Greene v. Wci Holdings Corp.

• Decision Date: 27 February 1997
• Docket Number: No. 92 Civ. 0559(DNE).,92 Civ. 0559(DNE).
• Citation: 956 F.Supp. 509
• Parties: Cliff GREENE, Plaintiff, v. WCI HOLDINGS CORP., WCI Holdings II Corp., et al., J.R. Birdle, co-chairman, R.B. McKeon, co-chairman, S.A. Schwartzman, President & CEO, Defendants.
• Court: U.S. District Court — Southern District of New York

Page 509

956 F.Supp. 509

Cliff GREENE, Plaintiff, v. WCI HOLDINGS CORP., WCI Holdings II Corp., et al., J.R. Birdle, co-chairman, R.B. McKeon, co-chairman, S.A. Schwartzman, President & CEO, Defendants.

No. 92 Civ. 0559(DNE).

United States District Court, S.D. New York.

February 27, 1997.

COPYRIGHT MATERIAL OMITTED

Cliff Greene, Brooklyn, NY, pro se.

Stein, Zauderer, Ellenhorn, Frischer & Sharp, New York City (Louis M. Solomon, and James Robert Pigott, Jr., of counsel), for Defendants.

OPINION & ORDER

EDELSTEIN, District Judge:

Presently before this Court are plaintiff Cliff Greene's ("plaintiff" or "Greene") objections to a Report and Recommendation ("Report") by Magistrate Judge Naomi Reice Buchwald ("Magistrate Judge Buchwald") recommending that defendants' motion to dismiss plaintiff's complaint with prejudice pursuant to Federal Rules of Civil Procedure ("Rules") 12(b)(1) and 12(b)(6) be granted. For the following reasons, defendants' motion is granted.

BACKGROUND

This matter reaches this Court framed as a Rule 12(b)(6) motion. Accordingly, the facts recited herein are drawn strictly from plaintiff's complaint, except where specifically noted and justified. See Fed.R.Civ.P. 12(b)(6); Kopec v. Coughlin, 922 F.2d 152, 155-56 (2d Cir.1991). Plaintiff filed with the Clerk of the Court of the Southern District of New York a document titled "Complaint," attached to which are two other documents: (1) an affidavit seeking injunctive relief and a temporary restraining order; and (2) a document titled "Plaintiff Demands Trial By Jury" which is written as a brief. See (Complaint, Greene v. WCI Holdings Corp., 92 Civ. 0559, attached to which is (Affidavit of Cliff Greene for Injunctive Relief and Temporary Restraining Order, Greene v. WCI Holdings Corp., 92 Civ. 0559 ("Greene Aff.") (Jan 22, 1992), and (Plaintiff Demands Trial By Jury, Greene v. WCI Holdings Corp., 92 Civ. 0559 ("Jury Demand") (Jan. 21, 1992).) Because the documents are part of the complaint, they may be considered in deciding defendants' motion to dismiss. Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir.1993) (holding that on a Rule 12(b)(6) motion, a court may consider, inter alia, documents attached to, or incorporated by reference into, a complaint). Moreover, because plaintiff is a pro se litigant opposing a Rule 12(b)(6) motion, the factual allegations in plaintiff's complaint (and attached documents) will be construed in the light most favorable to plaintiff. See LaBounty v. Adler, 933 F.2d 121, 123 (2d Cir.1991) (courts must construe pleadings in the light most favorable to the party opposing a Rule 12(b)(6) motion); Elliott v. Bronson, 872 F.2d 20, 21 (2d Cir.1989) (courts must apply less stringent standards to pro se litigants' submissions).

Plaintiff alleges that between April 1985 and April 1987, he purchased 160,000 warrants (the "warrants") to purchase common stock in the Wickes Companies, Inc. ("Wickes"). (Greene Aff. ¶¶ 2, 3.) Plaintiff paid $481,532.24 for the warrants, each of which entitled plaintiff to buy one share of Wickes' common stock for $4.43. Id. ¶ 2. The Wickes warrants were issued pursuant to a warrant agreement (the "warrant agreement") which set forth the rights and obligations of Wickes and the warrant holders. The warrant agreement provided that, if Wickes merged with, or sold its assets to, another firm, the Wickes warrant holders would be entitled to the same consideration as the holders of Wickes common stock.

Effective August 13, 1987, both Wickes common stock and Wickes warrants underwent a "five for one reverse split," which left plaintiff with 32,000 warrants. (Jury Demand at 2.) Each post-split warrant entitled plaintiff to purchase one share of Wickes common stock at $22.15 per share. Id. One year later, in August 1988, "Wickes announced that it had agreed to be acquired by a newly organized company formed by members of its senior management and Drexel Burnham Lambert Inc." Id. Under the terms of this management-led buyout, "approximately 83% of Wickes' outstanding common shares were to be purchased in a tender offer at a price of $12 cash per share." Id. The Wickes warrants, however, were not to be purchased in the merger. Id.

On August 19, 1988, the last trading day before the buyout was announced, the Wickes warrants' closing price on the New York Stock Exchange ("NYSE") was "approximately $3.00 per warrant." Id. at 3. Plaintiff alleges that "after the announcement of the management-led buyout, the price of the warrants dropped radically," and have traded at less that $.125 per warrant. Id. The proposed management-led buyout, however, was never consummated.

On October 26, 1988, Wickes announced another proposed merger, this time with WCI Holdings, Inc. ("WCI") in which WCI agreed to make a tender offer of $11.25 per share for 38,324,444 shares, or approximately 80%, of Wickes common stock. Id. Under the terms of the merger, each publicly held share of Wickes common stock would be exchanged for .45 shares of a new class of "Wickes 15 ½% cumulative exchangeable redeemable preferred stock" ("Wickes preferred stock"), which in turn could be exchanged for one share of "WCI 15 ½% cumulative redeemable exchangeable preferred stock" ("WCI preferred stock"). Id. at 4. Under the merger, the Wickes warrants were to remain outstanding until a "follow-up merger" was completed, at which time they could be exercised in the same manner as the Wickes common stock — that is, into .45 shares of Wickes preferred stock, which could then be exchanged for one share of WCI preferred stock. Id. As a result of these steps, Wickes would become a whollyowned subsidiary of WCI, and the holders of Wickes preferred stock would receive WCI preferred stock. On October 27, 1988, the day after this proposed merger was announced, the warrants closed on the NYSE at a price of $.25 per warrant. Id.

Between November 1988 and April 1989, the proposed merger took place as described. The net effect of the merger on the warrants was a dramatic drop in their price. The drop appears to be because each warrant — at an exercise price of $22.15 — could now only be exercised into .45 shares of WCI preferred stock which was valued at $11.25. Id. at 7.

In May 1989, Wickes, WCI, and several other parties were sued in a class action in Delaware by one of the Wickes warrant holders (the "Delaware case"). Although in the context of a Rule 12(b)(6) motion this Court is primarily confined to judging the adequacy of the Complaint, this Court may also judicially notice public records submitted to it, see Morelli v. Cedel, No. 96 Civ. 2874, 1997 WL 61499, at *5 n. 5 (S.D.N.Y. Feb. 13, 1997); Brass, 987 F.2d at 150, such as the Complaint and opinions filed in the Delaware case. These documents were submitted to this Court as exhibits to defendants' notice of motion to dismiss. (Notice of Motion, Greene v. WCI Holdings Corp., 92 Civ. 0559 ("Notice of Motion") at Exhs. C-E (April 2, 1992).) The class action asserted claims for breach of the warrant agreement, breach of good faith and fair dealing, breach of fiduciary duty, and misrepresentation. Id. at Exh. C at 1-2. As a warrant holder, plaintiff was a member of the putative class in the Delaware case. Prior to class certification, however, the Delaware court dismissed plaintiffs' claims, granting defendants' motion to dismiss for failure to state a claim. Id. at 10.

On January 23, 1992, plaintiff initiated this action. Plaintiff's Complaint, liberally construed, appears to allege the following federal violations by defendants: (1) securities laws; (2) racketeering laws; and (3) the United States Constitution. In addition, plaintiff also asserts state law claims against defendants for: (1) breach of contract; (2) breach of fiduciary duty; (3) breach of implied duty of good faith; and (4) misrepresentation.

On April 3, 1992, defendants filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6). (Notice of Motion at 1.) On April 15, 1992, plaintiff filed his opposition to defendants' motion to dismiss. (Plaintiff's Memorandum of Law in Opposition of Defendants' Motion to Dismiss His Complaint, Greene v. WCI Holdings Corp., 92 Civ. 0559 ("Pltf.Opp.Memo") (April 13, 1992).) On April 24, 1992, defendants submitted reply papers in further support of their motion. (Defendants' Reply Memorandum in Support of Their Motion to Dismiss the Complaint, Greene v. WCI Holdings Corp., 92 Civ. 0559 ("Dfts. Reply Memo") (April 24, 1992).) On April 27, 1992, this Court ordered that this case be referred to a magistrate judge for pretrial determinations. (Order, Greene v. WCI Holdings Corp., 92 Civ. 0559 (April 27, 1992).) On that same day, this action was assigned to Magistrate Judge Buchwald. (Notice of Case Assignment, Greene v. WCI Holdings Corp., 92 Civ. 0559 (April 27, 1992).)

On July 9, 1992, Magistrate Judge Buchwald filed her Report recommending that this Court grant defendants' motion to dismiss with prejudice in its entirety. (Report at 1.) On July 17, 1992 plaintiff filed objections to the Report. (Objection to Magistrate's Report and Recommendation, Greene v. WCI Holdings Corp., 92 Civ. 0559 ("Pltf.Objs.") (July 16, 1992).) Finally, on July 29, 1992, defendants responded to plaintiff's objections to Magistrate Judge Buchwald's Report. (Defendants' Response to Plaintiff's Objections to the Magistrate Judge's Report and Recommendation That The Court Grant Defendants' motion to Dismiss, Greene v. WCI Holdings Corp., 92 Civ. 0559 ("Dfts.Objs.Resp.") (July 28, 1992).)

DISCUSSION

Before resolving the issues currently before it, this Court first must set forth the legal standards which govern the instant Opinion and Order.

I. RELEVANT LEGAL STANDARDS

The relevant legal standards for purposes of the instant Opinion and Order are those which control: (1) a district court's review of a magistrate judge's recommendation; and (2) a motion to dismiss for failure to state a claim upon...