Friedlander v. Nims
| Decision Date | 19 March 1985 |
| Docket Number | No. 84-8110,84-8110 |
| Citation | 755 F.2d 810 |
| Parties | Fed. Sec. L. Rep. P 91,981, 1 Fed.R.Serv.3d 946 Herman FRIEDLANDER, etc., et al., Plaintiffs-Appellants, Cross-Appellees, v. Jerry C. NIMS, et al., Defendants-Appellees, Timex Corporation, Defendant-Appellee, Cross-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Edward L. Greenblatt, Lipshultz, Frankel, Greenblatt, King & Cohen, Atlanta, Ga., Henry A. Brachtl, Richard B. Dannenberg, Lowey, Dannenberg & Knapp, New York City, for Herman Friedlander, etc., et al.
Richard Sinkfield, Rogers & Hardin, C.B. Rogers, Janice E. Garlitz, Atlanta, Ga., for J.C. Nims and Lo.
Kent E. Mast, Hansell, Post, Brandon & Dorsey, Atlanta, Ga., Ralph J. Savarese, Gaspare J. Bono, Jean M. Allison, Howrey & Simon, Washington, D.C., Kent E. Mast, Richard M. Kirby, Hansell & Post, Atlanta, Ga., for Timex.
Oscar Persons, Atlanta, Ga., for Nimslo, et al.
Thornton W. Morris, Atlanta, Ga., for Bostic.
Emmet J. Bondurant, II, Trotter, Bondurant, Miller & Hishon, Atlanta, Ga., for Seifert.
Appeals from the United States District Court for the Northern District of Georgia.
Before VANCE and ANDERSON, Circuit Judges, and PITTMAN *, District Judge.
Appellant Friedlander contends that the district court erred in granting defendant Timex's motion to dismiss for failure to state a claim and for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b). Because we find that appellant deliberately chose to forego his opportunity to cure the defects of his complaint despite specific and repeated warnings from the trial judge that such amendment was necessary to avoid dismissal, we affirm.
Friedlander brought this class action on behalf of the minority shareholders of Nimslo Technology, Inc. (Nimslo) alleging that Timex and several other corporations and individuals entered into a conspiracy to "freeze out" Nimslo's minority shareholders at an unconscionably unfair price through fraud and deception. Fred Olsen and James Davidson, who are controlling shareholders and officers of Timex, were among the individuals named as defendants. The complaint contained four counts, only three of which pertained to Timex. Those counts alleged violations of (1) Rule 10b-5, 17 C.F.R. Sec. 240.10b-5; (2) section 12(d) of the Georgia Securities Act, O.C.G.A. Sec. 10-5-12(d); and (3) various sections of the Racketeer Influenced and Corrupt Organizations provisions of the Organized Crime Control Act of 1970, 18 U.S.C. Secs. 1961-68. Timex responded to the complaint with a motion to dismiss for failure to state a claim or, in the alternative, for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b).
At the hearing on Timex's motion, 1 the district court specifically expressed concern over "whether Timex [was] properly in the case." On several occasions during appellant's argument on the motion, the court asked why the complaint did not allege specifically that Olsen's and Davidson's acts were undertaken on behalf of Timex. Each time counsel responded, in essence, that it was a mere oversight which could easily be corrected if the court granted leave to amend. Typical of these exchanges is the following:
Later during appellant's argument, the district judge made it clear that he felt some amendment was necessary and stated, "I'm not satisfied that those bare allegations are sufficient to hold a corporation [liable]." The judge was even more specific during Timex's rebuttal and after stating that he thought Friedlander "could state a claim" against Timex, he admonished appellant's counsel that "I don't believe that Mr. Olsen's activities are necessarily attributable to Timex unless they are properly plead [sic] to be."
At the close of argument on the motion, the district judge indicated without ruling that his initial conclusion was that Timex was not properly in the case, but he was also inclined to give Friedlander an opportunity to amend the complaint. He cautioned Friedlander against recklessly alleging facts just to keep Timex in the case, warning that appropriate sanctions would follow such conduct. Not surprisingly, the court's subsequent order granted Timex's motion to dismiss subject to Friedlander's right to amend the complaint within fifteen days. Friedlander v. Nims, 571 F.Supp. 1188, 1199 (N.D.Ga.1983). The order stated that the court was granting Timex's motion because the complaint failed to state a cause of action against Timex. It further stated that even if the complaint had stated a cause of action against Timex the court would have granted the motion for failure to plead fraud with particularity as required by rule 9(b). In granting Friedlander an opportunity to amend, the district judge reminded counsel of the requirements of rule 11 and reiterated that sanctions would be imposed for false pleadings. Id. at 1194-95. Friedlander, apparently after re-evaluating his original complaint in light of the court's order, determined that it adequately stated a 10b-5 claim against Timex and chose to forego his opportunity to amend. He contends in this appeal that the district court erred in finding that his original complaint failed to state a 10b-5 claim against Timex. 2
We are reluctant to approve rule 12(b)(6) dismissals in light of the well-established 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 claims which would entitle him to relief." 3 Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957) (footnote omitted); McKinnis v. Mosely, 693 F.2d 1054, 1058 (11th Cir.1982). Our strict adherence to this rule has led us to hold that a district court should give a plaintiff an opportunity to amend his complaint rather than dismiss it when it appears that a more carefully drafted complaint might state a claim upon which relief could be granted. See Dussouy v. Gulf Coast Investment Corp., 660 F.2d 594, 597-99 (5th Cir.1981); Sarter v. Mays, 491 F.2d 675, 676 (5th Cir.1974). This is precisely the situation the district court below faced. The court not only gave Friedlander the opportunity to amend, but even told Friedlander the deficiency in the complaint and how it could be remedied. The district court therefore properly granted Friedlander the opportunity to amend his complaint 4 once it determined that the original complaint was deficient.
A district court may dismiss a case for failure to comply with the pleading rules. Although this is a severe sanction, its imposition is justified when a party chooses to disregard the sound and proper directions of the district court. See, e.g., Maddox v. Shroyer, 302 F.2d 903, 904 (D.C.Cir.), cert. denied, 371 U.S. 825, 83 S.Ct. 45, 9 L.Ed.2d 64 (1962) (); see also Hyler v. Reynolds Metal Company, 434 F.2d 1064 (5th Cir.1970), cert. denied, 403 U.S. 912, 91 S.Ct. 2219, 29 L.Ed.2d 689 (1971) (). It is difficult to imagine how the district court could have been more explicit in expressing its concern over the complaint's deficiencies and in recommending the changes necessary to correct them. Friedlander acknowledges that he does not...
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