Ferreri v. Fox, Rothschild, O'Brien & Frankel

• Decision Date: 07 July 1988
• Docket Number: Civ. A. No. 88-3953.
• Citation: 690 F. Supp. 400
• Parties: Alfred FERRERI v. FOX, ROTHSCHILD, O'BRIEN & FRANKEL and Price Waterhouse.
• Court: U.S. District Court — Eastern District of Pennsylvania

690 F. Supp. 400

Alfred FERRERI v. FOX, ROTHSCHILD, O'BRIEN & FRANKEL and Price Waterhouse.

Civ. A. No. 88-3953.

United States District Court, E.D. Pennsylvania.

July 7, 1988.

Alfred Ferreri, Philadelphia, Pa., pro se.

Jeffrey B. Albert, Stephanie Resnick, Fox, Rothschild, O'Brien & Frankel, Philadelphia, Pa., for defendant Fox, Rothschild, O'Brien & Frankel.

Patricia L. Freeland, Margaret A. Suender, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for defendant Price Waterhouse.

MEMORANDUM AND ORDER

KATZ, District Judge.

Before the court are the motions to dismiss of defendants Fox, Rothschild, O'Brien & Frankel ("Fox, Rothschild") and Price Waterhouse. Both defendants seek dismissal of plaintiff's complaint for failure to state a claim upon which relief can be granted and for lack of subject matter jurisdiction. In addition, Fox, Rothschild asks that the court hold an evidentiary hearing and thereafter impose sanctions on plaintiff Alfred Ferreri, pursuant to Rule 11 of the Federal Rules of Civil Procedure. For the reasons below, plaintiff's complaint will be dismissed and no hearing will be held and no sanctions imposed on plaintiff Ferreri, who has filed this suit pro se.

BACKGROUND

The complaint at issue here is only the latest salvo in Mr. Ferreri's crusade against those individuals and entities which he believes to be responsible for serious financial losses he suffered while trading stock options on the Philadelphia Stock Exchange in July and August of 1983.¹ In an effort to recoup some of these losses, in February 1984, Mr. Ferreri retained Abraham C. Reich, and Mr. Reich's law firm, defendant Fox, Rothschild, as his attorneys. (Plaintiff's Complaint ¶ 8). In April of that year Mr. Reich and defendant Fox, Rothschild filed suit on Mr. Ferreri's behalf in the Philadelphia Court of Common Pleas. Named as defendant in that suit was First Options of Chicago ("First Options"), the clearing house through which Mr. Ferreri had cleared his options transactions. (Plaintiff's Complaint ¶¶ 7, 8, 19). That suit was removed to this court by First Options pursuant to 28 U.S.C. § 1441, (Plaintiff's Complaint ¶ 20) and a jury trial was held in order to determine whether plaintiff was required to arbitrate the dispute under the agreement in effect between the parties. See Ferreri v. First Options of Chicago, Inc., 661 F.Supp. 1186 (E.D.Pa.1987). A jury found plaintiff's claim to be arbitrable, and Mr. Ferreri then filed for arbitration under the authority of the New York Stock Exchange. (Plaintiff's Complaint ¶¶ 20-22). It is this arbitration proceeding that forms the gravamen of plaintiff's complaint in this case.

Mr. Ferreri was represented at the arbitration proceeding by Mr. Reich and defendant Fox, Rothschild, and defendant Price Waterhouse was employed by Mr. Ferreri to provide expert accounting testimony at the arbitration. (Plaintiff's Complaint ¶¶ 10, 24, 30, 31). Despite the fact that arbitration of plaintiff's claim against First Options resulted in a monetary award in his favor, see Ferreri, 661 F.Supp. at 1186, Mr. Ferreri remains dissatisfied with the result and now raises various claims against defendants Fox, Rothschild and Price Waterhouse.

DISCUSSION

Because Mr. Ferreri is proceeding pro se his complaint is to be held to a less stringent standard than would a formal pleading drafted by an attorney. Likewise, the allegations contained in plaintiff's complaint are to be liberally construed. Becker v. Commission of Internal Revenue, 751 F.2d 146, 149 (3d Cir.1984) (citing Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972)); see also Carr v. Sharp, 454 F.2d 271, 272 (3d Cir.1971). Regardless of the identity of the plaintiff, however, on a motion to dismiss, all material allegations of the complaint must be treated as true and construed in the light most favorable to the party opposing the motion. The complaint may be dismissed only if it appears that the plaintiff cannot establish any set of facts in support of his claim which would entitle him to relief. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Helstoski v. Goldstein, 552 F.2d 564, 565 (3d Cir.1977); Truhe v. Rupell, 641 F.Supp. 57, 58 (M.D.Pa.1985). Despite a liberal construction of plaintiff's complaint and taking as true all of Mr. Ferreri's allegations, plaintiff cannot prove any set of facts which would entitle him to any legal relief in this court.

Assuming for the purposes of this motion that the allegations made by Mr. Ferreri in his complaint are indeed accurate, during the arbitration proceedings initiated by Mr. Ferreri to recover his lost savings, Fox, Rothschild, (as represented by one of the firm's partners, Abraham C. Reich), intentionally failed to assert various federal securities laws violations against First Options, as well as failed to pursue other securities law claims in a separate forum against First Options, Andrew Mainardi, III (plaintiff's trading partner in the ill-fated options transactions) and the Philadelphia Stock Exchange. (Plaintiff's Complaint ¶¶ 30, 31). In addition, defendant Fox, Rothschild manifested a conflict of interest, exemplified by their "passive conduct and the preferential loyalty extended to large corporate entities by major law firms." (Plaintiff's Complaint ¶ 33). Plaintiff points specifically to Fox, Rothschild's: (1) unwillingness to file suit against the Philadelphia Stock Exchange on plaintiff's behalf; (2) instructions from Fox, Rothschild to Mr. Paul DaLomba, a certified public accountant employed by defendant Price Waterhouse, and plaintiff's expert witness at the arbitration proceeding, which limited the scope of Mr. DaLomba's testimony; (3) failure to request "Mr. DaLomba to present pertinent evidence at hand"; (4) failure to properly question witnesses; and to Fox, Rothschild's (5) "failure to seek expert advice at early stage of litigation for proper orientation of cause of action." (Plaintiff's Complaint ¶ 33).

In addition, Mr. Ferreri is dissatisfied with the performance of defendant Price Waterhouse, which provided plaintiff with expert accounting testimony at the arbitration hearing. Mr. Ferreri asserts that Price Waterhouse likewise exhibited an unacceptable "conflict of interest" by (1) Mr. DaLomba's association "with a multiplicity of corporate entities engaged in the securities industry"; (2) Mr. DaLomba's acquaintance with the President of the Philadelphia Stock Exchange; and (3) Price Waterhouse's provision of "accounting, auditing and ancillary services to the Philadelphia Stock Exchange." (Plaintiff's Complaint ¶ 35). Likewise, Mr. Ferreri asserts that Price Waterhouse's expert testimony "was a complete failure and detrimental" to his case by (1) "failing to make the relative mathematical representation"; (2) "introducing ambiguous statements"; (3) "refusing to clearly distinguish the subject matters in question"; (4) "addressing irrelevant questions in favor of First Options"; (5) "fraudulently concealing documentary evidence provided by defendant prior to arbitration"; and (6) "making concluding statements which completely refuted whatever scant support was shown in his Mr. DaLomba's presentation." (Plaintiff's Complaint ¶ 36). According to plaintiff's complaint these facts amount to a violation of the federal securities laws, specifically sections 6, 7, 8, 10, 15 and 20 of the Securities Exchange Act of 1934. (Plaintiff's Complaint ¶ 1).² Likewise, plaintiff's complaint asserts that Price Waterhouse's and Fox, Rothschild's conduct amounts to professional malpractice and negligence due to defendants' conflicts of interest, their breach of their fiduciary and ethical obligations to Mr. Ferreri; and their needless exposure of plaintiff to unnecessary delay, risk, and expense. (Plaintiff's Complaint ¶ 39).

Defendants contend that Mr. Ferreri has failed to state a claim under the federal securities laws. As Mr. Ferreri agrees that he has no such claim, (Plaintiff's Answer to Motion to Dismiss of Price Waterhouse ¶ 1), and as my review of the securities laws reveals the absence of any conceivable claim under these statutes by Mr. Ferreri³, plaintiff's complaint must be dismissed unless there is some other basis for the exercise of federal jurisdiction in this case. As there are no viable federal claims contained on the face of plaintiff's complaint, the only possible remaining basis for plaintiff's suit against these two private entities is the exercise of diversity jurisdiction by this court over plaintiff's claims of professional malpractice and negligence.

In his complaint Mr. Ferreri alleges that he "is an adult individual residing in ... Philadelphia, Pennsylvania." (Plaintiff's Complaint ¶ 2). I take this allegation of residence to be a statement of plaintiff's citizenship. In addition, both Price Waterhouse and Fox, Rothschild are partnerships. (Affidavit of James Clancy, Exhibit A to defendant Price Waterhouse's Motion to Dismiss; Affidavit of Jeffrey Albert, Exhibit B to defendant Fox, Rothschild's Motion to Dismiss). It is well established that in order for a federal court to exercise jurisdiction in diversity, complete diversity between all parties opposed in interest is required. Carlsberg Resources Corp. v. Cambria Savings and Loan, 554 F.2d 1254, 1257-58 (3d Cir.1977) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806)). Likewise, when partnerships are involved "the courts should look to the citizenship of the persons comprising such organizations in order to determine whether there is compliance with the diversity standard." Carlsberg, 554 F.2d at 1258. Indeed, "the citizenship of the partnership for diversity purposes is that of each partner." Lucido v. Cravath, Swaine & Moore, 425 F.Supp. 123, 125 n. 2 (S.D.N.Y.1977) (citing Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456...