Petition for Writ of Certiorari — BBF Liquidating, Inc. v. United States

OCTOBER TERM, 1971

&

No.

_BBF Liquip sini Ixc., *

"1- 963"

. Petitioner,

v.

-Unrrep States or AMERICA,

, . Respondent.

j

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS»

ba OR THE NINTH Gaoer Shes

ie i

| we Wuitney on SEYMOUR

One Battery Park Plaza

New York, New York 10004

Lavcaun i. WATERS’ ;

445 South Figueroa Street

Los Angeles, Califarnia 90017

ue Counsel for Petitioner |

Cyrus. R. Vance

Snipsox Toacuer & BartLetr

New York, New York

Ricwarp R. Martanp 5S

NossaMAN, Waters, Scott, ~~ /

- Kruecer & Riorpan

Los Angeles, California

Of Counsel.

- January 28, 1972

.

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INDEX

oN a ig ‘ ‘PAGE

~ Oprnrons BELOW .......... 9 igennnsnenmieniontuicsaciionancneiiesell a -

. . eee = .

TRIE — issn spose incense Se ciasasscacciiaeweion ye ae

Questiox en RETAIL TO AN 2

oa NG

STATUTES icviliwies iddcscsiapanuicscchehesciidihabiosceaaieaancesstticisiniiestlia ; 2

. “. a < . cree ‘

- , Sravrement.or-tat Case 2 eB

° | : a : - ae

- Reasons FOR GRANTING oe Wet... et

I. The decision Sie ¥ is in direct: conflict with the ~ ees

decision of the Tenth Cireuit Court of Appeals S “t/"

in United. States v. Safeway y Stores, Ants sad a

F.2d 834 {10th Cir. 1944) 22.2... Sededniscseesecesan aig? Fa -

. I. The Courtbelow has.decided an important ques- rk

* ‘tion of Federal Law w hich has not been settled : y

Lo this Court Ree nena Pier HOE Cine 8

; nt cane? , f

: Conciusion sh aha ani ee cers eee oe ia ae ae 18. pe

pote aa ‘ ' : see fe

Siegen A—Per Curiam opinions of the United & gy

Pe ae Court of Appeals for.the Ninth Cireuit onl .v

_ APPENDIX B—Statutes Wane on 4 21 :

ove wane | CITATIONS: ©

Cases / SA Ue ee see tee Pe ae

> Alamo Fence Company of Houston v. .U nited States, *

240 F.2d 179 (Sth Cir. aa, eo ueantineennerenaeoreaiepnicoc eas 11

Bank of Alameda County Vv. MeCotoan, 69 Cal. aoe 2d |

Te | at) Sepmnnsmeenemmonave Wervunnnvesiw saver ienrenee! en 1B ey

; ane v. ss of San Jose, v1 Cal, 3d 56 (1969), ae S

ii ?

a PAGE .

Cal Pacifie Collections, Inc. v. Powers, 70 Cal.2d 135

a en ene stad cieqaiebSaeamecciouss 17

pee v. Traders é General Ins. Co, 52 Cal. 2d 786

SUDED) nna enan canna enna een ctpenect en ageeenccceneneneesencmmne 16

Melrose Distillers, Inc. v. United States, 309 U. S. o2tl

. 1) ae ee 8, 9, 10, 11, 12

Techuicolor Motion Pictures Cor p. V. ‘Westover, 202

* A*.2d 224 (9th Cir. 1953): as ESE Oe Le Ca ORO 17

- Prubbwitch v. a Canning Co., 30 Cal.2d 335° vis

(1940) "13

United States v. Arcos Corporation, 234 F. Supp. 300

OE Re RN TD sna nc cacctnctesocseiinccececlaceneinnnnoennes

a i ‘ o .

United States v. Carter, 311.F.2d 934 (6th “Cir. 1963}. °5

United States_v. Cigarette Merchandisers Assi, Ine.,

136 F. Supp. 214 (S.D.N.Y, 1955) 0: 12

United States y. Globe Che »*mical Co., 381i F.Supp. 535 ea

Be RTE IR ald ae eh caret aC an)

United States v. P. F. Colliér €: Son Corp., 208 F.2d oe

6 toate OD 15

United States v. Safeway Store s, iain 140 F.2d 8354 <;

Ce ae, Se oe anna 0, 1,9

United States v. San Diege Grocers s Associntion, TIne.,

177 F.Supp. 352 (S.D. Cal. 1959) 2. 5, 6, 7, 10, 1, 16

| - United States v. Seaboard Coast Line R.R. Co., 326

F. Supp. _ pee Fla. _ sepetesneeeeeencneeceenct ates essceneee D

Statutes . 5 - Bets eth 1 A

: in elm a. ‘

Aa yt “ mans * oe ; PAGE ‘

_ Sherman Act, Section 1, 15 U.S.C. Se Siete D4, 6, 11,17,21 —

Sherman Act, Section 8, F5 S.C..§ 7. acne SY 1

i OE: 6 308 Seninener PO PEaea mea

“18 U.S.C. § 3731 ..:..- ee ae ae

28, U.S.C, §1254(1) - Reet ctee oe Ss

Cak Civ. Code { ¢ 200:(1988) ree 13, 15, 16°

Cal. Code of Civil Procedure, § § 22; 24 ceemeemiaee 22

-_ (al. Corp. Code, § 5012 en : me Bek cheat 13

Cal, Corp. Code, § 5400 nejcceneen-n6, 12,14, 15, 16, 17, 24

_ Cal. Corp. Code, § 5401 Pisces everett ee 6, 16, 17, 22

Del: Code, Title 8, $2 "Seer oe es bee ate 14,15

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eee THE

| a Cowt of the Buited States

OCTOBER* TERM, 1971

ee ’ BBF Liquiatine, ‘Inc, WB: ct , 2

nee noe aaa er "Petitioner, -

- Ss ; ae e

‘Unirep Statey oF AMERICA, . -

alas: i: Nie Respondent.

PETITION FOR WRIT OF CERTIORARI TO |

THE spa STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT -

. @

’. Petitioner, BBF souineiual Inc., prays. that a’ weit of

prnreay issue to reyiew the judgment of the United States ~

Court: of Appeals for the Ninth Circuit. rendered in this ~

- cause. on — 14, 1971.

ae

e

_

“Opinions Below

> The District Court for the Central District of California Be

‘granted Petitioner’s motion to dismiss’ the indictment and

. rendered no written opinion thereon. The per curiam opin-.,

¥ jon of the. Court of Appeals for the Ninth Cirenif reversing

has not been’ officially reported. It is reprinted. herein as

Appendix A.’ (App. 19.) ane has also reprinted in

. , Appenets A the per curiam opinion of the Court of Appeals

- for the Ninth — denying’ its petition for rehearing i in

/ / bane. (App. 20.) . es 7 ?

|

\

2

Jurisdiction _

The ‘Salita of the Court of Appeals for the Ninth Cir

cuit was entered on Octg®er 14, 1971. Petitioner filed a\,

Petition for Rehearing in Bane on November 8, 1971. Sueh °

- Petition was denied on November 29, 1971. On December

22, 197 1, the Honorable William O. Douglas extended thé

time for filing this Patition to and igtlnding January 28, -

1972. The jurisdiction of this Court is invoked under 28

U.S.C. § 1254( a

Question ieoianat

Whether Petitioner, a California corporation which was

liquidated and dissolved prioy to the institution of any pro

ceeding leading to its subsequemindictment for an alleged. .

violation of Section 1 of the Shetnn Act, ean be deemed

@ of the Sherman Aet so that it could ‘be validly in

under rsa 1? -

. an existing “person” within the m aning of Sections nt

dicts

. a

Statutes Involved -

The statutes involved are Sections 1 and 8 of the Sher-

—jnan Act (15 U.S.C. §§1, 7), and Sections 5400 and 5401

of the California’ Corporations Code, Cal. Corp.- Code

. © $5400, 5401 (West 1955). Fach of the forecoine statutes

are set forth in Appendix B merete, (App. 2t-22.)

.: ‘Statement of the Case |

Petitione +. BBF Liquidating, Ine. (hereinafter “BRF”),

“was one of four corporations indjeated on May 26. 1970, in

Los Angeles, California fer an alleged violation of Section

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1 of the Sherman Act.' The jurisdiction of the WNnited °

States. District Court for the Central a of California

was. invoked under 18 U.S.C. 63231. + .- *.

Prior to November 27, 1968, BBF was engaged ji in the

business of manufacturing and selling certain snack foods

“(such as potato chips and corn chips). in California, Nevada

. and,dtizona’ Pursuant to the terms of an acquisition

_ agr nent among BBF, Sunshine Bisenits, Ine. and others

dated November 8, 1968, BBF transferred all of its operat-

ing assets. to a subsidiary of Sunshine Biscuits, Ine., on

November 27, 1968. (R. 24, 3.)' Subsequent to that date,

BBF has not conducted any business. (TR12.% _

In retutn for the transfer of its operating assets, BBF .

received certain shares 6f the common stock of American

BrandsgJ ne., the parent company of Sunshine Biseuits, Ine.

On or before January 24, 1969, BBF distributed jts assets,

infeluding the American Brands comnion stock, to its share-

holders in liquidation: and, on January 28, 1969, BBF was

dissolved under. California law. (R. 24-25, ©5-6.) As a

result of the aequisitiowsSunshine Biscuits, Ine. obtained

~ 100% control over < operating assets and’ BBF’s

Shareholders reétai no further interest in these assets.

1. The other defendants. Frito-Lay. . Granny Goose Foods,

Inc., and Pet., Inc., later pleaded nolo ond ndere and were fined.

These parties have not been nattied in this Petition aml it is peti-

tioner’s belief that these noes have no interest in the outcome

of this case before this Court.

2. Prior to Novembet 27. 1968. RPF transacted sities under

the name of Bell Brand Foods, Lid.

3. Reference to pages of the Record filed in the Circuit Court

of Appeals for the Ninth Circuit and certified to this Court by the .

Clerk of the Circuit Court wll be designated by “R” followed by

the appropriate page’ reer Se and the Supplemental Record. con-

sisting of the réporter’s ¢ranscript. of proceedings before the District

Court, will be designated by “TR” followed by the appropriate page -

numbers. Reference to the other materials certified to this Court

will be specifically identified.

it

4

A

BBF’s dissolution was ‘effec ‘ted prior to the ecanalling

of the federal grand jury in April 1969, and more than one

year prior to the refurn of the indictment on May 26, 1970.

At no time prior to BBF's dissolution did its management

or shareholders have.any kitowledge. that criminal proceed-

ings of any kind, ineluding a grand jury investigation, were

contemplated. (R. 25,-7 8.)* -

Since the date of dissolution, all of the shareholders of

BBF have either retired or are. engaged in business anre-

lated to the snack foods industry. (R. 24, § 7. \

the Proceedings ‘Niles

_ On October 28, 1970, following the return of the indict-

ment, BBF filed a motion in the District Court to dismiss

‘the indictment on the ground that it was not a “person”

‘within the meaning of Section 8 of the Sherman Act and

therefore could not be prosecuted for an alleged violation

of Section 1. On November 2, 1970, the District Court

granted BBF’s motion from the bench and dismissed the

indictment against it.

In‘ ruling »pon the motion, the ‘District Court observed

that the cases upon which Respondent relied were dis-

tinguishable in that BBF had totally discontinued its busi- ,

ness prior to the indictment. and had transferred its assets

to a different ownership. (Tr. 12-13.)} On November 27,

1970,’ Respondent filed'a “Petition for Rehearing,” and on

December 21,.1970, the District Court denied this reqnest.

_ On January 20, 1971, Respondent filed its notice of ap- .

peal to the Court of Appeals for the Ninth Cireuit under

18 U.S.C: § 3731. The appeal was argued before the Honor: ©

able Richard H. Chambers and the Honorable Herbert Y.

C. Choy of the Court of Appeals for the Ninth Cirenit, and

4. Respondent conceded in. the- court below that BBF’s dissolu-

tion was effected in good faith and without “foreknowledge” of the

instant criminal proceeding. (Brief for-Appellant soos scan be-

sore the Circuit Court of — at 10.) -

. &

ee,

e . ot | 5

the Honorable C..A. Muecke, District Judge. On October

14, 1971, an opinion per curiam was rendered by the Court -

of Appeals, reversing the judgmient of the District Court

and holding that a dissolved California corporation can-be |

federally indicted after dissolution. (App..19.) A Petition

for Rehearing in Bane was filed with the Court of Appeals

on November & 1971, and was, denied per curiam on No-

vember 29, 1971. |

The time to file this Petition was extended to and inelud-—

ing January 28, 1972, by the Honorable William O. Douglas

on December 22, 1971. |

REASONS FOR GRANTING THE WRIT _.

, >

The decision below is in direct conflict with the

decision of the Tenth Circuit Court of Appeals in

United States v. Safeway Stores, Inc., 140, F.2d 834

(10th Cir. 1944). ie.

*

The only decisions ruling upon the question whether a

criminal prosecution can be instituted against a dissolved

- California corporation,-other than the lower court decisions

in this ease, are ["nited States vy. San Diego Grocers Asso-

‘ciation, Inc., 177 F. Supp. 352 (S.D. Cal. 1959), and United

States v. Safeway Stores, Tnc., 140 F.2d 834 (10th Cir.

1944).5 | ’ | |

5. United States v. Carter, 311 F.2d 934 (6th Cir. 1963), is also’

jn conflict with the Tenth Circuit's decision to the extent that it held

a dissolved corporation may be indicted subsequent to ‘dissolution —

although an Ohio statute was there invglved. Other conflicting cases -

involving ‘the general question of the indictment of dissolved corpora-

tions include United States v. Seabord Coast Line R.R. Co., 326 F.

Supp. 897 (M.D. Fla. 1971), which held that a criminal prosecution

could not be commenced against a dissolved Virginia corporation, and

United States v. Globé Chemiéal Co., 311 F. Supp. $35 (S.D. Ohio

1969) and United States v. Arcos Corporatien, 234 F. Supp. 355

(N.B.- Ohio 1964) which respectively. held that criminal prosecutions

could he commenced against corporations dissolved under Ohio and

Pennsylvania law. -

? | 6

‘The decision of the Cireuit } ery below adhered to the

district court’s holding in San Diego Grocers that a erimi-

nal prosecution may be commenced against a dissolved

California corporation. . This is in direct conflict with the

Tenth Cireuit’s decision in Safewag which, conversely, held

that. a dissolved California corporation did not eontinue to

exist for purposes of criminal prosecutions commenced

after its dissolution.

In Safeway, the defendant corporationswere dissolved ©

— _pursuant-to the laws of their respective states of i ineorpora-

tion prior to the return of an indictment against them for

alleged Sherman Aét violations. De ‘fendants moved to dis-

miss the indictinent on the round that no criminal proseeu-

tion could be instituted against them following their. dis-

solutions. In assessing the effect of dissolution upon the

eriminal prosecution, the Tenth Cirenit construed the stat-

-utes of Calffornia, Delaware; Nevada and Texas, the respee-

tive states of incorporation, to determine whether the de-

fendants were “persons”. as that word is used in Section 1

and defited int Section 8 of the Skerman Act.

The precise language of the California statute construed

in n Safer ay, in pertinent part, provides:

“A corporation ‘which is dissolved by the _expira-

tion of its term of existence. by order of eourt, or

otherwise, nevertheless shall continue to exist for

the purpose of winding‘ up its affairs, —-

and defending actions by or against it, ... .*

‘Since the Califernia courte had not ruled upon the con- ~

. struction of the word “actions,” -” Tenth Cireuit focused

5. The statute construed by the.court in Safeway wa's Section 399-

of the California Civil Code. Three years after the Safeway decision,

this provision was re-enacted’ without change as Sections 5400 and .

* 5401 of the pm Corporations Code.

: *

its inquiry upon several cases from, the ‘ale of Ohio,

Pennsylv ania and Massachusetts, which construed the word

“actions” to include only civil litigation. The Tenth‘Circuit

then held that the Calitornia corporate defendants did not

continue to exist for ar pate of criminal prosecution ‘and

that the word “actions,” as used in the California statute,

- Ineludes “civil actions —: does not embrace criminal prose-—

cutions.” 140 ¥. 2d at 83

The Court of Appeals i in a thie case, howev er, said that it

“generally” elected to follow the District Court’s decision .

in United States v. San Die go Grocers Association, Tne. 177

I. Supp. 352 (S. D. Cal. 1959). In San Diego Grocers, the. |

district court ‘specific ‘ally re jected. Safeway and held that a

California corporation did continue to exist under Cali-

fornia law for purposes 6f criminal ives com-

‘menced after its dissolution. a.

The San Diego Grocers ease.is factually ity diatingsishahie

in important ftespects. There, the sole owner and president

of the dissolved defendant corporation, .after becoming

aware of the pending grand jury proceedings, caused the

defendant to transfer its assets to ‘another corporation.

under his control-and dissolve, seemingly in an attempt to”

evade prosecution. Tn the case at bar. however, BBF was

‘ dissolved. prior to the impaneling of the grand jury which

ultimately returned the indietment and was not aware that

any criminal proceedings were contemplated when it dis-

solved. Moreover, its shareholders did not retain any con-

trol over the operating assets,

. The present conflict between*the Ninth and Tenth Cir-

- enit Courts of Appeal ha ated a federal question of pub-

lie importanee—whether- 2 a er}minal prosecution under the

ieee — en Act’ nay be commenced ag rainst a dissol¥ ed cor-

poration in the absence of a state statute providing: for the <7

‘surviv al.of state or federal criminal prosecutions,

- Such a question involying an interplay of federal jet

R45 state law has been deemed appropriate’ for consideration by:

this Court. As stated by Mr. Justice. Douglas in Melrose «

Distillers, Inc. v. United Stutes, 309 US. 271 (19: 59):

“We have fYere a situation whete the eae’ of

federal and state law makes it clear that’ petitioners

did -not escape eriminal ie ri under the

Sherman Act by the kind of dissolution decreed

4q tnder Maryland ae Delaware law. * at 272. ,

Unlike the. Melros. se case which focused upon the question

of whether an antitrust action abates against a corporation

which a hg ‘ing the pendency of the-action, this case

involves. the question. of whether the right’ ta, commence a :,

.eriminal antitrust’ prosecution is entirely barred by. the

prior dissolution, “where there is no. possible claim of bad —

“faith i in the dissolution.

Bb ae we

The Court below has decided an important question

of Federal law which has not.been settled by this Court.

In Melrose Distillers, Inc. . United. States, supra, this’

Court held that a pending ee proseention against an

existing corporation could. not he ahated by the corpora- -

tion’s subsequent dissolution. This Court, howev er, has

. not ruled upon the question of whether 4 eriminal proseen-

tion not pending against a corporation at the time of its.’

- dissolution survives the dissolution and may. thereafter be

commenced, - ; | 4

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Indeed, the policy considerations involved in thie question :

of abatement. of a pending prosecution are significantly

different -Than those involved in the. question whether the, ~ - > g

‘right to commence a eriminal’ prosecution: survives a cor- ee

poration’s dissolution. « ~ - ta

In Melrose, a Delaware and. a “Maryland corporation, :

both wholty- owned subsidiaries of Schenley, Industries, ° Mg

Ine:, were indicted: for alleged violations of thésSherman.

Act. “Shortly after the indiétment w as¢returned, these cor:

porations were dissolved under the laws of their respective ©.’ .

states of incorporation and heeame separate divisions ofa

new wholly-owned subsidiary of Schenley. Both ¢orpora- -

tions moved to: dismiss the indictinent against them on the - .

-ground ‘that . their Aissolutions abated ‘the criminal. ;

prosecution. =~ | iA 2 : |

Following an ‘extensive: analysis of the: controling Dela- ~ be

" war@eand Maryland statutes, the -district court-held that Pe > “te

i tlconae of those statutes was sufficiently broad to I

continue the existence of the defendants for purposes of =

minal; prosecution: The Cirenit Court of Appeals for

the Fourth Cireuit affirined. This Court noted a conflict

among the cireuits concerning this question of abate ment,

granted ‘certiorari and affirmed?

The corporate defendants in Melre e were awate of thie

pendmg criminal prosecution prior to éheir¢ respective

dissolutions. The facts were further aggravated in that,

“after the dissolution, the business of those corporate de-

fendants was continued under the same ownership. Bes =e

a7

7. Although this Coutt. did not discuss the Safeway decision i in

its opinion in Melrose, which reversed sub silentio Safeway's cén-

struction of the significantly broader Delaw are ‘survival statute, Safe-

ways construction of the California statute has not t been considered

by this Court.

—

Peete

This Court was ‘undoubtedly. concerned Leet permitting

the evasion of criminal prosecution by. voluntary ‘dissolu-

tion, stating: ~ pag oy ar 3

“Policy reasofis look to the same result.. Peti-

tioners were wholly owned subsidiaries of Schenley

Industriés, Inc. After dissolution they simply he-

‘caine divisions of a new corporation under the same |

ultimate “ownership. In this situation there is. no.

more reason’for. allowing them to escape ‘eriininal |

penalties than damages i in civ ivil suits. . .” 39 U. 8.

at 274: 7s | a |

?

°

3BF was not aware at the timé of its dissolution or prior

thereto that it would subsequently be indicted and, unlike

the ‘situation i Melrose, BBF transferred its operat-

ing assets to ibs, Neen entity -.nder entirely different

ownership. Moreover, its: shareholders divested themselves

of all control over BBF’s operating assets (R. 25,- 4 7.)

’ The complete. good faith in which they acted, conceded .

by the Government below, precludes the use here of, the’

policy considerations which led to the decisions’ in Melrose

and San: Diggo- Grocers. There is no, occasion here to.

streteh the state statute beyond its intended ambit: to per-

mit prosecution of a.dead entity without existence or assets

to pursue. abn

As a result of the conflict. which now exists be veen the

Ninth and. Tentli Cireuits, and the absence of anv ruling.

on this question by this Court, the petition for a writ of

ce rtiorari should. be granted.- While the question is a nar-

row one, it is important for the Gov ernment and defendants

to. know what former entities ean or cannot be indicted and,

as the decision below “was erroncous, the indictment here

should not be permitted to stand. a

1

”

o me oe a eo"

The Circuit Court of Appeals Erred In Holding That

_-The California Survival Statute Conferred -Sufficient

-- “Vitality” Upon A Dissolved Corporation To Be

' Deemed An Existing “Person” Under The Sherman

Act. “3

- AM decision of the Court of Appeals in this case is par-

even if the California surviv al statute continued the exist- |

ticule ‘ly significant because of tlie question which it decided

‘by endorsement. . In the Court of Appeals, Respondents,

relying on Melrose, argued that, even if the California stat-

ute continued the existence of BBF after its dissolution

. only for purposes of civil cases, BBF still had sufficient

“vitality’’’to be an “existing” person within the meaning of .

Sections. 1 and 8 of the Sherman Act. (Brief for Appellant

[Respondent] before the Court. of Appeals, at: 12, et seq.) .

Although the Court of Appeals did not expressly discuss

this question, it chose “generally” to follow: ‘the ease of

-United States v. San Diego Grocers Association, Inc., 177

F.Supp. 352 (S.D. Cal. 1959). In Sax Diega Grocers, the

district court affirmatively. stated that a federal criminal

prosecution under the Sherman ‘Act would. not. be barred

-ence- of a dissolved corporation only for the purpose of

prosecuting and defending civil actions. 177 F.Supp. at 354.

“The: question is of extreme publicimportance since: it

involves the determination of whether the federal govern-

ment should be permitted to prosecute’ a corporation dis-—

solved under State law when that State has decided that no

prosecution, federal or state, should be permitted4

ics

8. This is significantly different than the question of whether a

~ State can continue the éxistence of a dissolved corporation solely for

purposes of state prosecution while immunizing it for purposes of

federal criminal prosecution. See, Alamo Fence Company of Hous-

* ton v. United States, 240 F.2d 179, 183 (Sth Cir. 1957}. -.

\

This question clearly could affect dissolved corporations

in the many states'where they are continued in existence for

any purpose. As évideneed by ‘the conduct, in the case at

bar and i in the several cases cited in footnote 5, supra, ‘Re-

spondent apparently intends: to. continue to institute such

_eriminal proceedings against dissolved corporations gen-.

- erally. Until such tinieas this question i is decided, dissolved

corporations will be forced to defend such prosecutions: and

_ eontinue to challenge-the Government’s theory on tliis issue: ,

More speeifigally, corporation§ digsolved: under California

law will continue to be buffeted by the conflict here: —

this Court resolves it. |

Assuming; as BRF aaa Section 5400 of the Cali-.

fornia a Code ‘(generically referred to as the -

California survival statute), continues the existence of a

dissolved corporation solely forspurposes of civil litigation,

‘the question. which » this Court should resolve is whether

-such a limited. existence is sufficient to render ‘the dissolved

eprpor ation stibject to criminal prosecution under the Sher- --

man Act. . .

There is no. question that a ‘corporation, at common law,

* eeased to exist for any purpose’ upon its dissolution in

accordance with the laws of its state “of incor poration.

Melrose Distilters, Inc. v. United States, supra, at 272. This

common law rule, however, often operated to the detriment

of both creditors and shareholders of the dissolved cor po-

ration by cutting off all claims by or. against that corpora-

tion. See, ‘United States vi Cigare tte Merchandisers Assn.,

Inc., 136 42 Supp. 214, 9245 (S.D.N.Y. 1955): )"(he purpose of

keeping a corporation in existence for certain pur poses after

its dissolution is “to-ameliorate the unjust and harsh results’ \

to creditors. and stockhdiders alike if the strict common law

doctrine of corporate’ death and abatement were applied”).

Accordingly, most jurisdictions, including California,

have enacted statutes that continue the existence of dis-

a

0. ‘See p. 14, et seq., infra.

,

4 « . > ~

j e 4 . 2

: - > ee . 2

ve -

oO

Q

au

te °

A ‘

e

solved: corporations in order to permit each such corpora-

tion to enforce. its inchoate claims for the ‘benefit of -its

shareholders. Under these: statutes, any person damaged

by a corporation may enforce his claim subse quent to the

corporation’s dissolution. Sce®, Bank of Alameda County v.

od 469 Cal. App. 2d 464, 471 (4945) (the survival sta- |’

ite” is “for the protection. of both thé corperation and the

_public. A way is set ur to protect creditors. ... "aa

The purpose of a er iminal' prosecution is achieved by the °

* imposition of: a pefaity. In California,and in most juris-

“we

dictions, the assets of a dissolved “corporation \ lich ave

distributed to its shareholders remain. subject t¢ an equi-

-“table charge for the debts of tlie corporation. See, Cal.

Carp. Code § 5012 (West 1955); Trulowitch v. Riverbank

Canning Co., 30 Cal. 2d:335, 845 (1947). - : 7

Thus, if criminal liability: is. established against a this.

solved corporation which has. distributed all of its assets

in dissolution‘and a fine is impesed, the shareholders of that

- corporation will be liable for the payment of a. fine to

the extent of their respective distributive shares. Sincga

-eriminal fine imposed against a dissolved corporation would

were thereby reduced. - :

have to -be paid fram the assets’ distributed ‘to the share:

holders, the'ability of creditors s or other persons to satisfy

their sloduen would be 1 impair ed to the extent that sitch assets

The institution of criminal charg es against a°dissdlved

: corporation: serves no useful pur pose. Such a éorporation

clearly has no capacity to,cémmit a crime and its prosecu-_

tion is not necessary to deter it from futurk valaivful con-—

duet. Just as the imposition’ of a criminaMme against

the estate of an individual wauld have the undesirable result

+

“~

10. . Former Section 399 was before the Court. |

“a

Ped

14

‘ of punishing th: at indiv idual’s heirs, the imposition, of a

-eriminal fine against a dissolv ed’ corporation would result

in the punishment of its non-management shareholders for

a crime committed by the corporation and its makagement,

even though such. shareholders were not parties to that

prosecution and were not charged with any wrongdoing.

Under California Law No State or Federal Criminal

Prosecution May Be Commenced Against A Dissolved

Unlike other jurisdictions whose statutes refer to “ae- Y

tions, suits or proceedings” which must be commenced with-

in a specified period of tyne," Califortia has chosen not to

go any fyrther than neee4aary in abrogating the common law

principles of abatement 4

creditors and shareholdegs. -BBF re spectfully submits ‘that

this Court should he it a criminal prosecution may not

he commenced agains California corporation after ‘its

flissolution, certainly wityre the dissolution was effected

without anv knowledge of the likelihood of prosecution.

The legislative history of the California survival statute,

— ~ , ae : ‘oa. a .. 2: "

Section 5400 of the California Corporations Codé, requires

the conelusion that the Statute does not, and was not in-

‘.tended to, continue the existence of a dissolved corporation

s

for purposes of a criminal prosecution instituted after

dissolution. “

‘The language of Section 5400 is clearly much narrower

than the language of comparable statutes in other jurisdic-

meagan corporation continues to exist for the pur-

_tions. Por example, while Section 5400 provides that a dis-

OV

‘It. See, a. a. Detiw: are General fenpen ration Latv § 278, 8 Del. Cc.

§ 278 at p. 15, infra

dl survival for the protection “of -

15 se ee

pose of prosecuting and doting “actions” by or against °

-it, the analogous Delaware aetate provides:

“with respect to any action, suit,.or proceeding

he un or commenced by or against the corporation

within three vears after the date of the expiration or

dissolution, the corporation shall. only fer the pur-

pose of such aetions, suits or proce dings, so

or commenced, be continued bodies corporate beyond

the three-year period and until any judiments,

orders, or- decrees therein shall be fully exectited.”

S Del. C. § 278 (emphasis supplied). -

=

-

In contrast to the plethora of cases cited by Respondent

in its brief in the Court of Appeals constrning the word

“proceedings” to embrace criminal prosecutions, the eases _

construing the word “actions,” with the single exception of

San Diego-Grocers, have consistently held that-it includes

only civil litigation... United States v. Safeway ‘Stores,

Ine., supra, 140 F.2d at S38-39, and the cases éited therein:

See also, United States v. P. F; Collier & Son Corp., 208

F.2d 936, 939 (7th Cir. 1953) (“the word ‘action’ standing

alone might reasonahly he Ine Id as nof including a criminal

proseetition. . ...”).

The, legislative re-enactment of the California survival

-statute also supports this construetion. Just three vears

_after the Tenth Cirenit’s decision i in Safe way. the Califor-

nia legislature re-enacted Section. 299 Of the California.“

Civil Code without change gs Sections 5400 and 5401 of the

Corporations Code. Since Tt is the regula? practice of the ~

legal staff of the California legislature (The Legislative

Counsel), to review the existing law in connection with

areas of proposed legislative enactments. the legislature \

was umloutbtedly aware of the Tenth Cirenit’s construction

of Section 399 when it enacted Section 5400. . ;

A legislature which re-enacts a statute without change »

is iresnmed to have adopted the-existing judicial construe- -

tion thereof. Bishop v. City of San dose, 1 Cal. 3d 56, 65 —

id

Ue

(1969) (estatutes are to be interpreted by axsuming* that

the legislature Was aware of the existing judicial deci-

sions”), See also, Jensen vy. Traders & General Ins. Co., 52

Cal. 2d 786, 797 (1959). If the legislature had disagreed

with the Tenth Circuit's construction of Section 5400 in

Safe way, it surely would haveamended that Section to ex-

geod include ¢riminal prosecutions. ,

| Nevertheless, the district court in United States ¥. San

Diego Grocers ‘Axsociation, Luc,, supra, construing thé word

“actions” in, Section.3400 to include criminal prosecutions,

relied on Sections 22 and 24 of the California Cade of Civil

Procedure which define the word “action” to inelude erimi-|

nal prosecutions. However, nowhere in the history of See--

tion )400 does it appear that the. legislature considered

these two provisions, enacted in 1872, when it enacted. See-

tion 399 and, later, Section 5400 as part of two entirely

different codes—the Civil Code and thé Corporations Ci ‘ode.

In view of the fact that Section 399 and Section 5400 were

both enacty(! more than half-a-century after the 1872 defini-

tion, it is unlikely that the legislature was mindful of: these’

provisions when it again used the word “actions” in ‘Section

5400. :

A comparision of Section .5400 with Section 5401, Cali-

fornia’s abatement statute, clearly illustrates the limited

seope of Section 5400. Section 401] provides that “n

[pending] action. or proceeding to which a ane ca is

a party abates by the dissolution of the corporation. . . .”

(Emphasis added. ) By ineludine the words “or proceed-

ing” in Section 5401, the. California -legislature pr. vided

that a pending criminal prosecution against a corporation

would not abate by reason of its dissolution. y

“Even if the 1872 provisions were to he considered, how-

ev er, they should not-be regarded as controlling. Tt would

f-

Pa

be itmproper to treat Section 5400 as incorporating a term

dealing only with abatement and to do so ould make the

language of Section 5401 superfluous—an egregious result

which is unacceptable. This would also run afoul of another

basic maxim of statutory construction—* . . . that effect

“must be given if possible to all words and parts of a statute .

so that none will be insignificant or meaningless.” Techni-

color Motion Picture Corp. v. Westover, 202 F.2d 224, 228

(9th Cir. 1953). See also, Cal. Pacifie Collections, Inc. v.

Powers, 70 Cal. 2d 135, 139 (1969).* | . 2

BBF respectfully submits that the Ninth Cireyft’s con-

struction of Section 5400 of the California Corporations

Code holding that a dissolved California corporation. may —

he subsequently indieted under Section 1 of the Sherman

Act was in error: ne

4

18

CONCLUSION

-For the foregoing reasons, the petition for a writ of

certiorari should issue to review the judgment of the United

States Court of Appeals for the Ninth Cireuit rendered in

this cause on October 14, 1971.

Respectfully submitted, —

Wuitney Norto Seymour

One Battery Park Plaza

New York, New York 10004

Lavcnuw FE. Waters

_ 445 South Figueroa Street

Los: Angeles, California 90017

Counsel for- Petitioner

Cyrus R. Vance

- Srvpson Tuacuer & Bartiettr

New York, New Fork: —

~ Ricwarp R. Marsranp ~

NossaMax, Waters, Scorr,

Kruecer & Riorpan ,

Los Angeles, California bg

Of Counsel.

January 28, 1972

a 19

; _ APPENDIX A

UNITED STATES COU RT OF APPEALS”

* F6ér THe NINTH Circvit

No. *71-1360

Unirep States or America,

=o,

- a .

PE ~*S>- & ~—-_"

BBF Ligcmatinea. [ne.,

: ee Appellee.

. | Octoher4 4, 1 971 T

Appeal from the United States Distriet Court for the

- © Central District of California —

?

: Before: CH AMBERS and CnHoy, Cire nit Judges, and Mvecke,*

_ District noe.

PER Curr: :

The order dismissing -the indjetme nt, against BBF Liqui-

dating, Inc. is reversed, ‘The district court is directed to |

reinskate the indicetment.-

The Jquestion is whether a dissolved California corpora-

tion can be federally indicted after. dissolution. Here the

district court seems to have follow ed United States v. Safe-

"way Stores, "ne., 10 Cir.. 140 F.2d i 7 ;

dlowever, generally we elect to follow Uniied States. *.

— Diego Grocers Association, Inc., 8.D. Cat.. 177 F. Supp.

392, which reaches an opposite r ae from Safew ay, supra.

We take San Diego Grgcers Associ ation to he a holding

that a dissolved Califorttia corporation has the same vitality

for all criminal prosectitions as it does for civil actions.

* The Honorable C. A. Meaiie United States District Judge for .

the District of. Arizona, sitting by designation,

Ss | A ppellant,

™

2

UNITED STATES COURT OF APPEALS

For tHe Nintu Circuit

No. 71-1360

~~

| Unirep States or AMERICA, gor ty

eee ce ae cee | eee ! Appellant, |

2 tl . vs.

BBF Ligquipatine, Inc.,

Appellee. ~

‘ > 7 ?, = .

| Before: Cuambers and Cuoy, Circuit Judges, and Mvecker,

: District Judge. |

Per Curtam:

The petition for rehearing is denied - the suggestion

for a rehearing en ‘bane is rejected. >

- -The. suggestion fora rehearing en bane has been passed

to all active judges of the Court and none has requested a

rehearing en hesecuad

; s

: J

4 e .

’ =

~élared by sections 1-

- APPENDIX B

Section 1 of the Sherman Act, 15 U.S.C. §1,

Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce

. among the several States, or with foreign ‘nations,*is de- .

clared to be illegal. . .°. Every person Who-shall make any

contract or engage in any combination or conspiracy: de-

7 of this title to be illegal .shall be

deemed guilty af a misdemeanor, | and, on conviction

thereof, shall be punisied by fine not exceeding fifty thou-

sand dollars, or by imprisonment not ‘exceeding one year, or

by both said punishments, in the discretion of the court.

Section 8 of the Sherman Act, 15. U.S.C. $7

The word “person”, or “persons”, wherever used in .see-

_tions-1-7 of this title shall he deemed to include corpora-

_tions and associations existing under or sperined by the

lays ‘of either the Whited States, the laws

of any df: the

Territories, the laws of any State, or the laws of any for-

eign country: | ; 7

-

Section 5400, California Corporation Code

A corporation which is dissolved by the expiration of

its term of existence, by forfeiture of existence by order, of:

court, or otherwise, nevertheless continues to exist for the

purpose of winding up its affairs, prosecuting and defend-

ing actions by or against it, and enabling it to collect and

discharge obligations, dispose. of and pier th property,

and collect and divide its assets, but not fox the purpose .

of continuing business except so far as necessary for the

winding up thereof. (Stats. 1947, ¢. 1038, p. 2399, § 5400.)

é ps.

- 22 : | : .

Srcriox 401; ‘California Corporation Code e:

* No action or - proceeding to. which a corporation. is a party -

abates by the dissolution of the corporation or by reason

of proceedings for dissolution and_ winding up thereof.

(Stats. 1947, ¢. 1038, p. 2399, $5401.) . Wes

‘

- Secrion 22 California Code of Civil Procedure

An action is an ordinary proceeding in a court of justice

by which one party prosecutes another for the declaration, 5

enforcement, or protection’ of a right, the redress or pre- ’

_ vention of a wrong, or. the ‘punishment of ‘a public offense. .

| = nacted: +22. 4s amended Stats. 1933, -c. 742, p. or

¢

SECTION Oo, California Code of Civil Procedure

Drvisions or Actioxs. Actions are of two kinds:

* S

1. Civil; and, ©

2 Criminal (Enacted 1872.)

yr om.