McClune v. Shamah, 78-1795
| Decision Date | 08 March 1979 |
| Docket Number | No. 78-1795,78-1795 |
| Citation | 593 F.2d 482 |
| Parties | Robert C. McCLUNE, and Hilda A. McClune, his wife, Joseph C. Weimer, Jack D. Adelson and Ruth B. Adelson, his wife, Sidney N. Busis and Sylvia A. Busis, his wife, Gaetano Dentici, Calvin Hill, James P. O'Malley and Dorothy J. O'Malley, his wife, Allen J. Cousin, Thomas D. O'Malley and Mary Alice O'Malley, his wife, Gerald S. Soroker, Stephen Bruno, Richard Dipietro, Mark H. Wholey, M. N. Adelson & Sons, Inc., a Pennsylvania business corporation, James Sloss, Leonard Merkow, Ned A. Nutz, Alex E. Sebastian, Miriam H. Sadler, Maida R. Rubenstein, William J. Ivill and Linda M. Ivill, his wife, Robert S. Ruben and Anne H. Ruben, his wife, J. L. Coon and Grace H. Coon, his wife, Robert Gifford, and Roman A. Babin v. Alfred A. SHAMAH, Steven J. Gumenick, Donald F. Martin, Jr., Brunswick Management Corporation, a Delaware business corporation, Babbitt Meyers & Company, a Pennsylvania partnership, Robert E. Rose, Spector Cohen Hunt & Rosen, a Pennsylvania professional corporation, and Arthur R. Spector, Edward E. Cohen, and Betsy Z. Cohen, trading as Spector & Cohen, a Pennsylvania partnership, Cedar Bayou, Ltd., a Pennsylvania limited partnership, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Robert L. Potter, Roslyn M. Litman, John E. Grasberger, Litman, Litman, Harris & Specter, P. A., Pittsburgh, Pa., for appellant.
William H. Holden, Jr., Weinberg & Green, Baltimore, Md., for appellees, Alfred A. Shamah, Steven J. Gumenick, and Brunswick Management Corp.
Stewart B. Barmen, Raphael, Sheinberg & Barmen, P. A., Pittsburgh, Pa., for appellee, Robert E. Rose.
Paul R. Rosen, Edward M. Dunham, Jr., Spector, Cohen, Hunt & Rosen, P. C., Philadelphia, Pa., for appellee, Spector, Cohen, Hunt & Rosen.
James J. Restivo, Jr., Arthur J. Schwab, Frederick N. Egler, Jr., Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for appellees, Arthur R. Spector, Edward E. Cohen and Betsy Z. Cohen.
Before SEITZ, Chief Judge, and GIBBONS and HIGGINBOTHAM, Circuit Judges.
Cedar Bayou, Ltd., a Pennsylvania limited partnership, appeals from an order of the district court denying its motion to intervene in this lawsuit, brought by all of its limited partners.
The limited partners filed suit in the district court on August 19, 1977, asserting causes of action under the Securities Act of 1933, the Securities Exchange Act of 1934 and pendent claims arising from their investment in Cedar Bayou, Ltd. Their complaint alleges securities fraud, mismanagement and breaches of common law duties arising from Cedar Bayou's formation and its participation in a joint venture with a second limited partnership, Baytown, Ltd. The purpose of the joint venture was to finance the purchase and facilitate the ongoing management of two apartment complexes located in Baytown, Texas. The joint venture has experienced serious financial difficulties, and the investors in Cedar Bayou have suffered concomitant losses, which the plaintiffs attribute to actions of the defendants. Subsequent to the commencement of this lawsuit, Cedar Bayou itself filed a petition in the district court for an arrangement under Chapter 12 of the Bankruptcy Act.
The named defendants in this action include Brunswick Management Corporation, hired by the joint venture to manage the apartment complexes; Alfred Shamah and Steven Gumenick, officers and principal shareholders of Brunswick and sole owners of Baytown, Ltd.; Donald Martin, an officer of Brunswick and the ousted general partner of Cedar Bayou; Babbitt Myers & Company, the securities dealer and broker that sold the plaintiffs their interests in Cedar Bayou; Robert Rose, an employee of Babbitt Myers; and Spector Cohen Hunt & Rosen, and some of its partners, the law firm that prepared documents allegedly relied upon by the plaintiffs in purchasing interests in Cedar Bayou.
Plaintiffs' complaint includes eight counts. The first five allege that all of the defendants, in participating in the formation of Cedar Bayou and in the sale of limited partnerships to the plaintiffs, committed violations of the federal securities acts and regulations, the Pennsylvania Securities Act of 1972 and implementing regulations, and legal duties owed plaintiffs under Pennsylvania common law. Count VI is directed against defendants Shamah and Gumenick. It seeks a declaration that a promissory note and deed of trust, obtained by them from the joint venture some two years after the plaintiff's purchase of their interests in Cedar Bayou, are null and void. Count VII is directed against Brunswick Management Corporation. It seeks a declaration that the agreement by which Brunswick receives fees for operating the real estate owned by the joint venture is null and void and a money judgment for fees already paid. Count VIII is directed against the law firm and its partners. It seeks damages for legal malpractice in the drafting of the "private placement memorandum" that was allegedly relied upon by plaintiffs, as clients of the firm, when they purchased interests in Cedar Bayou.
On January 31, 1978, counsel for the plaintiffs filed a motion on behalf of Cedar Bayou, as an entity, to intervene as a party plaintiff in this action. The motion asserted that the applicant was entitled to intervene in these proceedings as a matter of right under Rule 24(a)(2) of the Federal Rules of Civil Procedure; alternatively, it sought permissive intervention under Rule 24(b). This motion for intervention was filed in response to an argument raised by defendants Shamah and Gumenick that Count VI of the complaint should be dismissed because it stated a cause of action belonging to Cedar Bayou itself and not its individual limited partners. The complaint in intervention incorporated Counts VI, VII and VIII of the plaintiffs' complaint.
On March 6, 1978, the district court denied the motion for intervention. With respect to the claim that Cedar Bayou could intervene as a matter of right, the court stated that the partnership did not have the requisite interest relating to the property or transaction which is the subject of this action. The court characterized Cedar Bayou's complaint as raising claims for mismanagement and breaches of duty by the defendants unconnected with the sale of interests in the limited partnership. Permissive intervention was denied on jurisdictional grounds, and because the court, in the exercise of its discretion, believed that litigation concerning the claims asserted by Cedar Bayou would inject new issues into an already complex case and unduly delay the adjudication of plaintiffs' action.
The district court evidently assumed that each of the claims asserted by Cedar Bayou stated causes of action belonging to it as an entity or to the joint venture and that these claims were not properly raised in the original complaint. On the same date that it denied intervention the court dismissed Count VI of plaintiffs' complaint on that basis. In the same order the court declined to dismiss Count VII because of its belief that the amount of management fees owed by the limited partners to Brunswick could be determined on a counterclaim or final accounting. However, in denying the motion to intervene, the court stated that insofar as Count VII constituted an action to set aside the management agreement itself, that action belonged to the joint venture and could not be raised by Cedar Bayou or its limited partners. Presently, the law firm defendants' motion to dismiss Count VIII on similar grounds is pending before the district court.
Following the district court's denial of plaintiffs' motion to amend their complaint to include Cedar Bayou as a party plaintiff and Cedar Bayou's motion to reconsider its application for intervention, Cedar Bayou filed a notice of appeal from the order denying intervention. The law firm defendants filed a motion to dismiss the appeal, contending that the denial of intervention is not an appealable order, and that motion has been referred to this panel for...
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Engl v. Berg, Civ. A. No. 80-4065.
... ... McClune v. Shamah, 593 F.2d 482, 487 (3d Cir. 1979). The equities of the situation also militate in favor ... ...
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Goto v. Dist. of Columbia Bd. of Zoning A.
... ... See, e. g., McClune v. Shamah, 593 F.2d 482, 486 (3d Cir. 1979) (district court properly denied motion of limited ... ...
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Rose v. Ark. Val. Environ. & Utility Auth.
... ... one who lacks standing is a nullity from the outset — a "nonexistent lawsuit" — citing McClune v. Shamah, 593 F.2d 482 (3d Cir. 1979), and Hobbs v. Police Jury of Moorehouse Parish, 49 F.R.D ... ...
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Lusardi v. Xerox Corp.
... ... Volk, 351 F.2d 323, 328 (3d Cir.1965); see also McClune v. Shamah, 593 F.2d 482, 486 (3d Cir.1979) ("A motion for intervention under Rule 24 is not an ... ...