Although the certificate of the circuit court may not state
exactly how the jurisdictional question certified arose, this Court
can ascertain it from the record, together with the opinion of the
court below made a part thereof.
The jurisdiction of the circuit court must be determined with
reference to the attitude of the case at the date of the filing of
the bill.
When a citizen of one state has a cause of action against a
citizen of another state which he may lawfully prosecute in a
federal court, his motive in preferring a federal tribunal, in the
absence of fraud and collusion, is immaterial.
If it does not appear that there was any collusion within the
meaning of the ninety-fourth rule in equity for the purpose of
conferring jurisdiction, not otherwise existing, on the circuit
court of the United States, that court does not lose its
jurisdiction of a suit brought by a nonresident stockholder, after
request to and refusal by the corporation, to enjoin
Page 204 U. S. 322
the enforcement of an ordinance against the corporation, and of
which the court would not have had jurisdiction had the corporation
been complainant, because subsequent events make it to the interest
of the corporation and its officer to make common cause with the
complainant stockholder. An admission by complainant that he
expected the action to be brought in the United States court does
not necessarily show collusion to confer jurisdiction.
In this case,
held on the facts that no collusion
between the stockholder bringing the suit and the corporation
refusing to bring it was shown that deprived the circuit court of
jurisdiction thereover.
143 F. 430 affirmed.
The facts are stated in the opinion.
Page 204 U. S. 325
MR. JUSTICE DAY delivered the opinion of the Court.
This case is here upon a question of jurisdiction of the Circuit
Court of the United States for the Northern District of Illinois to
entertain the suit. 26 Stat. 826. The case originated in a bill
filed in that court by the complainant, Darius O. Mills, a citizen
of California, as a stockholder in the People's Gas, Light &
Coke Company, a corporation of the State of Illinois, to restrain
the City of Chicago from enforcing a certain ordinance limiting the
right of the gas company as to charges for furnishing gas.
Complainant averred a demand of the directors that an action be
brought by the company to restrain the city from enforcing the
ordinance, and alleged compliance with the ninety-fourth equity
rule, and the refusal of the company to bring the action.
The original bill alleged that the ordinance impaired the
obligation of the contract contained in the charter of the gas
company in contravention of the contract clause of the federal
Constitution; and also that the ordinance was illegal in that the
city had no power to pass it.
The ordinance thus complained of was adopted by the City of
Chicago October 15, 1900, and provided that charges for gas in
excess of 75 cents per 1,000 cubic feet should be illegal, and
fixed a penalty of not less than $25 or more than $200 for each and
every violation of the ordinance.
The objection made to the jurisdiction of the circuit court, and
which is said to be established in the record and duly presented
here, is based upon the allegation that the suit by Mills was
brought in the federal court by collusion between him and the gas
company, and for the fraudulent purpose of invoking the
jurisdiction of the federal court concerning a controversy which
was really between the company and the City of Chicago -- parties
lacking the requisite diversity of citizenship to maintain the suit
in the federal courts.
The record discloses that the appeal was allowed to this
Page 204 U. S. 326
Court solely upon the question of the jurisdiction of the court
as a circuit court of the United States. A certificate entered the
same term at which the appeal was allowed sets forth that the city
objected to the jurisdiction of the court as a federal court, and
that the appeal was prayed solely upon the question of jurisdiction
of the court as a circuit court of the United States, and that the
appeal was granted solely upon the question of jurisdiction.
Portions of the proceedings, including the testimony on the
question of jurisdiction, duly signed and sealed and made part of
the record, are certified to this Court by a certificate in the
form of a bill of exceptions.
In re Lehigh Min. &
Manufacturing Co., 156 U. S. 322;
Nichols Lumber Co. v. Franson, 203 U.
S. 278.
A preliminary objection is made that the certificate does not
show whether the jurisdictional question arose from insufficient
amount, want of diversity of citizenship, collusion, or otherwise.
But we are of the opinion that an examination of the record, aided
by the opinion of the court contained therein, and made part
thereof, distinctly shows that the question of jurisdiction passed
upon concerned the collusive character of the action of the
complainant.
We think this brings the case within the ruling in
Smith v.
McKay, 161 U. S. 355, in
which the Court, looking into the character of the appeal, the
certificate of the court, and the certified copy of the opinion,
made part of the record, sustained the court's jurisdiction,
citing, with approval
Shields v. Coleman, 157 U.
S. 168, and
In re Lehigh Mining & Manufacturing
Company, 156 U. S. 322.
The circuit court, after an examination of the testimony,
reached the conclusion that the action was not collusive, and, upon
final decree, granted a perpetual injunction against the
enforcement of the ordinance in question. On this appeal, we are
only concerned with the correctness of the conclusion reached in
the circuit court as to the question of jurisdiction. This question
is before us upon this record.
Wetmore v.
Rymer,
Page 204 U. S. 327
169 U. S. 115. In
order to determine it, it is necessary to consider briefly as may
be the facts shown in this record.
The ordinance in question was passed October 15, 1900. The
People's Gas, Light & Coke Company, on the twenty-first of
December, 1900, brought a suit in the Circuit Court of the United
States for the Northern District of Illinois seeking to enjoin
enforcement of the ordinance upon the ground that it impaired the
obligation of its charter contract, denied equal protection of the
laws, and amounted to a confiscation of its property, and upon the
further ground that no power had been conferred upon the City of
Chicago by the Legislature of Illinois to thus regulate the price
of gas.
It is unnecessary to recite all of the proceedings of that suit
in detail. The history of the litigation will be found in the
opinion of the chief justice when the case came here from the
circuit court on appeal,
194 U. S. 194 U.S.
1.
To the bill as originally filed in that case the City of Chicago
filed a general demurrer, and the circuit court, holding that no
constitutional right of the company was impaired, decided that its
jurisdiction would not extend to the question of the power of the
council to pass the ordinance in question, and that such a question
was one primarily for the state courts; thereupon the company filed
an amended bill limiting its rights to the alleged impairment of
its contract. The City of Chicago also demurred to the amended
bill, and, upon the hearing of the demurrer, it was sustained and
the bill dismissed for want of jurisdiction, and a final decree was
entered to that effect. An appeal was thereupon taken to this
Court.
When the litigation had progressed thus far, complainant, Mills,
who was the largest stockholder in the company, consulted counsel
in New York with a view to protecting his interests. Counsel,
having examined the record, prepared a letter dated December 16,
1902, addressed to the directors of the gas company and signed by
complainant, in which he set forth that the proceedings in the suit
concerning the ordinance reducing the price of gas to 75 cents per
1,000 cubic feet had been submitted
Page 204 U. S. 328
to his counsel, together with a copy of the opinion of the
circuit court, and that an appeal was then pending in the Supreme
Court of the United States; the advice of his counsel that that
suit might not adequately protect his interests, as the bill was
dismissed for want of jurisdiction, and that the Supreme Court
might limit the decision of the case to the question of
jurisdiction. And further that it did not involve the question of
the power of the council of the City of Chicago to reduce the rates
of the company. He then requested the institution of a suit against
the City of Chicago at the earliest practicable moment for the
purpose of preventing the enforcement of the ordinance, upon the
ground that it impaired its charter contract and that the council
had no power to pass it. The letter further expounded the necessity
of resorting to a court of equity for protection of the company's
rights.
The record discloses that the company's counsel came to New
York, where a conference was had with the counsel retained by
Mills, and a difference of opinion was developed as to the
propriety and advisability of a new suit which would cover the
points in difference. The result of this conference was that the
company's counsel notified counsel for Mills that he should advise
the board to decline the request to bring a new suit.
On January 29, 1903, the company wrote to Mills, declining to
begin the suit, and sent a copy of the resolution reciting the
belief of the board that for the company to institute further legal
proceedings to test the validity of the ordinance of October 15,
1900, would excite public prejudice against the company, which at
that time it was deemed of great importance to avoid, and
afterwards, at the annual meeting of the stockholders of the
company, a resolution directing the beginning of the suit was
defeated.
The question of jurisdiction must be decided having reference to
the attitude of the case at the date the bill was filed, on June 8,
1903.
Kirby v. American Soda
Fountain Co., 194
Page 204 U. S. 329
U.S. 141,
194 U. S.
145-146. As to the refusal of the company to institute a
new suit, there is nothing in the record to show any concert of
action between complainant and the company. At that time, his
counsel in New York was not concerned in the litigation in Chicago
or in the appeal to this Court. As the case brought by the gas
company then stood, it had been dismissed for want of jurisdiction,
and an appeal taken from that decree of dismissal. The case did not
necessarily involve the question of contract rights, and did not
embrace the question of power of the city.
In this attitude of affairs, counsel might well advise that the
protection of the stockholders' interest required the beginning of
a suit which should embrace the vital questions in issue. There was
a sharp difference of views between the representatives of Mills
and those of the company's solicitors as to the advisability of
bringing an action.
For the prudential reasons outlined in their letter of January
29, 1903, above referred to, the directors of the company declined
to bring the suit. After the judgment of the circuit court was
affirmed in this Court, the question of the power of the city to
pass the ordinance was left undecided, and was subsequently
litigated to a final decree in favor of the contention made in the
suit begun by Mills.
It is true that, upon the hearing of the demurrer in this
action, the circuit court ordered a decree correcting its former
decree in the gas company suit so as to show that the court decided
the case upon the merits as to the allegations as to contract, and
dismissed the bill without prejudice to the bringing of any other
suit to test the power of the city.
The corrected decree was brought before this Court in the then
pending appeal of the gas company.
194 U. S. 194 U.S.
1.
After the decision in this Court affirming the decree in the gas
company suit, an amended bill was filed by complainant Mills based
solely upon the alleged want of power of the City Council of
Chicago to pass the ordinance in controversy, which resulted in the
decree to which we have referred, enjoining
Page 204 U. S. 330
the enforcement of the ordinance, for the reason that the City
Council of Chicago had no power to pass the same.
As we have said, we think the record establishes that
complainant and his counsel honestly believed that such new suit
was necessary to protect the stockholders' interests. There is an
entire lack of testimony to show any collusive action at the time
of the beginning of the suit.
It is true that subsequent events made it to the interest of the
company to make common cause with Mills against the enforcement of
the ordinance in question, but, when he began his suit, no
proceedings were pending which involved the important question of
the power of the city upon which the complainant ultimately
prevailed.
It is true that an officer of the company who was the next
largest stockholder to Mills contributed to the expenses in this
suit, but he testified, and there is nothing in the record to
contradict him, that he paid this money from his own resources,
without actual repayment, or any understanding with the company
that he should be reimbursed.
It is true that Mills' counsel was retained in the suit in this
Court after the beginning of his suit in Chicago.
It is also true that, in answering to a question put in the
language of the ninety-fourth rule as to whether the suit was
brought to confer upon the circuit court of the United States
jurisdiction in a case of which it would not otherwise have
cognizance, complainant answered that he so understood it, but
subsequently said that he did not understand the question. This
admission, intentionally made, would not necessarily show
collusion. But we think it was not the purpose of the complainant
to say more than that he expected his action to be brought in the
United States court. When a citizen of one state has a cause of
action against a citizen of another state which he may prosecute
lawfully in a federal court, and when the suit is free from fraud
or collusion, his motive in preferring a federal tribunal is
immaterial.
Blair v. Chicago, 201 U.
S. 400,
201 U. S. 408,
and previous cases in this Court therein cited.
Page 204 U. S. 331
Upon the whole record, we agree with the circuit court that the
testimony does not disclose that the jurisdiction of the federal
court was collusively and fraudulently invoked, and the judgment
below will be
Affirmed.
Dissenting: MR. CHIEF JUSTICE FULLER and MR. JUSTICE HARLAN.