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KOSTER v. LUMBERMENS MUT. CAS. CO.

January 30, 1945

KOSTER
v.
(AMERICAN) LUMBERMENS MUT. CASUALTY CO. et al.



The opinion of the court was delivered by: ABRUZZO

The plaintiff, a citizen of New York, residing in this District, sued the three defendants above named.

The Lumbermens Mutual Casualty Company is a mutual insurance company which was organized and exists under the laws of the State of Illinois.

James S. Kemper & Co., Inc., is a corporation organized under and by virtue of the laws of the State of Illinois; and James S. Kemper, the individual defendant, is a citizen and resident of Illinois.

 The plaintiff alleges that since May, 1941, he has been and is now a member and policyholder of the Lumbermens Mutual Casualty Company and brings this action in the right and on behalf of all its members and policyholders.

 The motion brought under Rules 12(b) and 19(a) of the Rules of Civil Procedure, 28 U.S.C.A.following section 723c, asserts (1) that this Court in its discretion should not entertain jurisdiction over an action requiring it to interfere with and to control the internal affairs of a foreign insurance corporation; and (2) that plaintiff has failed to bring before the Court as a defendant, an indispensable party, to wit, James S. Kemper.

 The first cause of action is against Lumbermens Mutual Casualty Company and the individual defendant, Kemper, and alleges that the defendant Kemper received from the Lumbermens Mutual Casualty Company an unwarranted increase in salary and other compensation which was without consideration and constituted a gift of corporate assets.

 The second cause of action, against all three defendants, alleges that the individual defendant Kemper dominated and controlled the management, personnel and business policies of the defendant, James S. Kemper & Co., Inc.; and that the defendant, James S. Kemper & Co., Inc., received commissions, fees and other payments for services to the Lumbermens Mutual Casualty Company which the Lumbermens Mutual Casualty Company could have rendered just as efficiently for itself with its own employees; and seeks an accounting of all the profits derived by the James S. Kemper & Co., Inc., because of the action so complained of.

 The third and fourth causes of action against the individual defendant Kemper and Lumbermens alleges that Kemper knowingly and willfully caused Lumbermens at various times to sell shares of stock for a sum less than the true value of the security and, by reason of these sales, the Lumbermens sustained damages in excess of $ 1,112,050.

 The complaint demands that Kemper and the Kemper corporation be required to account to the Lumbermens for all damages and profits alleged in the complaint; and that the plaintiff be awarded the costs and expenses of this action including counsel fees and accountant's fees.

 James S. Kemper, a very necessary party, especially in the first cause of action, and in the third and fourth causes of action, has not been served and, unless he is found in this jurisdiction, never can be served. The first cause of action, therefore, will, unless service is effected, necessarily fall, as will the third and fourth causes of action. The second cause of action being against all three defendants can be tried but not against Kemper as an individual defendant. Under the first cause of action, the Lumbermens Mutual Casualty Company will receive no benefits unless a judgment directs Kemper to account for his excess in compensation. The third and fourth causes of action would necessarily have to direct Kemper, the individual, to pay back to Lumbermens, a judgment up to and beyond the sum of $ 1,112,050. The second cause of action might possibly result in some benefit to the Lumbermens Mutual Casualty Company in the event it were tried.

 Rule 12(b) of the Rules of Civil Procedure permits defenses at the option of the pleader: (1) For lack of jurisdiction over the subject matter, (2) for lack of jurisdiction over the person, (3) improper venue, (4) insufficiency of process, (5) insufficiency of service of process, and (6) failure to state a claim upon which relief can be granted.

 The affidavit of T. H. Gillespie, secretary Lumbermens Mutual Casualty Company, in support of this motion makes the following allegations which I believe are pertinent to the issue involved:

 Lumbermens does business in every one of the 48 states. It employs approximately 2,144 persons, 750 of whom are employed in the Chicago offices, the home and principal place of business of Lumbermens since its organization. All of the general records relating to the business of Lumbermens are maintained in Chicago or warehouses located closely thereby. Lumbermens has seven directors, five of whom are residents of the State of Illinois having regular places of business in the City of Chicago. The other officers are residents of the State of Illinois. None of the records necessary for the trial of the issues of this action and none of the witnesses who apparently have any knowledge of the acts alleged in the complaint live outside the State of Illinois, and most of the witnesses and all of the records are in and about the City of Chicago.

 There will be involved in the trial of this action the transportation of large quantities of records from Chicago to this District. There will also be involved the traveling expenses and subsistence of witnesses for examination before trial of directors, officers and employees of Lumbermens and the attendant loss of time of these witnesses when they come to this District. If the defendant is successful, it would be ...


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