Cooper v. Parsky

Decision Date02 April 1998
Docket NumberDocket No. 97-7525.
Citation140 F.3d 433
PartiesStanley COOPER, Sheila Cooper, Richard C. Stein, as Trustee of the Trust for the benefit of Michael Cooper and Richard C. Stein, as Trustee of the Trust for the benefit of Adam Cooper, Plaintiffs-Appellants, v. Gerald L. PARSKY, William E. Simon, Richard K. Gottlieb, Charles G. Berg, Alan Andreini, Michael J. Sacks, J. Michael Bell, Peter Ackerman, W. Ross Reucassel, Raymond F. Sebastian, John H. Long, Jr., WSGP International, Inc., WSGP-USP, Inc., Century City 1800 Partners L.P., Wespar Insurance Brokerage, Inc., Southwest Venture Partners II, BMG Partners, Inc., IGI-Boler, Inc., Boler Petroleum Corporation, The International Group, Inc. (Delaware), The International Group, Inc. (Canada), Defendants-Appellees, Elizabeth Cole, WSGP-Partners, L.P., Wsgp-Limited Partnership, Aurora 1800 Partners, L.P., Defendants.
CourtU.S. Court of Appeals — Second Circuit

Richard C. Stein, New York City, (Edward Cherney, Woodbury, NY, on the brief), for Plaintiffs-Appellants.

Lawrence Byrne, New York City (On the brief: S. Elizabeth Foster, Gibson, Dunn & Crutcher, New York City, for Defendants-Appellees Parsky, Berg, Andreini, Ackerman, WSGP International, Inc., WSGP-USP, Inc., and Century City 1800 Partners L.P.; Jack Wenick, Michael G. Albano, Sills Cummis Zuckerman Radin Tishman Epstein & Gross, New York City, for Defendants-Appellees Reucassel, IGI-Boler, Inc., Boler Petroleum Corporation, The International Group, Inc. (Delaware), and The International Group, Inc. (Canada); Elisabeth Goot, Latham & Watkins, New York City, for Defendants-Appellees Simon and Wespar Insurance Brokerage, Inc.; K. Ann McDonald, Robinson Murphy & McDonald, New York City, for Defendants-Appellees Bell, Long, Southwest Venture PartnersII, and BMG Partners, Inc.; Peter Jakab, Fein & Jakab, New York City, Robert Gooding, Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Newport Beach, CA, for Defendant-Appellee Sebastian; Ross E. Kimbarovsky, Hopkins & Sutter, Chicago, IL, for Defendant-Appellee Sacks).

Before: FEINBERG, KEARSE, and JACOBS, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiffs Stanley Cooper ("Cooper") and members of his family (collectively "the Coopers") appeal from a judgment of the United States District Court for the Southern District of New York, John G. Koeltl, Judge, dismissing their amended complaint alleging that defendants Gerald L. Parsky et al. violated various contractual, fiduciary, and other duties to plaintiffs in connection with the Cooper family's ownership of a corporation founded by Cooper. The district court found, inter alia, that there was no diversity jurisdiction, that it lacked personal jurisdiction over certain defendants, that the complaint failed to state a claim on which relief can be granted, and that most of plaintiffs' claims were barred by the statute of limitations. On appeal, plaintiffs primarily challenge the rulings that the complaint failed to state claims for breach of fiduciary duty, fraudulent conveyance, and breach of contract and that those claims were barred by the statute of limitations. They also contend that they effectively dropped from the lawsuit the defendant whose presence destroyed diversity. For the reasons that follow, we deem the nondiverse defendant to have been eliminated; we affirm the dismissal of all but one of plaintiffs' claims; and we remand for further proceedings on the reinstated claim.

I. BACKGROUND
A. The Events Alleged in the Amended Complaint

According to the amended complaint, in October 1986, Cooper established a corporation called U.S. Petroleum ("USP" or the "Company"). Cooper was the first chairman and chief executive officer ("CEO") of USP; he and his family owned a majority of its stock. USP was established for the purposes of building the first free-standing petroleum wax refinery processing plant in the United States, and of acquiring and developing other petroleum-wax-producing properties and refineries. Cooper retained an investment banker in order to obtain $150,000,000 in financing for the construction of a plant in Utah.

In the meantime, USP and plaintiffs entered into other agreements for the infusion of capital. On December 22, 1987, USP entered into loan and investment agreements with defendant Southwest Venture Partners II ("Southwest" or "Southwest II"), a limited partnership, through which Southwest became USP's then-principal lender and a substantial shareholder. After Southwest's investment, the Coopers held approximately 71% of USP's stock. However, pursuant to these agreements, Cooper relinquished his positions as chairman and CEO, and Southwest was allowed to place four directors on USP's board. Among those named by Southwest were defendants J. Michael Bell, Raymond F. Sebastian, and John H. Long, Jr.

Simultaneously with the loan and investment agreements, two additional agreements were executed: (1) a Voting Agreement ("Voting Agreement"), pursuant to which the Coopers gave USP's directors proxies to vote the Coopers' USP shares for up to 10 years, and (2) a five-year employment agreement between USP and Cooper. The Voting Agreement provided, in pertinent part, as follows:

THIS AGREEMENT, made this 22nd day of December, 1987, among

those persons whose names appear on the signature page of this Agreement under the heading "Voters" (hereinafter, together with persons who may succeed them as hereinafter provided, called the "Voters"),

those persons and trusts whose names appear on the signature page of this Agreement under the heading "Stockholders" (hereinafter, the "Stockholders"), and

U.S. Petroleum Corp., a Delaware corporation with its principal office at 230 Park Avenue, New York, New York (hereinafter, the "Company")

WITNESSETH:

WHEREAS, in order to enhance the continuity of the management of the Company, the parties desire to enter into this Agreement NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows:

1. Each Stockholder agrees that, for the term of this Agreement, his, her or its shares of Common Stock of the Company ... shall be voted by the Voters in the manner hereafter provided, and to that end does hereby irrevocably constitute the Voters as his, her or its proxy to vote the same as so provided....

....

3. The Voters, who shall consist of the then directors of the Company who may hold such office from time to time, shall have the power and authority to vote the Shares with respect to all matters affecting the Company for which the action of the holders of the Common Stock of the Company is required or permitted.... In casting their votes, the Voters shall not be held by this Agreement to any specified standard of care on [sic] fiduciary responsibility and in no event shall they be liable to any of the Stockholders except for their gross negligence or wilfull [sic] misconduct. In addition, the Voters shall cast their votes in a manner consistent with the purposes and intent of Sections 5.7 and 7.1 of the Investment Agreement, dated December 1987 between the Company and Southwest Venture Partners II.

4. This Agreement shall terminate and expire on the earliest of the following dates to occur: (a) the seventh anniversary of the date when the Company's Plant (proposed to be constructed in Salt Lake City, Utah for the separation of wax and other petroleum products from crude oil and for the further processing of wax) shall have been placed in service, (b) such date as the Company shall have issued and sold, by means of an underwritten public offering and an effective registration statement under the Securities Act of 1933, as amended, in one or more transactions, at least 10% of the Company's Common Stock then outstanding, (c) such date as the number of shares of Common Stock of the Company owned by the Stockholders shall in the aggregate become less than 10% of the total then outstanding, (d) such date on which all indebtedness included in the construction financing for the aforesaid Plant (or any refinancing thereof) shall have been paid in full, (e) the date, if any, prior to the first drawing down of funds for the construction of aforesaid Plant on which Salomon Brothers Inc shall cease to be the Company's investment banker, (f) the date on which Stanley H. Cooper shall die or become permanently incapacitated (in which event the Shares shall be voted by Joel Stern, Esq. or Mr. Cooper's executor, as the case may be,) or (g) the tenth anniversary of the date of this Agreement....

5. This Agreement shall be binding upon and enure to the benefit of the parties hereto and upon and to others as follows:

....

Any Voter: So long as any Voter shall remain a director of the Company and thereafter, upon and to any person who shall succeed to or replace such person as such director; and

The Company: any one or more successors by way of merger, consolidation or sale of assets.

(Voting Agreement dated December 22, 1987, at 1-5.) The amended complaint alleged that when the Voting Agreement, which the amended complaint refers to as a "Trust," was entered into,

[u]nder no circumstances was the Voting Trust to be used to dilute or eliminate the equity interest of the Coopers.... Further, at the same time, Long, Bell and Sebastian represented to the Coopers that the voting of the Trust would be purely ministerial, and for administrative purposes. ... The statements were false at the time, and the true objective of having the power to dilute the Cooper holdings was never disclosed.

(Amended Complaint ¶ 48.)

Under the employment contract, Cooper was to serve as a senior employee and receive the same annual salary, minus one dollar, as the president of USP, along with various other benefits; his employment was to be terminable only for cause. The term of the employment contract was five years; Cooper was fired and locked out of the USP premises after...

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