Kauffman v. Dreyfus Fund, Inc.
| Citation | 434 F.2d 727 |
| Decision Date | 24 September 1970 |
| Docket Number | No. 18568-18696.,18568-18696. |
| Parties | Joseph B. KAUFFMAN et al. v. The DREYFUS FUND, INC., et al., Investors Diversified Services, Inc., et al., Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
COPYRIGHT MATERIAL OMITTED
James Hunter, III, John P. Hauch, Jr., Archer, Greiner, Hunter & Read, Camden, N. J., for appellants.
Co-Counsel for Appellants:
Samuel W. Murphy, Jr., Donovan, Leisure, Newton & Irvine, New York City, for Investors Diversified Services and Stuart F. Silloway.
Stuart A. Jackson, Royall, Koegel & Wells, New York City, for Financial Programs, Inc., Thomas J. Herbert, Dreyfus Corp. and Howard M. Stein.
W. Foster Wollen, James R. Hawkins, II, Shearman & Sterling, New York City, for Tsai Management & Research Corp.
Daniel Mungall, Jr., Stradley, Ronon, Stevens & Young, Philadelphia, Pa., for Wellington Management Co. and Walter L. Morgan.
Norman A. Hubley, Herrick, Smith, Donald, Farley & Ketchum, Boston, Mass., for State Street Research & Management and Paul C. Cabot.
Albert D. Jordan, Valicenti, Leighton, Reid & Pine, New York City, for Waddell & Reed, Inc., Joe Jack Merriman, Arnold Bernhard & Co., Inc. and Arnold Bernhard.
Robert J. Sisk, Hughes, Hubbard & Reed, New York City, for National Securities & Research Corp. and Philip C. Smith.
Philip F. Belleville, Richard Carver, Joseph A. Wheelock, Latham & Watkins, Los Angeles, Cal., for Capital Research & Management and Jonathan B. Lovelace.
Edward H. Hatton, Raymond, Mayer, Jenner & Block, Chicago, Ill., for Securities Supervisors and Edward P. Rubin.
Jerome P. Facher, Hale & Dorr, Boston, Mass., for Pioneer Management Corp. and Philip L. Carret.
James M. Redding, Meyers & Matthias, Chicago, Ill., for Supervised Investors Services and John Hawkinson.
John A. Beck, Frost & Towers, Washington, D. C., for Johnston, Lemon & Co. and James H. Lemon.
Roberts B. Owen, Covington & Burling, Washington, D. C., for Hamilton Management Corp.
Dickinson R. Debevoise, Riker, Danzig, Scherer & Brown, Newark, N. J., for appellants.
Co-Counsel for Appellants:
Philip H. Strubing, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for Putnam Management Co., Inc., Charles M. Werly, Massachusetts Co., Inc., Henry R. Guild, Colonial Management Ass'n, James H. Orr, Loomis-Sayles & Co., Inc. and Maurice T. Freeman.
Debevoise, Plimpton, Lyons & Gates, New York City, for Scudder, Stevens & Clark, Ronald T. Lyman, Jr., E. W. Axe & Co., Inc. and Louis K. Hyde, Jr.
William P. Verdon, Meyner & Wiley, Newark, N. J., for Fidelity Trend Fund, Inc., Fidelity Fund, Inc., Puritan Fund, Inc., Fidelity Capital Fund, Inc., Dow Theory Investment Fund, Inc., Boston Fund, Inc., Axe-Houghton Fund B, Inc., Eaton & Howard Stock Fund, Eaton & Howard Balanced Fund, One William Street Fund, Inc., Channing Shares, Inc., a corporation, also d/b/a Channing Growth Fund, Channing Balanced Fund, Scudder, Stevens & Clary Common Stock Fund, Scudder, Stevens & Clary Balanced Fund, Inc. and Stein, Roe & Farnham Balanced Fund, Inc.
Thomas F. Campion, Shanley & Fisher, Newark, N. J., for Manhattan Fund, Inc.
Of Counsel for Appellant:
Whitman, Ransom & Coulson, New York City.
Saverio R. Principato, Camden, N. J., for T. Rowe Price & Associates, Inc., Rowe Price Management Co., Inc., T. Rowe Price, Charles W. Schaeffer, Anchor Corp. and John R. Haire.
Of Counsel for Appellants:
Daniel A. Pollack, Pollack & Singer, New York City.
Charles J. Milton, Milton, Keane & De Bona, Jersey City, N. J., for Affiliated Fund, Inc.
William G. Bischoff, Burchard V. Martin, Taylor, Bischoff, Williams & Martin, Camden, N. J., for appellants.
Of Counsel for Appellants:
Davis, Polk & Wardwell, New York City, for Dreyfus Fund, Inc., Investors Mutual, Inc., Investors Stock Fund, Inc., Investors Variable Payment Fund, Inc., Wellington Fund, Inc. and Windsor Fund, Inc.
Modesitt & Shaw, Denver, Colo., for Financial Industrial Fund, Inc.
Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for United Funds, Inc., United Accumulative Fund, United Science Fund, United Income Fund, Value Line, Special Situations Fund, Inc., Selected American Shares, Inc., Chemical Fund, Inc., Dividend Shares, Inc. and Bullock Fund, Ltd.
Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., for State Street Investment Corp. and Federal Street Fund, Inc.
Berlack, Israels & Liberman, New York City, for T. Rowe Price Growth Stock Fund, Inc. and Rowe Price New Horizons Fund, Inc.
Carl J. Schuck, Overton, Lyman & Prince, Los Angeles, Cal., for Investment Co. of America.
O'Melveny & Myers, Los Angeles, Cal., for American Mutual Fund, Inc.
Frost & Towers, Washington, D. C., for Washington Mutual Investors Fund, Inc., Technology Fund, Inc., Pioneer Fund, Inc., Fundamental Investors, Inc., Anchor Growth Fund, Inc., Anchor Income Fund, Inc., National Securities Series, National Securities Stock Series and National Securities Growth Series.
Winner, Berge, Martin & Clark, Denver, Colo., for Hamilton Funds, Inc.
John C. Howell, Moore & Howell, Newark, N. J., for Colonial Fund, Inc., Commonwealth Investment Co., George Putnam Fund of Boston, Loomis-Sayles Mutual Fund, Inc., Massachusetts Fund, Inc., Putnam Growth Fund and Putnam Investors Fund, Inc.
Donald B. Kipp, James C. Pitney, Pitney, Hardin & Kipp, Newark, N. J., for Fidelity Management & Research Co., Edward C. Johnson, II, Boston Management & Research Co., Vance, Sanders & Co., Inc., Henry T. Vance, Eaton & Howard, Inc., Charles F. Eaton, Jr., American Express Investment Management Company (Formerly Fund American Investment Co.), Lord, Abbett & Co., Robert S. Driscoll, Lehman Brothers, Allan B. Hunter and Van Strum & Towne, Inc.
Of Counsel for Appellants:
McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for American Express Investment Management Co. (formerly Fund American Investment Co.)
Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for Lord, Abbett & Co. and Robert S. Driscoll.
Simpson, Thacher & Bartlett, New York City, for Lehman Brothers and Allan B. Hunter.
Milbank, Tweed, Hadley & McCloy, New York City, for Van Strum & Towne, Inc.
William F. Hyland, Hyland, Davis & Reberkenny, Cherry Hill, N. J., for F. Eberstadt & Co., Calvin Bullock, Ltd., Keystone Custodian Funds, Inc., Distributors Group, Inc., Francis S. Williams, Hugh Bullock, Wilfred Godfrey, Herbert R. Anderson and Investment Company Institute.
Of Counsel for Appellants:
Marvin Schwartz, Sullivan & Cromwell, New York City.
Doane Twombly, Durand, Twombly & Imbriaco, Newark, N. J., for Group Securities, Inc.
Of Counsel for Appellant:
Putney, Twombly, Hall & Hirson, New York City.
Samuel P. Orlando, Orlando & Orlando, Haddonfield, N. J., for Stein, Roe & Farnham, Harry H. Hagey, Jr., Ralph E. Samuel & Co., Donald C. Samuel and Energy Fund.
Of Counsel for Appellants:
Otis H. Halleen, Sonnenschein, Levinson, Carlin, Nath & Rosenthal, Chicago, Ill., for Stein, Roe & Farnham and Harry H. Hagey, Jr.
Larry M. Lavinsky, Proskauer, Rose, Goetz & Mendelsohn, New York City, for Ralph E. Samuel & Co., Donald C. Samuel and Energy Fund.
Harold E. Kohn, Bruce W. Kauffman, David Pittinsky, Dilworth, Paxson, Kalish, Kohn & Levy, Philadelphia, Pa., for appellees.
Of Counsel for Appellees:
Joseph B. Kauffman, Atlantic City, N. J.
Before WINTER,* ALDISERT and GIBBONS, Circuit Judges.
Before us for review is an interlocutory order of the district court duly certified for appeal under the provisions of 28 U.S.C. § 1292(b) denying appellants' motions to dismiss the action in its entirety or, alternatively, to dismiss certain individual, representative, and derivative claims.
Plaintiff-appellee, a shareholder of four mutual funds,1 filed a three-count action against 65 mutual funds, 38 investment advisers, 37 directors alleged to be serving contemporaneously as fund directors or trustees and investment advisers, and the Investment Company Institute, a trade association. Appellee also sued a number of unnamed defendants as part of the three defendant classes: mutual funds, investment advisers, and "self-dealing" directors.
Charging violations of the Sherman Act, 15 U.S.C. §§ 1, 2, and the Clayton Act, 15 U.S.C. §§ 15, 26, Count I alleges that appellants have engaged in a combination and conspiracy "with horizontal and vertical forms and levels of agreement," to adopt and stabilize fees for management services and investment services, to limit competition, to refrain from providing internal fund management, and to otherwise monopolize the management market.
Count II invokes provisions of the Investment Company Act of 1940, 15 U.S. C. § 80a-1 et seq. It asserts that the investment advisers indulge in practices known as "give-ups," whereby they direct brokers to execute stock transactions for less than the commission paid to them, giving up the balance to non-executing brokers, and "reciprocals," whereby the advisers, in return for allocating portions of the commissions to non-executing brokers, receive additional compensation in the form of free or discounted investment advice and management services.
Count III, brought under the Securities Exchange Act of 1934, 15 U.S.C. § 78n, the Investment Advisers Act of 1940, 15 U.S.C. § 80b-6, and the Investment Company Act, supra, charges appellants with misrepresentation in the preparation and issuance of proxy and other statements, including the failure to disclose, or the making of false disclosures with respect to, the alleged wrongdoing set forth in Counts I and II.
Appellee sought to maintain this action in several capacities: as a shareholder in his own right against the...
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