensating for actual damages, this is
     not a criminal or quasi-criminal action where
     penalties recovered would be paid into the state
     treasury and thus it is a "civil action" and can
     be removed under 28 U.S.C. § 1441.
  3. Even if the Court somehow had no jurisdiction over
     plaintiffs' demand for the 10% "penalty", it
     clearly has jurisdiction over the single cause of
     action alleged in the complaint and it must,
     therefore, retain jurisdiction to consider the
     other relief which it can give (i.e., injunctive
     relief) if plaintiffs prevail on the merits.
  4. Even if the Court had no jurisdiction over the
     penalty claim and even if the demands for
     inspection and penalty were separate causes of
     action, the Court should adjudicate the penalty
     claims under 28 U.S.C. ยง 1441(c) because
     efficiency ...

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