Lind v. Vanguard Offset Printers, Inc.

• Decision Date: 11 July 1994
• Docket Number: No. 91 Civ. 2502 (RWS).,91 Civ. 2502 (RWS).
• Citation: 857 F. Supp. 1060
• Parties: Gerard G. LIND, Plaintiff, v. VANGUARD OFFSET PRINTERS, INC., and Thomas B. Tyrrel, Defendants.
• Court: U.S. District Court — Southern District of New York

857 F. Supp. 1060

Gerard G. LIND, Plaintiff, v. VANGUARD OFFSET PRINTERS, INC., and Thomas B. Tyrrel, Defendants.

No. 91 Civ. 2502 (RWS).

United States District Court, S.D. New York.

July 11, 1994.

COPYRIGHT MATERIAL OMITTED

Brown & Wood, New York City, for plaintiff; E. Michael Bradley, William C. Rand, of counsel.

Shiff & Tisman, New York City, for defendant Thomas B. Tyrrel; Stephen E. Tisman, of counsel.

OPINION

SWEET, District Judge.

Defendant Thomas B. Tyrrel ("Tyrrel") moves to dismiss the Complaint of Plaintiff Gerard G. Lind ("Lind"), pursuant to Rule 12(b)(6), Fed.R.Civ.P., on the grounds that it fails to state a claim upon which relief may be granted; for summary judgment, pursuant to Rule 56, Fed.R.Civ.P.; and to amend his answer, pursuant to Rule 15, Fed.R.Civ. P., in order to assert a statute of limitations defense. For the reasons set forth below, Tyrrel's motion is denied in part and granted in part.

The Parties

Plaintiff Lind, a citizen and resident of New York, ran his own printing business known as Lind Brothers prior to the events giving rise to this action. From November 1989 through January 1991, Lind was employed in a managerial position at a company affiliated with Defendant Vanguard Offset Printers, Inc. ("Vanguard"), B.H. Tyrrel ("Tyrrel Inc."). Lind is now employed as a manager in another printing business in New York.

Vanguard was a New Jersey corporation with its primary place of business in Hillside, New Jersey.

Defendant Thomas B. Tyrrel is a citizen and resident of New Jersey, the Chairman of Vanguard, an owner of more than two-thirds of Vanguard's stock, and allegedly a "controlling person" of Vanguard within the meaning of Section 20 of the Exchange Act, 15 U.S.C. § 78t.

Prior Proceedings

The original Complaint in this action, filed on April 10, 1991, sought $150,000 in damages under three causes of action: breach of contract, common law fraud and conversion due to Vanguard's failure to deliver a stock certificate representing the 5% interest in Vanguard purchased by Lind. Upon tendering the stock certificate, the Defendants moved for an order of summary judgment in this action, which was granted by the Court "in part on the grounds of mootness" on July 11, 1991. At that time, Lind was granted leave to replead.

On January 14, 1992, Vanguard filed for protection under Chapter 11 of the Bankruptcy Code and that case is now pending in the United States Bankruptcy Court for the Southern District of New York before the Honorable Tina L. Brozman, Bankruptcy Judge.

On January 17, 1992, Lind served his first Amended Complaint which alleged the following counts: breach of contract, breach of fiduciary duties, conversion, fraud, and fraudulent misrepresentation pursuant to Sections 10(b) and 20 of the Securities and Exchange Act of 1934 (the "Exchange Act"), as codified at 15 U.S.C. §§ 78j(b), 78t, and Rule 10b-5, as promulgated under 17 C.F.R. § 2450.10b-5.

On August 13, 1993, Lind filed his Second Amended Complaint alleging $150,000 worth of damages based upon the following six counts: (1) federal securities fraud, in violation of § 10(b) of the Exchange Act; (2) breach of contract; (3) common law fraud; (4) breach of fiduciary duty; (5) conversion; and (6) unjust enrichment.

The motion was filed on March 9, 1994 and oral argument was heard by this Court on May 11, 1994. The motion was considered fully submitted at that time.

Facts

On a Rule 12(b)(6) motion to dismiss, the factual allegations of the complaint are presumed to be true and all factual inferences must be drawn in their favor and against the defendants. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir.1989); Dwyer v. Regan, 777 F.2d 825, 828-29 (2d Cir.1985). Accordingly, the factual allegations considered here and set forth below are taken from the Plaintiff's Second Amended Complaint and do not constitute findings of fact by the Court. They are presumed to be true only for the purpose of deciding the present motions.¹

Lind and his nephew, who is not a party in this action, were employed by Tyrrel Inc. from November 1989 through February 1, 1991. Between September 1989 and February 1990, Lind and Tyrrel had a series of discussions at Tyrrel's Manhattan office concerning the sale of some of Vanguard's stock.² These discussions culminated in the signing of a written agreement (the "Agreement") between Lind and Tyrrel on February 16, 1990.

The terms of the Agreement stated that Tyrrel would sell to Lind five percent of Vanguard's stock for $150,000, to be paid in three installments, and that Vanguard would have the right to redeem Lind's stock for a minimum of $150,000 should Lind choose to sell. The text of the Agreement is as follows:

February 16, 1990

Understanding Between the Two Parties

Gerard G. Lind and Vanguard Offset Printers and its majority stockholder Thomas Tyrrel.

1. Five percent equity in Vanguard for $150,000

                  Payment
                  $70,000    February 6
                  $30,000    March 15
                  $50,000    April 20
                  ========
                  $150,000
                

2. An option to buy 5 percent additional equity in Vanguard between November 1, 1990 and June 30, 1992 for $150,000.

3. It is the understanding between the two parties that if G. Lind wishes to sell his stock he must first offer it back to Vanguard and receive a minimum of $150,000.

4. That the money will be used in the operation of the business and not to repay shareholder loans or buy back shareholders' equity. (Exclusive of Tom and Biff's short-term loan only when Tyrrel pays an equal amount.)

Between February 16 and April 23, 1990, Lind paid Vanguard $150,000, pursuant to the terms of the Agreement. On March 26, 1990, one month prior to Lind's final $50,000 installment, Lind asked Tyrrel, in the form of a written memorandum, to furnish various corporate and financial information regarding Vanguard. Tyrrel did not provide the requested information. After the final installment payment, Lind requested Tyrrel to provide his stock certificates. Tyrrel failed to do so and their relationship deteriorated. On February 1, 1991, Tyrrel terminated Lind's employment at B.H. Tyrrel, and Lind filed this action a few months later.

Lind claims that the Defendant's refusal to redeem Lind's shares for a minimum of $150,000 breached the third paragraph of the Agreement, which he contends creates a "put" option.

According to Lind, Tyrrel fraudulently induced him into entering into the Agreement through a series of false misrepresentations and omissions. For example, Lind contends that Tyrrel told him that he would share in the management, control and operation of Vanguard so that Lind could protect the value of his investment. However, Lind found that the Defendant "refused to allow Lind to share in the management, control and operation of Vanguard ... and refused to provide financial reports and information regarding Vanguard to Lind despite requests that they do so, and contrary to Tyrrel's representation to Lind." (Sec.Am.Compl. ¶ 30.)

Lind also claims that Tyrrel concealed the fact that Vanguard had guaranteed 100% of a $5 million loan made by Orix Credit Alliance (the "Orix Loan") to Vanguard and several other companies then under Tyrrel's control. Lind claims he was unaware of the fact that if Tyrrel Inc. or these other companies defaulted on their share of interest on the Orix loan, then Vanguard would be required to cover the defaulting company's share. Lind contends that a material cause of Vanguard's bankruptcy was the increased interest expenditure on the other companies' share of the Orix loan and that if he had known of the guarantee or the pledge of assets, he would never had purchased the Vanguard stock.

On April 10, 1991, Lind filed his original Complaint. On April 29, 1991, Lind received a certificate representing the Vanguard stock he purchased on February 16, 1990. On July 26, 1991, at a special meeting of Vanguard's stockholders in West Orange, New Jersey, the Defendants refused to purchase Lind's shares for a minimum of $150,000.

Discussion

I. Legal Standards

In addressing the Defendant's motion, the following familiar standards are germane. First, "summary judgment may be granted only when there is no genuine issue of material fact remaining for trial and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). As a general rule, all ambiguities and inferences drawn from the underlying facts should be resolved in favor of the party opposing the motion, and all doubts as to the existence of a genuine issue for trial should be resolved against the moving party. However, where the nonmoving party bears the burden of proof at trial, Rule 56 permits the moving party to point to an absence of evidence to support an essential element of the nonmoving party's claim." Bay v. Times Mirror Magazines, Inc., 936 F.2d 112, 116 (2d Cir.1991) (citations and internal quotation omitted). In sum, if in "viewing the evidence produced in the light most favorable to the nonmovant, ... a rational trier could not find for the nonmovant, then there is no genuine issue of material fact and entry of summary judgment is appropriate." Binder v. Long Island Lighting Co., 933 F.2d 187, 191 (2d Cir.1991); See also Bay, 936 F.2d at 116.

A court should dismiss a complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure only if it appears beyond doubt that the plaintiff can prove no set of facts supporting its claim that entitles it to relief. See H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984); Dahlberg v. Becker, 748 F.2d 85, 88 (2d Cir.1984), cert. denied, 470 U.S. 1084, 105 S.Ct. 1845, 85 L.Ed.2d 144 (1985). The complaint's allegations must be construed in the light most favorable to the plaintiff and the plaintiff's...