The opinion of the court was delivered by: Bua, District Judge.
Before the Court is defendant United Artists Corporation's
motion for summary judgment. Also pending are cross motions for
Rule 11 sanctions. For the reasons stated below, United Artists
Corporation's motion for summary judgment is granted and all
Rule 11 motions are denied.
On November 9, 1984, the Court denied certain defendants'
motion for partial summary judgment on the statute of
limitations issue. United National Records, Inc. v. MCA, Inc.,
609 F. Supp. 33 (N.D.Ill. 1984). The Court held that plaintiffs
had raised questions of fact as to whether the applicable
four-year statute of limitations barred any pre-December 13,
1978 claims. Since the Court's November 9 Order, all
defendants, with the exception of United Artists Corporation,
have entered into settlement agreements with the plaintiff
Those settlements total 26.2 million dollars, excluding
Defendant United Artists Corporation ("UAC") had presented a
separate motion for summary judgment, arguing, in addition to
the statute of limitations defense, that as the former parent
corporation of a record and tape producer, it was not liable
for any alleged antitrust violations of its former subsidiary.
The Court, on November 9, 1984, entered and continued UAC's
motion pursuant to Fed.R.Civ.P. 56(f) pending the completion of
discovery. Plaintiffs have now completed discovery on that
issue and UAC's motion for summary judgment has been renewed
and is now before the Court.
Notwithstanding UAC's suggestion to the contrary, plaintiffs,
as the nonmoving parties on this motion, do not bear the burden
of establishing a question of fact in order to avoid summary
judgment. Summary judgment for a defendant under Rule 56 is
appropriate "only if the pleadings, depositions, and affidavits
fail to disclose a genuine issue of material fact."
Gracyalny v. Westinghouse Electric Co., 723 F.2d 1311, 1316
(7th Cir. 1983). In deciding the motion, the Court must
"resolve all doubts against the party seeking summary
judgment." Id. Applying this standard, the following facts are
assumed to be true for purposes of this motion.
A. UAC's Motion for Summary Judgment
Plaintiffs' amended complaint*fn2 charges that since January
1, 1971, defendants conspired to fix, maintain and stabilize
the price of records and tapes in violation of § 1 of the
Sherman Act, 15 U.S.C. § 1. UAC, a California corporation and
distributor of motion picture films, has never been a producer
of phonograph records or tapes. In November of 1968, however,
UAC acquired 100 percent of the outstanding stock of Liberty
Records, Inc., a California corporation engaged in the record
business. Following UAC's acquisition of Liberty's stock,
Liberty's name was changed to Liberty/UA, Inc. In February of
1971, Liberty/UA, Inc. changed its name to United Artists
Records, Inc. In September of 1974, United Artists Records,
Inc. changed its name to United Artists Music and Records
Group, Inc. Throughout this opinion, these wholly-owned
subsidiaries of UAC will be referred collectively as "UAR". UAC
sold the stock of UAR in May of 1978. Throughout the November
1968 to May 1978 period, UAC owned 100 percent of the stock of
In addition to owning 100 percent of UAR's stock, several UAC
directors and officers held positions as directors or officers
of UAR between 1971 and 1977. See Plaintiff's Exhibit 13. For
example, for a short period in 1971, the President of both UAR
and UAC was David Picker. In April of 1971, Michael Stewart
replaced Picker as President of UAR. During the period
1971-1975, Stewart served both as President of UAR and Vice
President of UAC. In 1975, L.J. Bos, a Senior Vice President of
UAC and member of UAC's Executive Committee, became UAC liaison
officer for UAC with responsibility for the operations of UAR.
Bos, however, did not have direct authority over UAR personnel,
worked through Stewart, the President of UAR at the time. In
November of 1975, Bos replaced Stewart as President and
Chairman of the Board of UAR. Also during the 1971 to 1977
period, UAC made cash advances to UAR in the forms of
interest-and noninterest-bearing notes. As of December 31,
1977, UAC advances to UAR totaled nearly $40 million. For a
brief period in 1969, UAR's payroll was paid by UAC out of
UAC's New York office.
UAR kept its own books and records throughout the 1971-1978
period. UAR financial statements from 1972 to 1978 show that
its assets, liabilities, capital structure, expenses, and
payroll were kept separate from UAC. Although a UAR branch
office was located in UAC's headquarters in New York City,
UAC's executive offices were located at an office in Los
Regarding UAR's alleged involvement in the price fixing
conspiracy, plaintiffs have uncovered evidence which suggests
that UDC, a distribution company for UAR, acted as a vehicle
for exchanging pricing information between UAR and its
competitors. At one point in August of 1972, distribution
agreements between UAR, MGM, and Polydor contained a built-in
mechanism for the preannouncement exchange of pricing
information. On September 25, 1972, a meeting took place
between representatives of UAR, Polydor, and MGM in which an
understanding on pricing was reached among those present.
Michael Stewart, President of UAR and Vice President of UAC,
attended that meeting.
In 1978, UAC sold the stock of UAR to M & R Music
Corporation. In connection with the stock sale, UAC received
repayment of its advances made to UAR between 1971 and 1978. On
February 5, 1979, Capital Industries-EMI, Inc. acquired UAR
from M & R Music Corporation. There is no evidence in the
record to suggest that UAR was ever undercapitalized or
otherwise not financially responsible for its debts and
liabilities either while UAR was a wholly-owned subsidiary of
UAC or after UAR was sold to M & R Music Corporation.
At the time of this Court's November 9, 1984 opinion,
Steven v. Roscoe Turner Aeronautical Corp., 324 F.2d 157, 160
(7th Cir. 1963), was controlling precedent in this Circuit on
the issue of a parent corporation's liability for the wrongs of
its wholly-owned subsidiary. The Seventh Circuit had applied
the Roscoe Turner test to various cases which involved piercing
the corporate veil. See e.g., In re Palmer Trading Post,
695 F.2d 1012 (7th Cir. 1982) (bankruptcy); C M Corp. v. Oberer
Development Co., 631 F.2d 536 (7th Cir. 1980) (diversity suit
alleging breach of contract); Allegheny Airlines, Inc. v.
United States, 504 F.2d 104 (7th Cir. 1974) (Federal Tort
Claims Act ...