66 F.R.D. 36 (S.D.N.Y. 1975), Civ. 2837 (JMC), Elkind v. Liggett & Myers, Inc.
|Docket Nº:||Civ. 2837 (JMC).|
|Citation:||66 F.R.D. 36|
|Opinion Judge:||CANNELLA, District Judge:|
|Party Name:||Arnold B. ELKIND, Plaintiff, v. LIGGETT & MYERS, INC., et al., Defendants.|
|Attorney:||Robert N. Kaplan, New York City (Kaplan, Kilsheimer & Foley, New York City, of counsel), for plaintiff. Herbert M. Wachtell, William C. Sterling, Jr., Steven M. Barna, New York City (Wachtell, Lipton, Rosen & Katz, New York City, of counsel), for defendants Neuberger & Berman, Marvin C. Schwartz ...|
|Case Date:||February 10, 1975|
|Court:||United States District Courts, 2nd Circuit, Southern District of New York|
Stock purchaser brought action against corporation, its officers, and certain traders based on alleged failure of corporation and officers to disclose certain information to the public and alleged disclosure of that information by the corporation and officers to selected traders. On motion for class action determination, the District Court, Cannella, J., held that there were two classes, i.e., those who purchased stock between the time the duty to disclose allegedly arose and the time that plaintiff purchased his stock and those who purchased stock between the time that the selected disclosures allegedly occurred and the time the plaintiff purchased his stock; that plaintiff was an adequate representative of those persons; that plaintiff's claim was typical of claims of those persons but not of persons who purchased stock after he did, as plaintiff had no interest in proving duty to disclose or selected disclosure occurring after he purchased stock; that class action method was superior; and that common questions of fact and law predominated.
In this action alleging violations by twenty-two named defendants of Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)), and Rule 10b-5 (17 C.F.R. § 240.10b-5) promulgated thereunder, the plaintiff (Arnold Elkind) moves for a determination that this case proceed as a class action under Rule 23(b)(3) of the Federal Rules of Civil Procedure. The Court, treating the motion as one made against each defendant individually, finds that as to defendant Liggett & Myers, Incorporated (‘ L& M’ ) the requirements of Rule 23 have been met and as discussed below class action status is warranted. As to the other named defendants, however, insufficient facts have been pleaded or presented by way of affidavit to permit such a finding, and plaintiff's motion in this respect is therefore denied without prejudice to renewal within thirty days.
In his complaint plaintiff pleads two causes of action. The first alleges that defendant Liggett & Myers, Incorporated, a publicly owned corporation whose shares are traded on the New York Stock Exchange, and certain of L& M's officers and directors violated Rule 10b-5 as a result of their failure, beginning on or about June 17, 1972, to publicly disclose substantial declines in L& M's earnings. Plaintiff alleges, that beginning in February of 1972 ‘ L& M executives commenced a series of meetings with various securities analysts during which L& M's all time high 1971 net earnings were discussed, and statements were made that L& M was optimistic about the future progress of its businesses.’ (Amended Complaint at 6 ¶ 16c.) It is further alleged that in March, April and May of 1972, L& M issued press releases and a report to shareholders detailing the advances of 1971 and early 1972. In light of these actions and public statements, it is urged that L& M, upon learning in May and June of 1972 that net earnings for April and May were substantially lower than those reported in the comparable periods of 1971, ‘ knew or should have known, at least as early as June 17, 1972, that its earnings during the foreseeable future would be declining,’ (Amended Complaint at 8 ¶ 20) and, therefore, had a duty to so state in a public disclosure. Having failed to do so it is contended that they violated Rule 10b-5 in that said information would have been material to prospective purchasers of L& M stock.
For a second cause of action, plaintiff alleges that beginning sometime near the end of June 1972 certain defendants ‘ tipped’ selected brokers by disclosing to them non-public information regarding the decline in April and May earnings as well as their expectation that 1972's second quarter earnings would prove to be similarly unfavorable. The complaint specifically alleges that this non-public information was tipped to defendant Paine, Webber, Jackson & Curtis, Inc. (‘ Paine, Webber’ ) in a series of meetings and telephone calls occurring on...
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