Brief for The Respondents in Opposition — Schy v. Susquehanna Corp.

"LIBRARY

SUPREME COURT, u. S.

. cout US.

op

IN THE:

JUL 24 1970

abt SEAVER, CLERK

——— os

| Supreme Court of the ited sSeeab |

ae | _ OCTOBER TERM, 1970

s

_No. 320 .

Mavnice H. Sony,

v.

' (ae Susquenanna Corporation, a Delaware corporation, . .

SamvueL M, Fercuson, M. M; Harpy, H. F. Koruozz,

J. Earte May, Huen C. MicHELs,. AKSEL Nretson,. D. W.

Rerves, R. C. ScHENK and N. F. Tispazg, JR.,

Respondents,

é

\ ° . age ; =

*ON PETITION FOR. A WRIT OF CERTIORARI 0 THE »

UNITED STATES. ‘COURT OF APPEALS FOR THE

SEVENTH CIRCUIT

Vy ; :

. ; : " tae ees ; Me . os : =

BRIEF FOR RESPONDENTS IN OPPOSITION

—

: Chacala S. Ruvxn ;

Courts OuLAHAN

ALEXANDER YOUNGER

Rayne & Rayve

400 Hill Building «

Washington, D. C. 20006 _

Attorneys for Respondents

. ¢ + pee, ae

' rae Si Ma

a ~ ° . : 2

a8

Petitioner,.. -

——

‘ oy eee east sine

Statement of the Case ....... prea ieee eiaas mo

‘Questions Presented ‘ ‘ ewer re eevee Cee 7 eis. ae

ARGUMENT;

¥ Decision of this Court in Mills v. Elec-

1c Auto- Lite ( J0., 996 US. 375, Clearly Does |

Not. Apply ‘1 ‘o The Factual SituationHere .. 5

; IL There fs No Conflict Between the Holding

Below and the Law: Prevailing i in. the Second

Circuit on the Class Action: ‘Question ..:.... & .

III. There ls No Occasion Kor This Court To"Re- >

’ view The Procedure’ Followed By The Dis-

trict Court In Dismissing. Petitioner’s Coni-

NN Soon od cas Fre ter ere ieee eee

COMOLAMION oe noe 5a kek at ee ees EE I gh oe a

“a? : “ ‘ . a ‘

| CITATIONS : ;

Cases: . ae) a

Anderson National Bank vy. Luckett, 321. U.S, 233 ~ 14

Carrall v; American Federation of ‘Musicians, 372 .

F, 2d 155 (2d Cir. 1967), ¥ vacated, 391 U.S.99 ... ° WH

. ££ onley v. Gibson, 355 U.S. 41 2.0.0... Te ce Pe ; Ls 14

Crawford v. Yoaate, Ine. 40-F.R.D. 381 (S. D.N See

| ETT ee rT ete LE PL > einity tae eee ag ~- it

- Dasho et al. v. PvaeB hanna Corp., igi Fed. See: .

*. + +L, Rep. a ies 2,575 (N:D. Ill. 1970): 2.2.0... eeogt 2

Edelman v\ California, 344 U.S. er rr! ey |

Eisen v. Carlisle & Jacqueline, 391. F. 2d 555. (2a © .

Oe. POO oa evece ck ccex ss Poet eae ea re 8.9510, 11

Foman v. Davis, 371 U.S. 178 2.2.0... ayer me 14

| a "

y .

————

so

“e

it’ .

PAGE

' Georgia’ Southern & ‘Florida Railway Co. a

‘*. Atlantic Coast Line Railway Co., 373 F. 2d 493 .

(OGRE CONG; RIED hex 55.58 ca aes ee ae 15.

- Giordano vy. Radio Corporation af America, 183 F.

‘Od 558 (3rd Cir. 1950) ........... rey Pee we -11

Hannah v. Larche, 363 U.S. 420 2.0... nee Rea 14

_- Hansberry v. Lee, 311 U:S." Nas <eaeeeh ao Se atanats ig

- ' Iless Vv, Anderson, Clayton & Co., 20 F.R.D. 466

(S.D. Calif. i} Sanne ae maatpind ik ara sea aera 11

Hohmann v. Packard Instrument Co, , 398 F F. 2d 711

(7th. Cit; SUED as secs aah RE Ni 8, 9, 10, 11

—— I, Case Co. v. Borak, 317 US. een eS temee 4,8

Mills y. Electric Auto-Lite Co., 408 F. 2d 429 (7th

‘Cir. 1968), reverséd, 396 U.S. 375 ..0....... 4,5, 6; 7, 8

Multane v. Central Hanover Bank & Trust Co., 339

Mi DOO es coc LER e ne ee en ree oe 14

Neely v. Martin K. Eb in Const. Co., 386°U.S. a7. ee,

Pele las v. Caterpillar Trac tor Co. » 118 F. 2d 629°

(7th Cir. 1940) ..... Re eee Price re ae + 3h

_ Schroeder v. City of New York: 371 ‘Us. 208 - ast "140

_ Schy v. Susquehqnna Corp., 419 F. 2d 1112 (7th

. Cir. 1970) ei te Ke nena ae amare

ees, Surow itz v. Iilton Hotel Corp., 383:.U.8. 363 .... 13,14

Troup ¥. McCart, 238 F. 24 289 (5th Cir. 1956)... 1

4 VW “hite River Lumber Co. vz Arkansas, 279 U.S. 6927 ;

Wisconsin. v. Federal ‘Power Commission, 373 US.

; 294 Te Te A ar cee: te Ay Wee eS Ree oe

Statute’ : ; | .

Securities Exchange Act of 1934 (15 U. e C. $78) | 1

" Miscellaneous:

Federal Rules of Civil Procedure:

Rule 12(b) (6) encanta em ee “seen eee 5, 16

Rule 23 «20... cece eee ee. Pers Veuve veauk: 12

IN THE

Supreme Court of the United States ~

October Term, 1970

oy No. 320

‘Mavrice H. Scuy, )

Petitioner,

v. ;

Tue Susqvenanna Corporation, a Helaware corporation,

SaMUEL M. Fercusox, M. M. Harvix, H. F. Konrifiouz.

J. Karte May, Heucou C. Micners, Akser Niersox, D. W.

Reeves, R..C. Scnenk and N. F. Tispaue, Jr., | :

Respondents.

*

+e

ON PETITION: FOR A. WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SEVENTH CIRCUIT

_°

- BRIEF FOR RESPONDENTS IN OPPOSITION

Statement of the Case ,

mt

Petitioner is an attorney and stockholder i in The Susque-

hanna Corporation (Susquehanna) who-seeks to have this

Court review every facet of the decisions of the two Courts

below dismissing his purported class action under Section

14(a) of the Securities Exchange Act of 1934 (the ‘‘Act?’),

Both the District Court and the Court of Appeals hekl (1) -

that Petitioner did not adequately represent the class— |

‘Susquehanna stockholders—on whose. behalf he allegedly

© a

~

sued, and (2) that the action should be dismissed for failure

to state a claim on which relief could be granted.

Petitioner brought suit in the United States District Court

‘for the Northern District of Illinois on October 18, 1967, on

behalf of himself and other stockholders ‘‘situated simi-

larly’? to enjoin the issuance of-a newly-authorized class of

Preferred Stock of Susquehanna.' Issuance of this Pre-

ferred Stock had beet) previously authorized by the: stock-

holders after their votes had been solicited by a Proxy State-

-ment for the Corporation’s Annual Meeting dated Mareh

29, 1967. Petitioner’s Complaint alleged that this Proxy

‘Stateme nt’ omitted thaterial information in violation of

Section 14(a).

However, on October 26, 1967, eight days after Petitioner

filed his action, Susquehamma, together with Atlantie Re-

search Corporation, issued a Joint Proxy Statement (Merger

. Proxy Statement).. This second Merger Proxy Statement

sought stockholder approval for the proposed merger of the

two corporations, It also sought stockholder approval for the

issuance of the Preferred ‘Stock authorized by the March 29

Statement. Beeause this Preferred Stock was basic to the

merger plan, the Merger Proxy. Statement deseribed the terms

of its issuance in exhaustive detail. In addition, the Merger

Proxy Statement covered the ‘same ground as the March 29

Proxy Statement by seeking, once again, stockholder approval

of an amendment to the Certificate of Incorporation authoriz-

ing issuance of the Preferred Stock. The exact text of the |

Amendment ‘was included.

1 Other complaints of Petitioner against this same corporation

were held to be without merit after a lengthy trial in Dasho, Dasho-

Rogers, Inc. and Mairice H. Schy v. The Susquehanna Corporation

et al., CCH Fed. Sec. L. i § 92,575 (N.D. Ill. 1970).

3

The Merger Proxy Statement also contained a complete

summary. of every aspect of Petitioner’s Complaint, inelud-

ing the reVof sought—an injunction against issuance-of the

Preferrec stock. At oral argument’ before the Court of

Appeals, Petitioner’s counsel 1 admitted that this summary,

as well as’the rest of the Merger oe Statement, was com-

plete and fair.

~The stockholders, acting on the basis of the Merger Proxy

“Statement, vote d almost unanimously— 80.8% to 0.42%—

to! approve the Atlantic Research-Susquehanna merger.

They also approved authorization and issuance of the Pre-

ferred Stock—doing so fully mindful of Petitioner’ s pend-

ing Complaint. ag .

Thereafter, Respondents, relying.on this, stockholder repu-

diatron of Petitioner’s claims; moved for an order (1) that

Petitioner could not adequately represent the Class, and (2)

that the Complaint should-be dismissed because Petitioner ’

had not exhausted his intracorporate remedies,

ry ‘.

The District Court, alter receiving memoranda and exhibits

from both ‘sides and he: aring oral argument, held that the

action could not be maintained as a class action, and that the

Complaint failed to state a claim. It reached the latter con-

clusion. after determining that the action was moot, that no

damage resulted to Susquehanna’s stockholders from the chal-.

lenged actions, and that the Merger Proxy. Statement gave

-full notice to the stockholders about Petitioner's ( ‘omplaint.

The Court.of Appeals unanimously affirmed: It agreed with

the District Court’s holding that ‘Petitioner could-not properly

represent other stockholders, and held. that summary, judg-

ment was properly granted. 419 F. 2d at 1116-17. On the:

merits, the Court of Appeals held that. the District “Court

Ok.

7

&

‘

ers found that the March 29 Profy Statement—the

‘basis of Petitioner’s claim—w as not the cause of any cor-

porate action, and no damage resulted from its issuance.

““The shar which were issued and used to ‘effectuate the

merger wre issued in response to the October 26, 1967

proxy, Mhich the plaintiff admits was fair and complete.’’

419 F.2d at 1117. Any defect in the earlier proxy state-

ment was held cured by the later Merger Proxy Statement:

‘Here there was no influence from the March 29, 1967 proxy

statement which was unremedied by the October 26, 1967

proxy statement.’? 419° F, 2d at 1117.

The Court further held that this Court’s opinion in J. J.

Case Co. v. Borak, 377 U.S. 426 and its own opinion in Mills

v. Electric Auto-Lite Co., 403 F.2d 429 (7th Cir. 1968), re-

versed 396 US. 3875, w ere biapplicable because the facts of

those’ ¢ cases are So very different.

Questions Presented

I. Whether this Court should, on the basis of its opinion

in Mills v. Electric Auto-Lite Co., 396 U.S..375, review the

decision below, where the Proxy Statement which is alleged

to be false and misleading was superseded by a ‘subsequent

Proxy Statemett which’ was admittedly fair and accurate,

the corporate action complained of being based on this

subsequent Proxy Statement?

IL. Whether this Court should review the decision below

disqualifying. Petitioner as a class. representative where

there is no underlying factual basis on which a substantive

-eause of action ean be grounded?

D

III. Whether this Court sheuld review re decision below

disqualifying Petitioner as a class representative because

‘fis position’ was found to have been overwhelmingly re-

pudiated by the class he purported to represent, and becanse

his interests were found to.conflict with those of the class?

IV. Whether this ( ourt should grant certiorari to review

the holding ef the Court of Appeals that summary judg-

ment was properly g ranted, where the decision on the merits.

is clearly correct and -Petitioner’s contentious, as toe the

procedure followed below raise .no genuine issues of any

mag guituget

ARGUMENT

The decisions helow are cle: arly correct, both on the merits

and on the procedural questions involved. There is no

conflict of decisions. The questions involved are not of

gencral or prospective importance. Indeed, both holdings

- below turn on the unique factual. pattern presented by this-

‘reeord., Accordingly, there is no occasion for further review’

I, The Decision of this Court in Mills v. Electric

Auto-Lite Co., 396 U.S. 375, Clearly, Does Not Apply To

The F actual Situation Here.

Petitioner’s effort to attract the Court’s interest in this

case by concocting an alleged disregatd of Mills vy. Llectric

Auto-Lite Co., 396 U.S. 375, by the Court of Appeals. is

baseless. Milts is inapplicable here because there is a break

in the chain of causation which divotces the’ Proxy’ State-

ment which Petitioner's lawsuit challenges from the cor-

_ porate action taken by the stockholders. Fe

‘

6 °

The fatal tlaw in Petitioner's effort to apply Mills here is

that it fails to take aceount of the faet that two Proxy.

Statements are involved. . Petitioner’s contention that the

first one —the March 29 Proxy Statement—was ‘‘deceptive

in matertal respeets’] and henee violative of Seetion 14(a)

overlooks the fact that, as the Court of Appeals said, ‘The

shares which were issued and used to effectuate the merger

were issued in response to the October 26, 1967 [Merger]

Proxy [Statement], whieh the plaintiff admits was fair and

complete.” 419 F.2d at Wiz

Nothing was done as a result-of the March 29 Proxy

Statement. MI that Management sought therein was stock-

holder approval of an aniendment ‘to the Certificate of

Incorporation authorizing, future issuance of the Preferred -

Stock. But, as the Court of Appeals noted, ‘No. shares of |

preferred stock were ever issued pursuant to the March 29,

1967 proxy.”!? 419 F. 2d at 1117.

When the Preferred Stock was issued, it was done pur-

suant to stockholder approval sought in the Merger Proxy

Statement. Retreading ground already trod in March, this

Statement sought new stockholder authorization by seeking,

‘ approval. of an amendment virtually idetitical to the one

proposed in the Mareh 29 Statement. The terms surround-

‘ing the actual issuance of the Preferred Stock—dividend,

voting, liquidation and conversion rights and redemption

_privileges—were detailed in the new Merger Proxy State-

ment. This Merger Proxy Statement, which Petitioner ad-

mitted on oral argument in the Court of Appeals ‘“was-

o

‘accurate and complete’’,? 419 I. 2d at 1114, was the legal

‘ause Of the corporate action about which Petitioner com-

-plains—-issuance of the Preferred Stock:

In Ails, this: Court addressed itself to a situation wholly

different: from the one here. That case furnishes no basis

for the grant of certiorari. In d/ills, the proxy statement

under attack was the one employed to induce stockholder

approval of the merger. Petitioner’s att&ek heye is. on the

March 29 Proxy Statement, Superseded in eve ry respect by

one which two Courts, as well as Petitioner’s counsel, have

.

anid Wis fair and accurate, The March 29. Proxy State ment:

ee

was not fan essential link in the accomplishment of the

transection’, 396 U.S, 385.- Indeed, it was entirely aca

demic, Surely the inst int casé is a prime example of what

“this Court coutemplated When it said that its postulation of

the materi: lity requirement

i

‘fadequately serves the purpose of insuring that’.a

‘ause of action cannot be established by proof of a.

defect vo trivial, or so unrelated to the transaction

for which approval is sought, that correction of the

“ Petitioner’s assertion that the Court. of Appeals “based” its

affirmance of the District Court.on his courtsel’s admission ‘in oral

argument that the Merger-Proxy Statement was. fair is clearly spu-

rious. This -fabricated. issue affords no basis for granting certiorari.

Petitioner's counsel did make ‘the admission, Petitioner i is hound by

the statements of. his freely chosen agént! and. the \lerger Proxy

Statement is, as both Courts below held, complete, fair and accurate.

Moreover, even if his counsel did not make the admission., Petitioner

never challenged the Merger Proxy Statement in his ‘ ‘omp laint or

his Amended “Compl: int, god he cannot smuggle In a. new cause of

action at this stage of the proceedings. or raise questions here which

he did not raise below. Neely vy. Martin K. Eby Const. Co.,-386 U.S.

317, 330; Hlseonsin v. Federal Power Commission. 373 U.S. 294,

_ 303 . See also. White River Lumber Co. v. Arkansas, 279 U.S. 692.

700; /:delman v. Calornee, “344 U.S: 357.

2

~~

8

defeet or imposition of liabilitiy would not further

the interests protected by § 14(a).”” O96 U.S. at 384.

(Miphasis added).

Here tlie alleged defects were so academic, so unrelated to

the assailed action, that imposition. of liability would do-

‘Violence to Section T4(a).-Laek of any possible catsal con-

heelion was proad facie evident from’ the moving papers.

There was no dispute below concerning the ope rative facts.

8 herefore, mindful that this case is mi: inifestly distinguish-

able trom W2/s, both Courts below correctly held that Peti-.

tioner could not possibly establishia cause of action. Wills .

thus provides no ground for efanting the writ,

Just as Petitioner's reliance on Jills sibeori sneegoa so also

‘is his relianee on J. 1. Case Go. Vv. Borak, 877 US. 426, 45 1.

There the Court simply held that tlie causation question

should be resolvedgat trial; net in this Court. The Proxy

Statement involved) there, however, clearly Played some

part in the merger. Whether it had decisive: effect was the

issue over which there was a faétual dispute. Here, how-

ever, the record is clear that the Mareh 29 Proxy Statement:

Was not responsible for the challenged corporate action.

On. There Is No Conflict Between the Holding Below |

and the Law Prevailing i the Second Circuit on the.

| [Class Action Question.

Contrary to Petitioner's assertion, there is no conflict of

decisions on the class action. issue. Petitioner has sought to

manufacture a conflict between. the Court of Appeals holding

here, on the ‘one hand, and decisions of the. Second and

Seventh Cireujts in Liven v. Carlisle & Jacqueline; 391 F:

2 555 (2d Cir. 1968) and Hohmann v. Packard Instrument

Co., 399 F.2d 711 (ith Cir. 1968), on the other hand.

.

a

Kiven af Petitioner’s contention were: sound, -it| would

Jurnishnoe occasion for granting the writ. This is so because

the two Courts below were so clearly correet in their hold-

ings on the merits that for this Court to grat certiorari

because of this alleged issue would afford only an Scie

“tunity: 4o correct ate ‘chnical error, On the merits; Petitioner’

eause of action has been held to be moot. There is no aa

way Petitioner can slow any causal ne xus between the al-

“Teged deficiencies: in the Maich 29 Proxy Stateme nt and

the issuanée of the Preferred Stock. The subsequent Merger

Proxy Statement is admittedly: fair. Therefore, it would be -

nothing short of futile for this Court’to ‘vrant certiorari

to correct an asserted error of adjective law where the un-

derlying: substantive claim is, without legal basis...

Denial of the writ may be justified on the alternative:

ground, however, that. the Court. of Appeals decision ‘is

consistent with Kisen aud Hohmann. Petitioner urged both

these eases on the Court .of Appeals. That Court rejected

. them wis, controlling authority because both, cases. merely

hold that, on, the issue of adequate representation, the fact’

that only one or two of a large class have filed suit and no

others, have intervened is: not dispositive. Neither. dase

dealt with the situation here, where a large majority of the

class, on being fully informed of Petitioner's claims as their

representative (ax they’ were cin. the Merger Proxy State--

ment), repudiated him as their representative by voting

almost unanimously* to authorize and issue the Preferred

Stock (to which his Complaint objected) and to use it in

the merger.

“

® As the Court of Appeals stated: “After being fully informed of

the nature of plaintiff's pending suit, 80.87 of the stoc Khalde Bs voted

in favor of the propos#l made in the. October 26, 1997, proxy state-

ment... . Only 0.42% voted against it.” 419 F. 2d at 1117.

t

following passage: o

10

‘In Eisen, the Court of Appeals reversed the District

Court’s holding that the ~Plaintitt there was, not a proper _

repr esentative bee use’ he Was the only member of a large

_¢lass who had sted and because no, other members had sought |

to intervene. The essence ‘of the Court’ s holding. is in the

se

ma,”

We are not persuaded that if 1s’ essential that any

~ . other members of the’ class seek to intervene. . .

If we have to rely-on one litigant to assert the rights

of a large class then rely we must.... 0000”

— & Necessarily, a different’ sitiation is presented’

« where absent class members inform the court of their

displeasure. with plaintiff’s representation, [cita-

tion], but the representative party cannot be said to

have an affirmative duty’ to demonstrate that. the .

whole ora majority of the class considers his repre- .

se ntation adequate.” : 891 Fi2d at —_.

Thus Kisen simply held. that a class action could not he

' dismissed solely because other members of the class were

silent and-had not sought to intervene, But here the Court

of Appeals Iaid.stress on the fact that the stockholders

massively repudiated Petitioner’ s gratuitous efforts by their

informed vote to authorize and carry out the very action his

lawsuit sought to block.

Hohmann, which like the instant case was decided by the

Seventh Circuit, followed Hisen and cited it with approval.

In Molimann,.the-Court’s holding was also limited tothe

harrow point phat ‘‘whether other members of thie class have

sought to ‘intervene is not: de terminativ e of the question’

whéther the plaintiffs are qualified to actin behalf of absent

member s of the class.”’ 399 F. 2d at 714.

.

°

a

Pe os, ase Vic ae

Both ‘Eisen and Hoh minu, therefore, dealt with’ the nar-

row question of. what inferences a Court could ‘preperly

draw from silence and inaction by other members of a

class: In Schy, the Court dealt with. the inference to be

drawn from the affirmative action taken by members of the

class to repudiate the. essence of the cause of action: The

cases are thus plainly. distinguishable. The decision of the

Court below is also squarely in accord with decisions of

other Courts of Appeals on the same issue.‘ There is there-

fore no conflict between the Circuits w arranting cs go ot

“a writ.

&

* Rather than ‘‘leaving conflict in its wake’? a Petitioner *

asserts, ‘the Court below was faithful to decisions of this

Court in purported class action cases. The Court of Appeals,

_.. properly reliéd_6n this Court’s holding in //ansberry v. Lee,’

311 U.S. 32, 44-45 and Carroll v.@@merican F ederation of

Musicians, 391 U.S..99; 103, Note 4, which also involved

situations where Substantial portions of aclass took posi-

tions contr ary to that. of their se If-appointed: ‘représentatiy e.

There is thus no occasion tor further review.

Certiorari should also be detiied on the additional ground

‘that the representation question presented liere arises from. . :

the unique facts of this case. Petitioner is an attorney. His

counsel below filed an Affidavit with the District Court stat-

ing that.there was an agr eement that Petitioner would share

in whatever attorney’s s fees might be allowed. Both Courts

below indicated that, because of this — and\ because of

' 4 Troup Hp ee 238 F: px, 294 (5th Cir: 1956) : Giordano v.

Radio Corporation of -Ameri#a, 183 F. 2d 558, 550 ( 3rd.Cir. 1950) :

Pelelas v. Caterpillar Tractor Co., 113 F. 2d 629, 632. (7th Cir. 19403-!

Carroll v. American Federation of Musicians, 372 F, 2d.155, 162 (2d .

Cir, 1967), vacated on other grounds, 391 U.S. 99; see also Crawford

v. Texaco, Inc., 40 F:R.D.- 381, 385 (S. D. NA Y. 1966): Hess v.

Anderson, Clayton & Cot, 20 F:R. D. 466, 483 (5. D. Calif. 1957)...

.

the stockholders’ repudiation of Petitioner’ S position, his -

interests contlicted with those of the oe The lack of -

direct authority on: the iSsue—the Petition for Certiorari

cites nyne—indieates that the question can hardly be said

- to’ be of ‘w idespread and recurring. importance to the

oF ederal: Courts. Should the question ‘arise in the future,

its ‘résolution by the two Courts below provides dimple

guidelines for decisien consistent with the language and.

purposes of Rule 23, F.R.C.P. Determination of this. aspect

of the case be low thus eliminates any need for further con-

sideration by ‘this Court.- > + :

° . : . -

TH. There Is No Chesicaiaee For This Court To Review —

The Procedure Followed By The District’ Court In

Dismissing Petitioner's ne.

“The lack of merit tin Petitionic rs: position i is nowhere more

clearly demonstrated than in his le nethy argument that he’ *

was denied due process of law by, the trial Court's granting

of summary judgment in this case. Petitioner’s argument,

essentially ‘an effort té have this Ceurt’ second guess every

action of the District Céurt, is not supported by authority

and raises issues which have already been: considered by

another appellate tribungl. Noe of Petitioner’s numerous

contentions i is. of suflicient magnitude to justify review here.

Prine decisions of this Court cited by Petitioner are

plainly distinguishable, Thus, the language from Conley \

‘Gilson, 355 US. 41, 48 (Petition, p. 16) concerned an argu-

ment by respondents there that. the Complaint therein, filed,

by Negro empleyees contending their union was not repre-

senting them fairly, ‘‘failed to set-forth speéifie facts to

support its general allegations of discrimination, and that

oot , is.

its dismissal is therefore proper.’? 355 U.S.. at. 47. Re-

id.not seek dismissal because of

Pétitioner was disqualified

as a ice represcitatl eC ac had no legally cognizable

claim. : ; abet

Similarly, Petitioner ‘wholly misconstrues this gong

decision in Surow if v. Hilton Hotel Corp., 383 os: 363, | St2

Petitioner, himself an. attorpey, Was represented in botii

courts below by a nine- member law firm, yet he seeks by

inference to put hiniself. in the same category as-the ‘uns.

‘sophisti rated litigant” ‘so summarily dealt with by the;trial

Court in Surowite. There it was apparent that, as the Court

of Appeals had note “d, ‘*many of the material allegations ,of

the complaint. are trae and cannot be refuted’, 342 F. 2d at

607, yet the District Court dismissed ‘without requiring any ,

response from Defendants. -In language oe by ;Peti-

tioner, this Court held: | ¥ ne

\

1

“We cannot eonstrut Rule 23.0r ‘any ior one of: the

Federal Rules as compelling courts te summarily

dismiss, without any answer or argue nt at all, cases

like this whose grave charges of fraud are shown on

the reaord to be based‘on reasonable ie crow ing

=_—-*

Vout of careful investig atian. oe 383 US. i t 373.-(En-

“* . phasis added).

Here, an Answer was filed. A hearing was held. Respond-

ents’ Motion, together w ith Exhibits,was filed on July 17,.

1968, and oral argument on the Motion was held some three

months later, on October 15, 1968—adequate time. for Peti-

tioner and his counsel to prepare. Here too, dnlike

‘Surow itz, Petitioner pr eviously had filed a Motion for

Summary Judgment, which he subsequently withdrew buy)

. ‘ x

later renewed. And, -unlike Surowitz, the Complaint here

ean Aardly be said to be ‘based on reasonable beliefs

growing out of careful investigation.”’ — as

BN

ys ° Petifioner’s citation of Foman vy, Davis; 371 U.S. 178,

.

se .

to support his contention that the District Court. wrongly.

eg te er te ek -@® + z ‘o “ ‘

/g denied him leave to amend, is also wide of the mark. Homan

involved a situation worlds apart from-that here, anu held

that a District Court should have granted leave where the.

. . i 7 .

proposed amended complaint would have done no more

than state an alternative theory. 371 U.S. at 182. But here.

the’ proposed new pleading was identical in. all material

respects with the origihal pleading except. that it included

.

*a claim for money damages. Leave to amend’ would thus

have beemfutile. = : is

\

S: : : ° oS : Oo 3

Couley, Surowitz and Foman, like the other decisions”,

relied on by Petitioner, a thus factually distinguishable

and furnish-no authority for granting certiorari.

; ¢ :

“Apart fromthe fact the—Petitioner—has. not cited any ~

authority in point, the Court’should deny certiorari for the

additional reason that the arguments raised by Petitioner”

‘about the District Court’s dismissal have been fully. con-

‘sidered “by the Court of Appeals and found to be either

inacefirate or Without merit. Thus, Petitioner, intimates

that his counsel wag taken by surprise by Respondent’s

5 Anderson National Bonk vo Luckett, 321 U.S. 233, Schroeder V,

City of New York, 371 U.S. 208, and Mullane vy. Central Hanover

Rank & Trust Co., 339 U.S. 306,.cited in the Petition (p: 18), all

invelved the question whether statutory notice provisions comport .

with due process requirements. Petitioner, however, does not

challenge the notice provisions of the Federal Rules of Civil Pro-

cerure. Petitioner's reliagce on Hanngh v. Larche,, 363 U.S. 420, 442

(Petition, p. 18). is mystifying, since that°case concerns the due

process rights to be accorded by investigative agencies, an issue wholly

irrelevant here. a tad tc

4 va vo

*

| . : ees | 19 rea SA ’

moving to dismiss for failuregp state a ‘claim. Responder s’

Motion to Dismiss had been grounded on Petitioner’s failur e

to exhaust his intr acorporate remedies. But, when: Respond-- -

ents raised the Rule 12(b)(6)* defense at the oral argu. |

ment on the motion, Petitioner’s counsel, rather than ob-

jecting oF indicating he was wiprepared, craked strenuously

and at length that Respondents were-wrong in asserting that

_there was no damage to the corporation. Petitioner cannot

now contend that he was taken by surprise. As the Coal

of ‘Appeals held, ‘*. . the plaintiff fully argued this ground

at the hearing ane cannot complain a that the district

scourt considered it. ° [citing vases ].’ 419 F. 2d at 1115.

Moreover, the defense of fuilgre to state a claim had been

raised in the Answ er and the Answer was before the Court.

Similarly, Petitioner’ s objection to Exhibits aceomimpany-

ing Respondents’ motion to disniiss comes late’in the day.

As the Court of Appeals held, “The plaintiff did not com-

plain of “untinelinessin the trial court, although he did urge

the court not to’ consider the exhibits as evidence, *Since-

the plaintiff did not complain. about the late filing: in the

- trial court, he cannot do so on appeal.’ "419 Fi XV at 1116.

Georgia Southern and Florida Railw ay, Co. v. Atlantic Coast

Line Railway Co.,'373 F. 2d 493 (5th Cir. 1967) does not,

‘support. petitioner’s position. There, the losing party had

no notice before a hearing on a motion For. prehminary im- =

* junction that ‘‘a final ‘judgment would result from it.”

373 F. 2d at 497... ae Petitioner had known for three

sd oe .

® This Rule provides:

“Every defense, in law or fact, to a claim for saiet a in any

pleading, ‘whether a claim, counterclaim, cross-claim, or third-

party claim, shall be asserted in ‘the responsive pleading thereto.

except that the following defetises at the. option of the pheader

may .be made lw motion: . . (6) failure to’ state a claim

» ° . upon which relief can be granted . a

o

° -

months that Respondents would seek disniissal of his Com-

- / plaint. Petitioner-came to the hearing prepared to argue

; oD a

: eden

yee ° . °,¢ . » ® ; ‘

against the disjuissal. Petitioner also knew from Respond- .

ents’ Answer that they relied on the Rfile 12(b) (6) defense.

“

“(In challenging as he does tl

= Pa] : :

conchision of the Court of ..-

Appeals that ‘the procedy followed by the distriet court

in granting summary judgment did not involve reversible

error.” 419 Fl 2d at 1146, Petitiouer appears to be asking

this Court to assume the role of a trial Court and-hear once’

again his objections to, Respondents’ Motion to Dismiss.

‘That ts not this Court’s function. Hence it should deny. .

certiorari on this’as Well as on the other gretiids stated in

this Brief. , ie

*~ €ONCLUSION Weare.

The Petition for Certiorari raises no issué of sufficient -

magnitude to justify consideration by this Court, points to

no conflict of decisions, and shows no error by the Courts

helow. It is therefore respectfully. urged that the Petition. .

should be denied. °

Aim ~ ° ; ; . 4

” ‘

* — Crartes S. Ruyne

Courts OULAHAN - :

ALEXANDER YOUNGER

Stead 8 : ‘- Ruyne & RuyNne

i eintg S Saee 400 Hill Building

Pek OMNES a Ss Washington, D.'C. 20006

‘ _ * Attorneys for: Respondénts

July 24, 1970. | ae