Appeal, in a case involving claims under the Automobile Dealers' Franchise Act, 15 U.S.C. §§ 1221-25 (1970), the antitrust laws, and New York State law, from a judgment of the United States District Court for the Eastern District of New York, John F. Dooling, Judge, dismissing plaintiffs' action on the merits, after the court granted defendants' motion for summary judgment, holding that claims belonged to the corporation and not the plaintiff shareholders. Affirmed.
Moore and Mansfield, Circuit Judges, and Holden,*fn* District Judge.
The plaintiffs-appellants are collectively the owners of 100% of the stock of Long Island Diamond Reo Truck Co., Inc. ("L.I. Reo"). They appeal from a final judgment dismissing their claims on the merits against the defendants-appellees White Motor Corporation ("White") and Glenn F. Kommer. The facts material to decision are as follows:
L. I. Reo is the successor corporation of a predecessor partnership and from 1958 to 1967 was a dealer of trucks manufactured by the Diamond and Reo truck divisions (eventually consolidated into a single division) of defendant White. Beginning in 1962, L.I. Reo's purchases of new and used trucks were financed through Universal C.I.T. Corp. ("C.I.T."). White also agreed to guarantee L.I. Reo's financial obligations to C.I.T. and to take over all of L.I. Reo's paper on demand if L.I. Reo defaulted in these obligations. White also agreed with L.I. Reo to finance L.I. Reo's substantial parts business on an open ledger running account.
When in November 1966 C.I.T. determined that L.I. Reo was "out of trust" with respect to some of the trucks floor-planned by C.I.T., i. e., L.I. Reo had sold the trucks without paying C.I.T. from the proceeds the amount of the indebtedness owed on the trucks, C.I.T. demanded that White honor its guarantee and purchase all of L.I. Reo's outstanding obligations. White complied, and as a result of White's payment to C.I.T. and certain other amounts owed to White in connection with the financing of L.I. Reo's parts business, in November 1966 the total indebtedness due from L.I. Reo to White approximated $200,000.
At this point, White and L.I. Reo negotiated and executed a financing agreement, dated November 23, 1966. Plaintiff Thomas Vincel, as president, executed the agreement for L.I. Reo, and he and plaintiffs Nuno Tardo and Breen also signed the agreement as shareholders. The agreement contained a mutual release of all existing claims and obligations except for those specified in the agreement.*fn1 It also provided for the simultaneous execution of a note by L.I. Reo for $195,837.50, the amount then owed to White. The agreement outlined the manner of paying the note, and the note was to be secured by chattel mortgages or other security instruments on new or used trucks then or subsequently owned by L.I. Reo. Vincel also agreed personally to guarantee the note. In addition, the shareholder signatories agreed to place all shares of the voting stock of L.I. Reo and affiliated corporations owned by them in a voting trust, the terms of which were set out in a separate agreement.*fn2 The agreement designated defendant Glenn F. Kommer, Treasurer of White, as the Trustee. The voting trust agreement dated December 29, 1966, empowered the Trustee to appoint an individual acceptable to him as L.I. Reo's general manager. The voting trust agreement was to terminate upon the payment by L.I. Reo of the indebtedness specified in the financing agreement of November 23, 1966. Paragraph 5 also provided for the possible resignation of the Trustee and gave White the power to appoint a successor.
In February 1967 the Trustee Kommer proposed Samuel Antelis as general manager of L.I. Reo, and this appointment was approved by L.I. Reo's board of directors. Also about this time, L.I. Reo issued some $40,000 in checks to White in reduction of the indebtedness. These checks bounced, and this prompted the execution of another note, guaranteed by Vincel, in the amount of $42,739.56. On February 21, 1967, L.I. Reo and White signed a security agreement which essentially gave White a security interest in all trucks and parts owned or thereafter acquired by L.I. Reo. Thereunder, L.I. Reo could sell trucks and parts to retail customers but had to account for and pay the proceeds to White to the extent of any outstanding obligations. The security agreement provided that in the event of default by L.I. Reo in the performance of any term of the November 23, 1966 financing agreement, the $195,837.50 note, or the security instrument itself, White was authorized to enter L.I. Reo's premises, take possession of the secured property, and sell it at a public or private sale at which White itself might be a purchaser.
By mid-1967 L.I. Reo had defaulted by selling trucks without turning over the proceeds to White. White then on August 25, 1967 commenced an action in the New York Supreme Court against L.I. Reo and Vincel for breach of the agreements and conversion of the trucks. An order of attachment was obtained, pursuant to which White repossessed (in some cases with and in others without legal process) the vehicles subject to its security interest. L.I. Reo interposed several counterclaims and also moved to vacate the order of attachment. White countered with a motion to replevy parts in L.I. Reo's possession, which had also been attached. On December 11, 1967, the State court denied L.I. Reo's motion and granted White's cross-motion.
Meanwhile Kommer had resigned as Trustee, effective August 28, 1967 (about the time White commenced its action in State court). White had indicated that it did not intend to appoint a successor, and the voting trust agreement was terminated by the tender back of stock certificates to the depositing shareholders.
On December 21, 1967, shortly after the New York Supreme Court's decision respecting the attachment order, L.I. Reo filed a voluntary petition in bankruptcy in the United States District Court for the Eastern District of New York. White filed claims as a creditor amounting to $323,610.14. The Trustee in Bankruptcy asserted defenses and counterclaims in the amount of $3,000,000, which were essentially the same as L.I. Reo's counterclaims previously lodged in the State court. They charged in essence that White had driven L.I. Reo out of business.
With the approval of the Bankruptcy Referee after a hearing, and over the objection of the plaintiffs, White and the Trustee in Bankruptcy entered into an agreement compromising all claims. White agreed to pay the bankrupt estate the sum of $100,000. White's claim as a creditor was withdrawn, and the Trustee discontinued his counterclaim with prejudice. In addition, the Trustee and White agreed to stipulate to a discontinuance, with prejudice, of the then pending action in the State Supreme Court. The agreement further provided, however, that it would not affect "the action of White Motor Corporation against Thomas A. Vincel and Thomas A. Vincel's defenses and counterclaims to such action."*fn3 In short, therefore, all claims existing between L.I. Reo and White were settled upon payment by White of $100,000 and the other consideration stated in the agreement.*fn4 Claims between White and Vincel were thus preserved.
The plaintiffs commenced this action in 1969. Jurisdiction was based on diversity of citizenship and the Automobile Dealers' Franchise Act, 15 U.S.C. §§ 1221-1225. The original complaint and a subsequent amended complaint set forth six separate claims for relief: (1) that defendants violated their contractual duties to plaintiff under the two 1966 agreements; (2) that defendants violated their fiduciary duties to plaintiffs under the same agreements; (3) that defendants coerced plaintiffs into entering into those agreements; (4) that defendants and other officers of White conspired to combine White's three separate truck divisions in 1966 and to drive out of business the dealers of two of its divisions, including L.I. Reo, by unfair competition and other anticompetitive practices;*fn5 (5) that defendants violated their duty to plaintiffs under the federal Automobile Dealers' Franchise Act (15 U.S.C. §§ 1221-25); and (6) that defendants violated their duty to plaintiffs under a similar New York statute N.Y. General Business Law § 197 (McKinney's Consol. Laws, Supp. 1974-75).
Upon motion of the defendants, the district court first dismissed the plaintiffs' fourth claim in a comprehensive memorandum dated August 2, 1972, that summarized the background of the action and indicated "that any principle considered dispositive of the motion would necessarily have some application to the other causes of action as well." (194A). Plaintiffs were thereafter permitted to file an amended complaint, and the ...