The opinion of the court was delivered by: GURFEIN
There have been many skirmishes between the parties and the war apparently goes on. The procedural history attests to the resourcefulness of all counsel in the proxy battle for control of GAF Corporation (GAF). That particular battle having ended with a victory by the management of GAF, both sides, nevertheless, persist in further action, the individual defendants by continuing a derivative suit against management; the plaintiff by pursuing its action against the defendant Circle Floor Co., Inc. (Circle) for alleged violations of the antitrust laws (Sherman Act, Sec. 1 and Sec. 2, (15 U.S.C. Sec. 1, 2), and Clayton Act, Sec. 7 (15 U.S.C. Sec. 18)). Since either side may have a claim for relief, the motivation of the parties is irrelevant except as it bears on the good faith of allegations made and answers given. See American Mfrs. Co. v. American Broadcasting, 388 F.2d 272, 279, Fn. 9 (2 Cir. 1967). One phase or another of the litigations has been before Judges Pollack, Cooper and Metzner of this Court. A little history will suffice to set the stage for the formulation of the issues now before the Court.
GAF is the largest manufacturer and distributor of floor tile in the New York area with approximately 20% of the market. Circle installs finished floors. It purchases approximately 28% of all of the floor tile purchased by major contractors in this area. For some years GAF has supplied floor tile to Circle, furnishing about 50% of Circle's tile requirements in the New York area. Until July 1968 Circle was a private company owned by Morris and Paul Milstein, his son. In July 1968 Circle was acquired by and became a wholly owned subsidiary of Kinney National Services, Inc. Circle owns 420 shares of preferred stock of GAF acquired several years ago. The Milsteins (including two other children of Morris) own 324,346 preferred shares and 209,300 common shares of GAF which has outstanding thirteen million shares of common stock and more than three million shares of preferred stock.
The plaintiff claims that although concededly during 1970 Circle's purchases from GAF for the New York market actually amounted to as much as $1,100,000, nevertheless, the purchases by Circle in 1968, 1969 and 1970 have declined 33%, 71% and 35%, respectively, from the volume purchased from GAF during the year 1967. The complaint alleges that over the three years GAF was deprived of more than three million dollars of sales and $730,000 of profit.
The plaintiff has submitted an affidavit concerning a meeting in February 1969 between two of its sales representatives and Paul Milstein (chief executive officer of Circle) in which Milstein was apprised of an intent by GAF to raise prices on certain tile; that Milstein rejoined that every other manufacturer of vinyl asbestos tile was offering a lower price on vinyl asbestos and about the same price for asphalt tile; that Milstein stated he believed that anyone with about 400,000 shares of GAF stock deserved representation on the board of directors; that he wanted Dr. Werner, Chairman of the Board of GAF to meet him; that if the stock dropped the Milsteins would buy more; that he did not like what GAF had done to the Milsteins and others; and that the relationship between the Milsteins and GAF had to be straightened out if Circle was to continue to buy GAF floor tiles. He also said that if the relationship between GAF and the Milsteins was not settled it could affect GAF's sales volume outside of the Eastern sales region inasmuch as he had some ideas about all the flooring contractors whom he personally knew in other parts of the United States. He also stated that he intended to exercise full control over Circle's business, apparently despite its ownership by Kinney.
History of the Litigations
At first GAF brought an action to enjoin the Milsteins,
who allegedly controlled Circle, from purchasing stock and conducting a proxy contest against GAF management upon the ground that the defendants had violated Section 13(d) of the 1934 Act, as amended (15 U.S.C. Sec. 78m) for having failed to file the statement of ownership required and for other 1934 Act violations. Circle was not made a party defendant. Judge Pollack in a well reasoned opinion held that no claim for relief had been stated. The cause of action based on purported violation of the proxy rules and other provisions of the 1934 Act thus died aborning. But GAF, in the meantime, had started this action against the same defendants and Circle as well, charging violations of the antitrust laws from before 1968. GAF seeks: (1) a preliminary and permanent injunction against all the defendants from soliciting or voting proxies at any GAF meeting and from acquiring stock in GAF; (2) divestiture by defendants of their holdings in GAF; (3) award of damages in the amount of $730,000 plus damages sustained in defending the proxy contest, all trebled to aggregate in excess of $2,190,000.
The posture of the case is unusual. The moving defendant Circle apparently jumped the gun on its co-defendants, the Milsteins, and moved to dismiss the present antitrust complaint before Judge Cooper. Judge Cooper decided that there were triable issues of fact and denied the motion.
The individual co-defendants, the Milsteins, on the other hand, waited to move against the antitrust complaint until after the annual meeting had taken place. They then moved for summary judgment (although the corporate defendant did not) before Judge Metzner who granted the motion. Immediately after Judge Metzner's decision the corporate defendant, Circle, now moves for the same relief. The plaintiff contends that the corporate defendant has already lost before Judge Cooper and should not have a second chance. The corporate defendant, on the other hand, claims that if the individual defendants, the alleged prime movers in the alleged conspiracy, have had the action dismissed as to them there is no reason why the corporate defendant alone should stand trial. They also contend that Judge Cooper's decision denying summary judgment to the corporate defendant is not binding because the fact situation has changed. As Circle puts it: "Judge Metzner relied on events taking place after April 1, 1971 (the annual meeting of GAF)." Neither side has adequately briefed the substantive issues on the theory, apparently, that the matter would not be decided de novo.
An analysis of the several opinions of this Court and of the gravamen of the antitrust complaint is required to determine the instant motion.
The rules relating to denial of summary judgment in the context of "law of the case" are not obscure. Although the Court of Appeals for this Circuit once held that, in the interests of orderly procedure, a second District Judge was required to follow a first District Judge who had refused to dismiss a complaint (Commercial Union of America v. Anglo-South American Bank, 10 F.2d 937 (2 Cir. 1925)), that Court has since overruled the doctrine. Dictograph Products Co. v. Sonotone Corp., 230 F.2d 131, 134-36 (2 Cir. 1956) per Learned Hand, J., cert. den. 352 U.S. 883, 1 L. Ed. 2d 82, 77 S. Ct. 104 (1956). There Judge Hand suggested that there were only two reasons advanced as to why the second Judge may not rule contrary to the earlier ruling: (1) mutual respect and (2) avoidance of shopping by the defeated party. As to the first reason, Judge Hand said that "judicial sensibilities should play no part in the disposition of suitor's rights" (at 135). As to the second reason, while it has much to recommend it, it will not "under all circumstances make the first ruling immune from reconsideration." See also Uniformed Sanitation Men Assoc. v. Commr. of Sanitation, 426 F.2d 619, 628 (2 Cir. 1970), cert. den. 403 U.S. 917, 29 L. Ed. 2d 693, 91 S. Ct. 2223 (1971); Leroy v. Sabena Belgian World Airlines, 344 F.2d 266, 274 (2 Cir. 1965), cert. den. 382 U.S. 878, 15 L. Ed. 119, 86 S. Ct. 161 (1965).
In any event, denial of a motion to dismiss is not a "final order" even in the District Court. See Commerce Oil Refining Corp. v. Miner, 303 F.2d 125 (1 Cir. 1962). The doctrine of "law of the case" which "merely expresses the practice of courts . . . not a limit to their power" (Holmes, J. in Messinger v. Anderson, 225 U.S. 436, 444, 56 L. Ed. 1152, 32 S. Ct. 739 (1912)) is not applicable in the absence of a final order. United States v. United States Smelting Co., 339 U.S. 186, 198-199, 94 L. Ed. 750, 70 S. Ct. 537 (1950). Neither the refusal to grant summary judgment by Judge Cooper nor the granting of summary judgment by Judge Metzner deprives me of power to come to my own conclusion; indeed, the Court of Appeals for this Circuit recommends that course of action to District Judges.
The granting of injunctive relief in the circumstances of this case where the defendant lacks the present capability of putting the alleged plan into effect; and where it is mere conjecture whether the defendant will purchase more stock is precluded by the recent decision of our Court of Appeals. General Fireproofing Co. v. Wyman, 444 F.2d 391, decided June 18 (2 Cir., 1971). As to divestiture, to order Circle to divest its 420 ...