Chahal v. Paine Webber Inc.

• Decision Date: 04 January 1984
• Docket Number: No. 369,D,369
• Parties: Balwant Singh CHAHAL, Bakshish Singh Chahal, Harkewal Singh Chahal, Bachan K. Singh, Suraj Kaur, Gurbachan Singh Chahal & Sarban Singh, Plaintiffs-Appellants, v. PAINE WEBBER INC. and Timothy E. Longworth, Defendants-Appellees. ocket 83-7642.
• Court: U.S. Court of Appeals — Second Circuit

Page 20

725 F.2d 20

Balwant Singh CHAHAL, Bakshish Singh Chahal, Harkewal Singh Chahal, Bachan K. Singh, Suraj Kaur, Gurbachan Singh Chahal & Sarban Singh, Plaintiffs-Appellants, v. PAINE WEBBER INC. and Timothy E. Longworth, Defendants-Appellees.

No. 369, Docket 83-7642.

United States Court of Appeals Second Circuit.

Argued Nov. 22, 1983.

Decided Jan. 4, 1984.

Edward Cherney, New York City (Herbert Lebovici, New York City, of counsel), for plaintiffs-appellants.

Catherine A. Ludden, New York City (Martin P. Unger, Gaston Snow Beekman & Bogue, New York City, of counsel), for defendants-appellees.

Before FRIENDLY, MANSFIELD and KEARSE, Circuit Judges.

MANSFIELD, Circuit Judge:

Plaintiffs appeal from a judgment of the Southern District of New York entered pursuant to a decision of Chief Judge Motley granting defendants' motion for summary judgment and dismissing the complaint in this action for damages based on defendants' alleged intimidation of a witness in violation of 42 U.S.C. Sec. 1985. ¹ Since the complaint pleads the necessary elements of such an action, albeit rather inartfully, and the papers raise material factual issues precluding summary judgment under Rule 56, we reverse.

Plaintiffs lost a considerable amount of money as a result of investments made in San Francisco, California, through Paine Webber Inc., a corporate member of the New York Stock Exchange engaged in the stock brokerage business, upon the advice and recommendation of Vijay K. Kohli, a registered representative employed by Paine Webber. In February 1980 plaintiffs consulted David Warmin, a securities expert specializing in review of securities' accounts to determine whether brokers handling such accounts have complied with regulatory policy (particularly with respect to churning and suitability of investments). After analyzing plaintiffs' accounts with Paine Webber, Warmin informed them that Kohli had recommended investments unsuitable for their objectives and needs and had grossly "churned" the account. Warmin completed a detailed written report to that effect, and was paid $1,410.00 for his services. Plaintiffs thereupon brought suit against Paine Webber and Kohli in the United States District Court for the Northern District of California, alleging various securities law violations. Chahal v. Paine, Webber, Jackson & Curtis, Inc., No. C-81-1021 RFP. As far as can be gleaned from the record, that action (hereinafter "the California action") is still pending. The case before us arises from events following that suit.

Sometime prior to June 1981 Warmin moved to New York, where he accepted a position with Smith, Barney, Harris, Upham and Co. ("Smith Barney"). On June 26, 1981, plaintiffs filed in the California action an affidavit executed by Warmin summarizing the results of his investigation. He closed his affidavit with the statement that because he now resided in New York "it may be difficult for me to arrange to appear in San Francisco for testimony."

Plaintiffs allege that in July 1981 defendant Timothy E. Longworth, a Vice President of Paine Webber, initiated a conversation with George Saks, a supervisor at Smith Barney in New York, in which he told Saks that David Warmin was violating "an understanding" among brokerage firms that their employees do not testify against each other. According to plaintiffs, Warmin then made a "frantic" long distance phone call to Allen J. Capeloto, plaintiffs' attorney in the California action, attempting to withdraw his affidavit because he had been criticized by his Smith Barney supervisor for his involvement in the plaintiffs' California case, and had been told that he would have to resign from his participation in the case if he wished to continue his employment with Smith Barney. Accordingly, Warmin told Capeloto that he would no longer be available to participate in the case. Longworth concedes that he called Saks, but claims that he simply informed him that Warmin was violating Rule 346(b) of the New York Stock Exchange, which provides that "[w]ithout the prior written consent of his member ... organization, no member ... shall ... be employed or compensated by any other person." Neither Longworth nor Saks has been deposed in this litigation.

Following the foregoing episode plaintiffs amended their California complaint to allege a violation of 42 U.S.C. Sec. 1985(2), which prohibits, inter alia, conspiracies to deter witnesses from attending or testifying freely to any matter pending in a federal court. Section 1985(3) confers a cause of action upon a party injured by such a conspiracy; Sec. 1988 vests jurisdiction in the federal courts. On March 8, 1982, Chief Judge Robert F. Peckham, although indicating that plaintiffs had standing under Sec. 1985(2) to prosecute their civil rights claim, dismissed the claim for lack of proper venue, based principally on the convenience of Longworth, Warmin, and other persons who had their residences or places of business in New York, and suggested that the claim be brought in New York.

The complaint in this action was thereupon filed on January 27, 1983. Defendants moved to dismiss it for failure to state a claim upon which relief could be granted, Fed.R.Civ.P. 12(b)(6); Judge Motley ruled that she would treat the motion as one for summary judgment, Fed.R.Civ.P. 56. Plaintiffs noticed the taking of the deposition of David Warmin, but Judge Motley granted the defendants' motion to stay the deposition until after she ruled on the summary judgment motion.

In an opinion dated June 30, 1983, Judge Motley granted the motion for summary judgment. ² She noted Warmin's June 26, 1981 affidavit indicating that it might be "difficult" for him to appear in San Francisco as evidence that he had withdrawn from the case prior to the alleged conspiracy. She also relied on plaintiffs' statement filed pursuant to Local Civil Rule 3(g) of the Southern District of New York, which denied the defendants' assertion that "[p]laintiffs wish to continue to have Warmin in their employ as a potential expert witness in the California action." To the contrary, plaintiffs now stated that they had made "other arrangements." Judge Motley concluded, "Nothing in these allegations suggests that Warmin is either a party to or a proposed witness in the California litigation.... Plaintiff's complaint alleges no injury, no witness, and no facts in support of its allegation of conspiracy." From this decision plaintiffs appeal.

DISCUSSION

The two questions before us are whether plaintiffs have pleaded all the requisite elements of a claim under Sec. 1985(2), which would enable the complaint to survive a Rule 12(b)(6) attack, and, if so, whether there is an unresolved issue of material fact, which would require us to reverse the district court's grant of summary judgment.

The essential allegations of a Sec. 1985(2) claim of witness intimidation are (1) a conspiracy between two or more persons, (2) to deter a witness by force, intimidation or threat from attending court or testifying freely in any pending matter, which (3) results in injury to the plaintiff. In construing the complaint we must bear in mind the strictures of Fed.R.Civ.P. 8(f) that "[a]ll pleadings must be so construed as to do substantial justice" and the guidelines established by the Supreme Court in Conley v. Gibson, 355 U.S. 41, 45-46, 47-48, 78 S.Ct. 99, 101-102, 103, 2 L.Ed.2d 80 (1957), wherein it stated:

"In appraising the sufficiency of the complaint we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

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"[T]he Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he bases his claim. To the contrary, all the Rules require is 'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.... Such simplified 'notice pleading' is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules to disclose more precisely the basis of both claim and defense and to define more narrowly the disputed facts and issues." (footnotes omitted)

We have frequently voiced our adherence to these principles. In New York State Waterways Ass'n v. Diamond, 469 F.2d 419, 421 (2d Cir.1972), for instance, we stated that "[w]hile plaintiffs' complaint is hardly a model of compliance with the Federal Rules ... it is our duty to read it liberally, to determine whether the facts set forth justify taking jurisdiction on grounds other than those most artistically pleaded." See also, 2A J. Moore, Moore's Federal Practice p 8.34 (2d ed. 1983); 5 C. Wright and A. Miller, Federal Practice and Procedure Sec. 1286 (1969). On the other hand, when a complaint fails to state facts as distinguished from conclusions or vague general allegations we have not hesitated to uphold its dismissal. See, e.g., Ostrer v. Aronwald, 567 F.2d 551, 553 (2d Cir.1977).

The complaint in the present case is brief and rather inartistically drawn. Nevertheless, when construed liberally, it is sufficient. It clearly alleges the first and third elements of a claim under Sec. 1985(2) as...