General Acquisition, Inc. v. GenCorp Inc., C-2-87-0348.

• Decision Date: 25 May 1990
• Docket Number: No. C-2-87-0348.,C-2-87-0348.
• Citation: 766 F. Supp. 1460
• Parties: GENERAL ACQUISITION, INC., et al., Plaintiffs, v. GENCORP INC., et al., Defendants. GENCORP INC., Defendant-Counterclaimant, v. WAGNER & BROWN, et al., Defendants on the Counterclaims, and Shearson Lehman Hutton, Inc., et al., New Party Defendants on the Amended Counterclaims.
• Court: U.S. District Court — Southern District of Ohio

766 F. Supp. 1460

GENERAL ACQUISITION, INC., et al., Plaintiffs, v. GENCORP INC., et al., Defendants.

GENCORP INC., Defendant-Counterclaimant, v. WAGNER & BROWN, et al., Defendants on the Counterclaims, and Shearson Lehman Hutton, Inc., et al., New Party Defendants on the Amended Counterclaims.

No. C-2-87-0348.

United States District Court, S.D. Ohio, E.D.

May 25, 1990.

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Thomas W. Hill, Melvin D. Weinstein, Emens, Hurd, Kegler & Ritter, Columbus, Ohio, for GenCorp, Inc., defendant-counterclaimant.

James E. Pohlman, Daniel W. Costello, Porter, Wright, Morris & Arthur, Columbus, Ohio and Willkie Farr & Gallagher, New York City, for counterclaim-defendant, Shearson Lehman Bros. Inc., new party defendant on the Amended Counterclaims.

OPINION AND ORDER

KINNEARY, Senior District Judge.

This matter comes before the Court to consider the motion of Shearson Lehman Hutton, Inc. ("Shearson") and Shearson Lehman Brothers Holdings, Inc. ("SLB Holdings") for dismissal of the Counterclaims of GenCorp, Inc. ("GenCorp") under Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. SLB Holdings also moves for dismissal of the Counterclaims for lack of personal jurisdiction. Fed.R. Civ.P. 12(b)(2).

In considering a motion for dismissal, the Court is mindful that dismissal of a counterclaim for failure to state a claim upon which can be granted is appropriate only in limited circumstances. A district court may not dismiss a claim under Rule 12(b)(6) for failure to state a claim unless it is apparent beyond a doubt to the court that the plaintiff can prove no set of facts to support a claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). In determining whether the facts presented in a counterclaim support a claim upon which relief can be granted, the district court must liberally construe the facts in the light most favorable to the counterclaim plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 1848, 23 L.Ed.2d 404 (1969); 5 C. Wright & A. Miller, Federal Practice and Procedure § 1357, at 594 (1969) hereinafter 5 C. Wright.

In considering whether the plaintiff sets forth in the counterclaim a claim upon which relief can be granted, the court must remain cognizant of the liberal pleading requirements embodied in the Federal Rules of Civil Procedure. Rule 8(a)(2) only requires "`a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the ground upon which it rests." Conley, 355 U.S. at 47, 78 S.Ct. at 103.

The function of pleadings under the Federal Rules is to give fair notice of the claim asserted so as to enable the adverse party to answer and prepare for trial, to allow for the application of the doctrine of res judicata, and to show the type of case brought so that it may be assigned to the proper form of trial.

Atlas Chem. Indus., Inc. v. Moraine Prods., 509 F.2d 1, 7 (6th Cir.1974) (quoting 2A J. Moore, J. Lucas & G. Grotheer, Moore's Federal Practice ¶ 8.13, at 8-61 to 62 (2d ed. 1989) hereinafter 2A J. Moore). "Under the `notice' theory of pleading it is immaterial whether the pleadings states `conclusions' or `facts' as long as fair notice is given and the statement or claim is short and plain." 2A J. Moore, supra, ¶ 8.13, at 8-66. There is no requirement that the claimant provide in detail the facts upon which his claim is premised so long as his opponent is apprised as to the basis of his claim and ground in support thereof. Conley, 355 U.S. at 47, 78 S.Ct. at 103. Indeed, "there is no requirement that the pleading state `facts,' or `ultimate facts,' or `facts sufficient to constitute a cause of action.'" 2A J. Moore, supra, ¶ 8.13, at 8-60.

Obviously, what constitutes a "short and plain" statement is dependent upon such considerations as the nature of the suit and the relief sought, among other factors. The Court is mindful, however, that in evaluating a plaintiff's counterclaim the pleading requirements embodied in Rule 8(a) apply to all actions in the federal courts.¹ The need for the pleader to interpose only "a short and plain statement of the claim showing that the pleader is entitled to relief" governs "every case, regardless of its size, complexity, or the number of parties" involved. 5 C. Wright, supra p. 2, § 1217, at 127, § 1221, at 149. The principles underlying Rule 8(a)(2) equally control a district court's disposition of an action for recovery of $1,000 just as they do a multimillion dollar claim, such as in the case at bar. The amount prayed for by the plaintiff does not heighten the court's scrutiny.

In addition, while undoubtedly the plaintiff will be required to prove all elements to recover successfully under its various claims, a counterclaim cannot be dismissed simply because the plaintiff has failed to state precisely all elements that give rise to the alleged legal basis for recovery. Bramlet v. Wilson, 495 F.2d 714, 716 (8th Cir.1974); Ambling v. Blackstone Cattle Co., 658 F.Supp. 1459, 1462 (N.D.Ill.1987); Miener v. Special School Dist., 607 F.Supp. 1425, 1427 (E.D.Mo. 1985), aff'd in part, rev'd in part on other grounds, Miener By and Through Miener v. Missouri, 800 F.2d 749 (1986); Southwest Inv. I v. Midland Energy Co., 596 F.Supp. 219, 221 (E.D.Mo.1984); Comerio v. Beatrice Foods Co., 595 F.Supp. 918, 920 (E.D.Mo.1984); 5 C. Wright, supra p. 2, § 1216, at 120. Granted, some courts have held otherwise and required the pleading of each essential element of the claim alleged. See, e.g., Laxalt v. McClatchy, 622 F.Supp. 737, 740 (D.Nev.1985); Briggs v. Sterner, 529 F.Supp. 1155, 1164 (S.D.Iowa 1981). However, to embrace this view would essentially be a return to the common law practice of testing the legal sufficiency of a complaint by the means of a demurrer. Under such a practice, a party's claim could be lost by its attorney's failure to draft the counterclaim properly, despite the validity of the claim. 5 C. Wright, supra p. 2, § 1355, at 587. Such a practice would effectively eliminate the "notice" pleading theory codified in the Federal Rules of Civil Procedure. So long as the counterclaim sets forth sufficient facts by which the elements of the offense are reasonably inferred, it can withstand the scrutiny of a Rule 12(b)(6) motion.

Given the Court's duty to construe the facts in the light most favorable to the counterclaim plaintiff, the Court must accept the factual allegations contained in GenCorp's Counterclaims and any inferences to be drawn therefrom for purposes of considering this motion. Thus, the factual statement provided below is essentially an adoption and republication of GenCorp's statement of facts. The Court notes that the following does not constitute a finding of fact; it is merely a summary of the allegations contained in GenCorp's Counterclaims.

This action arises out of a tender offer commenced by General Partners on March 18, 1987 to purchase for cash all outstanding shares of GenCorp's common stock. General Partners terminated its tender offer on April 6, 1987, a move prompted by GenCorp's announced self-tender of fifty-four percent of its shares.

As part of its Second Amended Answer and Counterclaims, GenCorp filed the instant Counterclaims. Although General Partners and its related entities are named as counterclaim defendants, a consent order filed on May 8, 1987 provided for their dismissal. Hence, the only claims pending now before the Court are GenCorp's claims against Shearson and SLB Holdings.

Shearson served as the investment and financial advisor for GenCorp in conjunction with two GenCorp financial matters. Second Amended Answer and Counterclaims ¶ 124. In the course of this relationship, GenCorp provided Shearson with confidential, proprietary, and other nonpublic information about GenCorp, and Shearson was given the opportunity to observe, work with, and become privy to business and financial information about GenCorp that did not relate to matters within the public domain. Id. ¶¶ 125, 126.

Shearson first served as a financial advisor for GenCorp in June 1986, when Shearson performed for GenCorp a financial analysis of a potential leveraged buy-out of GenCorp's tire subsidiary, General Tire, Inc. GenCorp provided Shearson with confidential internal projections, forecasts, and other internal GenCorp information for use in Shearson's analysis. Id. ¶ 127. Upon completion of Shearson's analysis and transmittal of the findings, GenCorp elected not to pursue the matter further. Id. ¶ 128. All of these event occurred within in a one month period of time.

In November 1986, Shearson contacted GenCorp and offered to represent and assist GenCorp in evaluating the potential acquisition of Goodyear Aerospace. Id. ¶ 129. GenCorp agreed to have Shearson represent and assist GenCorp in that matter. Id. Shearson provided this assistance with the understanding that it would receive a fee in the event GenCorp opted to proceed with the proposed acquisition. Id.

In the course of Shearson's involvement, on December 2, 1986, a GenCorp representative met in New York City with Shearson representatives to determine the possible range of values for the acquisition of Goodyear Aerospace and the likely structure of such an acquisition. Id. Among the Shearson personnel attending this meeting and participating in the analysis was Linda Bornheutter. Id. In order to facilitate Shearson's analysis, GenCorp provided to Shearson confidential non-public information about GenCorp at this meeting. Id. ¶ 125. GenCorp and Shearson discussed and analyzed GenCorp's cost of capital, its ability and willingness to obtain financing, use of its line of credit, use of its cash resources, and the impact of an acquisition on GenCorp's stock repurchase program and...