The opinion of the court was delivered by: LEVET
Plaintiff in this action moves for an order pursuant to Rule 65 of the Federal Rules of Civil Procedure, 28 U.S.C.A., to enjoin the defendants, their officers, directors, agents, etc., from (A) taking any further action towards the consummation of the acquisition of the plaintiff; (B) from making any changes, directly or indirectly, in the corporate structure of the plaintiff; (C) from directly or indirectly voting the defendants' shares of common stock of the plaintiff at any meeting of the plaintiff's stockholders; (D) from acquiring any direct or indirect representation on the board of directors of the plaintiff; (E) from acquiring any additional shares of common stock of the plaintiff; (F) for such other and further relief as to the court may seem just and proper.
The alleged basis of this action is Section 7 of the Clayton Act, Title 15 U.S.C.A. § 18, as amended by the act of Congress of December 29, 1950, presumably as implemented by Title 15 U.S.C.A. § 26.
Section 18 of Title 15 U.S.C.A. is in part as follows:
'No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.'
Section 26 of Title 15 U.S.C.A., insofar as it is here pertinent, reads as follows:
'Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the anti-trust laws, including sections 13, 14, 18, and 19 of this title, when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings, and upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue * * *'
Plaintiff, E. L. Bruce Company, hereinafter referred to as 'Bruce,' is a corporation of the State of Delaware, with its principal offices in Memphis, Tennessee. It is said to be a publicly-held corporation, with an excess of 300,000 shares of common stock issued and outstanding. Plaintiff claims to be the world's largest distributor of hardwood flooring, as well as a leading producer and distributor of Southern hardwood and soft wood lumber and other products.
The defendant Empire Millwork Corporation, hereinafter referred to as 'Empire,' is the leading producer and distributor of millwork lumber and plywood. Rhodes Hardwood Flooring Corporation, hereinafter referred to as 'Rhodes,' is a wholly-owned subsidiary of Empire and a national distributor of hardwood flooring. The defendants Edward M. Gilbert, Harry Gilbert and Yolan Gilbert are alleged to be in control of Empire, owning at least 60% of its voting stock. Thus it is contended that since Rhodes is wholly owned by Empire, the Gilberts control both corporations.
Edward M. Gilbert, who is an officer and director of Empire and Rhodes, is said to be one of the leaders of the proposed acquisition of Bruce.
Empire controls a number of subsidiary companies, but these appear to be largely timber ownership (rather than production), retail lumber companies, millwork companies and realty or development companies. (See Exhibit A attached to motion papers)
Plaintiff contends that it is in vigorous and continual competition with Empire and Rhodes in the sale and acquisition of hardwood flooring and in other products. Hardwood flooring is produced from oak or other hardwood lumber, and oak is said to be the species predominantly used. The majority of hardwood flooring sold in the United States is oak. The actual production of hardwood flooring takes place in a flooring mill where rough oak lumber is cut and planed to lengths of flooring. It is necessary to have on hand a large inventory of hardwood flooring with a number of different grades and sizes. Only through warehousing large inventories of flooring is it possible to make immediate delivery of the desired grade and size.
Plaintiff asserts that both it and Rhodes have sales structures which permit competition nationally in the sale and distribution of their products and thus are said to compete. Among the areas where competition is evident is San Francisco Bay and the suburban area of Los Angeles, California.
The defendant Empire is said to have a 50% interest in a contracting firm based in Dallas, Texas, to wit, Dicker, Frank & Associates. Bruce sells, it is stated, at least 65,000,000 board feet per year of hardwood ...