Lawrence v. Cohn, 90 Civ. 2396 (CSH).
| Decision Date | 12 July 1996 |
| Docket Number | No. 90 Civ. 2396 (CSH).,90 Civ. 2396 (CSH). |
| Citation | 932 F. Supp. 564 |
| Parties | Alice LAWRENCE, Suzanne Lawrence, Richard Lawrence, and Marta Jo Lawrence, individually, and on behalf of the Estate of Sylvan Lawrence, including the Residuary Trust, Plaintiffs, v. Seymour COHN, Defendant. |
| Court | U.S. District Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Graubard, Mollen, Horowitz, Pomeranz & Shapiro (Steven Mallis, of counsel), New York City, for Plaintiffs.
Shea & Gould (Milton S. Gould, of counsel), New York City, for Defendant.
This complex case, arising out of the administration of the estate of a New York resident, has engaged and continues to engage the attention of this Court and the Surrogate's Court for New York County.
In 1994, after extensive motion practice in this Court, trial was scheduled to begin in the Surrogate's Court. In that circumstance, Magistrate Judge Grubin signed an order on May 18, 1994, placing the captioned case on this Court's suspense calendar. Counsel were instructed to notify this Court when trial in the Surrogate's Court was concluded. Counsel have not given such notice.
At the time Judge Grubin signed the order placing the case on suspense, a motion by defendant challenging the amended complaint on various grounds was pending, fully submitted, in this Court. I conclude that it is appropriate to file an Opinion deciding this motion now. To do so does not contravene the suspense order, the motion being sub judice before the order was signed. Resolving the issues before this Court at this time will assist in the further administration of the case.
Plaintiffs are beneficiaries under the will of the late Sylvan Lawrence, who died in December, 1981. The will grants plaintiff Alice Lawrence, the decedent's wife, 50% of the Lawrence Estate (the "Estate") in the form of an outright bequest, and directs that the other 50% be placed in a residuary trust for the decedent's three children. Defendant Seymour Cohn, Lawrence's brother, is sole executor of the Estate and trustee of the residuary trust created by the will. Cohn is also the sole general partner of a partnership in which the Estate has a substantial stake.
The Lawrence will was admitted to probate by the Surrogate of New York County on January 29, 1982. On February 1, 1982, Letters Testamentary and Letters of Trusteeship were issued to defendant as sole executor and sole trustee.
Plaintiffs accuse defendant Cohn of numerous acts of fraud and breaches of fiduciary duty. The parties have been engaged in litigation in the New York County Surrogate's Court (Hon. Renee R. Roth) since 1983.
In 1990, plaintiffs filed the instant action in this Court. They charge Cohn with violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (the "Exchange Act" or "1934 Act"), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5; and with violations of the RICO statute, 18 U.S.C. §§ 1962(a), (b) and (c).
To these federal claims, plaintiffs append claims for common law fraud, breach of contract and unjust enrichment. They pray for the imposition of a constructive trust on certain partnership interests acquired by defendant; a conveyance of those interests to plaintiffs and/or the Estate; an accounting; compensatory damages (trebled under RICO); punitive damages; and attorneys' fees and costs.
Subject matter jurisdiction in this Court depends on the viability of the § 10(b) and RICO claims.1 Defendant moves to dismiss the complaint pursuant to Rule 12(b)(1) and Rule 12(b)(6), arguing that plaintiff has failed to state a federal securities or RICO claim, and that therefore jurisdiction is lacking. Defendant also asserts that plaintiffs lack standing to bring the section 10(b) claim, and that they are collaterally estopped from doing so. Finally, defendant asks the Court to abstain from exercising its jurisdiction over all claims in deference to the Surrogate's Court.
The following factual recitations are based on allegations in the amended complaint, which are taken as true for the purposes of defendant's Rule 12(b)(6) motion.2
Prior to the death of Sylvan Lawrence, Lawrence and Cohn were the sole general partners of a limited partnership known as Ninety-Five Wall Street Company (the "Limited Partnership"). The Limited Partnership's principal asset was and remains an office building located at 95 Wall Street. At the inception of the Limited Partnership, Lawrence and Cohn owned a combined 60% interest as general partners; Jack R. Aron owned an 11% interest as a limited partner; Marvin H. Schur owned a 4% interest as a limited partner; Edward D. Roberts owned a 1% interest as a limited partner; Schur and Bernard E. Brandes, as trustees for the benefit of Robert Aron, owned a 12% interest as a limited partners; and Schur and Brandes, as trustees for the benefit of Peter Arthur Aron, owned a 12% interest as limited partners.
In paragraph 9, the Limited Partnership agreement provides:
If either Sylvan Lawrence or Seymour Cohn shall die, retire of be adjudicated incompetent, the partnership shall not terminate and the other of them shall continue as the sole General Partner. The retired General Partner or the legal representatives of the deceased or incompetent General Partner shall be and become a Limited Partner and the share of such retired Partner or of such representatives in the profits, losses including depreciation, and the distributions shall be 30%. The interest of the remaining General Partner shall thereafter be 30%.
Under this provision, Sylvan Lawrence's interest as a general partner in the Limited Partnership was, upon his death, automatically converted into a 30% limited partnership interest in favor of his Estate; Cohn became the sole general partner with the exclusive right to manage and control the affairs of the Limited Partnership.
The Limited Partnership agreement also provided in paragraph 8(b):
In the event that any one or more of the Limited Partners (hereinafter called "Offering Limited Partner") shall receive and wish to accept a bona fide offer for the purchase of his interest in the partnership (hereinafter called the "Outside Offer"), the Limited Partner shall promptly notify the other Limited Partners thereof giving the name and address of the offeror ("Outside Offeror") and a copy of the Outside Offer containing all the terms and provisions thereof, and the other Limited Partners shall be privileged to purchase the interest of the Limited Partner on the same terms as the Outside Offer in the proportion that their respective interests bear to the aggregate interests of all of the Limited Partners other than the interest of the Offering Limited Partner. If the Limited Partners have not agreed to purchase the interest of the Offering Limited Partner within 15 days after the Offering Limited Partner has advised them of the Outside Offer, then the rights of the Limited Partners or any of them to purchase the interest of the Offering Limited Partner shall cease and thereupon at the expiration of such 15 days, the Offering Limited Partner shall advise the General Partner of the Outside Offer, giving to the General Partner the name and address of the Outside Offeror and a copy of the Outside Offer containing all the terms and provisions thereof, and the General Partner shall have the right to purchase the interest of the Offering Limited Partner at the same price and terms as contained in the Outside Offer, provided the General Partner agrees so to do within 15 days after the giving of such notice to it.
On May 23, 1983, Cohn agreed with all of the then-existing limited partners, aside from the Estate, to purchase their Limited Partnership interests. Cohn purchased those interests, totalling 40% of the Limited Partnership, "as nominee for Seymour Cohn, as Executor of the Estate of Sylvan Lawrence, for Seymour Cohn individually, and for any combination thereof." Plaintiffs allege that the provision above vested the Estate with a right of first refusal over that purchase.
By order to show cause dated August 18, 1983, Cohn commenced a proceeding in the Surrogate's Court seeking the court's advice and direction regarding who, as between him and the Estate, should own the 40% limited partnership interests acquired pursuant to the limited partners buy-out agreement entered into in May 1983 (the "advice and direction proceeding"). In connection with that proceeding, Cohn submitted an affidavit outlining his opinion of the value of the limited partnership interests, and the wisdom of the Estate purchasing all or part of the interests up for sale. Cohn named the plaintiffs as respondents in the advice and direction proceeding.
On May 17, 1984, Cohn and the plaintiffs entered into a settlement taking the form of a purchase and sale agreement which provided for the final disposition of the 40% limited partnership interests. Pursuant to that agreement, the Estate obtained one-half of these interests, and Cohn acquired one-half individually. The Surrogate signed a consent decree approving this settlement.
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