Wachovia Bank & Trust Co., NA v. Randell
Decision Date | 05 February 1979 |
Docket Number | No. 77 Civ. 4716 (CBM).,77 Civ. 4716 (CBM). |
Citation | 485 F. Supp. 39 |
Parties | WACHOVIA BANK AND TRUST CO., N. A. (as Trustee and Agent for various trust accounts), Mellon Bank, N. A. (as Trustee for a special investment trust account), First Wisconsin Trust Co. (as Trustee for various trust accounts), the Dreyfus Offshore Trust, N. V., and National Fire Insurance Company of Hartford, Plaintiffs, v. Cortes W. RANDELL, John G. Davies, James F. Joy, Bernard J. Kurek, Roger O. Walther, Peat, Marwick, Mitchell & Co., Anthony M. Natelli, Joseph Scansaroli, Donald A. Fergusson, Robert A. Fergusson, White & Case, and Marion J. Epley III, Defendants. |
Court | U.S. District Court — Southern District of New York |
John M. Burns, III, New York City, Hill, Christopher & Phillips, P. C. by Richard M. Phillips, Juan A. del Real, Samuel D. Turner, Washington, D. C., for plaintiffs.
Burns, Jackson, Miller, Summit & Jacoby, New York City, for defendant Cortes Randell.
Frankenthaler, Kohn & Schneider, New York City, for defendant James F. Joy.
Bernard J. Kurek, pro se.
Winthrop, Stimson, Putnam & Roberts by Edwin J. Wesely, Eloise L. Morgan, Eugene G. McGuire, New York City, for defendants White & Case and Marion J. Epley.
Cahill, Gordon & Reindel by William E. Hegarty, Mathias E. Mone, Joseph W. Muccia, New York City, for defendants Peat, Marwick, Mitchell & Co., Joseph Scansaroli and Anthony M. Natelli.
Patterson, Belknap, Webb & Tyler by William J. Muller, New York City, for defendants Donald A. Fergusson and Robert A. Fergusson.
Plaintiffs have brought this action under the federal securities laws and under New York's law of fraud. The action arises out of the collapse of National Student Marketing Corp. (NSM) stock in February, 1970. Plaintiffs were institutional investors in that stock which they purchased on December 17, 1969. Several of the defendants have moved for summary judgment. Those defendants are the accountants to NSM: Peat, Marwick, Mitchell & Co. (Peat, Marwick), and two partners in that firm, Anthony Natelli and Joseph Scansaroli, and the lawyers for NSM, White & Case and a partner in that firm, Marion J. Epley. This action was commenced on September 26, 1977.
On March 2, 1970, a class action separate and distinct from this action was filed in the Southern District of New York against most of the defendants here on behalf of a class of investors in NSM stock alleging securities violations. Several other class actions were also filed in this court and were consolidated with the earlier action into one case, Garber v. Randell, 70 Civ. 835. Plaintiffs were by definition members of that class action. Before class action certification was decided, plaintiffs filed an action for securities violations in the United States District Court for the District of Columbia on January 29, 1973. Wachovia Bank and Trust Co. v. National Student Marketing Corp., (Parker, J.). Class action certification was then granted in the New York action, Garber. Plaintiffs then opted out of the class by letter dated November 23, 1973.
In 1977 a motion to dismiss was filed in the District of Columbia action by the Peat, Marwick and White & Case defendants based on the statute of limitations. Immediately, the plaintiffs filed the instant action based on the identical claims made in the District of Columbia action. Plaintiffs styled the instant action a "protective" action to be prosecuted in the event the other action was dismissed.
By opinion not yet published, dated November 20, 1978, Judge Parker in the District of Columbia action dismissed the plaintiffs' claims against the accountants and the attorneys on the ground of the statute of limitations. Judge Parker also denied plaintiffs' motion for reconsideration on December 20, 1978.
Judge Parker applied the statute of limitations of the District of Columbia since under the federal securities laws the applicable statute of limitations is the law of the forum state. Stull v. Bayard, 561 F.2d 429, 431-32 (2d Cir. 1977), cert. denied, 434 U.S. 1035, 98 S.Ct. 769, 54 L.Ed.2d 783 (1978). Under this statute he found that the plaintiffs' claims were barred as to the moving defendants.
The same defendants now move for summary judgment in the instant action on the ground that under Rule 41(b) Judge Parker's dismissal was on the merits and bars relitigation of that claim here. This court agrees and dismisses the action as to those defendants dismissed in the District of Columbia action.
Rule 41(b) states in part:
Plaintiffs urge that this dismissal not be considered as an adjudication on the merits. They argue that it would be contrary to reason to allow Judge Parker's dismissal based on the District of Columbia's statute of limitations to bar a claim in New York to which a longer statute of limitation applies.
However, the Second Circuit in Bertha Building Corp. v. National Theatres Corp., 248 F.2d 833, 840 (2d Cir. 1957), cert. denied, 356 U.S. 936, 78 S.Ct. 777, 2 L.Ed.2d 811 (1958), stated clearly:
This holding was followed by the district court in Murray v. A/S Sobral, 187 F.Supp. 163, 164 (S.D.N.Y.1960).
In 1973, the Second Circuit followed the Bertha holding. In Sack v. Low, 478 F.2d 360 (2d Cir. 1973), a Massachusetts District Court had dismissed federal securities law claims based on the Massachusetts statute of limitations. The plaintiffs brought the identical claims here in the Southern District of New York. The latter court dismissed the claims under Rule 41(b), the holding in Bertha, supra, that a dismissal based on the statute of limitations of another jurisdiction was an adjudication on the merits. The plaintiffs appealed to the Second Circuit. However, they also moved in the Massachusetts court for an order modifying the order of dismissal to one without prejudice. The Massachusetts court granted that motion and modified its order.
On appeal, the Second Circuit discussed the rule in Bertha, supra, as follows:
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