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September 3, 1985


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 class. Those settlements total 26.2 million dollars, excluding interest.*fn1

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 UAR.

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, but rather 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 Angeles.

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 ...

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