950 F.2d 89 (2nd Cir. 1991), 212, Adam v. Jacobs

Docket Nº:212, Docket 91-7466.
Citation:950 F.2d 89
Party Name:Laszlo ADAM, Dennis W. Brush, Michael J. Connelly, Jack Weinstein, Marcel Fournier, William S. Kingson, Plaintiffs-Appellees, v. Eli S. JACOBS, Defendant-Appellant.
Case Date:November 22, 1991
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
FREE EXCERPT

Page 89

950 F.2d 89 (2nd Cir. 1991)

Laszlo ADAM, Dennis W. Brush, Michael J. Connelly, Jack

Weinstein, Marcel Fournier, William S. Kingson,

Plaintiffs-Appellees,

v.

Eli S. JACOBS, Defendant-Appellant.

No. 212, Docket 91-7466.

United States Court of Appeals, Second Circuit

November 22, 1991

Argued Sept. 25, 1991.

Page 90

Gerson A. Zweifach, Washington, D.C. (Brendan V. Sullivan, Jr., Dennis M. Black, Williams & Connolly, Washington, D.C., J. Douglas Richards, O'Sullivan Graev & Karabell, New York City, of counsel), for defendant-appellant.

Allen S. Joslyn, New York City (Pamela G. Fisher, Cahill Gordon & Reindel, of counsel), for plaintiffs-appellees Adam, Brush, Connelly, Weinstein and Fournier.

Richard A. Rossman, Pepper, Hamilton & Scheetz, Detroit, Mich., Eleanor N. Ewing, Pepper, Hamilton & Scheetz, Philadelphia, Pa., Christopher Dee, Pepper, Hamilton & Scheetz, New York City, for plaintiff-appellee Kingson.

Before MESKILL, WINTER and ALTIMARI, Circuit Judges.

MESKILL, Circuit Judge:

This is an appeal from a judgment entered in the United States District Court for the Southern District of New York, Keenan, J., ordering defendant Eli S. Jacobs, the guarantor of payment on certain notes, to pay $4,744,285.23 to plaintiffs.

On appeal, Jacobs argues that the district court erred by addressing the merits of the plaintiffs' guarantee of payment argument without first addressing whether this action should have been brought as a compulsory counterclaim in a suit filed previously in a federal court in Michigan. Jacobs argues that the claim in the present action is a compulsory counterclaim and should have been dismissed or transferred to the district court in the Eastern District of Michigan.

We vacate the judgment and remand to the district court with instructions to dismiss.

BACKGROUND

Eli S. Jacobs, the defendant in this case, is a venture capitalist who runs the New York investment firm E.S. Jacobs & Company. His numerous holdings include a large stake in Flagship Express, Inc. (Flagship).

Rosenbalm Aviation services and maintains airplanes for air cargo carriers. It is incorporated in Nevada and maintains its principal place of business in Ypsilanti, Michigan. In November 1987, individual investment bankers known as the Adam Group, together with Fred K. Palone, a vice president of Rosenbalm Aviation, purchased the corporation. By December 1988, Palone and the Adam Group decided to sell the company.

In August 1989, the plaintiffs and Fred K. Palone entered into an Agreement and Plan of Reorganization to merge Rosenbalm

Page 91

Aviation into RA Acquisition Corporation (RA), a wholly owned subsidiary of Flagship's predecessor corporation. By all accounts, Jacobs actively participated in every stage of the sale transaction.

The original agreement called for an all cash deal, but when this became unfeasible, the plaintiffs agreed to accept a combination of cash and bridge notes of Rosenbalm Aviation, Inc., the corporation that would result from the merger. To induce the plaintiffs to accept these notes, Jacobs executed unconditional personal guarantees. These guarantees were attached to the merger documents. The guarantees state, in pertinent part:

The Guarantor understands and acknowledges that this Guaranty was a major inducement for Shareholder to accept the Note rather than to require full cash payment for his stock.

Accordingly, the Guarantor hereby absolutely, unconditionally and irrevocably guarantees ... prompt and unconditional payment.

...

No setoffs or counterclaims that the Guarantor or the Corporation may have against Holder will impair or otherwise affect Holder's rights against the Guarantor, and the Guarantor waives the assertion of any such setoffs or counterclaims in any proceeding to enforce the Guarantor's obligations under this Guaranty.

The guarantees do not mention the waiver of any rights (1) to assert defenses, or (2) to seek a declaratory judgment.

RA initially made the interest payments on these notes but on October 31, 1990, the day before full payment of the principal was due, Jacobs, Flagship, RAI, Inc. (a corporate conduit formed to...

To continue reading

FREE SIGN UP