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AMERICAN BRAKE SHOE & FOUNDRY CO. v. INTERBOROUGH

August 2, 1933

AMERICAN BRAKE SHOE & FOUNDRY CO.
v.
INTERBOROUGH RAPID TRANSIT CO.



The opinion of the court was delivered by: MANTON

MANTON, Circuit Judge.

There are pending before this court (a) an application to confirm the report of the special master recommending that the application to remove William Roberts and substitute Nathan L. Amster as receiver of the Manhattan Railway Company be denied and (b) the petition of the Manhattan Railway Company for the appointment of Nathan L. Amster as coreceiver.

While these applications were pending and undecided, an affidavit of personal bias and prejudice of the presiding judge was filed by the Manhattan Railway Company. That affidavit and the circumstances of its presentation will first be considered.

 This alleged affidavit of personal bias and prejudice, sworn to July 20, 1933, by Secretary-Treasurer Mullin of the Manhattan Railway Company, was left with me on July 20, 1933, in the afternoon by Mr. Franklin's representative, who then stated that Mr. Franklin wished me to read it before he formally filed it. After reading it, I requested Mr. Franklin to call at my chambers, which he did on July 21, 1933, in the afternoon. After a conversation, which I do not deem necessary to repeat in this memorandum, and which is grossly misstated in Mr. Franklin's affidavit of July 27, 1933, Mr. Franklin asked leave to withdraw the affidavit, stating that it was filed under a misapprehension. I told him that I could only permit this to be done if he filed a formal application for its withdrawal. Upon his promise that he would do so, I permitted him to take the affidavit with him when he left my chambers on that day. He complied with this requirement later that day. The withdrawal notice thus served upon me will be filed with the affidavits and other papers in the clerk's office.

 After 4 o'clock on July 27, 1933, I received a copy of the same affidavit of prejudice sworn to the 20th of July, 1933, and "a supplemental affidavit of prejudice" by Charles Franklin sworn to the 27th of July, 1933. They are herewith filed in the office of the clerk of the District Court for the Southern District of New York.

 Section 21 of the Judicial Code (28 USCA § 25) requires an affidavit of personal bias and prejudice to be filed "not less than ten days before the beginning of the term of the court, or good cause shall be shown for the failure to file it within such time." It has not been filed within the time required, and good cause for failure so to do is not shown.

 Amster became the president of the Manhattan Railway Company in November, 1932, and immediately thereafter Mr. Franklin became its attorney. Amster first attempted to become a coreceiver of the Manhattan Railway Company when, on September 6, 1932, it filed its petition to intervene in the suit of American Brake Shoe & Foundry Co. v. Interborough Rapid Transit Company. At that time William Roberts, its president, was appointed and latter qualified as receiver. It was then thought unnecessary to appoint a second receiver. The court, however, reserved the question of appointing a coreceiver until reason therefor should appear. Amster's application was denied.

 Amster caused the institution of the Johnson suit in which he attacked the jurisdiction of this court, for the same purpose. Mr. Franklin, his attorney, stated this at one of the hearings.

 When the Circuit Court of Appeals for the Second Circuit rendered its decision in the case of Johnson v. Manhattan Railway Company, 61 F.2d 934, on December 7, 1932, Amster began a new proceeding asking for the removal of Mr. Roberts and his own appointment as receiver. Issues were raised which were necessary to send to a special master, who filed his report recommending the denial of the application to remove Mr. Roberts. After an adverse decision in the Supreme Court in Johnson v. Manhattan Railway Company, 289 U.S. 479, 53 S. Ct. 721, 77 L. Ed. 1331 (May 29, 1933), he made the application to be appointed coreceiver.

 Mr. Franklin filed an application in the proceeding asking for an allowance of $75,000 for services in the case of Johnson v. Manhattan Railway Company in which he attacked the jurisdiction of this court. He based his application in part upon the claim that he had settled the jurisdictional question in favor of Judge Manton's jurisdiction. He stated in the affidavit: "The decision of the United States Supreme Court in the Johnson Case has definitely removed all doubt regarding the jurisdictional objection of both the Interborough and Manhattan Receiverships, and has thereby freed from question or embarrassment the receivership estate in which are involved securities and properties valued in excess of Five Hundred Million ($500,000,000.) Dollars. * * * so that by said decision the finality of the Senior Circuit Judges right to act in the American Brake Shoe case has now been firmly established."

 And further: "I therefore respectfully submit that I have performed a substantial service in having the power of Judge Manton vindicated, which has enured to the benefit of the receivership estate, and to all parties concerned therein."

 Now, after applying for the appointment of Amster as coreceiver, it is stated he was told Amster would be appointed, but still he files this affidavit of personal bias and prejudice in an effort to obtain the appointment of Amster as coreceiver. All of this indicates bad faith. As a plain showing of bad faith and the purpose of filing this affidavit of prejudice and personal bias, Franklin's statements in open court at hearings are interesting.

 At a hearing in open court on June 28, 1933, Mr. Franklin said:

 "Mr. Franklin: If your Honor please, may I take up a matter which it seems to me would be appropriate? I do not feel that I want to be too persistent. At the same time, the position of being the sole objector to a proceeding of this kind is neither easy nor is it pleasant, particularly as I am representing the directors and stockholders of the Manhattan Railway Company. I would like, therefore, if your Honor will grant leave to renew the application that I made at the inception of this receivership. Your Honor has stated in the past, I think it was on the day that the receivership was extended to the Manhattan Railway Company, I made an application to your Honor, then representing the Manhattan Railway Stockholders' Protective Committee, representing approximately ten millions of securities of that company, for the appointment of Mr. N. L. Amster as the receiver, or as a co-receiver of the Manhattan Railway Company. Your Honor after considering the matter a moment stated to me and to counsel present that if ever the time came when it seemed necessary or advisable to make such an appointment, that I could renew the motion. * * * I ...


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