Stratton Group, Ltd. v. Sprayregen
Decision Date | 12 February 1979 |
Docket Number | No. 76 Civ. 373 (KTD).,76 Civ. 373 (KTD). |
Citation | 466 F. Supp. 1180 |
Parties | The STRATTON GROUP, LTD., Plaintiff, v. Gerald SPRAYREGEN, Herman Sprayregen and Seymour Sprayregen, Defendants. Gerald SPRAYREGEN, Herman Sprayregen and Seymour Sprayregen, Defendants-Third-Party Plaintiffs, v. MARSHALL, BRATTER, GREENE, ALLISON & TUCKER, Milton Hausen, Laventhol Horwath Accountants, f/k/a Laventhol, Krekstein, Horwath and Horwath, Moe Bordwin, Stanley Gruber, Lawrence N. Hurwitz, and David Cohen, Third-Party Defendants. |
Court | U.S. District Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Aaron, Aaron, Schimberg & Hess, Chicago, Ill., for defendants-third-party plaintiffs Gerald, Herman and Seymour Sprayregen; Joel J. Sprayregen, Chicago, Ill., of counsel.
D'Amato & Lynch, New York City, for third-party defendant Laventhol; Robert E. Meshel, New York City, of counsel.
Newman & Schlau, New York City, for third-party defendant Moe Bordwin; Gerald L. Popovsky, New York City, of counsel.
Thomas J. Troiano, Bayville, N.Y., for third-party defendant Milton Hausen.
Donovan, Leisure, Newton & Irvine, New York City, for third-party defendants Marshall, Bratter, Greene, Allison & Tucker; James A. Magee, New York City, of counsel.
Goldschmidt, Fredericks, Levinson & Oshatz, New York City, for third-party defendant Stanley Gruber.
This action was originally brought by the Stratton Group Ltd., hereinafter referred to as "Stratton" against Gerald, Herman and Seymour Sprayregen, three officers and/or directors thereof, hereinafter collectively referred to as "the Sprayregens" alleging violations of Section 10(b) of the Securities Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, as well as claims of common law fraud and breach of fiduciary duty. The defendants, as third party plaintiffs, have individually filed complaints, pursuant to Rule 14, Fed. R.Civ.P., against seven third party defendants. Four of the third party defendants — Marshall, Bratter, Greene, Allison and Tucker ("Marshall Bratter"), Laventhol and Horwath Accountants ("Laventhol"), Moe Bordwin ("Bordwin") and Stanley Gruber ("Gruber"), have moved, pursuant to Rules 12 and 9 of the Fed.R.Civ.P., to dismiss the complaints for failure to state a claim upon which relief can be granted or, in the alternative, for failure to plead fraud with the requisite particularity. A fifth third party defendant, Milton Hausen ("Hausen"), has moved for summary judgment.
The main action, as well as the third party action, emanate from an agreement, executed in April 1970, between John's Bargain Stores, as predecessor of Stratton, and N.L.P. Fredi Inc., a newly formed subsidiary of Stratton. Pursuant to said agreement, Fredi agreed to issue all of its common stock to Stratton and all of its preferred shares to the Sprayregen & Co., Inc. shareholders, which included only one of the third-party plaintiffs herein — Gerald Sprayregen. These preferred shareholders were given the option to put all their shares, staggered over a three-year period, to Stratton. The contract also imposed certain restrictions upon which funds were to be used by Stratton to pay the agreed consideration of $15,000,000 for the put:
The Stratton complaint charges that Gerald and Herman Sprayregen, as officers and directors of Stratton, together with Seymour Sprayregen, as a Stratton director, engaged in a variety of fraudulent conduct calculated to induce Stratton to enter into the Agreement of April, 1970, which provided for a grossly inflated price to be paid for the shares to be put by the shareholders of Sprayregen & Co., Inc. thereunder. It was further charged that upon inducing the Agreement the defendants, to complete their fraudulent scheme, caused Stratton to pay for the put shares out of funds other than "excess cash," in violation of the conditions set forth in the Agreement. Plaintiffs argue that defendants' activities were violative of Section 10(b) and Rule 10b-5, as well as constituting common law fraud and breach of their respective fiduciary relationships with Stratton.1 Suffice it to say that the complaint alleges intentional fraud and deception attributable to the Sprayregens.
The defendants have in turn charged, in their third party complaints, that should they be held liable to Stratton they are entitled to "indemnity, reimbursement and contribution" from third party defendants based upon the roles played by the various third party defendants in the execution of the April Agreement and the subsequent put made pursuant thereto.
Marshall Bratter, a partnership engaged in the practice of law, was apparently acting as legal counsel to both Stratton and Gerald Sprayregen during the time period relevant to this action.2 It is upon this relationship that the three Sprayregens bring their third party actions against Marshall Bratter. More particularly, the complaints, each parroting the identical language, charge that:
A complaint should be dismissed for failure to state a claim only when it can be demonstrated beyond doubt that the plaintiff can prove no set of facts in support of his claim entitling him to relief. Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972).
Applying this standard to the complaints lodged against Marshall Bratter I find all three complaints unable to survive the instant motion.
It is undisputed that the three Sprayregen complaints in issue stem solely from the attorney/client relationship between Marshall Bratter, Gerald Sprayregen and the Stratton Corp. Moreover, in this regard the complaints allege claims founded exclusively upon the law of negligence.
In order to state a valid claim for negligence, sufficient to withstand a motion to dismiss, a plaintiff must allege (i) the existence of a duty owed by defendant to plaintiff; (ii) breach of this duty; (iii) resultant injury to plaintiff; and, (iv) a causal relationship between defendant's conduct and plaintiff's injury.
Applying these elements to the individual complaints of Herman and Seymour Sprayregen, I find them woefully deficient. The complaints are void of any allegations whatsoever concerning what, if any, relationship existed between Herman, Seymour and the law firm of Marshall Bratter. Indeed, they do not contend, nor could they on the facts of this case, that there existed any attorney/client relationship between them and Marshall Bratter.3 Absent such relationship they have failed to allege any basis upon which a duty owed by Marshall Bratter to Herman and Seymour may be founded. Consequently, their complaints, as against Marshall Bratter, must fall.
Turning to Gerald Sprayregen a different analysis obtains. It appears that Marshall Bratter represented Gerald Sprayregen between September 1970 through February 1971. (See Third-Party Plaintiff's Exhibit A). Thus, he has established a relationship sufficient to state a claim for negligence. The question remains, however, whether a theory of negligence is sufficient to support a claim of contribution4 in the instant action.
It is now settled that contribution is a remedy which is available to defendants guilty of...
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