Korwek v. Hunt
| Decision Date | 24 October 1986 |
| Docket Number | No. 84 Civ. 7934 (MEL).,84 Civ. 7934 (MEL). |
| Citation | 646 F. Supp. 953 |
| Parties | Philip and Dorothy KORWEK, Marty Finkelstein, William L. Cohn and James G. Williams, Plaintiffs, v. Nelson Bunker HUNT, William Herbert Hunt, Lamar Hunt, International Metals Investment Co., Ltd., Sheik Mohammet Aboud Al-Amoudi, Sheik Ali Bin Mussalem, Faisal Ben Abdullah Al Saoud, Mahmoud Fustok, Naji Robert Nahas, Bache Halsey Stuart Shields, Inc., Bache Group, Inc. (Prudential Bache Securities, Inc.), Merrill Lynch, Pierce Fenner & Smith, Inc., Conticommodity Services, Inc., Conti-Capital Management, Inc., Conti-Capital Ltd., Norton Waltuch, Melvin Schnell, Gilion Financial, Inc., Banque Populaire Suisse, Advicorp Advisory and Financial Corporation, S.A., Commodity Exchange, Inc., the Board of Trade of the City of Chicago, Donaldson, Lufkin & Jenrette Acli Futures, Inc., formerly Acli International Commodity Services, Inc., Litardex Traders, S.A., Walter Goldschmidt, Continental Grain Co., Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Deutsch and Frey, New York City, for plaintiffs; of counsel: Herbert I. Deutsch, Robert E. Frey, Richard L. Weingarten, John M. Martin, Law Clerk.
Shank, Irwin & Conant, Roger Goldburg, Roderic G. Steakley, Robert E. Wolin, Dallas, Tex., for Nelson Bunker Hunt, William Herbert Hunt and Lamar Hunt.
Sullivan & Cromwell, Marvin Schwartz, Richard H. Klapper, Marcy Engel, New York City, for Bache Group Inc. and Prudential-Bache Securities, Inc.
Rogers & Wells, William R. Glendon, Guy C. Quinlan, Susan A. Garcia, New York City, for Merrill Lynch, Pierce, Fenner & Smith, Inc. and Donaldson, Lufkin and Jenrette Futures, Inc.
Finley, Kumble, Wagner, Heine, Underberg, Manley & Casey, Paul L. Perito, John P. Wintrol, Robert E. Pokusa, Washington, D.C., and Finley, Kumble, Wagner, Heine, Underberg, Manley & Casey, Jerome Kowalski, New York City, for Intern. Metals Inv. Co., Ltd.
John R. Bartels, Jr., New York City, and Kaye, Scholer, Fierman, Hays & Handler, Steven J. Glassman, New York City, for Norton Waltuch.
Skadden, Arps, Slate, Meagher & Flom, Erskine Henderson, New York City, for Mel Schnell.
Paul, Weiss, Rifkind, Wharton & Garrison, Mark A. Alcott, Richard A. Rosen, New York City, for Conticommodity Services, Inc. and Conti-Capital Ltd.
Sidley & Austin, Marc J. Gottridge, for Continental Grain Co.; of counsel: Lawrence H. Hunt, Jr., David T. Pritikin, Sidley & Austin, Chicago, Ill., Sheldon L. Berens, Gen. Counsel, Continental Grain Co., New York City.
Parker, Auspitz, Neesemann & Delehanty, P.C., New York City, for Walter M. Goldschmidt; of counsel: Jack C. Auspitz, Hollis L. Hyans.
This class action is brought by five named plaintiffs on behalf of themselves and a proposed class of short sellers of silver futures contracts who traded between July 3, 1979 and February 26, 1980 against a number of defendants, including individuals, firms, and commodities exchanges. Plaintiffs allege that all defendants other than the exchanges attempted to manipulate the price of silver and silver futures and conspired to monopolize the market for silver and silver futures with the result that silver prices climbed to artificially high levels and plaintiffs were forced to liquidate their short positions at a substantial loss.
The complaint charges the non-exchange defendants with violations of Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1-2 (counts I & II); violations of the Clayton Act, 15 U.S.C. §§ 12-27 (count III); violations of New York antitrust law, N.Y. Gen. Bus. Law § 340 (count IV); violations of Sections 9(b) and 4b of the Commodity Exchange Act ("CEA"), 7 U.S.C. §§ 13(b) and 6b (counts V & VI); common law fraud (count VII); and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-68 (count IX). First Amended Complaint ¶¶ 223-30, 232-36 (filed Feb. 22, 1985).1 Certain of the non-exchange defendants (hereinafter "defendants")2 move to dismiss these claims — both as asserted by the proposed class and as asserted by the named plaintiffs individually — on the ground that they are barred by the applicable statutes of limitations. Defendants also move to dismiss the CEA § 4b claim for failure to state a cause of action.
The complaint is identical in its claims to that filed in a related, pending litigation before this court. See Gordon v. Hunt, No. 82-1318 (MEL) (S.D.N.Y. filed March 4, 1982). The plaintiff in Gordon sought to certify a class of those traders who sold silver futures contracts short and suffered a loss therefrom during the period August 7, 1979 through March 26, 1980. The Gordon class was certified on July 19, 1983, but limited to those persons who traded silver futures contracts during the period in August-September 1979 when the named plaintiff traded. See Gordon v. Hunt, 98 F.R.D. 573 (S.D.N.Y.1983). Subsequently, four of the five individuals who are named plaintiffs in the instant case filed a motion to intervene and expand the class in Gordon. Notice of Motion To Intervene and Expand the Class (filed Oct. 19, 1983). That motion was denied. Gordon v. Hunt, No. 82-1318, slip op. (Oct. 30, 1984) Available on WESTLAW, DCTU database.
The present class action was filed on November 2, 1984, three days after the motion to intervene and expand the class in Gordon was denied. The proposed class in this case is represented by the following named plaintiffs, whose states of residence and the periods during which they held short positions in the market are as follows:
Philip & Dorothy
Korwek Michigan 8/14/79-10/12/79
Marty Finkelstein Pennsylvania 7/2/79- 7/27/79
8/16/79- 8/18/79
9/5/79- 9/13/79
William L. Cohn Massachusetts 12/5/79- 2/26/80
James Williams Colorado 8/31/79- 11/7/79
Exhibit A to Complaint, Korwek v. Hunt, No. 84-7934 (filed Nov. 2, 1984); Amendment to Complaint By Stipulation Nunc Pro Tunc (filed June 19, 1985) (adding Williams as named plaintiff).3
The latest acts attributed by the complaint to any of the defendants occurred in May 1980. First Amended Complaint ¶¶ 124, 191. Consequently, absent any tolling effects, at the time this action was initiated on November 2, 1984, plaintiffs' claims were at least four years and five months old, and any causes of action governed by limitations periods of four years or less would accordingly have been time-barred.
Plaintiffs contend, however, that (1) the running of all applicable statutes of limitations was tolled by the defendants' fraudulent concealment of their alleged conspiracy and the plaintiffs' resulting inability to discover the actionable wrongs earlier than February 1985; (2) the defendants are estopped from raising statute of limitations defenses to the class action claims because they opposed notice to the proposed Gordon class in August 1983, shortly following the decision on the Gordon class certification motion; and (3) the filing of the Gordon class action and the related motion to intervene and expand the class tolled the running of all applicable statutes of limitations as to the present class action under the rule established by the Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974), and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 103 S.Ct. 2392, 76 L.Ed.2d 628 (1983).
Plaintiffs assert that the defendants fraudulently concealed their alleged conspiracy to manipulate the price of silver and silver futures, and that the plaintiffs were thereby prevented from discovering their causes of action until February 28, 1985, when the Commodity Futures Trading Commission ("CFTC") filed an administrative complaint against some of the defendants alleging a conspiracy to manipulate the market. Plaintiffs point to specific allegations in the complaint charging that various defendants misrepresented or withheld information from the CFTC and the Commodity Exchange, Inc. which had the effect of concealing the conspiracy (First Amended Complaint ¶¶ 58(k)(1), 94(a)-(e), 183(a)-(d), 186, 187, 197, 208), and argue that if the CFTC was unable to formulate and file a complaint before February 1985, plaintiffs — with significantly fewer resources than a national regulatory body — could not have been expected to do so.
The standard applicable to a claim of equitable tolling was set out by the Court of Appeals for this circuit in City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974):
Once it appears that the statute of limitations has run, the plaintiff must sustain the burden of showing not merely that he failed to discover his cause of action prior to the running of the statute of limitations, but also that he exercised due diligence and that some affirmative act of fraudulent concealment frustrated discovery notwithstanding such diligence.
Id. at 461 (citations omitted) (emphasis in original). The Court of Appeals has also held that "the time from which the statute of limitations begins to run is not the time at which a plaintiff becomes aware of all of the various aspects of the alleged fraud, but rather the statute runs from the time at which plaintiff should have discovered the general fraudulent scheme." Berry Petroleum Co. v. Adams & Peck, 518 F.2d 402, 410 (2d Cir.1975).
Even were plaintiffs' allegations of fraudulent concealment on the part of defendants sufficiently pleaded — an issue we do not reach here — plaintiffs have failed to carry their burden of showing that they did not discover their causes of action well in advance of February 1985 and that they could not with due diligence have made such a discovery.
Plaintiffs had the opportunity to learn of the general...
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