Strong v. France

• Decision Date: 28 February 1973
• Docket Number: No. 71-1440.,71-1440.
• Citation: 474 F.2d 747
• Parties: Sarame Raynolds STRONG, Plaintiff-Appellant, v. William H. G. FRANCE and the National Association for Stock Car Auto Racing, Inc. ("NASCAR"), Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

474 F.2d 747 (1973)

Sarame Raynolds STRONG, Plaintiff-Appellant, v. William H. G. FRANCE and the National Association for Stock Car Auto Racing, Inc. ("NASCAR"), Defendants-Appellees.

No. 71-1440.

United States Court of Appeals, Ninth Circuit.

February 28, 1973.

Jeffrey J. Parish (argued), Frederick P. Furth, San Francisco, Cal., for plaintiff-appellant.

Bruce W. Belding (argued), of Dinkelspiel & Dinkelspiel, San Francisco, Cal., Nathan Lewin, of Miller, Cassidy, Larroca & Lewin, Washington, D.C., for defendants-appellees.

Before CHAMBERS and CHOY, Circuit Judges, and JAMESON,^* District Judge.

JAMESON, District Judge:

This is an appeal from a final judgment, entered pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, dismissing the complaint of plaintiff-appellant, Sarame Raynolds Strong, as against the defendants-appellees, William H. G. France and the National Association for Stock Car Auto Racing, Inc. (NASCAR), following an order granting appellees' motion for summary judgment pursuant to Rule 56(c).¹

The complaint alleges violations of federal securities laws² stemming from an enterprise involving the creation of a corporation, Sportscaster, Incorporated, for the operation of a "closed circuit" radio broadcasting system at sporting events (golf matches, auto races, horse races) and the rental of small receivers to spectators to provide them with comments, interviews and additional information on the events. The chief promoter of the venture was the defendant Oscar Fraley.³

Shortly after the complaint was filed, the deposition of Sally Strong,⁴ the plaintiff, was taken, followed by answers of France, both individually and as president of NASCAR, and the defendants Fraley and H. Earle Barber to interrogatories submitted by plaintiff, and affidavits of plaintiff and France, with numerous exhibits. On the basis of these documents, France and NASCAR moved for dismissal and summary judgment. This motion was denied, "expressly without prejudice", following a hearing on January 13, 1969 at which the court stated that he denied the motion with "great reluctance" and "unless a very good showing was made" by the plaintiff on further discovery "the motion to dismiss ought to be granted."

In March, 1969 the depositions of France, Fraley⁵ and Barber were taken. There was no further discovery, and after a lapse of ten months the motion for summary judgment was renewed. An order was entered July 3, 1970 granting the motion, the court finding that "the acts attributed to defendants France and NASCAR are so remote from the plaintiff that no genuine issue as to any material fact exists which would support liability as to them."

In its order the trial court recognized that while, in ruling on motions for summary judgment, "all inferences of fact must be drawn in favor of the party opposing the motion (United States v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) and * * * the moving party has the burden of showing that he is entitled to judgment as a matter of law, (3 Barron and Holtzoff, Rules Edition, 149), it is also true that `the opposing party ... must show that evidence is available which would justify a trial ... (ibid.). And `courts should not be unduly reluctant to grant summary judgment when a trial would serve no useful purpose and the movant is entitled to judgment as a matter of law.' (6 Moore's Federal Practice para. 56.02(1))."

The motion here was supported by affidavits, answers to interrogatories, and depositions as provided in Rule 56(e) of the Federal Rules of Civil Procedure. Accordingly appellant "may not rest upon the mere allegations of * * * (her) pleading," but her response, by affidavits or otherwise, "must set forth specific facts showing that there is a genuine issue for trial."⁶

Appellant contends on this appeal that:

"* * * there are four separate but interrelated roles played by Mr. France and NASCAR on which their liability to Mrs. Strong is based. These are: (1) that Mr. France agreed to be a director of the Defendant corporation, Sportscaster, Inc., which issued stock to Mrs. Strong; (2) that France acted as a promoter of the venture and agreed to invest in the Defendant corporation; (3) that France and NASCAR were aiders and abettors of Defendants Fraley and Sportscaster, Inc.; and (4) that France and NASCAR were controlling persons of Defendants Fraley and Sportscaster, Inc. In addition, Appellant contends that Appellees\' motion was granted prematurely in that Appellant has not completed discovery."⁷

Factual Background

It is clear from appellant's deposition that she has never met France and has never had any "direct communication either by letter or telephone" with him or anyone at NASCAR. Strong dep. 5, 24. She did not at any time give any money or check to France or NASCAR.⁸ Strong dep. 50.

Appellant first met Fraley in 1962. She became associated with him in "putting out programs for sporting events", "put up money" for a closed circuit television broadcast of the Liston-Clay fight and "advanced money" for a golf tournament. She also "lent him money for himself when he was in between jobs", mentioning one loan of $8,000.00⁹ in early 1964 and another of $1,500.00 in 1963. Strong dep. 6-9.

Early in 1965 at a golf tournament in Miami, Florida, appellant and Fraley met Tom Burke, who was broadcasting at the tournament. According to appellant, she next met Fraley and Burke at a tournament in Pennsylvania where Fraley and Burke were "forming their own company", and two weeks later in New York, where both discussed the business venture with appellant and solicited an investment from her. Strong dep. 9-12.

Appellant testified that in this conversation Fraley said "he would need anywhere between 50 (sic) and $100,000 for the whole thing to go." Appellant agreed to "advance money if he needed it for the company." She "didn't put any limit on it because he said that he was going to get some of his wealthy friends to put up the money and that I would put up—he was not going to put up any money himself. But that I would put up as if it was his money and I would have a share in the partnership." Strong dep. 17.

At the same meeting Fraley told appellant that he had talked to France and "could get the contracts for racing." She also testified that about three weeks later, when appellant was in Beirut, Lebanon, Fraley phoned her that France "thought this was wonderful and that it would go", and he would use his connections with different people involved with the Racing Association and "would put a great deal of money in the company." Strong dep. 12-13. From time to time thereafter Fraley made a number of written and oral statements to appellant to the effect that France and NASCAR had agreed to support, promote and heavily invest in Sportscaster. There is no evidence that either France or NASCAR were aware of or authorized any of these statements. Other letters from Fraley to appellant cast some doubt on France's participation in the venture.¹⁰

On October 25, 1965 NASCAR and Fraley entered into a written contract whereby "NASCAR subject to the further approval by the respective promoters of NASCAR events, does hereby grant to Oscar Fraley and/or his Corporate Assignee, Racecaster, Inc., an exclusive contract for an on-course gallery communication system for a period of five years, provided only that Fraley shall in fact service such first event by not later than June 30, 1966." It was understood that the agreement "may be terminated by NASCAR at any time."¹¹

On March 18, 1966 France, as president of NASCAR, wrote a letter addressed "To Whom it May Concern" reading:

"This letter is to serve as confirmation that Mr. Oscar Fraley has a five year agreement with NASCAR for his sportscaster receiving system at the Association\'s races, subject to his agreements with the track operators.

"This is to further confirm that, to my knowledge, Mr. Fraley is a man of unquestionable character and reliability. He has a vast reputation in the field of sports, having served as syndicated columnist for United Press International and Associated Press, the nation\'s two largest wire services."

The certificate of incorporation of Sportscaster, Incorporated was filed on October 18, 1966 listing Oscar Fraley, H. Earle Barber, an attorney employed by Fraley, and Beatrice S. Smith, Barber's secretary, as incorporators and directors. Fraley was named president, Smith, vice-president, and Barber, secretary-treasurer. Subsequently stock certificates were issued to appellant (for an investment of $9,000) and six other persons (for investments totaling $18,000). No stock was issued to France or NASCAR.

No license was obtained from the Federal Communications Commission for the radio transmission and the enterprise has never been in operation.

Appellant claims that she invested a total of $72,699.41 in Sportscaster. It appears from her deposition, however, that this includes approximately $25,000 advanced to Fraley prior to learning of the proposed Sportscaster venture. Strong dep. 8-9.

With this background we turn to a consideration of the four bases of alleged liability on the part of France and NASCAR.

France as Director

France admits that he told Fraley "when he got his corporation going, he could use my name, and I would serve as director on the company." France dep. 87. Fraley, on March 17, 1966 wrote France to "acknowledge receipt from you of $1,000.00 for stock in Sportscaster, Inc., and permission to use y our (sic) name on the Board of Directors."¹² Plf. Ex. 4, France dep.

There is no evidence that France was ever appointed a director, or acted as one, or that Fraley ever "got his corporation going." There can be no fiduciary liability where there is no duty, express or implied, to act as a fiduciary. Appellant's reliance on Moerman v. Zipco, Inc., 302 F.Supp. 439, 447 (E.D.N.Y. 1969) is misplaced. There the persons held liable had "insisted on being...