In re Sunrise Securities Litigation, MDL No. 655.

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Writing for the CourtO'NEILL
Citation793 F. Supp. 1306
Docket NumberMDL No. 655.
Decision Date22 May 1992
PartiesIn re SUNRISE SECURITIES LITIGATION. This Document Relates to All Actions.

793 F. Supp. 1306

In re SUNRISE SECURITIES LITIGATION.
This Document Relates to All Actions.

MDL No. 655.

United States District Court, E.D. Pennsylvania.

May 22, 1992.


793 F. Supp. 1307
COPYRIGHT MATERIAL OMITTED
793 F. Supp. 1308
COPYRIGHT MATERIAL OMITTED
793 F. Supp. 1309
Berger & Montague, P.C., Philadelphia, Pa., Greenfield & Chimicles, Haverford, Pa., Squire, Sanders & Dempsey, Washington, D.C., for plaintiff

Dechert, Price & Rhoads, Philadelphia, Pa., for defendants.

MEMORANDUM

O'NEILL, District Judge.

I. Background

Two groups of claims relating to Sunrise Savings and Loan Association of Florida have been consolidated for pretrial proceedings in this multidistrict litigation: claims brought under the Securities Exchange Act of 1934 and under state common law asserted by a class of Sunrise shareholders (the "Securities case") and claims of breaches of fiduciary duties asserted by the Federal Deposit Insurance Corporation as manager of the FSLIC Resolution Fund1 (the "Fiduciary Duty case").2 Many of the defendants have filed cross-claims against other defendants and counterclaims to the claims asserted by the plaintiffs.

On May 29, 1990, I entered an Order approving a settlement agreement between

793 F. Supp. 1310
defendants Blank, Rome, Comisky & McCauley, Sunrise's law firm, Michael D. Foxman, M. Kalman Gitomer, Kenneth Treadwell and Edward E. Fitzgerald, Jr. and the plaintiffs in the Securities and Fiduciary Duty cases.3 The Order provided for the dismissal with prejudice of all contribution claims against Blank, Rome on the basis that plaintiffs will reduce, by the amount of Blank, Rome's proportional fault, if any, as determined at trial, any judgment that plaintiffs obtain against the non-settling defendants who are found to be joint tortfeasors with Blank, Rome. See In re Sunrise Securities Litigation, 131 F.R.D. 450 (E.D.Pa.1990)

Presently before the Court is Blank, Rome's motion to dismiss all the cross-claims asserted by the non-settling defendants against Blank, Rome.4 Extensive briefs were filed and I held an oral argument on the motion on November 4, 1991. The parties submitted additional briefs in March, 1992 on the question of what law is applicable to the FDIC's claims in the Fiduciary Duty case.

For the reasons that follow, I will grant the motion in part and deny it in part.

II. Discussion

A. Standard of Review

In deciding a motion to dismiss pursuant to Fed.R.Civ.P. Rule 12(b)(6), I accept the well-pleaded factual allegations of the cross-claimants' amended pleadings as true.5 A claim should not be dismissed for failure to state a claim unless it appears beyond a doubt that the non-moving party can prove no set of facts in support of its allegations which would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Marshall-Silver Construction Co. v. Mendel, 894 F.2d 593, 595 (3d Cir.1990). In making this determination, the court must construe the pleading in the light most favorable to the non-moving party. Budinsky v. Pennsylvania Dept. of Environmental Resources, 819 F.2d 418, 421 (3d Cir.1987).

B. Blank Rome's Motion to Dismiss Cross-Claims

In the Fiduciary Duty case, defendants Black, Blake & Associates, Devaney, Felps, Gruher, Kenneth Howard, Laddie Howard, Hyman, Ingles, Jacoby, Koushel, Robinson, Shurack, Skubal, Walker, Zambruski and the Outside Directors have cross-claimed for contribution and implied indemnity; Deloitte has cross-claimed alleging fraud, negligent misrepresentation, tortious interference, and for contribution and implied indemnity; and Taber has cross-claimed alleging intentional misrepresentation, negligence (including but not limited to negligent misrepresentation and professional malpractice), breach of contract, violation of Section 10(b) of the 1934 Securities Exchange Act and Rule 10b-5, and for contribution and implied indemnity.

793 F. Supp. 1311

In the Securities case, defendants Blake & Associates and Ingles have cross-claimed for contribution and implied indemnity; Jacoby has cross-claimed for contribution; and the Outside Directors and Shaw have cross-claimed alleging intentional misrepresentation, negligence (including, but not limited to negligent misrepresentation and professional malpractice), breach of contract, violation of section 10(b) of the 1934 Act and Rule 10b-5, and for contribution and implied indemnity.

For the reasons set forth below, I conclude that the contribution claims should be dismissed because they are barred by my Order dated May 29, 1990. I conclude further that the implied indemnity claims in the Securities case should be dismissed because there is no right to implied indemnity under the federal securities laws. I also conclude that the breach of contract claims should be dismissed because Blank, Rome and the non-settling defendants making the claims are not in privity. The negligence claims should be dismissed for similar reasons. The cross-claims asserting securities fraud under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 should be dismissed only to the extent that they are barred by the statute of limitations. All of the other claims have been properly asserted and will not be dismissed.

1. Pleading Deficiencies

Blank, Rome argues that the cross-claims alleging fraud should be dismissed because they contain pleading deficiencies — specifically that fraud is alleged by hypothetical pleading, that the claims were not pleaded with particularity and because the pleadings do not properly state the elements of the fraud claim.

a. Hypothetical pleading

Blank, Rome asserts that the cross-claims alleging fraud must be dismissed because they attempt to incorporate the indictment and related bill of particulars in United States v. Jacoby, Crim. No. 87-6034 (S.D.Fla.) by hypothetical pleading, in violation of Fed.R.Civ.P. Rules 10(c) and 8(e)(2).

Rule 10(c) states:

Adoption by Reference; Exhibits. Statements in a pleading may be adopted by reference in a different part of the same pleading or in another pleading or in any motion. A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.

Rule 8(e)(2) states:

A party may set forth two or more statements of a claim or defense alternately or hypothetically, either in one count or defense or in separate counts or defenses.

Rule 8(e)(2) may be relied upon by any party. 5 Wright & Miller § 1282, at 529. Claims asserted hypothetically need not be consistent with the defenses and denials raised in a party's answer. Id. For example, Wright and Miller cite a conspiracy action in which defendants denied that a conspiracy existed and then hypothetically asserted in a counterclaim that if in fact a conspiracy did exist plaintiffs had participated in it and had injured defendants. Id., citing Charles Rubenstein, Inc. v. Columbia Pictures Corp., 14 F.R.D. 401 (D.Minn. 1953).

Blank, Rome concedes that hypothetical pleading is permitted, Supplemental Memorandum of Blank, Rome, Comisky & McCauley in Support of its Motion to Dismiss All Cross-Claims, at 36, but contends that hypothetical pleading should not be used to allege fraud, at least where there has been adequate opportunity to determine the facts, because fraud may not be alleged merely on information and belief. In addition, Blank, Rome argues that hypothetical pleading is not permitted unless the pleader "honestly is in doubt about the factual background or legal theories supporting his claim." Id. at 37, citing 5 Wright & Miller at § 1282. It thus asks that those portions of the cross claims that attempt to incorporate the indictment and bill of particulars by hypothetical pleading be stricken. Blank, Rome Supplemental Memorandum, at 38.6

793 F. Supp. 1312

Blank, Rome has provided no authority to support its contention that hypothetical pleading should not be used to allege fraud. Rule 8(e)(2) and the authority cited interpreting it demonstrate that hypothetical pleading is permitted thereunder. Hypothetical pleading is not permitted only when the pleader is in doubt about the factual background or legal theories supporting his claim. Here, the Outside Directors and Deloitte have denied that the sham loans were made but pleaded hypothetically that if the loans were in fact made Blank, Rome concealed them from the Directors and Deloitte. Nothing in the pleadings suggests that the cross-claimants doubt the veracity of their claims.

Additionally, while Blank, Rome contends that fraud may not be alleged merely on information and belief, the allegations of the cross-claimants are not information and belief allegations; they are if-then, or hypothetical, pleadings. The claims are detailed and are structured as they are merely to reflect the Directors' decision not to admit facts they cannot admit and which might lead to liability they do not believe they have.

b. Particularity

Blank, Rome argues further that the fraud claims should be dismissed because they were not pleaded with adequate facts to support certain conclusions or because they were not pleaded with particularity in violation of Fed.R.Civ.P. Rule 9(b).7

Rule 9(b) requires a claimant to plead (1) a specific false representation of material fact; (2) knowledge by the person who made it of its falsity; (3) ignorance of its falsity by the person to whom it was made; (4) the intention that it should be acted upon; and (5) that the claimant acted upon it to his damage. Shapiro v. UJB Financial Corp., 964 F.2d 272, 284 (3d Cir.1992). The Court of Appeals for the Third Circuit has held that "Rule 9(b) requires plaintiffs to plead with particularity the `circumstances' of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of immoral and fraudulent behavior." Seville Industry Machinery Corp. v. Southmost Machinery Corp., ...

To continue reading

Request your trial
20 practice notes
  • In re Cendant Corp. Securities Litigation, No. 98-CV-1664(WHW).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • April 16, 2001
    ...indemnity are or are not "de facto" federal securities claims.... Id. at 536 (emphasis added), citing In re Sunrise Securities Litig., 793 F.Supp. 1306, 1321 (E.D.Pa.1992). Lucas did not rely upon the PSLRA's contribution bar in its analysis of the "indemnity" claims. In re Sunrise Securiti......
  • Rudolph v. Adamar of New Jersey, Inc., No. CIV. A. 00-190.
    • United States
    • U.S. District Court — District of New Jersey
    • July 31, 2001
    ...for indemnification, Tropicana relies on Alexander v. Hargrove, 1994 WL 444728 (E.D.Pa.1994), and In re Sunrise Securities Litigation, 793 F.Supp. 1306, 1317 (E.D.Pa.1992). Tropicana's reliance on these cases, however, is misplaced. Tropicana cites the following passage from Alexander to su......
  • Major Tours, Inc. v. Colorel, Civil No. 05–3091 (JBS/JS).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • October 11, 2011
    ...of another commits a tort is allowed indemnity against the person who caused him to act.”); In re Sunrise Securities Litigation, 793 F.Supp. 1306, 1317 (E.D.Pa.1992) (“Indemnity also may be allowed ... where he acted pursuant to directions of the indemnitor which the indemnitee reasonably b......
  • In re Cendant Corporation Securities Litigation, Master File No. 98-CV-1664 (WHW)
    • United States
    • New Jersey District Court
    • September 16, 2003
    ...are or are not "de facto" federal securities claims . . . . Id. at 536 (emphasis added), citing In re Sunrise Securities Litig., 793 F. Supp. 1306, 1321 (E.D. Pa. 1992). Lucas did not rely upon the PSLRA's contribution bar in its analysis of the "indemnity" claims. In re Sunrise Securities ......
  • Request a trial to view additional results
20 cases
  • In re Cendant Corp. Securities Litigation, No. 98-CV-1664(WHW).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • April 16, 2001
    ...indemnity are or are not "de facto" federal securities claims.... Id. at 536 (emphasis added), citing In re Sunrise Securities Litig., 793 F.Supp. 1306, 1321 (E.D.Pa.1992). Lucas did not rely upon the PSLRA's contribution bar in its analysis of the "indemnity" claims. In re Sunrise Securiti......
  • Rudolph v. Adamar of New Jersey, Inc., No. CIV. A. 00-190.
    • United States
    • U.S. District Court — District of New Jersey
    • July 31, 2001
    ...for indemnification, Tropicana relies on Alexander v. Hargrove, 1994 WL 444728 (E.D.Pa.1994), and In re Sunrise Securities Litigation, 793 F.Supp. 1306, 1317 (E.D.Pa.1992). Tropicana's reliance on these cases, however, is misplaced. Tropicana cites the following passage from Alexander to su......
  • Major Tours, Inc. v. Colorel, Civil No. 05–3091 (JBS/JS).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • October 11, 2011
    ...of another commits a tort is allowed indemnity against the person who caused him to act.”); In re Sunrise Securities Litigation, 793 F.Supp. 1306, 1317 (E.D.Pa.1992) (“Indemnity also may be allowed ... where he acted pursuant to directions of the indemnitor which the indemnitee reasonably b......
  • In re Cendant Corporation Securities Litigation, Master File No. 98-CV-1664 (WHW)
    • United States
    • New Jersey District Court
    • September 16, 2003
    ...are or are not "de facto" federal securities claims . . . . Id. at 536 (emphasis added), citing In re Sunrise Securities Litig., 793 F. Supp. 1306, 1321 (E.D. Pa. 1992). Lucas did not rely upon the PSLRA's contribution bar in its analysis of the "indemnity" claims. In re Sunrise Securities ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT