468 F.2d 1326 (2nd Cir. 1972), 278, Leasco Data Processing Equipment Corp. v. Maxwell
|Docket Nº:||278, 138-142, 71-1563, 72-1638 72-1640, 72-1611, 72-1654.|
|Citation:||468 F.2d 1326|
|Party Name:||LEASCO DATA PROCESSING EQUIPMENT CORPORATION, Leasco World Trade Company (U.K.) Ltd., Plaintiffs-Appellees, v. Robert MAXWELL et al., Defendants-Appellants. LEASCO DATA PROCESSING EQUIPMENT CORPORATION, Leasco World Trade Company (U.K.) Limited, Plaintiffs-Appellants, v. Isidore KERMAN, Defendant-Appellee.|
|Case Date:||October 30, 1972|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued Nov. 11, 1971, and Sept. 26, 1972.
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Anthony F. Phillips, New York City (Willkie, Farr & Gallagher and Jack David, New York City, of counsel), for plaintiffs-appellants.
Howard A. Heffron, Washington, D. C., for defendant-appellee, Isidore Kerman.
Frederick B. Boyden, New York City (Shaw, Bernstein, Scheuer, Boyden & Sarnoff and Helen E. Freedman, New York City, of counsel), for defendant-appellant Robert Maxwell.
John S. Martin, Jr., New York City (Martin & Obermaier, New York City, of counsel), for defendant-appellant Chalmers, Impey & Co.
Peter K. Leisure, New York City (Curtis, Mallet-Prevost, Colt & Mosle and Ernest A. Gross, John P. Campbell, John E. Sprizzo, Peter A. Kalat, and Robert S. Lipton, New York City, of counsel), for defendants-appellants Robert Fleming & Co. Limited and Robert Fleming, Inc.
Maurice N. Nessen, New York City (Nickerson, Kramer, Lowenstein, Nessen & Kamin, New York City, of counsel), for defendants-appellants Isthmus Enterprises, Inc., Maxwell Scientific International, Inc. and MSI Publishers, Inc.
Anthony F. Phillips, New York City (Willkie, Farr & Gallagher, Howard C.
Buschman, III, Jack David and Mary F. Kelly, New York City, of counsel), for plaintiffs-appellees.
Before FRIENDLY, Chief Judge, FEINBERG, Circuit Judge, and DAVIS, Associate Judge. [*]
FRIENDLY, Chief Judge:
This case, in which the plaintiffs (hereinafter collectively referred to as Leasco) seek large damages allegedly resulting from the purchase of shares of a British company on the London Stock Exchange, first came to our attention in October, 1971, on Leasco's appeal from a judgment entered by Judge Lasker in the District Court for the Southern District of New York, 319 F.Supp. 1256, dismissing the complaint as against defendant Isidore Kerman, a London solicitor, for lack of jurisdiction over the person. Consideration of the questions presented by that appeal led us to wonder whether, because of the foreign elements in the transaction in suit, the district court had jurisdiction over the subject matter. As that issue had not been briefed or argued, we gave the parties an opportunity to submit further briefs, and, since the issue was of obvious interest to other defendants, also invited them to furnish briefs. Plaintiffs' counsel advised that this question as well as claims of lack of personal jurisdiction as to other defendants were sub judice before Judge Ryan in the Southern District and suggested that the best course might be to withhold decision on Leasco's appeal from the judgment dismissing its complaint against Kerman until the entire matter could come before us. Following that suggestion, we awaited Judge Ryan's decision. He denied all the motions but certified the issues of in personam and subject matter jurisdiction pursuant to 28 U.S.C. § 1292(b). We granted leave to appeal.
The story of the circumstances underlying this action, a complicated one at best, is still harder to tell because there has thus far been no trial and the facts have not been determined. Yet the issue of subject matter jurisdiction and even, in some instances, that of personal jurisdiction depend on what the facts were. Conceding that, on the issue of subject matter jurisdiction, Leasco at this stage would be entitled to every favorable inference, Steele v. Bulova Watch Co., 344 U.S. 280, 284, 73 S.Ct. 252, 97 L.Ed. 252 (1952), defendant Maxwell suggests that we are likely to get somewhat closer to the truth if we disregard Leasco's affidavits subsequent to the motion to dismiss for lack of subject matter jurisdiction and look to its answers to defendants' interrogatories, which were made before that issue was raised. In the main we shall follow that course, without thereby implying that broader assertions in Leasco's later affidavits would have been disregarded if they were necessary to our decision. We add that if a trial should disclose that the allegedly fraudulent acts of any of the defendants within the United States were non-existent or so minimal as not to be material, the principles announced in this opinion should be applied to the proven facts; the issue of subject matter jurisdiction persists.
I. The Facts Claimed by Leasco
The gist of the complaint is that the defendants conspired to cause Leasco to buy stock of Pergamon Press Limited ("Pergamon"), a British corporation controlled by defendant Robert Maxwell, a British citizen, at prices in excess of its true value, in violation of § 10(b) of the Securities Exchange Act and the SEC's sufficiently known Rule 10b-5. According to Leasco, and-as we shall not always repeat-we here state only Leasco's version, the first contact occurred early in 1969 when Maxwell came to Great Neck, N. Y., where Leasco then had its principal office, and proposed to Saul Steinberg, Chairman of Leasco, that Pergamon and Leasco engage in a joint venture in Europe. Maxwell falsely told Steinberg that Pergamon had a
computerized typesetting plant in Ireland and gave Steinberg the most recent Pergamon annual report, which contained untruthful and misleading statements of Pergamon's affairs. Steinberg telephoned Maxwell in London to decline the joint venture; Maxwell invited him to come there to discuss areas of possible cooperation.
Steinberg and Robert Hodes, a director of Leasco, met Maxwell at the latter's London office in late April, 1969; Maxwell made various false or exaggerated statements of Pergamon's performance and prospects. When he suggested that Pergamon could acquire Leasco's European operations, Steinberg responded that Leasco would be interested only in acquiring Pergamon and its related companies. Clark, a director of Pergamon, entered the room, Maxwell having left for a short time, and whetted Leasco's interest by falsely touting the profitability of International Learning Systems Company (ILSC). Pergamon was a 50% owner and had an option to acquire the other 50% of ILSC. When Maxwell rejoined the group, he told Steinberg and Hodes that Ladislaus Majhtenyi, an official of Pergamon Press, Inc., an American subsidiary whose stock was traded on the American Stock Exchange, would provide Leasco with all financial data necessary to evaluate the worth of Pergamon and the Maxwell-related companies.
In late April or early May, Michael Gibbs, Leasco's director of corporate planning, met in New York with Majhtenyi. The latter said that the Pergamon and Maxwell operations were very profitable. He added that Pergamon was in the process of acquiring MSI Publishers, Inc. (MSI) and falsely spoke in glowing terms of the profitability of that company's operations in selling Pergamon back issues in Canada, Mexico and South America. This was followed by telephone calls between Maxwell and Steinberg; in some (or perhaps all) of the calls, one (or perhaps both) of the participants were in the United States. Maxwell reported enthusiastically, and falsely, about sales of ILSC encyclopedias in Australia. Expressing surprise at the paucity of information Majhtenyi had given to Gibbs, he said he would meet Steinberg in New York City.
The meeting occurred at a hotel in early May; Maxwell, with Majhtenyi present, made various misrepresentations about the sales and earnings of Pergamon and ILSC. Around May 17 Maxwell mailed a letter from London to Leasco in New York enclosing a dozen documents. Among these were a false report of ILSC's profits; a draft of the 1968 Pergamon annual report, certified by defendant Chalmers, Impey & Co., containing false reports of profits; and a misleading report on Pergamon's affairs, prepared by Whinney, Murray & Co., accountants retained by defendant Robert Fleming & Co. Ltd. (Fleming Ltd.), a London banking firm whose clients were large holders of Pergamon stock and which also acted as financial adviser to Pergamon. Late in the month Maxwell, in London, called Steinberg, in New York; he said that any contract for the takeover would have to be signed before the Pergamon annual meeting on or about June 19. As a result, Gibbs and Schwartz went to London around May 30 and met for four days with Maxwell, Clark, Kerman (a director of Pergamon and Pergamon Press, Inc. and senior partner of a large London firm of solicitors which represented Pergamon and the Maxwell family interests), and others. Many further misrepresentations with respect to Pergamon and ILSC were allegedly made by Maxwell. The meetings were followed by telephone conversations between Maxwell in London and Steinberg in New York, in the course of which Maxwell is claimed to have made further false statements, especially with respect to Pergamon's profits from the sale of back issues. Around the same time Richard Fleming, chairman of Fleming Ltd., and Lawrence Banks, president of its American subsidiary, Robert Fleming, Incorporated (Fleming, Inc.), visited Leasco's offices in New York and told
Schwartz and Hodes that Pergamon was far more valuable than the price Leasco was proposing to pay; in effect they also vouched for the correctness of the Whinney Murray & Co. report.
Later Maxwell telephoned from London that the contract would have to be signed on or before June 17. He and...
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