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B.F. Goodrich Co. v. Northwest Industries Inc.

decided: April 14, 1970.

THE B.F. GOODRICH COMPANY
v.
NORTHWEST INDUSTRIES, INC., AND INTERSTATE COMMERCE COMMISSION



Seitz, Van Dusen, and Adams, Circuit Judges.

Author: Adams

ADAMS, C.J.

The primary issue in this case is whether a corporation whose stock is sought by a company under the jurisdiction of the Interstate Commerce Commission (Commission) may institute a private action to enjoin an alleged violation of § 5 of the Interstate Commerce Act (Act), or whether it must pursue its prior complaint before the Commission and then if dissatisfied appeal the decision of the Commission to a three-judge court.

In the present suit, B.F. Goodrich Company (Goodrich) seeks in effect to enforce Section 5(2) of the Act*fn1 by an action in the District Court of Delaware requesting an injunction to restrain Northwest Industries, Inc. (Industries) from acquiring Goodrich stock without first obtaining Commission approval, and an order declaring such action unlawful without Commission approval.*fn2 The basic contention in the Goodrich complaint is that control of Goodrich by Industries without Commission approval would violate Section 5(2) because it would result in control of a carrier (Goodrich acquired control of a motor carrier) by a company (Industries) which is not a carrier but has control of one or more carriers.

Goodrich is a New York corporation whose stock is traded on the New York Stock Exchange. Industries, a Delaware corporation, is a conglomerate holding company whose interests include approximately 99 percent of the voting stock of Chicago & North Western Railway Company (North Western), as well as direct or indirect control of other railroads. North Western is a common rail carrier subject to the Act.

On January 20, 1969, Industries made a public announcement that it would offer to exchange certain of its securities for Goodrich stock. Goodrich sought to prevent this acquisition by filing, on January 27, 1969, a petition with the Commission for leave to intervene in the Chicago and North Western Railway Company-Merger proceeding, then pending before the Commission.*fn3 In the petition, Goodrich also endeavored to reopen the proceeding with the Commission, complaining that Industries should be subject to certain portions of Section 20 of the Act.*fn4

On March 4, 1969, Goodrich purchased all the outstanding shares of Motor Freight Corporation, a motor carrier subject to the Act, which operates under certificates of public convenience and necessity issued by the Commission. Industries did not apply to the Commission for approval of its acquisition, and indicated that it did not intend to do so. On March 7, 1969, Goodrich filed with the Commission its "Supplement to Amended and Supplemental Petition", which advised the Commission of Goodrich's ownership of Motor Freight. It contended that the acquisition of Goodrich by Industries would violate Section 5(2) of the Act in that a "person which is not a carrier and which has control of one or more carriers" would "acquire control of another carrier" without the approval of the Commission.*fn5

Industries answered, on March 10, 1969, that its acquisition of Goodrich would not violate the Act because " simultaneously with acquisition of control of Goodrich, the stock of Motor Freight Corporation will be sold to a non-affiliated non-carrier [and] pending sale, complete control of such motor carrier will be placed in an independent voting trustee."

The Commission issued an order, on April 24, 1969, granting Goodrich the right to intervene in the proceeding, reopening the proceeding for the "sole purpose" of subjecting Industries to the provisions of Section 20(5) of the Act, and denying the petition "in all other respects." In the order the Commission indicated that it found Industries' plan of divestiture acceptable to preclude a violation of the Act, stating,

"* * * simultaneously with acquisition of control of B.F. Goodrich Company the stock of Motor Freight Corporation will be sold to a non-affiliated non-carrier, or, pending sale, complete control of such motor carrier will be placed in an independent voting trustee, that the Commission has held in the past that the placing of stock in an independent voting trust, with necessary restrictions, constitutes divestiture of control * * *".

On July 25, 1969, Goodrich filed a complaint in the District Court of Delaware for a declaratory judgment and injunction.*fn6 The Commission intervened.

Judge Steel granted the Commission's motion to dismiss the complaint, and denied Goodrich's motion for a preliminary injunction. The basis for his order was (1) lack of jurisdiction over the subject matter in that there is no private right of action for enforcement of Section 5(2) of the Act, (2) Goodrich had exhausted its administrative remedy unsuccessfully and therefore the "doctrine of primary jurisdiction requires this Court to respect the administrative ruling implicit in the Commission's decision", and (3) there was insufficient danger of irreparable harm to Goodrich or likelihood of a violation of a statute by Industries to warrant the issuance of a preliminary injunction. Goodrich then appealed the dismissal of the complaint to this Court, but not the refusal to grant the injunction.

We agree that the District Court had no jurisdiction over the Goodrich complaint. The complaint was in substance a collateral attack on an order of the Commission and an attack on such an order may be brought only before a three-judge court convened pursuant to 28 U.S.C. § 2325. Venner v. Michigan Central Railroad Co., 271 U.S. 127, 70 L. Ed. 868, 46 S. Ct. 444 (1926); Lambert Run Coal Co. v. B & O Railroad Co., 258 U.S. 377, 42 S. Ct. 349, 66 L. Ed. 671 (1922); Suffin v. The Pennsylvania Railroad Co., 396 F.2d 75, 76 (3d Cir. 1968) cert. denied, 393 U.S. 1062, 21 L. Ed. 2d 705, 89 S. Ct. 713; Schwartz v. Bowman, 244 F. Supp. 51 (S.D.N.Y. 1965) (extensive citations at 67), aff'd. sub nom. Annenberg v. Alleghany Corp., 360 F.2d 211 (2d Cir. 1966), cert. denied, 385 U.S. 921, 87 S. Ct. 230, 17 L. Ed. 2d 145.

Although the Commission's order is not precisely worded, it is clear that the Commission dealt with the same contentions made by Goodrich in the District Court. Goodrich contended in its March 7, 1969, petition before the Commission, as it did in the District Court and continues to do here, that Industries, which held 99 percent of North Western stock, was a "person * * * which has control of one or more carriers" and since Goodrich controlled Motor Freight the acquisition of Goodrich by Industries without permission of the Commission would violate the Act. The Commission rejected such contention when it ...


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