Lipsky v. Commonwealth United Corp.

Decision Date01 December 1976
Docket NumberNo. 37,D,37
Citation551 F.2d 887
PartiesGerald LIPSKY, Executor under the Will of Walden Robert Cassotto (a/k/a Bobby Darin), Deceased, Plaintiff-Appellant, v. COMMONWEALTH UNITED CORPORATION (now known as Iota Industries, Inc.), et al., Defendants-Appellees. ocket 76-7125.
CourtU.S. Court of Appeals — Second Circuit

Patterson, Belknap & Webb, New York City (by Thomas Thacher and William J. Muller, New York City), for plaintiff-appellant.

Burns, Van Kirk, Greene & Kafer, New York City (by William D. Greene and James P. Corcoran, New York City), for defendants-appellees Iota Industries, Inc. and Commonwealth United Music, Inc.

Lord, Day & Lord, New York City (by Thomas F. Daly, R. Scott Greathead, and Richard Gaines, New York City), for defendants-appellees The Hudson Bay Music Co. (formerly known as Alley-Street Music Venture), Alley Music Corp. and Street Songs, Inc.

Before FEINBERG and VAN GRAAFEILAND, Circuit Judges, and MOTLEY, District Judge. *

MOTLEY, District Judge:

Appellants appeal from two orders of the District Court for the Southern District of New York. The first of these orders struck certain portions from appellant-plaintiff's Amended Unified Complaint under Rule 12(f), Fed.R.Civ.P.

The second order dismissed the complaint for failure to state a claim under Rule 12(b)(6), Fed.R.Civ.P. We affirm in part and reverse in part the order which strikes portions of the complaint. We reverse the order of dismissal.

Appellant, Gerald Lipsky, is the executor under the will of Walden Robert Cassotto also known as Bobby Darin of singing fame ("Darin"). Defendants are a number of corporate entities all of which, according to Darin, have either the stock or the underlying assets of T. M. Music, Inc. ("T.M."). Darin was once the sole stockholder of T. M. In 1968, Darin entered into an agreement under which he exchanged all of this stock for the stock of one of the defendants. He now seeks rescission of this agreement, alleging a material breach of the contract. He has joined as defendants those companies which allegedly have some part of the T. M. stock or assets.

I. The Facts

The important facts are not in dispute. In August of 1968 Darin was a well known actor, singer, and composer of popular songs. He was also the sole stockholder of T. M., a New York corporation which held title to various of his musical copyrights, publishing and recording rights in songs which were composed by Darin and other artists. On August 20, 1968, Darin entered into a contract with Commonwealth United Corporation ("CUC") and Commonwealth United Music, Inc. ("CUM") 1 under which he agreed to transfer to them all of his TM stock in return for CUC common stock worth $1.3 million. Both CUM and CUC are Delaware corporations. As part of their obligations under the contract, CUC agreed to file a Registration Statement for Darin's CUC securities at its own expense and to use its best efforts to cause the Registration Statement to become effective. The contract is a lengthy one with many provisions, but the dispute centers around that provision which deals with the registration of Darin's stock (this paragraph is quoted in the margin). 2 The transaction was closed on September 13, 1968, and at that time, CUC stock was being traded on the American Stock Exchange for $18 per share.

On November 27, 1968, CUC did file a registration statement with respect to Darin's stock, which was later amended on April 29, 1969. On July 22, 1969, trading in the CUC stock was halted on the American Stock Exchange at CUC's request, and Over the Counter trading was suspended on August 1, 1969. On December 23, 1969, OTC trading was resumed and the stock was then priced at $.50 bid and $.75 asked.

At this point (and up to the time of this writing) Darin's stock had not been registered with the Securities and Exchange Commission ("SEC"). On April 7, 1970, Darin demanded that the contract be rescinded and that CUC and CUM return his TM stock. They refused. Darin commenced suit in United States Court, Central District of California, on August 27, 1970. On November 19, 1970, CUM sold the underlying TM assets, which it held, to the remaining defendants in the case: The Hudson Bay Music Company (formerly known as Alley-Street Music Venture), Alley Music Corporation, and Street Songs, Inc. They will be collectively referred to as "the Hudson defendants".

The Proceedings Below

Although originally filed in California, this case was transferred to the Southern District of New York by order of the Judicial Panel on Multidistrict Litigation (dated October 28, 1970) and a stipulation of the parties (dated November 9, 1972). The reason for this transfer was that in 1970, there were already 16 class and derivative suits pending against CUC and Seeburg Corporation (its wholly owned subsidiary) in the Southern District of New York. The Darin suit, and one other, were sent along as "tag along" cases for the convenience of the parties and the court. All of these suits which constituted the Seeburg-Commonwealth Multidistrict Litigation were tried before Judge McFadden, of the Northern District of Alabama, sitting by designation. The sixteen other suits, but not the instant case, were subsequently consolidated into two class actions which have already been settled. Darin's litigation has not been incorporated into either of the class actions. Aside from being a part of the Multidistrict Litigation, it has no relationship to these other cases.

In November of 1973, the District Court granted Darin's motion to amend and supplement his complaint and to add the Hudson defendants as additional parties. The Court also denied defendants' motion to dismiss at that time. A Unified Complaint was filed, and after Darin's death on December 20, 1973, an Amended Unified Complaint, substituting Darin's executor as plaintiff, was filed.

The District Court's Order of July 11, 1975

On August 28, 1974, all of defendants moved under Rule 12(f), Fed.R.Civ.P., to strike certain portions of the Amended Unified Complaint. In four paragraphs of his complaint, Darin had alleged that the SEC had objected to a registration statement, two amendments to the registration statement and a proxy statement filed by CUC on the grounds that they contained material omissions, misleading statements, etc. 3 Defendants also objected to a copy of the SEC's civil complaint against CUC which was attached to the new complaint as an Appendix. These submissions and the SEC complaint did not relate to the submissions required to register Darin's particular shares. Darin claimed they were basically duplicates of the Darin statements and were probative on the question whether CUC used its best efforts to register the Darin stock.

A hearing was held on March 31, 1974 to discuss the motion and hear arguments. The motion to strike was granted in full. On July 11, 1975, the court ordered Darin to file a Second Amended Unified Complaint in the precise form as the first, except with the SEC allegations omitted. The result was that Darin was not permitted to allege that the filings and amendments to registration statements relating to his stock were defective. The order also noted that Darin had limited his suit to the single cause of action for rescission. 4 Pursuant to an agreement of the parties, a schedule was adopted for the determination of the various issues and for the determination of defendants' affirmative defenses under Rule 12(b)(6). The order provided that if the motion be granted, then the case would be dismissed with prejudice; otherwise, the remaining defendants would be required to answer the complaint and plead their affirmative defenses of laches and estoppel. At this point, discovery would be limited to that bearing on these defenses. A trial limited to these issues would then be held. If Darin survived this stage, then a trial would be held on the merits of his contract action. This July order also stayed all discovery, including interrogatories and requests for admissions submitted by Darin, until further order of the District Court.

The District Court's Order of February 17, 1976

By notices dated August 26, 1975, defendants moved to dismiss the Second Amended Unified Complaint, averring it failed to state a claim under Rule 12(b) (6). Oral argument on this motion was heard at a pretrial conference October 15, 1975. The motion was granted February 17, 1976.

The order was without an opinion. It contained a number of conclusions: 1) as a matter of law, the "best efforts" clause requiring CUC to register Darin stock was not a "material" element of the contract and rescission was, therefore, not an appropriate remedy; 2) no breach by CUM, the recipient of the TM stock, is alleged in the complaint and CUM cannot be required to return the stock merely because CUC may have breached the "best efforts" clause; 3) although Darin is conceivably entitled to a return of his stock, no facts are alleged which show that he may be entitled to a return of the underlying assets; 4) rescission is not an appropriate remedy because a return to the status quo existing at the time the contract was signed would be impossible; 5) the complaint was fatally deficient because it failed to allege that CUC's alleged breach caused Darin any injury; and 6) the complaint fails to state a cause of action against the Hudson defendants.

The order concluded by dismissing the complaint with prejudice. It also ordered the delivery of 10,000 shares of CUC stock to Darin. 5

Darin appeals from both the July 11, 1975 and February 17, 1976 orders. We shall formulate the precise issues in the course of the following discussion and shall group them around the order striking certain portions of the First Amended Unified Complaint, the order denying the remedy of rescission, and the order which denied relief as to CUM and the Hudson defendants.

II. The Order to Strike Portions of the Complaint.

...

To continue reading

Request your trial
503 cases
  • United States v. Shell Oil Co.
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Colorado
    • March 26, 1985
    ...will be denied, unless it can be shown that no evidence in support of the allegation would be admissible." Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir.1976). Only allegations "so unrelated to plaintiff's claims as to be unworthy of any consideration" should be stricken. E......
  • Gannett Co., Inc. v. Register Pub. Co.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Connecticut)
    • February 7, 1977
    ...be returned in the same condition. Restatement, Contracts, § 349, comment (b); 17 Am.Jur.2d, Contracts, § 514; Lipsky v. Commonwealth United Corporation, 551 F.2d 887 (2d Cir. 1976, applying New York law). If the wrongful acts of the defrauding party are what make restoration of the status ......
  • In re Trilegiant Corp., CIVIL ACTION NO. 3:12-CV-00396 (VLB)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Connecticut)
    • March 28, 2014
    ...WL 4268372, at *1 (D. Conn. Nov. 24, 2009) (citations and internal quotation marks omitted); see also Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir. 1976). Rules 23(a) and 23(b) provide the procedural bases for determining the appropriateness of class certification. See Fed......
  • Copantitla v. Fiskardo Estiatorio Inc. D/B/A Thalassa Rest.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • May 27, 2011
    ...the courts should not tamper with the pleadings unless there is a strong reason for doing so.’ ”) (quoting Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir.1976)). Defendants assert in conclusory fashion that these allegations relate only to Garcia's withdrawn retaliation clai......
  • Request a trial to view additional results
1 firm's commentaries
  • String Of Recent Circuit Court Opinions Impact SEC Enforcement Program
    • United States
    • Mondaq United States
    • September 14, 2012
    ...facts into evidence, reasoning that doing so would have a chilling effect on the settlement process); Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir. 1976) (refusing to admit a consent judgment and complaint in an SEC civil action, finding that they were not true adjudicatio......
4 books & journal articles
  • Collateral Estoppel and Prima Facie Effect
    • United States
    • ABA Antitrust Library Antitrust Evidence Handbook
    • January 1, 2016
    ...judgments or decrees entered before any testimony has been taken.” 15 U.S.C. § 16(a); see, e.g., Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir. 1976); In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465, 475 (S.D.N.Y. 1998); United States v. Nat’l Ass’n of Broadcast......
  • Relevance
    • United States
    • ABA Antitrust Library Antitrust Evidence Handbook
    • January 1, 2016
    ...decrees do not have any collateral estoppel effect and are treated like pleas of nolo contendere. See Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893–94 (2d Cir. 1976); see also In re Rough Rice Commodity Litig., No. 11 C 618, 2012 WL 473091, at *5 (N.D. Ill. Feb. 9, 2012) (adopting ......
  • Table of Cases
    • United States
    • ABA Antitrust Library Antitrust Evidence Handbook
    • January 1, 2016
    ...Inc. of Phila. v. Am. Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973), 257, 268 Lipsky v. Commonwealth United Corp., 551 F.2d 887 (2d Cir. 1976), 60, 268 Little Rock Sch. Dist. v. Borden, Inc., 1978-1 Trade Cas. (CCH) ¶ 62,020 (E.D. Ark. 1978), aff’d , 632 F.2d 700 (8th Cir.......
  • Stolen Plausibility
    • United States
    • Georgetown Law Journal No. 110-2, December 2021
    • December 1, 2021
    ...Kodak Co., 81 F. Supp. 325, 333 (N.D. Ill. 1948) (granting a motion to strike references to other proceedings involving Kodak). 40. 551 F.2d 887 (2d Cir. 1976). 41. Id. at 890. 42. Id. 43. Id. 44. Id. at 892. 45. Id. 46. Id. 47. Id. 48. Id. 49. Id. at 893. 50. Id. 298 THE GEORGETOWN LAW JOU......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT