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RUTKIN v. REINFELD

June 22, 1954

RUTKIN
v.
REINFELD et al.



The opinion of the court was delivered by: MURPHY

These are motions by defendants under Rules 50(a) and 50(b), Fed.Rules Civ. Proc., 28 U.S.C.A., (1) to dismiss the complaint and supplemental complaint and for a directed verdict at the close of plaintiff's case, (2) for a directed verdict at the close of all of the evidence, and (3) after verdict by the jury for plaintiff, to set aside that verdict and enter judgment on one directed for defendants. Judgment having been reserved on the first two sets of motions, all three are considered in this opinion.

Plaintiff sued to recover $ 22,000,000 in damages resulting from a single conspiracy among defendants affecting a partnership of which plaintiff was a member and a corporation in which he had an interest. In a supplemental complaint, plaintiff sought $ 500,000 more on account of, among other things, his conviction for attempted income tax fraud and evasion which plaintiff claimed was procured, as part of the same conspiracy, by perjured testimony given and procured by defendants and influence improperly exercised by them over certain federal employees. On motion by defendants during plaintiff's case, this count in the supplemental complaint was dismissed and no evidence supporting it was received on the ground that this court was collaterally estopped in this civil cause by the judgments of federal courts on this issue in the criminal action. *fn1" Defendants denied these claims generally and pleaded as affirmative defenses a general release and the statute of limitations.

 Plaintiff alleged that he and defendant Joseph Reinfeld had been partners for a long time prior to May, 1931. According to his complaint, plaintiff and Joseph Reinfeld had equal shares in a transaction involving L. L. & B. Distilleries, Ltd. (hereafter called L. L. & B.). In May, 1931, Joseph Reinfeld negotiated with representatives of L. L. & B. in order to finance the company and buy a controlling interest in it. On July 2, 1931, Joseph Reinfeld entered into an agreement with L. L. & B. representatives, on behalf of himself and plaintiff, as partners, to invest $ 500,000 in L. L. & B. over a period of time, including the purchase of a first mortgage of $ 25,000 and a second mortgage of $ 50,000, upon a distillery, located at Chatham, Ontario, Canada. Plaintiff claimed that Joseph Reinfeld purchased the first mortgage, had it transferred to his nominee, and later made partial payments on the second mortgage. About July 3, 1931, Joseph Reinfeld and defendants Samuel and Allen Bronfman are alleged to have formed a conspiracy whereby Reinfeld was to break his agreement with L. L. & B., unjustly enrich the conspirators and deprive plaintiff of his share of the profits of the agreement and, as a further objective, all of the conspirators were to conceal their activities from plaintiff. In order to induce Joseph Reinfeld to break the agreement with L. L. & B. representative, defendants Samuel and Allen Bronfman are alleged to have delivered to Reinfeld, or his nominee, shares of stock in Distillers Corporation-Seagrams, Ltd. (hereafter called Distillers-Seagrams) and other benefits and emoluments unknown to plaintiff, and that all of them agreed to keep from plaintiff any information regarding these shares and other benefits. The breach of the agreement with L. L. & B. by Joseph Reinfeld was allegedly of benefit to the Bronfmans because L. L. & B. was in direct competition with Distillers-Seagrams.

 Plaintiff claimed that pursuant to this conspiracy, the L. L. & B. distillery was sold in foreclosure of the second mortgage and that the L. L. & B. stock, previously acquired by Joseph Reinfeld, was sold to a nominee of the Bronfmans, and that the Bronfmans agreed to indemnify Joseph Reinfeld against any loss and in fact paid him about $ 70,000 for counsel fees and other expenses incurred in the transaction.

 Thereafter, according to plaintiff, Joseph Reinfeld told him that the partnership interest in L. L. & B. had been sold to the Bronfmans for the amount invested by the partnership in L. L. & B. and that all transactions conducted by Reinfeld on behalf of the partnership had been carried out in good faith and for adequate considerations. Plaintiff alleged that these representations were false to the knowledge of Reinfeld and were made by him, with knowledge of the Bronfmans, to induce plaintiff to rely on them and to prevent him from inquiring into the details of the transactions. Plaintiff claimed that he relied upon these representations and that he did not discover their falsity until May 27, 1946. Plaintiff further alleged that he had never received any share in the benefits obtained by Reinfeld from the Bronfmans and that by reason of this conspiracy he has been damaged in the sum of $ 22,000,000.

 Plaintiff's supplemental complaint alleged, in addition to the dismissed count relating to his conviction, an additional transaction in furtherance of the original conspiracy which caused him damage of $ 500,000. This transaction concerned Browne-Vintners Co., Inc. (hereafter called Browne Vintners Old), a corporation in which plaintiff and defendant Joseph Reinfeld, as partners, allegedly owned a majority stock interest, held as a matter of record under the names of Joseph Reinfeld and other nominees. Pursuant to the original conspiracy the defendants allegedly agreed in December 1940 that Reinfeld would cause the business and assets of Browne Vintners Old to be sold to Distillers-Seagrams for an inadequate price and that the sale would include the transfer of certain agencies then held by Browne Vintners Old for Cointreau, Piper Heidsieck and Remy-Martin. After the sale, Browne Vintners Old was dissolved and the proceeds distributed to its shareholders but certain benefits allegedly accruing to Reinfeld were withheld from plaintiff and he claimed that he did not discover this until after July 1, 1948. The three agencies, Cointreau, Piper Heidsieck and Remy-Martin, were then transferred to defendant Renfield Importers, Ltd., a corporation controlled by defendants Joseph Reinfeld and Harold C. Renfield. Plaintiff claimed that this transfer took place without his knowledge or any consideration to him, and that further this transfer was part of the consideration to Joseph Reinfeld for his breach in 1931 of the agreement with L. L. & B. and for his cooperation with the Bronfmans in eliminating the potential competition which that distillery would have presented for them. Plaintiff alleged that the defendant Renfield Importers, Ltd., acquired these three agencies with full knowledge of the relationship between plaintiff and Joseph Reinfeld and of the fact that their acquisition was in part payment to Reinfeld for his breach of the agreement with L. L. & B. According to plaintiff, Reinfeld fraudulently represented to him and others that no consideration other than the cash mentioned in the agreement of sale had been paid and deliberately concealed the retention and acquisition of the three liquor agencies by Renfield Importers, Ltd., controlled by him and Harold C. Renfield.

 In addition, Reinfeld was claimed to have represented fraudulently the extent of the interests of plaintiff, and others, in Browne Vintners Old, concealed from plaintiff the true value of his interest, and did not disclose to plaintiff other secret considerations and emoluments received by Reinfeld. Reinfeld was also charged by plaintiff with having fraudulently caused him, and others, to execute a general release in exchange for certain payments made by Reinfeld to them, which were represented by Reinfeld to be their proper shares in the proceeds of the sale of Browne Vintner's Old and also to be tax free to them.

 Upon defendants' general denial and affirmative defenses of a general release and the statute of limitations, the issues of fact were tried over a five week period. Referring to the alleged 'one single overall conspiracy' and two transactions (L. L. & B. in 1931, and the sale of Browne Vintners Old in 1940) 'allegedly carried on in furtherance of the one conspiracy', the court left these three main issues upon which the jury was to return a general verdict:

 1. Was there in fact a conspiracy to defraud the plaintiff?

 2. Only if that question is answered in the affirmative, need this second one be decided, viz., Was the relationship of each of the defendants, considered individually and separately, to such combination or conspiracy, such as to make such defendants participants in the conspiracy to defraud?

 3. Only if questions one and two are answered in the affirmative, for some particular defendants, need the third question be decided with respect to such defendants, viz., What amount of money in damages will justly compensate the plaintiff for his losses proximately caused by the participation of the defendants, or some of them, in a conspiracy to defraud?

 In addition the court sought written answers to the following three interrogatories concerning each of the two transactions in event of a general verdict for the plaintiff in order to assist the court in resolving the issue raised by the affirmative defense of the statute of limitations:

 
(1) 'Approximately at what time did any claim plaintiff may have had against ...

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