Robison v. Caster
| Decision Date | 10 February 1966 |
| Docket Number | No. 15166,15167.,15166 |
| Citation | 356 F.2d 924 |
| Parties | Ashley L. ROBISON, Plaintiff-Appellant, v. Josephine B. CASTER, Executrix of the Estate of Louis E. Caster, deceased, Defendant-Appellee. TRANS AMERICA TELEVISION CORPORATION, a Nevada Corporation, on Behalf of Itself and All Other Stockholders of WDUL Television Corp., a Delaware Corporation, Plaintiff-Appellant, v. Josephine B. CASTER, Executrix of the Estate of Louis E. Caster, deceased, and WDUL Television Corp., a Delaware Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Thomas Keister Greer, Rocky Mount, Va., James Madden, Hunter, Hunter & Hunter, Freeport, Ill., for appellants.
William C. Jackson, Barrick & Jackson, Rockford, Ill., for Josephine B. Caster, Exx. of Estate of Louis E. Caster, decd., defendant-appellee, Peter S. Switzer, Rockford, Ill., of counsel.
Before KNOCH, CASTLE and SWYGERT, Circuit Judges.
The plaintiffs in these diversity cases appeal from orders dismissing their respective complaints. The complaints are based upon the same alleged series of events. The first complaint, dismissed for failure to state a claim upon which relief could be granted, attempts to set out a claim for conspiracy to defraud; the second, dismissed for failure to comply with Rule 23(b) of the Federal Rules of Civil Procedure, attempts to assert a stockholders' derivative claim for fraudulent breach of fiduciary duties.
In the first complaint the plaintiff, Ashley L. Robison, names a single defendant, the executrix of the estate of Louis E. Caster, Josephine B. Caster. The complaint alleges that Louis E. Caster and two other persons, L. F. Gran and Bruce Gran, organized WDUL Television Corporation in 1958 and received its 500 shares of stock; that these persons formed a conspiracy to defraud the plaintiff; that in pursuance of the conspiracy they prevailed upon the plaintiff to purchase 150 shares of stock in WDUL for $15,000, to take an option for the remaining 350 shares, and to become WDUL's general manager. The complaint then alleges that the defendant's decedent and his coconspirators concealed the sale of stock, the stock option given to the plaintiff, and "numerous other material facts" concerning WDUL from the Federal Communications Commission, and that as a result the FCC refused to grant WDUL a construction permit, rendering the plaintiff's investment worthless. Next, the complaint charges that the conspirators fraudulently induced the plaintiff to expend $250,000 in the affairs of WDUL; that they failed to pay the remainder of the subscription price ($95,000) for their own stock; that they failed to fulfill a commitment to loan $290,000 to WDUL; and that they sought "in divers ways and by manifold schemes" to prevent the plaintiff from exercising his stock option. The complaint concludes with a prayer for $5,000,000 damages.
The district court granted the defendant's motion to dismiss the complaint for failure to state a claim upon which relief could be granted, and dismissed it with prejudice. The court held that the complaint did not plead fraud with the required specificity. It further held that insofar as the complaint might be viewed as an attempt to bring some kind of minority stockholder's suit in equity against majority stockholders, it was improperly brought.
Reading the complaint in the light most favorable to the plaintiff and disregarding the bare assertions of a conspiracy to defraud, we find nothing more than an alleged concealment of a stock transfer from the FCC and an alleged failure to honor financial commitments to a corporation. Rule 9(b) of the Federal Rules of Civil Procedure provides that "in all averments of fraud * * *, the circumstances constituting fraud * * * shall be stated with particularity." The complaint before us is so insufficient in particularization as to indicate that no attempt was made to comply with this rule; thus the complaint was properly dismissed. Duane v. Altenburg, 297 F.2d 515, 518 (7th Cir. 1962).
The plaintiff contends that the complaint is not actually an attempt to allege a "common law" fraud at all, that it is really an equitable claim asserting only the breach of a fiduciary relationship to a minority shareholder by the majority shareholders (in this case a single shareholder) of a corporation. Aside from the fact that such an identification of the content of the complaint approaches clairvoyance, the complaint viewed in this manner is equally deficient. The plaintiff admits that the breach of fiduciary relationship which he is attempting to assert is a "scheme to defraud." Rule 9(b) must therefore be followed. Duane v. Altenburg, supra. Yet the plaintiff's complaint asserts only that a scheme existed and that he is entitled to $5,000,000 because of it.
The second case is a stockholders' derivative action brought by Trans America Television Corporation on behalf of itself and the other shareholders of WDUL Television Corporation. WDUL and Josephine B. Caster, as executrix of the estate of Louis E. Caster, are the named defendants. The complaint contains many of the same allegations present in the complaint filed...
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