558 F.Supp. 1375 (E.D.Pa. 1983), 82-4069, Goodwin v. Elkins & Co.

Docket Nº:82-4069.
Citation:558 F.Supp. 1375
Party Name:J. Donald GOODWIN v. ELKINS & CO., et al.
Case Date:March 25, 1983
Court:United States District Courts, 3th Circuit, Eastern District of Pennsylvania

Page 1375

558 F.Supp. 1375 (E.D.Pa. 1983)



ELKINS & CO., et al.

No. 82-4069.

United States District Court, E.D. Pennsylvania.

March 25, 1983

Page 1376

H. Donald Busch, Lewis Grafman, Busch & Schramm, Karen von Dreusche, Bala Cynwyd, Pa., for plaintiff.

David Doret, Robert A. Silverman, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., for defendants.


FULLAM, District Judge.

The defendants have filed a Motion to Dismiss all of plaintiff's claims under the federal securities laws, pursuant to F.R.C.P. 12(b)(6), and a Motion to Stay and Compel Arbitration of all other claims asserted in the Complaint. The relevant facts are gleaned from the pleadings.

Plaintiff was a general partner in the brokerage firm of Elkins & Company, and a registered representative. He had been associated with that firm for more than 20 years when, in 1981, he became dissatisfied with the management policies of the firm, and announced his resignation as of October 1981. He was prevailed upon to withdraw his resignation and continue with the firm until at least March 31, 1982, so as to avoid undue prejudice to the firm. In February 1982, plaintiff was advised that it would be more convenient if his withdrawal from the firm were to take effect as of January 1, 1982. Plaintiff acquiesced in that suggestion, and his withdrawal from the firm was effectuated as if it had occurred on January 1, 1982. Plaintiff asserts that, in connection with the February agreement, plaintiff was falsely and fraudulently advised that no sale or merger of the firm was in contemplation; and that the defendants fraudulently concealed from plaintiff the fact that such negotiations were then actively being pursued. On March 17, 1982, the Elkins firm was purchased by and merged into Bache, Halsey, Stewart, in a transaction which was financially advantageous to the general partners of the Elkins firm. Plaintiff seeks to recover the difference between the amount paid to him upon his withdrawal (representing the value of his

Page 1377

interest calculated as of January 1, 1982) and the amount which would have been paid to him had his interest been valued as of the date originally agreed upon, March 31, 1982. Plaintiff also seeks punitive damages.

Plaintiff asserts violations of § 10(b) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. § 78j(b) and Rule 10b-5 promulgated thereunder, and, under state law, breaches of fiduciary duty and common law fraud. In addition to invoking federal-question jurisdiction under the Securities Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1331, plaintiff asserts that the parties are of diverse citizenship and that the amount in controversy exceeds $10,000, so that 28 U.S.C. § 1332(a) also establishes jurisdiction.

Paragraph 31 of the partnership agreement provides:

"Any controversy arising hereunder will be determined by arbitration pursuant to the Constitution and Rules of the Board of Governors of the New York Stock Exchange."

In addition, it is undisputed that, in his application to the New York Stock Exchange for allied membership...

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