Cantor Fitzgerald Inc. v. Lutnick
| Citation | 313 F.3d 704 |
| Decision Date | 16 December 2002 |
| Docket Number | Docket No. 01-7291. |
| Parties | CANTOR FITZGERALD INCORPORATED, a Nevada Corporation, Iris Cantor, individually, as trustee of the Cantor Family Trust and as executor of the will and codicil of B. Gerald Cantor, Plaintiffs-Appellants, v. Howard LUTNICK, Stephen Merkel, Stuart Fraser, Philip Ginsberg, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Joshua T. Rabinowitz, Slotnick, Shapiro & Crocker, LLP, (Barry I. Slotnick and Michael Shapiro, on the brief), New York, NY, for Plaintiffs-Appellants.
Karen L. Valihura, Skadden, Arps, Slate, Meagher & Flom, LLP, (Thomas J. Schwarz, Joseph M. Asher, Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY; Leonard P. Stark, Jennifer C. Kelleher, Skadden, Arps, Slate, Meagher & Flom, LLP, Wilmington, DE, on the brief), Wilmington, DE, for Defendants-Appellees.
Before: WALKER, Chief Judge, JACOBS and SACK, Circuit Judges.
In this diversity action, plaintiffs-appellants Cantor Fitzgerald Incorporated ("CFI") and Iris Cantor (collectively, "plaintiffs") appeal from the March 16, 2001 judgment of the District Court for the Southern District of New York (Loretta A. Preska, District Judge) granting the motion of defendants-appellees Howard Lutnick, Stephen Merkel, Stuart Fraser, and Philip Ginsberg (collectively, "defendants") to dismiss plaintiffs' complaint asserting claims of breach of fiduciary duty under Fed.R.Civ.P. 12(b)(6) as barred by the statute of limitations. See Cantor Fitzgerald Inc. v. Lutnick, No. 99 Civ. 4008, 2001 WL 111200, at *1, *4 (S.D.N.Y. Feb. 8, 2001). Although the district court erred by applying federal statute of limitations law in a diversity case, we find that plaintiffs' suit is nevertheless time barred under the applicable state statute of limitations. Accordingly, we affirm the district court's judgment.
Accepting the truth of plaintiffs' factual allegations at the pleading stage, Dawes v. Walker, 239 F.3d 489, 491 (2d Cir.2001), the following account is drawn substantially from CFI's complaint.
CFI is a Nevada corporation with offices in Los Angeles, California. Until September 1992, CFI was a holding company that owned various operating companies engaged primarily in the brokerage of securities and the sale of financial market data. In September 1992, CFI transferred substantially all of its assets to Cantor Fitzgerald Limited Partnership ("CFLP"), a Delaware limited partnership. As a result of this reorganization, Iris and G. Bernard Cantor (Iris Cantor and Cantor, respectively) became the sole owners of CFI, which became the managing general partner of CFLP. Defendants Lutnick, Fraser, and Ginsberg became partners in CFLP. Cantor died in July 1996. At the present time, Iris Cantor, a California resident, is the trustee of the Cantor Family Trust, which holds CFI's shares.
During the relevant period, defendants Lutnick, Fraser, and Ginsberg were officers, directors, or both, of CFI, and all were citizens of New York. Merkel, also of New York, was general counsel of CFLP, in which capacity he provided legal advice to CFI. During the relevant period he also assumed the positions of secretary and senior vice president of CFI. Plaintiffs claim that defendants owed fiduciary duties to CFI and its shareholders, the Cantors.
Under the Agreement of Limited Partnership of Cantor Fitzgerald, L.P., dated September 25, 1992 (the "1992 Partnership Agreement"), section 3.03(a) released CFI from its fiduciary duty not to compete against CFLP, as follows:
Nothing contained in this Agreement shall be deemed to preclude CFI or any Affiliate of CFI from engaging or investing in or pursuing, directly or indirectly, any interest in other business ventures of every kind, nature or description, including those which compete with the Partnership, independently or with others; provided, however, that upon the occurrence of a Change of Control CFI shall be so precluded.
(emphasis added). Thereafter, Cantor competed with CFLP through Market Data Corporation ("MDC"), an "affiliate" of CFI as defined by the 1992 Partnership Agreement.
The dispute in this case stems from amendments made to the 1992 Partnership Agreement in 1993 that limited the ability of CFI and its affiliates to compete with CFLP. Cantor and all of the defendants except Fraser played significant roles in the amendment process. Cantor received the final draft, approved on June 3, 1993, and the Cantors both executed consents in which they acknowledged having received, reviewed, and consented to the 1993 amendments.1
Among the 1993 amendments, two changes were made that limited the ability of CFI and its affiliates to compete with CFLP. First, the language in section 3.03(a) that had previously permitted competition was removed and was replaced by language that precluded "Competitive Activities":
Nothing contained in this Agreement shall be deemed to preclude CFI or any Affiliate of CFI from engaging or investing in or pursuing, directly or indirectly, any interest in other business ventures of every kind, nature or description, independently or with others; provided, that such activities do not constitute Competitive Activities.
Agreement of Limited Partnership of Cantor Fitzgerald, L.P. Amended and Restated as of June 3, 1993 (the "1993 Partnership Agreement") § 3.03(a) (emphasis added). The term "Competitive Activities" is defined to include "directly or indirectly engag[ing] in, represent[ing] in any way, or [being] connected with, any Competing Business." Id. § 11.04(c). A "Competing Business," in turn, is broadly defined to include any activity that:
(i) involves the conduct of the wholesale or institutional brokerage business, (ii) consists of marketing, manipulating or distributing financial price information of a type supplied by the Partnership... to information distribution services or (iii) competes with any other business conducted by the Partnership ... if such business was first engaged in by the Partnership ... after the Restatement Date.
In the second relevant change worked by the amendments, section 3.03(a) was supplemented with a new subsection, section 3.03(b), which provided that each partner "acknowledges its duty of loyalty to the Partnership and agrees to take no action to harm (or that would reasonable [sic] be expected to harm) the Partnership or any Affiliated Entity." Id. § 3.03(b).
The gravamen of CFI and Iris Cantor's complaint is that for almost five years appellees exploited and failed to correct Cantor's mistaken belief that CFI's right to cause MDC to compete with CFLP survived the 1993 amendments. Plaintiffs claim that Lutnick approved the 1993 amendments, which he believed limited the right to compete, without authorization from and contrary to the wishes of Cantor. Further, plaintiffs claim that the defendants failed to inform Cantor of these restrictions, or at least their understanding of them, even as he continued to allow MDC to compete with CFLP. According to plaintiffs, as part of a "second campaign of deception" aimed at preventing Cantor from discovering the changes made by the 1993 amendments, defendants prepared and in some cases circulated documents pertaining to various securities offerings by CFLP and MDC that stated, or gave the impression, that MDC could compete with CFLP. These documents reinforced Cantor's belief that MDC had the right to compete under the 1993 Partnership Agreement and prevented him from taking steps to correct the amendments to restore that right.
Based on the foregoing allegations, plaintiffs claimed in the first count of their complaint that the defendants breached their fiduciary duties to CFI and its shareholders, the Cantors. In the second count, plaintiffs asserted that Lutnick breached his fiduciary duties by taking advantage of Iris Cantor's ignorance of the 1993 Partnership Agreement's restrictions on competition during negotiations to settle one of two previous lawsuits between the parties in Delaware Chancery Court.
The first Delaware action was commenced on March 6, 1996 and settled in May 1996. As part of the settlement agreement, CFI exchanged its general partnership units in CFLP for newly created limited partnership units. CFI and Iris Cantor maintain that, by keeping silent during the settlement negotiations about the restrictions on CFI's and MDC's ability to compete, Lutnick unfairly caused the Cantors and CFI to exchange their general partnership units at a "deep discount" price that did not reflect that the Cantors were relinquishing the right to compete with CFLP.
CFI and Iris Cantor assert that they first discovered defendants' breaches of their fiduciary duties in March 1998, when the second suit was commenced by CFLP in Delaware Chancery Court. In this action, CFLP sued CFI and Iris Cantor for violating the 1993 Partnership Agreement by causing or permitting MDC to license an automated electronic brokerage system to one of CFLP's competitors. In a post-trial opinion, the Chancery Court found that CFI's conduct was an "egregious breach of the Partnership Agreement," and rejected Iris Cantor's counterclaims seeking to reform the 1993 Partnership Agreement to conform to her and CFI's alleged understanding that the agreement did allow MDC to compete with CFLP.
On June 3, 1999, plaintiffs CFI and Iris Cantor commenced this diversity action charging defendants with fiduciary breaches in failing to disclose the 1993 Partnership Agreement's non-compete provision. Defendants moved to dismiss on the basis, among other reasons, that all of plaintiffs' causes of action accrued between June 1993 (when the 1992 Partnership Agreement was amended) and May 1996 (when the first Delaware action was settled) and, therefore, were barred by the applicable three-year statute of limitations. The district court applied California's and Nevada's...
To continue reading
Request your trial
-
In re Methyl Tertiary Butyl Ether (Mtbe) Products, MDL 1358(SAS).
...and plaintiffs did not have a chance to respond to it, the Court need not consider those arguments. See Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704, 711 n. 3 (2d Cir.2002). In addition, plaintiffs were specifically barred from presenting evidence regarding a hypothetical world where onl......
-
Brown Media Corp. v. K & L Gates, LLP
...law of the State of New York governs the statute of limitations, accrual, as well as any applicable tolling. Cantor Fitzgerald Inc. v. Lutnick , 313 F.3d 704, 709 (2d Cir. 2002) ; Personis v. Oiler , 889 F.2d 424, 426 (2d Cir. 1989). Under New York law, a claim for tortious interference wit......
-
Chiste v. Hotels.Com L.P.
...statute of limitations is shorter—New York's or that of the state where the cause of action accrued. See Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704, 710 (2d Cir.2002); Pricaspian Dev. Corp. v. Royal Dutch Shell, PLC, 382 Fed.Appx. 100, 102 (2d Cir.2010). In New York, “a cause of action......
-
Vincent v. Money Store
...... applicable tolling provisions, provided by either New York or the state where the cause of action accrued.” Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704, 710 (2d Cir.2002) (internal citation and footnote omitted). Under section 202, New York courts are required to borrow the statute ......
-
Forum Selection in Antitrust and Business Tort Litigation
...v. McCoach, 313 U.S. 498 (1941); see also Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3, 4 (1975); Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704, 710 (2d Cir. 2002); 28 U.S.C. § 1652. 7. See, e.g., Blankenship v. USA Truck, 601 F.3d 852, 856 (8th Cir. 2010) (“When there is no state supr......