« ForrigeFortsett »
which is practically to prohibit the shoe manufacturers from obtaining any such other machines from competitors of the defendants.
Competitors of the defendants have produced, sold, and leased, and are now producing, selling, and leasing, in interstate commerce machines similar in funetion to many of the important machines put out by the defendants and affected by the “ tying clauses" herein described. In nearly all cases where shoe manufacturers have used or are using lasting machines procured from competitors of the defendants, the latter have threatened, and do now threaten, to remove from the factories of said manufacturers, all machines leased from them. In some instances the defendants have removed such machines, and in other instances have imposed heavy penalties upon shoe manufacturers because of the use of such machines procured from the defendants' competitors in violation of said "tying clauses."
  Aside from these allegations, it is expressly stated in the bilī that no relief is sought against the lessees. What relief could the Government ask against them? They are alleged to be bound hand and foot by these clauses in the leases, and must either submit to them, or do without those machines, which are under the absolute and sole control of the defendants, and if compelled to do without them, go out of business. Even if the lessees were proper parties, which is doubtful, the jurisdiction of the court would not be ousted for a failure to join them, as only indispensable parties, and in some instances necessary parties, must be joined. (Cella v. Brown (C. C.), 136 Fed. 439; affirmed Id., 144 Fed. 742, 75 C. C. A. 608; O'Neil v. Wolcott Mining Co., 174 Fed. 527, 536, 98 C. C. A. 309, 318, 27 L. R. A. (N. S.) 200; Silver King, etc., Mines Co. v. Silver King C. M. Co., 204 Fed. 166, 122 C. C. A. 402; Lion Tractor Co. v. Bull Tractor Co., 231 Fed. 156,
C. C. A. -, opinion filed February 12, 1916.) An indispensable party has been defined as: When he has such an interest in the subject matter of the controversy that a final decree can not be rendered in the suit without injuriously affecting the absent party, or without leaving the controversy in such a situation that its final determination may be inconsistent with equity and good conscience. (Rogers v. Penobscot Mining Co., 154 Fed. 606, 83 C. C. A. 380, and authorities there cited.)
A necessary party is:
One who has "an interest in the controversy, and who ought to be made a party, in order that the court may act on that rule, which requires it to decide on and finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it.” (Shields v. Barrow, supra.)
No title to nor possession of property is involved in this case. Still, if any of the lessees believe that their interests may be injuriously affected by this action, they can apply to the court to be made parties, and the court will then determine whether leave to do so should be granted. So far none of the lessees has asked to be made a party, United States v. Du Pont de Nemours & Co. ((C. C.) 188 Fed. 127). In the court's opinion the lessees are not indispensable nor necessary parties to this action, as the relief prayed in the bill, if granted, can in nowise affect them or their rights, except that it may relieve them of an onerous, and, as the complaint alleges, illegal, burden. (Vetterlein v. Rarnes, 124 U. S. 169, 8 Sup. Ct. 441, 31 L. Ed. 400.)
[6, 7] Are the New Jersey company and the New Jersey corporation improperly joined as defendants?
It is urged that, as the Maine company is the only defendant alleged to have made the leases complained of within the jurisdiction of this court, the other corporate defendants, each of whom has filed a separate motion to dismiss, are not proper parties. The allegations in the bill are that the entire capital stock of the Maine company
is owned by the New Jersey company, and that the New Jersey corporation owns 98182 per cent of the capital stock of the New Jersey company; that the officers and directors of the three corporations are practically the same, all of them serving as such officers and directors in at least two of the corporations, and some in all three. But it is claimed that  as each corporation is an entity, and as there is no charge of conspiracy, the mere fact that they are the owners of the capital stock of the Maine company, the only offender, does not justify their being made parties defendants.
Whatever may have been the views of the courts in the early days of corporate existence, when there were but few corporations, and they mostly confined to business of a quasi public nature, at this date courts, and especially courts of equity, will look behind the corporate fiction, and if it clearly appears that one corporation is merely a creature of another, the latter holding all the stock of the former, thereby controlling it as effectively as it does itself, it will be treated as the practical owner of the corporation, when necessary for the purpose of doing justice. In McCaskill v. United States (216 U. S. 504, 514, 30 Sup. Čt. 386, 391 (54 L. Ed. 590)), Mr. Justice McKenna, delivering the opinion of the court, said:
Undoubtedly a corporation is, in law, a person or entity entirely distinct from its stockholders and officers. It may have interest distinct from theirs. Their interests, it may be conceived, may be adverse to its interest, and hence has arisen against the presumption that their knowledge is its knowledge the counter presumption that in transactions with it, when their interest is adverse, their knowledge will not be attributed to it. But while this presumption should be enforced to protect the corporation, it should not be carried so far as to enable the corporation to become a means of fraud or a means to evade its responsibilities. A growing tendency is therefore exhibited in the courts to look beyond the corporate form to the purpose of it, and to the officers who are identified with that purpose. Illustrations are given of this in Cook on Corporations (secs. 663, 664, 727). The principle was enforced in this court in Simmons Creek Coal Co. v. Doran (142 U. S. 417 (12 Sup. Ct. 239, 35 L. Ed. 1063]).
The same rule was recognized in Linn & Lane Timber Co. v. United States (236 U. S. 574, 35 Sup. Ct. 440, 59 L. Ed. 725). In Miller & Lux v. East Side Canal Co. (221 U. S. 293, 29 Sup. Ct. 111, 53 L. Ed. 189), it was held that a plea that the plaintiff Miller & Lux, who instituted the action in a national court of the State of California, claiming to be a Nevada corporation, was organized under the laws of Nevada to act as the agent of Miller & Lux, a California corporation; that the California corporation owned all the capital stock of the Nevada corporation; that all the property of the Nevada corporation was held as agent for the California corporation, and that it had no other existence; that it was incorporated with the sole object to enable it to maintain suits in the national courts of California by reason of a diversity of citizenship; that it transacted no business except such as was necessary to carry out the performances of the California corporation; that therefore the Circuit Court should not retain jurisdiction of the cause, there being, in fact, no diversity
of citizenship, both parties being citizens of the State of Californiawas rightly sustained by the Circuit Court, and its judgment affirmed by the Supreme Court. In Northern Securities Co. v. United States (193 U. S. 197, 24 Sup. Ct. 436, 48 L. Ed. 679), Mr. Justice Harlan said:
Necessarily by their combination or arrangement (referring to the Securitis Co. as holder of a majority of the shares of the constituent companies), the holding company in the fullest sense dominates the situation in  the interest of those who were stockholders of the constituent companies; as much so, for every practical purpose, as if it had been itself a railroad corporation which had built, owned, and operated both lines, for the exclusive benefit of its stockholders.
In the same case, when pending in the Circuit Court (120 Fed. 721, 725, 726), Judge Thayer, delivering the opinion of the court, in which Circuit Judges Caldwell and Sanborn concurred, said:
It will not do to say that, so long as each railroad company has its own board of directors, they operate independently, and are not controlled by the owner of a majority of their stock. It is the common experience of mankind that the acts of corporations are dictated and that their policy is controlled by those who own the majority of their stock. Indeed, one of the favorite methods in these days, and about the only method of obtaining control of a corporation, is to purchase the greater part of its stock. • The fact that the ownership of a majority of the capital stock of a corporation gives one the mastery and control of the corporation was distinctly recognized and declared in Pearsall v. Great Northern Railway (161 U. S. 646, 671, [16 Sup. Ct. 705, 40 L. Ed. 838), and numerous other cases cited in the opinion.
Referring to Pullman Car Co. v. Missouri Pacific Ry. Co. (115 U. S. 587, 6 Sup. Ct. 194, 29 L. Ed. 499), another case relied on by counsel for defendants, the same learned' judge distinguished it by saying:
In that case the meaning of the word “controlled," as used in a private con tract, was the point under consideration, and what was said on the subject can not be held applicable to cases arising under the antitrust act, when the point Involved is whether the ownership of all of the stock of two competing and parallel railroads vests the owner thereof with the power to suppress competition between such roads. We entertain no doubt that it does. Indeed, we regard the suppression of competition, and to that extent a restraint of commerce, as the natural and inevitable result of such ownership.
In Chicago Mill & Lumber Co. v. Boatmen's Bank, (234 Fed. 41, C. C. A. —, opinion filed April 27, 1916), Judge Adams, speaking for the Circuit Court of Appeals of this circuit, said:
" It is true that, apart from the question of ultra vires, not presently involved, when one corporation owns and controls the entire property of another, and operates its plant and conducts its business as a department of its own business or as its alter ego, it is responsible for its obligations," citing a number of authorities.
In Re Rieger (D. C. 157 Fed. 609), the court said:
The doctrine of corporate entity is not so sacred that a court of equity. looking through forms to the substance of things, may not in a proper case ignore it and preserve the rights of innocent parties or to circumvent fraud.
In United States v. Milwaukee Refrigerator Transit Co. (C. C. 142 Fed. 247), it was charged that the defendant was a dummy corporation, organized, owned, and operated by the stockholders of a brewing company, as a device to cover rebates on interstate shipments of beer, and the court held:
A corporation, from one point of view, may be considered an entity, without regard to its shareholders, yet the fact remains self-evident that it is not in
reality a person or thing distinct from its consistent parts. The word “corporation” is but a collective name for the members who compose the association (citing authorities). If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears;  but, when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.
Of the many other cases to the same effect, see State ex rel. v. Standard Oi Co. (49 Ohio Stat. 137, 30 N. E. 279, 15 L. R. A. 145, 34 Am. Stat. Rep. 541; First National Bank v. F. C. Trebein Co. (59 Ohio Stat. 316, 52 N. E. 834).
From the allegations in the complaint it is beyond question that the Maine company is merely a subsidiary of the New Jersey company, and that both are under the absolute control, by reason of its stock ownership, of the New Jersey corporation. The acts of one are the acts of all these corporations; in fact, it may truthfully be said that they are the acts of the United Shoe Machinery corporation. This being the case, they are properly joined as defendants.
[8–10] Is section 3 of the Clayton Act, so far as it applies to leases, unconstitutional !
Counsel for defendants challenge the constitutionality of so much of section 3 of the Clayton Act as applies to leases. It has been earnestly and ably argued that a lease is no more commerce than insurance or manufacturing, and it is claimed, if not commerce, it can not be interstate commerce. The diligence of the able counsel has not been rewarded by finding any authority which has determined that question, nor has the court been able to find any. In the argument many extreme illustrations were made. It is a wellsettled rule that courts are slow to declare the acts of coordinate departments of the Government void, and unless it appears beyond a reasonable doubt that the act is violative of the fundamental law of the United States the courts will uphold it. As stated by Mr. Justice Holmes in Interstate, etc., Railway Co. v. Massachusetts (207 U. S. 79, 128 Sup. Ct. 26, 52 L. Ed. 111, 12 Ann. Cas. 555):
It is not enough that a statute goes to the verge of constitutional power. We must be able to see clearly that it goes beyond that power. In case of a real doubt a law must be sustained.
This principle of law was settled at an early date by Chief Justice Marshall in Fletcher v. Peck (10 U.S. (6 Cranch) 87, 3 L. Ed. 162). The fact that the question has never been before the courts, or that the power has never been exercised by Congress, is no proof that the Constitution does not authorize it. Ås stated by Mr. Justice Brewer in Re Debs (158 U. S. 564, 591, 15 Sup. Ct. 900, 909, 39 L. Ed. 1092):
Constitutional provisions do not change, but their operation extends to new matters as the modes of business and the habits of life of the people vary with each succeeding generation. The law of the common carrier is the same to-day as when transportation on land was by coach and wagon, and on water by canal boat and salling vessel, yet in its actual operation it touches and regulates transportation by modes then unknown-the railroad train and the steamship. Just so it is with the grant to the National Government of power over interstate commerce. The Constitution has not changed. The power is the same. But it operates to-day upon modes of interstate commerce unknown to the fathers, and it will operate with equal force upon any new modes of such commerce which the future may develop.
It may be conceded that every lease is not commerce, but that is not conclusive that none may be. Each case must be determined from  the peculiar facts shown to exist in that case. When a corporation with millions of capital, doing an annual business amounting to millions of dollars, sees proper to conduct its business by only leasing its chattels, instead of selling them, why is it not as much engaged in commerce as if it sold them outright? But, aside from that, can not a person be engaged in interstate commerce, although, if its business is confined exclusively to its own State, it would not be engaged in commerce?
The act of Congress of June 25, 1910 (ch. 395, 36 Stat. 825 (Comp. St. 1913, secs. 8812–8819)), commonly known as the white slave act, makes it an offense to transport, or cause to be transported, in interstate or foreign commerce, any woman or girl, for the purpose of prostitution, or for other immoral purposes. In Hoke v. United States (227 U. S. 308, 33 Sup. Ct. 281, 57 L. Ed. 523, 43 L. R. A. (N. S.) 906, Ann. Cas. 1913E, 905), arising under that Act, it was contended that the immoralities of their citizens can only be controlled by the States, and as women are not articles of commerce, there can be no reason for holding that, by reason of transporting them from one State to another, or furnishing means for such transportation, the acts can become interstate commerce. But the court unanimously held that, while it is true that women are not articles of commerce, if transportation is employed as a facility for their wrongs, Congress has the power to regulate or prohibit such acts under the commerce clause.
Acquiring an education would not ordinarily be commerce, but in International Text-Book Co. v. Pigg (217 U. S. 91, 106, 30 Sup. Ct. 481, 54 L. Ed. 678, 27 L. R. A. (N. S.) 493, 18 Ann. Cas. 1103), it was held that, as contracts between the company and its patrons involved the transportation from one State to another of books, apparatus, and papers, useful or necessary in the particular course of study the scholar'is pursuing, the company was engaged in interstate commerce.
In Butler Bros. Shoe Co. v. United States Rubber Co. (156 Fed. 1 to 17, 84 C. C. A. 167, 183), the issue involved was whether a contract of factorage, under which the Rubber Co. consigned to the Shoe Co. goods from an eastern State to Colorado, to be sold by the Shoe Co. as a factor. Judge Sanborn, after a very thorough review of the authorities bearing on that subject, held:
Nor is the fact that these contracts did not evidence sales of the goods determinative of this question. A sale is not the test of interstate commerce. All sales of sound articles of commerce, which necessitate the transportation of the goods sold from one State to another, are interstate commerce; but all interstate commerce is not sales of goods. Importations into one State from another is the indispensable element, the test, of interstate commerce; and every negotiation, contract, trade, and dealing between citizens of different States, which contemplates and causes such importation, whether it be of goods, persons, or information, is a transaction of interstate commerce.
From this it appears that every negotiation or dealing between citizens of different States which causes such importation is a transaction of interstate commerce. In Marienelli v. United Booking Offices ([D. C.] 227 Fed. 165), it was held that booking performers for a theatrical circuit, which requires them to pass from State to