Barnes v. Peat, Marwick, Mitchell & Co.
| Decision Date | 07 June 1973 |
| Citation | 344 N.Y.S.2d 645,42 A.D.2d 15 |
| Parties | , Blue Sky L. Rep. P 71,089, Fed. Sec. L. Rep. P 94,021 Esther BARNES, et al., Plaintiffs-Respondents, v. PEAT, MARWICK, MITCHELL & CO., et al., Defendants-Appellants, and T. O. Allen, et al., Defendants. |
| Court | New York Supreme Court — Appellate Division |
Max Rosner, New York City, of counsel (Sidney O. Raphael and Benjamin Gassman, New York City, with him on the brief; Raphael Searles, Vischi, Scher, Glover & D'Elia, New York City, attys.), for plaintiffs-respondents.
William E. Hegarty, New York City, of counsel (David R. Hyde, Mathias E. Mone, Miles M. Tepper, John Logan O'Donnell, Charles M. McCaghey, Martin Kleinbard and Selvyn Seidel, New York City, with him on the brief; Cahill, Gordon, Sonnett, Reindel & Ohl, New York City, attys. for Peat, Marwick, Mitchell & Co.; Olwine, Connelly, Chase, O'Donnell & Weyher, New York City, attys. for National Student Marketing Corp.; and Paul, Weiss, Rifkind, Wharton & Garrison, New York City, attys. for Arthur B. Frommer), for defendants-appellants.
Before MARKEWICH, J.P., and KUPFERMAN, LANE, STEUER and CAPOZZOLI, JJ.
This is an action for damages resulting from the purchase by plaintiffs of stock of National Student Marketing Corporation. Liability of the defendants is based upon alleged violations of section 17(a) of the Securities Act of 1933 (U.S.Code, tit. 15, § 77q(a)) and of the New York General Business Law (§§ 339--a and 352--c).
The complaint alleges purchases by some 31 different persons and each purchase was a distinct and separate transaction not related to the others except that each is alleged to have been induced by the same wrongful acts of the defendants. Defendants moved to dismiss the various causes of action. Special Term, 69 Misc.2d 1068, 332 N.Y.S.2d 281, denied the applications, except that in one respect an amended pleading was ordered. We are in accord with that disposition.
Defendants in addition moved for other relief. It appears that several other actions are pending in the United States courts, brought by other purchasers against these and other defendants. Three such actions are pending in the Southern District of New York and have been consolidated. Further similar actions in that District have been enjoined. Four other actions were pending in other Federal districts, and the Securities and Exchange Commission has started an action against these defendants in the District Court for the District of Columbia. All of these actions have been combined, together with the three actions pending in the Southern District of New York, for the purposes of pretrial procedures. At the conclusion of such, the private actions will be returned to their respective forums for whatever procedures are required.
It would appear that the action taken in the United States courts is the most efficient way of handling the large number of cases that have arisen or may arise out of this stock offering. The Federal Court has before it all of the defendants and all of the issues here asserted. The prosecution of this action and others that may conceivably be brought in state courts would necessarily involve going over the same grounds covered in the Federal actions and result in a duplication of effort and a consequent waste of court time.
In such situations it is usual to stay the action pending the outcome of the Federal action (Research Corporation v. Singer-General Precision, Inc., 36 A.D.2d 987, 320 N.Y.S.2d 818; Channel Master Corporation v. JFD Electronics Corporation, 26 A.D.2d 961, 275 N.Y.S.2d 1019). The factors which should influence the granting or withholding of a stay of the state court action are set forth in Judge Fuld's ...
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