SCAVENGER SERVICE CORPORATION v. COURTNEY

EVANS, Circuit Judge.

This appeal is from a decree dismissing, for want of equity, appellant's bill for injunction and for other relief against appellees. The District Court made findings of fact and conclusions of law (summarized in the margin1) finding no evidence to support appellant's charge that a conspiracy existed between appellees (a scavenger association, the local of an A. F. L. union, the State's Attorney, and his chief investigator) to hinder and prevent appellant from carrying on a scavenger business in Chicago.

The District Court referred the hearing of the cause to a special master who concluded that a conspiracy existed between all appellees except Courtney whereby the union refused to furnish appellant with men because of appellant's price cutting practices, which it believed would hurt the members of the scavenger association to such an extent that they would be unable to continue the wage agreement with the union; that the picketing of buildings serviced by appellant was not peaceful picketing within the terms of the Norris-La Guardia Act (29 U.S.C.A. §§ 101-115); and that Capt. Gilbert informed building managers, who inquired of him, that appellant was connected with hoodlums.

Appellant is a Delaware corporation formed for the purpose of creating diversity of citizenship so as to maintain this suit. Its predecessor was a corporation formed in Illinois by one Dennis Finn who was in the excavating business but had idle trucks which he decided to use in the scavenger business. He had instituted suit in the state court on substantially the same charges as in the instant suit, but upon the incorporation of appellant and the bringing of the instant suit the state suit was dismissed without prejudice.

The decisive issue is whether a conspiracy existed among the appellees to destroy appellant's business. In view of the fact that the master found such a conspiracy to exist, and the District Court found the contrary, we have read with great care the entire transcript and the exhibits introduced.

The conflict and contradictions in the evidence are absolute and unsolvable. Someone has falsified.

Out of all the testimony the following conclusions may safely be announced as having the weight of the testimony to support them:

(1) Finn, originally in the excavating business, decided to make use of idle trucks and use them in the scavenger business. This was in January, 1934.

(2) Union officials had unemployed members whom they desired Finn to hire out but whom he did not employ, when he first started.

(3) Finn used some scavenger workers, members of the Chicago Teamsters local, a scavenger workers' union, the majority of whose members left the local and formed the new local, No. 731 (an appellee) affiliated with the A. F. of L.

(4) "Studdy" Looney, an alleged gangster, had some connection with the old union — probably collecting dues. Appellees insisted the reason they would not furnish Finn with men was that he was connected with Looney and other gangsters, through the union, and that one Brookbank whose trucks Finn used, got the trucks from one Munizzio who was in partnership with Looney. Finn said he was not in any way connected with Looney.

(5) Finn asked Local 731 for men and requested that his Chicago Teamster men be permitted to join Local 731. Both requests were refused.

(6) Finn cut rates for scavenger services (but probably maintained union scale of wage). This was without doubt a prime source of trouble with the association.

(7) A meeting was had at the N. R. A. office in July, 1934, where members of the union signed an agreement to furnish Finn men. This agreement was immediately repudiated by the union on various grounds — that they thought they were signing not an agreement but minutes of the meeting, and that it was never approved by the International union counsel.

(8) Pickets were placed by the union on buildings serviced by Finn, thereby effecting the stoppage of all A. F. L. union deliveries including milk and caused the cancelling of Finn's contract by the building owners or managers. There was evidence that there was no other cause for the cancellation of such contracts except the picketing.

(9) The pickets were paid, ostensibly by cash from the union's cash funds. Union officials vehemently deny the association paid for or ordered the picketing. The union's bookkeeping was very casual and did not rise to the dignity of evidentiary records — a cash fund was maintained and evidently no record kept of its income or disbursement. There was some evidence of union officials' calling on the association for funds for reimbursement.

(10) Association officials insist they have no agreement forbidding the union from furnishing men to independent scavengers who are not members of the association and cite instances.

(11) There is little evidence of Courtney's actual participation, but much more of his chief investigator, Capt. Gilbert. The latter consulted with both union and Finn and association men. Gilbert had formerly belonged to Chicago Teamsters.

Any of the following reasons may have been the source of the enmity which the appellees undoubtedly bore against appellant:

(1) The belief that appellant was in some way connected with gangsters; (2) It was openly operating the scavenger business at a cut rate and was successfully depriving members of the association of contracts for servicing buildings; (3) It was using members of the old Chicago Teamsters Union, not affiliated with the A. F. of L.; (4) It had originally refused, or at least failed, to use unemployed members of the A. F. of L. Local.

The law questions presented are: (1) What force has a master's finding of the existence of a conspiracy when overruled by the District Court's finding? Did a conspiracy in fact exist? If so, as to what parties? (2) Is the court deprived of jurisdiction because the appellant reincorporated in Delaware so as to have a diversity of citizenship basis for Federal court jurisdiction? (3) Do the facts of the case bring it within the Norris-La Guardia Act so that the District Court is without power to issue an injunction? (4) When may a public officer be deemed to have participated in a private conspiracy as distinguished from acting as a public officer?

Rule 61½ of the Equity Rules of the Supreme Court, promulgated May 31, 1932 (28 U.S.C.A. following section 723) defines the weight to be given to a master's finding. It provides

"In all references to a master, either compulsorily by the court in cases where it has the power to make a compulsory reference, or by consent of parties where consent is necessary, whether the reference be of all issues of law and fact, or only particular issues either of law or fact or both, the report of the master shall be treated as presumptively correct, but shall be subject to review by the court, and the court may adopt the same, or may modify or reject the same in whole or in part when the court in the exercise of its judgment is fully satisfied that error has been committed: Provided, That when a case or any issue is referred by consent and the intention is plainly expressed in the consent order that the submission is to the master as an arbitrator, the court may review the same only in accordance with the principles governing a review of an award and decision by an arbitrator."

In Uihlein v. General Electric Co., 47 F.2d 997, we collected the authorities that bore upon the binding efficacy of findings.

Both appellant and appellees filed numerous exceptions to the master's findings and conclusions. The District Court ruled upon these exceptions, allowing some and overruling others. He agreed with the master that Courtney was not involved in the instant controversy, and had no knowledge of his subordinate's action. As to Gilbert, the court was of the belief that he was not in the conspiracy whereas the master held Gilbert was in the conspiracy after the N. R. A. meeting, but not before.

As to picketing, the court concluded it was peaceable, there being no violence. The court pointed out that if the picketing were unlawful Finn could have complained in the state courts, which he did not even try to do; and if the union believed it had a grievance against appellant it had a lawful right to picket. The court concluded that the picketing was bona fide because the union entertained the belief in the beginning that Finn was not going to employ Local 731 men, and was in alliance with groups opposed to the A. F. L. union, and that the picketing was not unlawful and therefore should not be enjoined. The court also stated that if there were an agreement between the association and the union to keep others from engaging in the scavenger business, such agreement would be unlawful. If the union at the termination of the litigation refused to furnish appellant men, it could not lawfully attempt to interfere with its business.

Equity Rule 61½ provides that the master's report shall be treated as presumptively correct and the court may reject the same when in the exercise of its best judgment it is fully satisfied error has been committed. Roosevelt v. Missouri State Life Ins. Co. (C.C.A.) 70 F.2d 939; Cases decided before promulgation of rule 61½: Kimberly v. Arms, 129 U.S. 512, 9 S.Ct. 355, 32 L.Ed. 764; Davis v. Schwartz, 155 U.S. 631, 15 S.Ct. 237, 39 L.Ed. 289; Tilghman v. Proctor, 125 U.S. 136, 8 S.Ct. 894, 31 L.Ed. 664; Callaghan v. Myers, 128 U.S. 617, 9 S.Ct. 177, 32 L.Ed. 547.

The District Court was of the opinion the master erred in his conclusions of law and findings of fact.

The court's adverse conclusion is entitled to great weight on this review. He decided no conspiracy against appellant existed among any of the appellees. Whether or not a conspiracy existed is one of the basic questions confronting us. In this instance where the testimony on the two sides is in such sharp and utter contradiction, the decisive factor is the relative credence to be given the opposing witnesses. No better instance can be conceived for the application of the rule that a reviewing court will not disturb the finding of the trier who saw and heard the witnesses. For instance, the District Court said, "The witness Stroeble, I do not consider a credible witness and have given little weight to his testimony." Stroeble was president of the appellee union when appellant first went into business. He was later removed for embezzlement. The master also gave little credence to Stroeble's testimony but on two points at least based findings of fact upon his testimony because he found corroboration in documentary exhibits. The court observed that on reading the evidence he found all the witnesses on a certain subject were interested and some intensely hostile. For just such reasons is the fact finder's judgment valuable. He saw the witnesses and observed their demeanor. He could best evaluate and discount prejudices and hostility, could measure and determine by the yardstick of human experience the outward manifestations of a man lying or telling the truth, and find a sound conclusion by piecing together the full truths and the half truths which find corroboration in other oral testimony or better still in documentary evidence.

We have, as did the District Judge, read this entire testimony and are unwilling to override the presumptive correctness of the master's conclusions. There was much evidence to support them (admittedly denied on many material points) and it undoubtedly was the staunchness of the assertions and not the vehemence of the denials which caused him to form his opinion in favor of appellant.

If we try to ascertain the truth by searching for reasons for human conduct, the following facts are significant:

(1) The association would be the one immediately and primarily interested in appellant's cut rate practices, and not the union, inasmuch as (a) Finn paid the appellee union's scale of pay, (b) Finn was willing to hire members of appellee union, and (c) Finn was desirous of having his men join the appellee union;

(2) Because of such primary interest the association might have instigated picketing by the appellee union: (a) pickets were paid in cash and there is some evidence to the effect the cash was furnished by the association; (b) the cash books of the union showed no expenditure for pickets; (c) the sole result of picketing was that appellant lost "stops" to members of the association;

(3) A great many members of the union were members of the association which fact would actuate one organization to aid and co-operate with the other;

(4) At a meeting before an N. R. A. official (presumably impartial) attended by representatives of appellee union, a tentative agreement was effected requiring the union to furnish Finn men — cogently indicating that he wanted such workers — had asked for them and had been refused;

(5) No absolute proof was made as to Finn's gangster connection so that appellees were acting to injure another merely upon belief or suspicion and without sound reason, except self-protection or self-promotion;

(6) The fact that the written wage agreement between the union and the association makes no mention of the alleged agreement that the union only furnish men to members of appellee association would not refute a tacit agreement to that effect inasmuch as it is conceded by the master and the District Court that such an agreement would be illegal.

Our conclusion is that the presumption of correctness which attaches to the master's findings was not overcome. Were there no findings by the master or by the court, we would have reached findings similar to those found by the master.

A determination of the nature and character of the conspiracy is necessary to ascertain the participants in it, as well as the extent of the relief which should be awarded to appellant.

There is a vast difference between criminal and civil conspiracies. In fact, the latter may be divided into harmful or injurious, which may be actionable, and harmless, which of course is not actionable. In fact, individuals may conspire to accomplish a laudable object.2

At common law the existence of a criminal conspiracy could be established without proof of any act to further its object. Under the Federal statute a criminal conspiracy as there defined requires, in addition to the unlawful association, the existence of an overt act. However, the overt act may in and of itself be harmless. Criminal conspiracies may therefore be committed although no one is damaged. In actionable civil conspiracy, on the other hand, damage is the gist of the offense. Jones v. Monson, 137 Wis. 478, 119 N.W. 179, 129 Am.St.Rep. 1082; Wyeman v. Deady, 79 Conn. 414, 65 A. 129, 118 Am. St.Rep. 152, 8 Ann.Cas. 375; Boston v. Simmons, 150 Mass. 461, 23 N.E. 210, 6 L.R.A. 629, 15 Am.St.Rep. 230; Morris & Co. v. Nat. Ass'n of Stationers (C.C.A.) 40 F.2d 620, 626.

The alleged conspiracy in the instant case had for its object the prevention of appellant's successful entry into, and prosperous operation of, a scavenger business in Chicago. Back of this object was the desire of appellees to maintain prices. They feared that appellant would not maintain prices; hence war was waged upon it. Having concluded that a conspiracy of this nature existed, we are likewise of the opinion that International Brotherhood of Teamsters, Chauffeurs, Stablemen & Helpers of America, Local No. 731, Chicago Suburban Ash & Scavenger Corporation, Rogers, Monahan, Boss, Bohlman, Hess, Johnson, Grayson, and Boberg were parties to it. Both the master and the District Court found that Courtney, State's Attorney of Cook County, was not a party. He was, however, represented by one Capt. Gilbert, whom the master found was, after the N. R. A. meeting, in the conspiracy. The District Court did not agree with the master in this respect and found Capt. Gilbert was not a party to the conspiracy.

It is claimed for State's Attorney Courtney that he was prompted by worthy motives and that he wished to avoid the results which followed over-zealous and over-bitter competition in an industry so widely used by the public. On the other hand, it is argued that Courtney was prompted by a desire to win favor with a group with strong political connections and that his representative dragged him into active participation in the conspiracy with the other appellees who were relatively strong in vote producing circles. While we recognize that among public officials the influence of large voting groups is perhaps as great as the use of large sums of money, we are not justified in substituting suspicions for facts. In other words, we accept the finding of the District Court that neither Courtney nor Gilbert was a party to a conspiracy to ruin appellant's business or prevent his entry into the scavenger business.

Having reached a conclusion on the vital issues of the case, the issues of fact, we can more readily decide the other questions.

We are clearly of the opinion that no labor question is involved, and the District Court was not therefore denied jurisdiction by reason of the labor injunction act (Norris-La Guardia Act, 29 U.S.C.A. §§ 101-115). Three decisions of this court [Lauf v. Shinner & Co., 82 F.2d 68; United Electric Coal Companies v. Rice, 80 F.2d 1; Laclede Steel Co. v. Newton, 80 F.2d 636] are decisive of this question. By no stretch of reasoning can we find a labor question involved in this controversy.

Likewise, we are not prepared to hold that incorporation in a state other than Illinois, in order to establish diversity of citizenship, was collusive, or fraudulent, or would, for any other reason, bar the Federal court of jurisdiction. It is action by Congress which determines the jurisdiction of inferior Federal courts. The Congress has seen fit to make diversity of citizenship one of the grounds of Federal court jurisdiction. Likewise, the domicile of the corporation is the state of its incorporation at least for the purpose of determining Federal court jurisdiction. We must apply the law as we find it.

Finn was permitted to do business as an individual or he could incorporate if he chose so to do. He might incorporate in Delaware to conduct a business solely in Chicago. Again we might add, we must apply the law as we find it. We are not making the law. The reasons for his action were personal to him. They might be to avoid taxes or to better engage in wild financing or to restrict director's or official liability or for many other reasons, some of which may be more laudable. Finn, in the case before us, feared trouble with competitors and anticipated a bitter, ruthless, competitive warfare. He anticipated litigation and preferred to submit his right to engage in and carry on a scavenger business in Chicago to the Federal courts. To do so he felt disposed to incorporate in a foreign state. In so doing he acted within his rights, as decided by the Supreme Court in Black & White Taxi Co. v. Brown & Yellow Taxi Co., 276 U.S. 518, 48 S.Ct. 404, 72 L.Ed. 681, 57 A.L.R. 426.

The conspiracy was one to ruin appellant's business. Therefore the means adopted were unlawful. The actionable character of the means may be and often is determined by the use to which they are put. If, therefore, individuals conspired to commit the wrongful act of ruining appellant's business, the means, even though of themselves innocent, were actionable. Aside from whether the picketing was peaceful (American Steel Foundries v. Tri-City Central Trades Council, 257 U.S. 184, 42 S.Ct. 72, 66 L.Ed. 189, 27 A.L.R. 360), it was unlawful when its object was as here disclosed. In this case the picketing was well-nigh a boycott and most effective in accomplishing its object, which was to keep appellant out of the scavenger business. It was wrongful.

The decree of the District Court is reversed, and the court is directed to enter one in accordance with the views above expressed. The decree should direct the dismissal of the suit against those not included in the conspiracy. Those found to be in the conspiracy — namely the appellees International Brotherhood of Teamsters, Chauffeurs, Stablemen and Helpers of America, Local No. 731, Chicago Suburban Ash and Scavenger Corporation, E. J. Rogers, Larry Monahan, Matt Boss, Fred A. Bohlman, Arthur H. Hess, William B. Johnson, Joseph H. Grayson and Neils Boberg, should be enjoined from interfering with appellant's business by picketing or otherwise, or in any way carrying into effect the unlawful conspiracy charged and established.

Appellant shall recover its costs in this court against the above named appellees.

The appellees Courtney and Gilbert, and Peter Braeckman, William Venema, Arthur J. Criel, C. Groot, Edward Wendel, William Wischmeyer, Charles E. Larson, Daniel Teune and Harry Marks shall recover their costs against the appellant in this court.

The decree of the District Court for costs is reversed and the District Court will apportion the costs in that court as the equities and successes of the parties require.