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UNITED STATES EX REL. SCHIFF v. ATLANTIC BASIN IRO

DISTRICT COURT, E.D. NEW YORK


January 6, 1944

UNITED STATES et rel. SCHIFF et al.
v.
ATLANTIC BASIN IRON WORKS et al.

The opinion of the court was delivered by: BYERS

BYERS, District Judge.

On Motion for Reargument.

Reargument is sought of the motion to dismiss the complaint for failure to state a claim upon which relief can be granted (Federal Rules of Civil Procedure, Rule 12(b) (6), 28 U.S.C.A. following section 723c, which was denied as stated in opinion dated December 10, 1943.

 Attention is called to the court's reliance upon quotations from opinions in the cases of Leimer v. State Mutual Life Assurance Co., 8 Cir., 108 F.2d 302, and Tahir Erk v. Glenn L. Martin Co., 4 Cir., 116 F.2d 865, in neither of which was the court called upon to construe the requirements of Rule 9(b), touching the necessity for pleading the circumstances said to constitute fraud. So much is true, as was understood at the time. It was also understood that, if this plaintiff has averred alleged facts which would enable him to offer supporting testimony which if unrefuted would entitle him to some measure of recovery, it could not be said that he had failed to state a claim upon which relief could be granted.

 The effort was made to point out that he has alleged in a hazy and nebulous fashion that false claims were presented to the Government and allowed, to its own loss, arising out of a contract with the corporate defendant to repair certain designated vessels.

 It is true that the allegations are not precise and that the alleged circumstances are vague in outline and definition, but it was and is the opinion that the plaintiff should not be denied his day in court for what it is worth.

 The Court of Appeals for this Circuit has expressed the following views concerning a comparable pleading filed in a bankruptcy case (Levenson v. B. & M. Furniture Co., 120 F.2d 1009): "The petition at bar does not indeed allege the fraud with as much particularity as is desirable. But the omission is not fatal; it is only a pleading, and Rule 8(f) * * * demands that it 'shall be so construed as to do substantial justice.' Its general purport is plain enough, and if the debtor had really any doubt about its meaning -- which plainly it had not -- it had, and still has, relief under Rule 12(e); the day has passed when substantial interests stand or fall for such insubstantial reasons."

 To avoid further misunderstanding, it should be added that in this case it may well be true that the corporate defendant does not know what particular contract is referred to in the complaint; or in what respects its accounting methods were allegedly false and untrue; or what materials and supplies were falsely asserted by it to have been purchased as alleged; or what sum or sums were allegedly falsely presented and charged. Under such a state of facts, the language quoted would not apply to this corporate defendant's position, but the general theory of the decision seems to point to the necessary disposition of this motion.

 Fortunately this ruling will have no effect beyond the instant litigation, since it appears from the daily press that the statute invoked by the plaintiff has been repealed since the original disposition of the motion, and hence this particular type of litigation will soon come to an unlamented end.

 Sight has not been lost of the manifest difference between requiring a suitor who asserts that he himself has been defrauded, to designate with particularity the precise fraud of which he complains; and the case of one who proclaims, ostensibly in the public interest, that the Government has been defrauded and that he has come to its rescue as a litigant on its behalf.

 Perhaps as to him it may be argued that it is not a simple matter to recite the particulars of the alleged fraud which he asserts. The answer, I think, is that he must indicate with clarity and reasonable accuracy just what fraud he is talking about, or hold his peace.

 Opinions may differ as to whether this plaintiff has met such a requirement. Pressently the inclination is slightly to the effect that he has come close enough to doing so, to save his complaint against the present motion.

 I suppose the test will come when he undertakes to comply with the order for the bill of particulars. If he cannot put in plain and precise terms the exact fraud that he is talking about, without assistance by way of discovery, it would seem then to follow that he lacks the capacity to present a claim upon which relief can be granted. The disposition of this motion is without prejudice to the making of any new motion of which the defendants may be advised, in the future, addressed to the pleadings.

 Motion for reargument denied.

 Settle order.

19440106

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