Marshall v. SPANG & COMPANY
Decision Date | 25 January 1971 |
Docket Number | Civ. A. No. 70-552. |
Parties | Louis MARSHALL, Plaintiff, v. SPANG & COMPANY and Spang Industries, Inc., Defendants. |
Court | U.S. District Court — Eastern District of Pennsylvania |
Harry Markovitz, Pittsburgh, Pa., Rubin, Wachtel, Baum & Levin, New York City, for plaintiff.
Edmund K. Trent, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for defendants.
Presently before me for consideration are the defendants' Petition for Security for Costs pursuant to Rule 9(a) of this Court, and their Motion for Security for Expenses pursuant to § 516, subd. B of the Pennsylvania Business Corporation Law.
The plaintiff, Louis Marshall, a holder of 400 shares of common stock of Spang Industries, Inc. (Industries) brought suit on May 18, 1970 naming as defendants Industries and Spang & Company (Company). Company owns approximately 55% of the 2,403,780 outstanding shares of Industries, and by virtue of this ownership controls and dominates Industries. The complaint alleges violations of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. and the rule and regulations promulgated thereunder. The second portion of the suit, brought under the principal of pendent jurisdiction seeks security in conformity with the provisions of § 516, subd. B of the Pennsylvania Business Corporation Law, May 5, 1933, P.L. 364, 15 P.S. § 1516, subd. B, as amended.
The essence of the plaintiff's complaint is that as of January 31, 1970 Company caused Industries to sell to Company 415,849 shares of common stock of Industries for a grossly inadequate consideration consisting of all the issued and outstanding shares of Wolverine Toy Company; that this transaction constitutes a gift and waste of Industries stock, and that Company thereby breached its duties both under the Securities Act and under the Pennsylvania Business Corporation Law.
In their Petition for Security for Costs, the defendants rely on Rule 9(a) of the United States District Court for the Western District of Pennsylvania which provides that:
"In every action filed by a plaintiff who is not a resident of this District, the defendant, after answer to the complaint, may by petition and for good cause shown, have a rule upon the plaintiff to enter security for costs in such sum, in such manner and within such period of time as shall be determined by order of the Court upon hearing on the rule, all proceedings to stay meanwhile * * *"
In Paragraph 2 of the Petition for Security for Costs it is stated that "To the best of defendants' knowledge, plaintiff has no assets either in the Western District of Pennsylvania or elsewhere in the Commonwealth of Pennsylvania which would be available for payment of costs." The plaintiff in his reply affidavit does not deny this allegation but rather avers that his own financial stability obviates the necessity of providing security for costs.
Since the purpose of Rule 9(a) is to eliminate the necessity of pursuing a plaintiff's assets into another jurisdiction to secure payment of costs, it appears that defendants are entitled to have this security provided, especially, where as here the allegations are made that this is purely a "strike suit". Accordingly, the plaintiff will be directed to file with the Clerk of Court security for costs in the amount of $250.00, to be approved by the Court.
The defendants' second motion is a Motion for Security for Expenses pursuant to § 516, subd. B of the Pennsylvania Business Corporation Law on those counts asserted under this Pennsylvania Law.
It is provided in Section 516, subd. B that:
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American President Lines, Inc., In re
...939, 82 S.Ct. 382, 7 L.Ed.2d 339 (1961); Leslie One-Stop in Pa. v. Audiofidelity, 33 F.R.D. 16, 17 (S.D.N.Y.1963); Marshall v. Spang, 321 F.Supp. 1310, 1311 (W.D.Pa.1971). Even absent a local rule, district courts have been held to have that power. See, e.g., Hawes v. Club Ecuestre El Coman......
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