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RADIATION DYNAMICS, INC. v. GOLDMUNTZ

March 5, 1971

RADIATION DYNAMICS, INC., Plaintiff,
v.
Lawrence GOLDMUNTZ, Philip A. Fisher, individually and under the trade name and style of Fisher & Co., Hollybrook Co., John M. Hollern, Conley Brooks, individually and under the trade name and style of Allbrook Co., Defendants


Pollack, District Judge.


The opinion of the court was delivered by: POLLACK

DECISION

POLLACK, District Judge.

 On July 15, 1964 the plaintiff employed Smith, Barney & Company, who are investment bankers, advisers and stockbrokers, as plaintiff's agents to find a purchaser for and to sell on plaintiff's behalf 2800 shares of TRG stock at $46 a share upon a private offering and investment letter basis.

 Defendants' Exhibit 301 in evidence, the letter of July 15, 1964, from Radiation Dynamics, Incorporated to Smith, Barney & Company, Inc., reads in pertinent part:

 
"Pursuant to our conversation today and subject to our acquiring said stock as aforesaid, we authorize you to sell on our behalf 2800 shares of TRG at $46 per share upon a private offering and investment letter basis.
 
"We agree to pay to you a standard New York Stock Exchange commission upon any sales made by you."

 Plaintiff had agreed to acquire these shares together with other portfolio assets of deVegh International Corporation, Inc., in exchange for plaintiff's capital stock.

 The TRG stock was valued at the same price, namely $46 a share, in that exchange. The plaintiff was badly in need of cash for current working capital and the TRG stock was not registered, was restricted from public sale or distribution and could only be sold in a private placement subject to an investment letter from the purchaser.

 The brokers recommended to two Minneapolis clients for whom they furnished investment advisory services that they should purchase the stock for certain trust accounts which the Minneapolis people managed. The latter agreed to buy the stock and the brokers sold and delivered the stock to them in or about August 1964 charging a commission on the sell side and also on the buy side as well, apparently on a disclosed dual agency basis.

 The plaintiff now sues the Minneapolis purchasers claiming that through the plaintiff's agents and brokers the Minneapolis defendants became privy to material inside information concerning a merger in process of negotiation by TRG with Control Data Corporation.

 The plaintiff contends that the Minneapolis defendants as tippees should have abstained from the purchase and not having either disclosed their material inside knowledge to plaintiff or abstained from buying are chargeable with a Rule 10b-5 *fn1" fraud on the plaintiff.

 Plaintiff seeks damages claiming the difference between the selling price and some other amount to be found by the triers of fact.

 At the close of the plaintiff's case the Minneapolis defendants moved to dismiss the complaint against them. They also had pending a motion made before the trial for summary judgment under Rule 56 which they were given leave to renew and which they did renew at the commencement of the trial. Decision was reserved and it is now renewed at the close of the entire case on an application for a directed verdict.

 The plaintiff has failed to produce a scintilla of evidence or any inference which could be drawn from evidence inculpating the Minneapolis defendants on any fraud on the ...


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