Tcherepnin v. Franz

• Decision Date: 22 March 1966
• Docket Number: No. 64 C 1285.,64 C 1285.
• Citation: 277 F. Supp. 472
• Parties: Alexander TCHEREPNIN et al., Plaintiffs, Frank Balczo et al., Additional Plaintiffs 2/7/66, v. Robert FRANZ et al., Defendants, J. J. Lowenthal et al., Intervenors, Securities and Exchange Commission, Intervenor Amicus Curiae.
• Court: U.S. District Court — Northern District of Illinois

277 F. Supp. 472

Alexander TCHEREPNIN et al., Plaintiffs Frank Balczo et al., Additional Plaintiffs 2/7/66, v. Robert FRANZ et al., Defendants J. J. Lowenthal et al., Intervenors Securities and Exchange Commission, Intervenor Amicus Curiae.

No. 64 C 1285.

United States District Court N. D. Illinois, E. D.

March 22, 1966.

A. Bradley Eben, Solomon Jesmer, Arnold I. Shure, Chicago, Ill., for plaintiffs.

Seymour I. Burton and J. Richard Bockelman, Chicago, Ill., for Louis Kwasman, H. Hartman, Dennis Kirby & City Savings Assn.

William G. Clark, Chicago, Ill., for Jos. Knight, Justin Hulman.

Rosenthal & Schanfield, Chicago, Ill., for Franz, Pasko, Talarico, Jr., Hoover, Kramer, Mensik & Sprincz.

Raymond, Mayer, Jenner & Block Chicago, Ill., for City Savings, L. Kwasman, H. Hartman and Dennis Kirby.

Maurice J. Walsh, Chicago, Ill., Intervenors.

David Ferber, Washington, D. C., and Thomas B. Hart, Chicago, Ill., Robert Franz, Sigel & Albin, Chicago, Ill., amicus curiae, Securities & Exchange Comm.

CAMPBELL, Chief Judge.

MEMORANDUM AND ORDER

Plaintiffs are presently before the court on a motion seeking the appointment of a receiver.

Since I assumed jurisdiction in this case on January 17, 1966 I have had the benefit of extensive oral argument by the many able attorneys representing the various parties. Additional briefs and pleadings, in the main addressed to the present motion for the appointment of a receiver, have been filed and I have had the opportunity to review extensively the Peat, Marwick, Mitchell and Company April 30, 1964 Audit report, which prior to my order of February 21, 1966 (Transcript of Proceedings, February 21, 1966, p. 24) was filed of record but impounded. On the basis of this exhaustive review of what conservatively can be characterized as a most complex and extensive matter— both factually and legally—I make the following observations in deciding the pending motion.

When initially making my decision to assume jurisdiction over this case I was faced with deciding what I acknowledged to be a difficult, far reaching and close legal issue of first impression. I refer to the issue of whether or not Illinois savings and loan depositors or investors enter into an investment contract and in effect are purchasers of securities within the meaning and provisions of the Exchange Act. 15 U.S.C. § 78a et seq.

Normally, when making such an important interlocutory decision without the benefit of some prior judicial authorities, preferably from our own Seventh Circuit, I have looked with favor upon motions requesting a § 1292(b) interlocutory appeal. (Radiant Burners Inc. v. American Gas Association et al., 207 F.Supp. 771 and 209 F.Supp. 321, Rev. in 320 F.2d 314, 98 A.L.R.2d 228, cert. den. 375 U.S. 929, 84 S.Ct. 330, 11 L.Ed.2d 262.) However, in the instant case I denied defendants' motions requesting permission to file such an interlocutory appeal. In denying defendants' motions I explained that my main concern was the plight of the individual investors. (Transcript of Proceedings, January 21, 1966, pp. 17-20)

Then, as now, their protection and the expeditious resolution of all of the issues presently standing in the way of a final and fair total liquidation of City Savings and Loan Association was my objective. I was then impressed, as I am now even more impressed, with what appears to be a confusion in efforts, possible conflicting interests, and the possible resulting subjugating of investors' claims to the interests of others. A final and total resolution and payment of investors' claims appears long overdue.

Plaintiffs, certainly not by design, by their present motion for appointment of a receiver place an additional burden and obstacle in the way of my expediting this matter. The mere granting of the motion and appointment of a receiver— standing alone—would, of course, cause no additional delay, for that matter I believe the converse would result; the resolution of the cause would most probably be expedited. However, the granting of the motion would necessarily, and quite properly, serve to permit defendants the interlocutory appeal heretofore denied them. (Title 28 U.S. C.A. § 1292(a) (2) The delay I sought to preclude would thus prove unavoidable.

Accepting this necessary result, delay, albeit procedurally proper, is inevitable. The main cause for my denying defendants' earlier motions for interlocutory appeal is therefore no longer controlling.

A motion in Federal Court for the appointment of a receiver should be granted only under the extremist of circumstances. In Connolly v. Gishwiller, 162 F.2d 428 our Seventh Circuit Court of Appeals, although affirming the lower court's appointment of a receiver stated: "It is true, of course, the power to appoint a...