Stroup v. GCS Service, Inc.
| Decision Date | 28 June 1991 |
| Docket Number | No. 1560,D,1560 |
| Parties | Alice STROUP, Plaintiff-Appellant, v. GCS SERVICE, INC.; Tyfam Corporation; Parker R. Tyler; Gloria B. Tyler, Defendants-Appellees. ocket 90-7902. |
| Court | U.S. Court of Appeals — Second Circuit |
Leonard J. Colamarino (Colamarino & Nagashima, New York City, of counsel), for plaintiff-appellant.
Owen D. Kurtin (Susan S. Egan, Edwards & Angell, Richard G. Menaker, Menaker & Herrmann, New York City, of counsel), for defendants-appellees.
Before KEARSE, MAHONEY, and SNEED, * Circuit Judges.
Plaintiff, Alice Stroup, appeals from the entry of summary judgment dismissing her complaint in the United States District Court for the Southern District of New York. Stroup contends that the trial judge wrongly concluded that there were no triable issues of fact. We agree with the plaintiff and vacate the district judge's summary judgment order.
Stroup is the daughter of defendants Parker and Gloria Tyler. Both the Tylers are officers and directors of Tyfam Corporation (Tyfam), a holding company for GCS Service, Inc. (GCS). The Tylers are also directors and Officers of GCS. Tyfam stock is apparently convertible into shares of GCS at a ratio of approximately one to ten.
In 1981, Stroup became the owner of 3060 shares of Tyfam stock. These shares could be converted into approximately 30,000 GCS shares. In 1983, in an effort to help Stroup and her husband in their attempt to purchase an apartment in Paris, the Tylers suggested that Stroup redeem her Tyfam stock for $15,000. While suggesting that the stock was undervalued at that price, both the Tylers said they would attempt to replace the 3060 Tyfam shares with 30,000 GCS shares over a period of years.
Stroup accepted her parents' offer, tendered the shares to Tyfam, and received 30,000 GCS shares in return. GCS then redeemed the shares and paid Stroup $15,000. Stroup never received any of the promised replacement GCS shares from her parents.
In 1989, Stroup filed a complaint in federal district court against Tyfam, GCS, and her parents alleging violations of rule 10b-5 and the Securities Exchange Act of 1934 (Act) and various pendent state claims for breach of contract, common law fraud, and breach of fiduciary duty. At her deposition, Stroup testified that she viewed the $15,000 as a gift from her father. She said that she gave up her 3060 Tyfam shares to accommodate her parents and that she expected to later receive 30,000 GCS shares from her parents. She admitted that she had thought her father "forgot" to fulfill his agreement concerning the replacement stock. Stroup stated in her affidavit that the $15,000 was a gift and that her expectation was to receive GCS shares in exchange for the Tyfam shares she surrendered.
The district judge reviewed these facts and the applicable law and concluded that the alleged misrepresentations did not constitute violations of the securities laws. The judge held that any misrepresentation as to the parents' intent to replace the surrendered shares was not actionable because Stroup failed to make any showing of scienter on the part of her father. The court opined that there was no reliance by Stroup on any misrepresentation as to the value of the Tyfam shares because she did not care about their value since she expected the shares would be replaced over time. Having rejected the plaintiff's claims under the federal securities laws, the court also dismissed the plaintiff's pendent state claims.
This court has jurisdiction under 28 U.S.C. Sec. 1291 (1988).
Review of a district court's grant of summary judgment is de novo. Gibson v. American Broadcasting Cos., 892 F.2d 1128, 1131 (2d Cir.1989). Therefore, this court sits in the same position as the district court and applies the same summary judgment test that governs the district court's decision. Kronfeld v. Trans World Airlines, Inc., 832 F.2d 726, 731 (2d Cir.1987), cert. denied, 485 U.S. 1007, 108 S.Ct. 1470, 99 L.Ed.2d 700 (1988). Reading the record in the light most favorable to the nonmoving party, we can only uphold the summary judgment order if we agree that there is no genuine issue as to any material fact. Id.
The circumstances of this complicated transaction combined with the Tylers' failure to give Stroup any GCS shares suggest that the Tylers may never have intended to replace the Tyfam shares with GCS stock....
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