Stowell v. Ted S. Finkel Inv. Services, Inc.

• Decision Date: 02 April 1981
• Docket Number: No. 79-4045,79-4045
• Citation: 641 F.2d 323
• Parties: Fed. Sec. L. Rep. P 97,931 Aubrey L. STOWELL et al., Plaintiffs, Terry Beye, Plaintiff-Appellee, v. TED S. FINKEL INVESTMENT SERVICES, INC., et al., Defendants, Stanley H. Beck, Defendant-Appellant. . Unit B
• Court: U.S. Court of Appeals — Fifth Circuit

Page 323

641 F.2d 323

Fed. Sec. L. Rep. P 97,931

Aubrey L. STOWELL et al., Plaintiffs Terry Beye, Plaintiff-Appellee, v. TED S. FINKEL INVESTMENT SERVICES, INC., et al., Defendants Stanley H. Beck, Defendant-Appellant.

No. 79-4045.

United States Court of Appeals, Fifth Circuit.

Unit B

April 2, 1981.

Stanley H. Beck, pro se.

Shackleford, Farrior, Stallings & Evans, John I. Van Voris, Tampa, Fla., for Beye.

Appeals from the United States District Court for the Southern District of Florida.

Before FAY and HATCHETT, Circuit Judges, and GROOMS ^*, District Judge.

GROOMS, District Judge.

This is an appeal ¹ from an order of the District Court of the Southern District of Florida dismissing appellant Beck's second amended counterclaim for failure to state a cause of action. We AFFIRM.

Appellee Beye is one of the plaintiffs in the case in chief and Beck is one of the defendants. The plaintiffs sued Beck and the other defendants for violations of the federal and state securities laws. ² A crossclaim was filed by certain of the defendants against Beck, alleging active negligence by him. Beck then brought counterclaims against Beye for damages for fraudulent misrepresentation, indemnification, and contribution in the event that Beck is found liable to the plaintiffs or other defendants. The counterclaims here in question represent Beck's third attempt to frame a sufficient claim for relief.

It is Beck's position that prior to the investment made by plaintiffs that Beye represented in writing that he had sufficient financial expertise, knowledge and experience in tax and business matters to act as the Offeree's Representative for himself and the other plaintiffs. The essence of Beck's theory of Beye's liability is set forth in paragraph 14 of his second amended counterclaim, that:

Had plaintiff, Terry Beye, properly performed his duty as the plaintiffs' Offeree Representative, the plaintiffs would not have purchased limited partnership interests from the partnership. In excess of $700,000 in tax losses would not have been generated to purchasers having little or no taxable income. This action would never have been brought against defendant, Beck.

On appeal Beck has failed to demonstrate any legal basis under which Beye could be liable to him.

First, Beck attempts to state a cause of action for common-law fraud or misrepresentation against Beye. The essential elements necessary under Florida law to establish such a claim are:

(1) a false statement of fact, (2) known by the defendant to be false at the time it was made, and (3) made for the purpose of inducing the plaintiff to act in reliance thereon; (4) action by the plaintiff in reliance on the correctness of the representations; and (5) resulting damage to the plaintiff. (cites omitted)

Community Bank, Lake Oswego, Oregon v. Bank of Hallandale and Trust Company, 482 F.2d 1124, 1127 (5th Cir. 1973).

Beck has failed to show how the alleged misrepresentations were material or how he relied upon them to his detriment. The letter attached to the second amended counterclaim as an exhibit shows on its face that any representations were made not to Beck but to defendant Finkel. Assuming that Beck did rely on the truthfulness of all statements in the letter, there is no causal relation between that information and the acts of Beck for which he is being sued.

Beck seeks indemnity but fails to show the existence of any express or implied contract for indemnity or any duty imposed by law giving rise to a basis for indemnity. He does not show what duty Beye owed him, how it was breached, and most importantly, how a breach of the duty injured him. Even if Beye did breach some duty, it was a duty owed to the plaintiffs and not to Beck. Moreover, Beye's alleged failure to perform his duty as Offeree's Representative is simply not related to the acts for which Beck is being sued fraud and failure to register under applicable securities laws.

Furthermore, it may be noted that indemnification tends to frustrate the policy of securities legislation. "A securities wrongdoer should not be permitted to escape loss by shifting his entire responsibility to another party." Heizer Corp. v. Ross, 601 F.2d 330, 334 (7th Cir. 1979). The 1933 and 1934 Securities Acts "do not provide anywhere for indemnification under any circumstances." Id. 335.

Beck also seeks contribution in the event he is found liable. Contribution is available from joint securities tortfeasors under the federal securities laws for securities violations, Heizer, supra, and Odette v. Shearson, Hammill & Co., Inc., 394 F.Supp. 946, 958 (S.D.N.Y.1975). Three sections of the Securities Acts so provide. 1933 Act § 11(f), 15 U.S.C.A. 77k(f), 1934 Act §§ 9(e) and 18(b), 15 U.S.C.A. § 78i(e) and 78r(b). However, under the facts alleged by Beck it is clear that Beye was not a joint securities act...