Marx & Co., Inc. v. DINERS'CLUB, INC.

• Decision Date: 23 September 1975
• Docket Number: 72 Civ. 4324.,No. 70 Civ. 3064,70 Civ. 3064
• Citation: 400 F. Supp. 581
• Parties: MARX & CO., INC., et al., Plaintiffs, v. The DINERS' CLUB, INC., et al., Defendants, v. William D. FUGAZY and Louis V. Fugazy, Third-Party Defendants. William D. FUGAZY and Louis V. Fugazy, Plaintiffs, v. The DINERS' CLUB, INC., et al., Defendants, Marx & Co., Inc., et al., Additional Defendants on the Counterclaims.
• Court: U.S. District Court — Southern District of New York

400 F. Supp. 581

MARX & CO., INC., et al., Plaintiffs, v. The DINERS' CLUB, INC., et al., Defendants, v. William D. FUGAZY and Louis V. Fugazy, Third-Party Defendants.

William D. FUGAZY and Louis V. Fugazy, Plaintiffs, v. The DINERS' CLUB, INC., et al., Defendants,

Marx & Co., Inc., et al., Additional Defendants on the Counterclaims.

Nos. 70 Civ. 3064, 72 Civ. 4324.

United States District Court, S. D. New York.

September 23, 1975.

Harris, Fredericks & Korobkin and Olwine, Connelly, Chase, O'Donnell & Weyher, New York City, for plaintiffs; Barry I. Frederciks, James E. Tolan, New York City, of counsel.

Hardee, Barovick, Konecky & Braun, New York City, for defendants; Joseph J. Santora, Robert B. Kay, Robert B. McKay, New York City, of counsel.

OPINION

ROBERT J. WARD, District Judge.

Plaintiffs commenced these actions in 1970 and 1972, respectively, alleging, inter alia, that defendant The Diners' Club, Inc. ("Diners'") breached a contract to register certain unregistered Diners' stock held by them. In addition, plaintiffs asserted two claims alleging violations of § 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)), and Rule 10b-5 promulgated thereunder. Defendants denied plaintiffs' allegations and asserted various counterclaims. Following a trial which began on May 6, 1975 and concluded on May 28, 1975, the jury returned a verdict for plaintiffs on their contract claim and on defendants' counterclaims, awarding a total of $533,000 in damages on the former. The Court dismissed one of the plaintiffs' § 10(b) claims at the end of their case and the jury returned a verdict for defendants on the other § 10(b) claim.

Diners' moves pursuant to Rules 50 and 59, Fed.R.Civ.P., for judgment notwithstanding the verdict on plaintiffs' contract claim or, in the alternative, for a new trial or remittitur. In addition, defendants Diners' and Diners' World Travel, Inc., formerly known as Diners'/Fugazy Travel, Inc. ("DWT") move for judgment notwithstanding the verdict and a new trial with respect to their counterclaims.

Defendants base their motion for judgment notwithstanding the verdict on the grounds that plaintiffs failed to produce sufficient evidence to meet their burden of proof; that the verdict of the jury necessarily involved an erroneous determination of law; and that the evidence was overwhelmingly in their favor. A new trial is sought on the grounds that the verdict is contrary to the weight of the evidence; and that the Court made prejudicial errors in its rulings during trial, principally in permitting Stanley Friedman, a witness not identified in the pre-trial order, to testify as a rebuttal witness. A new trial or remittitur is sought on the ground that the jury made an erroneous determination of plaintiffs' damages. For the reasons set forth below, the motions are in all respects denied.

The facts, briefly, are these. Under an agreement dated October 10, 1967, Diners' acquired the assets of Fugazy Travel Bureau for unregistered Diners' stock and other consideration. Paragraph 10.2(b) of the agreement provided that Diners', upon receipt of notification from plaintiffs that they desired registration, would promptly file a registration statement for the unregistered Diners' stock held by plaintiffs and would use its best efforts to cause the registration statement to become effective.¹

On April 16, 1969, plaintiffs wrote a letter requesting Diners' to file a registration statement with respect to their Diners' stock. Instead of directing the preparation of a registration statement, George Faunce, then president of Diners', forwarded a copy of plaintiffs' letter containing the following notation to Harold Johnson, one of its directors, and executive vice president of The Continental Insurance Company ("Continental") which held a controlling interest in Diners':

"Harold — Alfred Bloomingdale, Diners' board chairman asked me to send this to you and Victor Herd Continental's board chairman. He wants to know your position-

George"

A letter dated April 24, 1969 from Johnson to Herd enclosing a copy of the April 16, 1969 request contained the following statement:

"The attached letter, I believe, is an effort on the part of Otto Marx, Jr. to have Continental purchase his shares.

"To my way of thinking there is nothing that needs to be done at the present time. Mr. Bloomingdale may discuss this at a later date but my reaction is to do nothing."

(emphasis added)

Although Diners' was requested to file a registration statement in mid-April, 1969, it is undisputed that Diners' did nothing to register the stock until late July, 1969, more than three months after receiving the letter requesting registration and almost two months after its financial statement for the fiscal year ended March 31, 1969 became available. From the foregoing, the jury could reasonably infer that Diners', with the urging and approval of Herd and Johnson, decided to do nothing and thereby avoid its obligations under paragraph 10.2(b) of the agreement.

It is clear that the motion for judgment notwithstanding the verdict on the ground that it is against the weight of the evidence and that the verdict of the jury necessarily involved an erroneous determination of law must be denied. The standard on such a motion is the same as the standard for a directed verdict, that is, whether there was evidence from which the jury could have properly found for plaintiff, against whom the motion is made, viewing the evidence most favorable to him and giving him the benefit of all reasonable inferences. 9 Wright and Miller, Federal Practice and Procedure § 2524 (1971); Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970). Viewed in this light, the evidence presented was certainly sufficient to permit the case to go to the jury.

Plaintiffs presented sufficient evidence to make out a prima facie case that Diners' had breached its agreement by failing to promptly file a registration statement.² Preparation of the registration statement did not begin until late July, 1969 and it was not filed until August 28, 1969. Although Diners' argued that it used its best efforts to cause the registration statement to become effective, it never became effective, having been withdrawn early in 1970 over the protest of plaintiff Marx.

At trial Diners' contended, and contends on these motions, that it was not responsible for the delay in filing but rather that the delay was occasioned by plaintiffs' failure to perform the conditions precedent to Diners' obligation to file. Diners' contends that its obligation to register plaintiffs' shares was subject to receipt of an amount sufficient to reimburse it for one-half of all registration expenses and delivery by plaintiffs of an indemnity agreement. Further, Diners' argues that upon receipt of the registration request it had two other performance options under the agreement, either of which could be pursued in lieu of registration.

Although it is ordinarily true, as Diners' argues, that a plaintiff must prove as an element of his cause of action for breach of contract the due performance by him of all conditions precedent, see, e.g., Marine Trust Co. of Buffalo v. Gilfillan, 258 App.Div. 296, 17 N.Y.S.2d 107 (4th Dep't 1939); 3A A. Corbin, On Contracts § 628, at 16 (1960), it is equally well-settled that a party cannot insist upon a condition precedent when he himself has caused its nonperformance. Wagner v. Derecktor, 306 N.Y. 386, 118 N.E.2d 570 (1954). From the evidence adduced at trial, the jury could have reasonably determined that upon receipt of plaintiffs' request Diners' did nothing. It failed to elect from among the options for performance available to it under the agreement and did not request a specific amount from plaintiffs representing one-half the registration costs until July 15, 1969, well after the registration statement should have been filed. Further, the sum finally requested was considerably in excess of the reasonable expenses to be incurred. It was not until August, 1969 that Diners' even raised the question of plaintiffs providing the indemnity agreement, although in the April 16, 1969 letter plaintiffs offered to provide one in accordance with the terms of the October 10, 1967 agreement. From all these facts, the jury could have reasonably concluded that Diners' acted in bad faith and thereby prevented or hindered performance of the conditions precedent in order to avoid its obligation to file a registration statement.

Moreover, Diners' contentions were covered in the Court's charge without objection by defendants. Rule 51, Fed.R.Civ.P., specifically provides that "no party may assign as error the giving or the failure to give an instruction unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection." A party cannot resurrect such an objection on a motion for judgment notwithstanding the verdict. Jennings v. Boenning & Co., 388 F.Supp. 1294, 1303-04 (E.D. Pa.1975); see Cohen v. Franchard Corp., 478 F.2d 115 (2d Cir.), cert. denied, 414 U.S. 857, 94 S.Ct. 161, 38 L. Ed.2d 106 (1973).

Diners' also argues that the parties entered an accord on August 27, 1969, thereby precluding plaintiffs from asserting any claim based on whatever superseded obligation Diners' may have had. Rule 8(c), Fed.R.Civ.P., requires that an accord be affirmatively pleaded, which does not appear to have been done.³ Diners' attempt to assert this affirmative defense after trial must be rejected.

Defendants also move for a new trial on the ground that the verdict was against the weight of the evidence. The standard by which evidence is judged on a motion for a new trial is less stringent than upon a motion for judgment notwithstanding the verdict. However, determination of that motion rests within the sound discretion of the trial court to see that there is no miscarriage of justice. 6 A. Moore's Federal...