In re Crazy Eddie Securities Litigation
| Decision Date | 04 September 1992 |
| Docket Number | No. 87 C 33,88 C 3481 and 92 C 0075.,87 C 33 |
| Citation | 802 F. Supp. 804 |
| Parties | In re CRAZY EDDIE SECURITIES LITIGATION. OPPENHEIMER-PALMIERI FUND, L.P., Entertainment Marketing, Incorporated, and Elias Zinn, Plaintiffs, v. PEAT MARWICK MAIN & CO., KMG Main Hurdman, Eddie Antar, Sam Antar, Mitchell Antar, Eddy Antar, Sam E. Antar, Solomon E. Antar, David V. Panoff, Isaac Kairey, Steve Pasquariello, William H. Saltzman, James H. Scott, Jr., Edmond Levy, and Carl G. Zimel, Defendants. CRAZY EDDIE, INC., Plaintiff, v. PEAT MARWICK MAIN & CO., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
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Sirota & Sirota (Howard B. Sirota, of counsel), Milberg, Weiss, Bershad, Specthrie & Lerach, Pomerantz, Levy, Haudek, Block & Grossman, Stull, Stull & Brody, Lowey, Dannenberg, Bemporad, Brachtl & Selinger, P.C., Kaufman, Malchman, Kaufman & Kirby, Law Offices of Harvey Greenfield, Christopher Lovell, P.C., Law Offices of Joseph H. Weiss, Abbey & Ellis, New York City, for class plaintiffs.
Milbank Tweed Hadley & McCloy (C. Stephen Howard, Suzanne Toes, of counsel) Los Angeles, Cal., New York City, for plaintiff Oppenheimer-Palmieri Fund Ltd.
Tuttle & Taylor, Los Angeles, Cal., for plaintiffs Elias Zinn, Victor Palmieri, Entertainment Marketing and Oppenheimer-Palmieri Fund.
Folkenflik & McGerity (Max Folkenflik, of counsel), New York City, for plaintiffs Entertainment Marketing Inc. and Elias Zinn.
Cadwalader, Wickersham & Taft (Howard R. Hawkins, Jr., of counsel), New York City, for Crazy Eddie, Inc.
Shearman & Sterling (Joseph McLaughlin, of counsel), New York City, for defendants Peat Marwick Main & Co. and KMG Main Hurdman.
Kaye, Scholer, Fierman, Hays & Handler (Steven Glassman, of counsel), New York City, for defendant Oppenheimer & Co., Inc.
Davis, Markel & Edwards (Thomas J. Sweeney, III, of counsel) New York City, for defendant Peat Marwick Main & Co.
Weil, Gotshal & Manges (Dennis J. Block, of counsel), New York City, for defendants Salomon Brothers, Inc., Bear Stearns & Co., and Wertheim Schroder & Co., Inc.
Wilson Elser Moskowitz Edelman & Dicker (Richard Oelsner, of counsel), New York City, for defendants Penn and Horowitz, J. Liebman & Co., Gary Perlmutter and Mark Halperin.
Hoffman & Pollok, New York City, for defendant Jacob Tambor, Sasson Cohen and Zazy International Corp.
Rosenman & Colin, New York City, for defendants Leonard Rubin, Richard Portnoy and Wren Distributing Co.
Kronish, Lieb, Weiner & Hellman (William O'Brien, Justin N. Feldman, William J. Schwartz, Ivan Kline, of counsel) New York City, for defendant Eddie Antar.
Warner & Joselson (Jonathon D. Warner, Sheryl L. Bregman, of counsel) New York City, for defendant Sam E. Antar.
Beldock Levine & Hoffman (Brian E. Mass, of counsel) New York City, for defendant Isaac Kairey.
Leader & Berkon (Frederick D. Berkon, of counsel), New York City, for defendants Solomon E. Antar, Eddy Antar, Steve Pasquariello, Edmond Levy and Carl G. Zimel.
Friedman & Kaplan, New York City, for defendant Eddie Gindi.
David M. Rubin, New York City, for defendant Abraham Grinberg.
Morgan, Lewis & Bockius (Kevin T. Rover, of counsel), New York City, for defendant David V. Panoff. Kelley, Drye & Warren (John P. Marshall, of counsel), New York City, for defendant James H. Scott, Jr.
Jean Cocchiara, pro se.
Kathleen Morin, pro se.
William H. Saltzman, pro se.
David Neiderbach, pro se.
Arnold Spindler, pro se.
Hellring Lindeman Goldstein & Siegal (Stephen L. Dreyfuss, Matthew E. Moloshok, of counsel), Newark, N.J., for defendants Danielle Antar, Deborah Rosen Antar, Gabrielle Antar, Simone Antar, Nicole Antar and Noelle Antar.
Law Offices of Raoul Lionel Felder, P.C., New York City, for defendant Deborah Rosen Antar.
Gersten, Savage, Kaplowitz & Curtin, New York City, for defendants Michelle Antar, Rose Antar, Rose M. Antar, Rori Antar, Sam A. Antar, Sam M. Antar, Adam Kuszer, Benjamin Kuszer, Ellen Kuszer, Simon Kuszer and Lillian Rosen.
Kostelanetz Ritholz Tigue & Fink, New York City, for defendants Rose Antar and Sam M. Antar.
Andrew J. Maloney, U.S. Atty., Brooklyn, N.Y. (Stephen J. Riegel, of counsel), for U.S.
Numerous memoranda and orders have recounted the facts of this litigation. The court assumes familiarity with its previous published memoranda and orders dated December 30, 1988, Bernstein v. Crazy Eddie, Inc., 702 F.Supp. 962 (E.D.N.Y.1988) (the 1988 Order); June 16, 1989, In re Crazy Eddie Sec. Litig., 714 F.Supp. 1285 (E.D.N.Y.1989) (the 1989 Order); June 19, 1990, In re Crazy Eddie Sec. Litig., 740 F.Supp. 149 (E.D.N.Y.1990) (the June 1990 Order); September 19, 1990, In re Crazy Eddie Sec. Litig., 747 F.Supp. 850 (E.D.N.Y.1990) (the September 1990 Order); March 6, 1991, In re Crazy Eddie Sec. Litig., 135 F.R.D. 39 (E.D.N.Y.1991) (the 1991 Order); and May 1, 1992, In re Crazy Eddie Sec. Litig., 792 F.Supp. 197 (E.D.N.Y.1992) (the May 1992 Order).
The court has before it motions by various defendants for partial summary judgment of the claims brought against them under Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, as well as common law claims for fraud and negligent misrepresentation. In its May 1992 Order the court reserved decision on these issues pending argument on the constitutionality of a relevant statute.
Also before the court is a motion for summary judgment by defendant Peat Marwick Main & Co. (Peat Marwick) on its cross-claim against defendant Sam E. Antar. There are also motions by Peat Marwick directed to claims in Crazy Eddie, Inc. v. Peat Marwick Main & Co., the Adversary Proceeding brought in the United States Bankruptcy Court for the Southern District of New York. That proceeding has been transferred to this court and consolidated for pre-trial purposes with this litigation.
Peat Marwick, Wertheim Schroder & Co., Inc. (Wertheim), Bear Stearns & Co. (Bear Stearns), Salomon Brothers, Inc. (Salomon), and Oppenheimer & Co., Inc. (Oppenheimer) seek dismissal of the claims against them under Section 10(b) of the Exchange Act, Rule 10b-5, and principles of common law fraud and negligent misrepresentation, to the extent those claims are based upon (a) a September 13, 1984 public offering of Crazy Eddie stock underwritten by Oppenheimer, (b) the December 1985 and March 1986 so-called "Oppenheimer Prospectus" sales of Crazy Eddie stock by Oppenheimer, and (c) the June 1986 public offering of Crazy Eddie debentures by Wertheim, Bear Stearns and Salomon.
The motion does not affect claims based on the March 13, 1985 public offering of Crazy Eddie stock by Oppenheimer or the March 7, 1986 public offering of Crazy Eddie stock by Wertheim, Bear Stearns and Salomon.
Defendants urge that plaintiffs' Section 10(b) and Rule 10b-5 claims are barred by the statute of limitations.
Because Section 10(b) contains no express statute of limitations the courts had typically applied analogous limitations periods of the forum state.
In the 1988 Order this court suggested its agreement with In re Data Access Sys. Sec. Litig., 843 F.2d 1537 (3d Cir.) (en banc), cert. denied, 488 U.S. 849, 109 S.Ct. 131, 102 L.Ed.2d 103 (1988), that courts should apply to Section 10(b) claims statutes of limitations governing other sections of the Exchange Act rather than state limitations periods. Bernstein v. Antar, 702 F.Supp. 962, 980-81 (E.D.N.Y.1988).
In the September 1990 Order the court declined to apply the federal limitations period retroactively because plaintiffs had reasonably relied on the old rule. In re Crazy Eddie Sec. Litig., 747 F.Supp. 850, 857-58 (E.D.N.Y.1990). The court relied on the Supreme Court's analysis in Chevron Oil Co. v. Huson, 404 U.S. 97, 106-7, 92 S.Ct. 349, 355, 30 L.Ed.2d 296 (1971). That case held that a new rule of law should not be applied retroactively if retaining the old rule solely for the purpose of the pending case would not retard the new rule's purpose and effect and if retroactivity would be inequitable.
In November, 1990 the Second Circuit adopted the federal statute of limitations, but because the claims in that case were time-barred under both the new rule and the old rule the court left open all questions of retroactivity. Ceres Partners v. GEL Assoc., 918 F.2d 349, 364 (2d Cir. 1990). In Welch v. Cadre Capital, 923 F.2d 989 (2d Cir.1991) ("Welch I"), vacated and remanded sub nom. Northwest Savings Bank v. Welch, ___ U.S. ___, 111 S.Ct. 2882, 115 L.Ed.2d 1048 (1991), the Second Circuit relied on a Chevron Oil analysis and declined to apply the new limitations period retroactively to bar the complaint.
On June 20, 1991 the Supreme Court held that Section 10(b) claims were governed by a federal statute of limitations of one year after the plaintiff discovers the facts constituting the violation, and in no event more than three years after such violation. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, ___ U.S. ___, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991). The Court applied the rule to the litigants in the case.
On the same day the Supreme Court decided James B. Beam Distilling Co. v. Georgia, ___ U.S. ___, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991), holding that "when the Court has applied a rule of law to the litigants in one case it must do so with respect to all others not barred by procedural requirements or res judicata," id. at ___, 111 S.Ct. at 2448, and that it is therefore "error to refuse to apply a rule of federal law retroactively after the case announcing the rule has already done so." Id. at ___, 111 S.Ct. at 2446. Justice Souter, who announced the judgment, saw the retroactivity question as a "choice of law" matter in which "principles of equity and stare decisis" prevail over claims based on a Chevron Oil analysis. Id. at ___, 111 S.Ct. at 2446.
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