Dolinka VanNoord and Co. v. Oppenheimer and Co., 1:94-CV-710.

• Decision Date: 16 June 1995
• Docket Number: No. 1:94-CV-710.,1:94-CV-710.
• Citation: 891 F. Supp. 1244
• Parties: DOLINKA VANNOORD AND COMPANY, a partnership; Marvin Dolinka, Kenneth Van Noord; Gerald Vanderlugt and Bruce Jelsema, its partners, Plaintiffs, v. OPPENHEIMER AND COMPANY, INC., Defendant.
• Court: U.S. District Court — Western District of Michigan

891 F. Supp. 1244

DOLINKA VANNOORD AND COMPANY, a partnership; Marvin Dolinka, Kenneth Van Noord; Gerald Vanderlugt and Bruce Jelsema, its partners, Plaintiffs, v. OPPENHEIMER AND COMPANY, INC., Defendant.

No. 1:94-CV-710.

United States District Court, W.D. Michigan, Southern Division.

June 16, 1995.

Grant J. Gruel, Gruel, Mills, Nims & Pylman, Grand Rapids, MI, for plaintiffs.

Bradley J. Schram, Hertz, Schram & Saretsky, P.C., Bloomfield Hills, MI, for defendant.

OPINION

HILLMAN, Senior District Judge.

In this diversity action the certified public accounting firm of Dolinka VanNoord & Co. and its partners, as plaintiffs, have brought a claim for contribution against defendant Oppenheimer & Co. ("Oppenheimer"), a securities brokerage firm. The claim arises from a judgment entered by this court against plaintiffs' predecessor, Dolinka Smith & VanNoord ("DSV"), on a securities fraud claim filed by a pension plan and its trustees against both DSV and Oppenheimer. Presently before the court is defendant Oppenheimer's motion to dismiss or, in the alternative, for summary judgment on plaintiffs' contribution claim, and for sanctions. For the following reasons, I grant partial summary judgment in favor of Oppenheimer, dismiss the remainder of plaintiffs' complaint, and deny Oppenheimer's accompanying request for sanctions.

I.

Plaintiffs seek contribution on a judgment of $539,012, which this court entered on December 1, 1993, against plaintiffs' predecessor, DSV, a CPA investment advisory firm located in Grand Rapids, Michigan. The judgment was entered against DSV on a securities fraud claim filed by George Cares, Paul Cares and Louis Cares ("the Careses") and their privately-held corporation's retirement plans, the Sheldon Co. Profit Sharing Plan and Trust and the Sheldon Company Defined Benefit Plan and Trust ("the Sheldon Plans").

The Sheldon Plans permitted the Careses, as trustees of the plans, to designate an investment advisor. The Careses elected to delegate their investment responsibilities to DSV. In the summer of 1985, Michael Smith, an associate and later a partner in DSV, opened two brokerage accounts on behalf of the Sheldon Plans, one of which was with the Chicago, Illinois, branch of Oppenheimer. Sheldon Altman was the Oppenheimer account representative.

In the summer of 1991, investigations revealed that Smith had embezzled money from a number of DSV clients, including the Sheldon Plans, although not from the Plans' Oppenheimer account. Following disclosure of his illegal dealings, Smith pled guilty in Michigan state court to at least one of the many crimes with which he was charged. Subsequently, he was sentenced to a substantial prison term.

Thereafter, the Careses and their Plans sued in this court Smith, DSV, Oppenheimer, Altman and others to recover compensatory and punitive damages. Their complaint alleged that Oppenheimer and Altman unlawfully engaged in "churning, inappropriate investments, and improper margin and option trading and excessive commissions." The complaint also alleged securities violations under section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5.

Oppenheimer and Altman filed a motion for summary judgment on these claims. By opinion and order issued on July 2, 1993, I granted the motion for summary judgment, and dismissed Oppenheimer and Altman from the case. Sheldon Co. Profit Sharing Plan and Trust v. Smith, 828 F.Supp. 1262 (W.D.Mich.1993). However, in the same opinion and order of July 2, 1993, I granted the Careses' and Sheldon Plans' motion for partial summary judgment against DSV, establishing DSV's liability as a partnership, under the Uniform Partnership Act, M.C.L. § 449.1 et seq, for the intentional wrongful acts of its ex-partner, Smith. Id. On December 1, 1993, after a trial on the issue of damages only, I entered judgment against DSV and its partners, jointly and severally, in the amount of $539,012.

On October 17, 1994, plaintiffs filed this action for contribution against defendant Oppenheimer. This court's jurisdiction over plaintiffs' claim is founded upon the parties' complete diversity of citizenship and the requisite amount in controversy.¹ 28 U.S.C. § 1332. On February 3, 1995, defendant Oppenheimer filed the motion which is presently before the court, seeking dismissal of plaintiffs' claim or, alternatively, summary judgment. Defendant also requested this court to award sanctions, including reasonable attorney fees, pursuant to Fed.R.Civ.P. 11.

II.

Defendant Oppenheimer seeks dismissal of plaintiffs' complaint under Fed.R.Civ.P. 12(b)(6), or, alternatively, summary judgment under Fed.R.Civ.P. 56(c). Because I find both rules necessary for proper disposition of defendant's motion, I set forth here the standards for granting motions under each.

The standard of review under a Rule 12(b)(6) motion is well-established. "In appraising the sufficiency of the complaint," the Supreme Court wrote in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957), "we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state a 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." The complaint must be construed in the light most favorable to the plaintiff, and its well-pled facts must be accepted as true. Scheuer v. Rhodes, 416 U.S. 232, 234, 94 S.Ct. 1683, 1685, 40 L.Ed.2d 90 (1974). Mere legal conclusions and unwarranted factual inferences, however, need not be accepted. Morgan v. Church's Fried Chicken, 829 F.2d 10 (6th Cir.1987).

The standard for granting summary judgment is also well-established. Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The crux of summary judgment is determining "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). In making this determination, the court must examine the record as a whole by reviewing all pleadings, depositions, affidavits and admissions on file, drawing all justifiable inferences in favor of the party opposing the motions. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The moving party bears the initial burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Kramer v. Bachan Aerospace Corp., 912 F.2d 151, 153-54 (6th Cir.1990). If the moving party demonstrates there is an absence of evidence supporting the nonmoving party's case, the party opposing the motion must come forward with specific facts showing that there is a genuine issue for trial. Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356; Kramer, 912 F.2d at 153-54. To sustain this burden, the non-moving party cannot rest on the mere allegations of the pleadings. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; Fed.R.Civ.P. 56(e). Rather, the non-moving party must come forward with specific facts to support its claims and show there is a genuine issue for trial. Id.

In recent years, the Supreme Court has encouraged the use of summary judgment where appropriate to ensure just, speedy, and efficient determinations in each case. Celotex, 477 U.S. at 327, 106 S.Ct. at 2554-55; Daughenbaugh v. Bethlehem Steel Corp., 891 F.2d 1199, 1205 (6th Cir.1989). The Sixth Circuit has recognized that the federal courts have entered a "new era" in summary judgment practice. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1478-81 (6th Cir.1989). As a result, mere allegations in support of the non-moving party are inadequate because the "mere existence of a scintilla of evidence in support of the positions will be insufficient; there must be evidence on which the jury could reasonably find for the non-moving party." Anderson, 477 U.S. at 252, 106 S.Ct. at 2512; Cloverdale Equip. Co. v. Simon Aerials, Inc., 869 F.2d 934, 937 (6th Cir.1989).

III.

While plaintiffs' complaint fails to identify any legal basis for their contribution claim, defendant asserts that plaintiffs' cause of action must arise, if at all, from either the Michigan contribution statute, or the Michigan common law of contribution. I agree. I address the merits of plaintiffs' claim under each theory.

The Michigan Contribution Statute

First, Michigan has created a statutory cause of action for contribution under the Michigan contribution statute, M.C.L. § 600.2925a. Section 600.2925a(1) provides:

Except as otherwise provided in this act, when 2 or more persons become jointly or severally liable in tort for the same injury to a person or property or for the same wrongful death, there is a right of contribution among them even though judgment has not been recovered against all or any of them.

However, section 600.2925a(8) provides: "This section does not apply to breaches of trust or of other fiduciary obligations." The judgment for which DSV and its partners seek contribution arises from a breach of fiduciary duties which DSV owed to the Careses and the Sheldon Plans.

Accordingly, by the express terms of the statute, plaintiffs have no right for contribution under M.C.L. § 600.2925a. See Federal Savings & Loan Ins. Co. v. Quinlan, 678 F.Supp. 174, 176 (E.D.Mich.1988) ("Thus, it is clear that no statutory right to contribution exists where a breach of trust or other fiduciary duty is involved."). To the extent plaintiffs seek relief under the Michigan contribution statute, therefore, plaintiffs' complaint must be dismissed for failure to state a claim.

The Michigan Common Law Right to Contribution

In their brief in reply to Oppenheimer's motion for...