The opinion of the court was delivered by: PLATT
Defendants, LAZARD FRERES & CO. and FELIX G. ROHATYN, have made a motion for an order pursuant to Rule 56 of the Federal Rules of Civil Procedure granting summary judgment dismissing the complaint on the ground that the claims of the plaintiff contained therein are time barred under Section 13 of the Securities Act of 1933 (15 U.S.C.A. § 77m).
Plaintiff's complaint which was filed on April 15, 1974, alleges that the defendants violated Section 11 of the Securities Act of 1933 (15 U.S.C.A. § 77k) in connection with the registration and public offering of one million shares of Cumulative Preferred Stock, $5.00 Convertible Series O of International Telephone and Telegraph Corporation ("ITT"), which plaintiff claims was sold to the public on April 27, 1971.
Plaintiff's first claim in his complaint is on behalf of himself and his second claim purports to be brought on behalf of himself and "all persons who purchased said securities that were the subject of the aforesaid registration statement from the defendants or their agents pursuant to Rule 23(b)(3) F.R.C.P. and have sustained a loss."
In his claims plaintiff alleges that he believes that the Internal Revenue Service ruling that the acquisition by ITT of Hartford Fire Insurance Company would not result in a capital gains tax being imposed upon Hartford shareholders who exchanged their Hartford stock for ITT securities "was obtained by a misleading application." Plaintiff further alleges that the aforesaid registration statement was false and misleading in that it omitted material facts, namely, that the application for the aforesaid Internal Revenue Service ruling was obtained on the basis of a misleading application and that accordingly the aforesaid ruling was subject to revocation with resulting adverse publicity to ITT and a potential liability of $35,000,000 to $40,000,000 to Hartford stockholders who exchanged their stock for ITT securities.
Plaintiff also alleges that he purchased five shares of the ITT Series O stock on February 15, 1973 for $464.04 and that he did not know of the omission of the aforesaid material facts and could not have known thereof in the exercise of reasonable diligence "since the revocation of the aforesaid ruling was not even announced until March of 1974."
For himself plaintiff claims damages in the amount of the decline in the value of his five shares from $464. to approximately $265 and for the class the total amount of "claims proved by all members" in addition to "an amount sufficient to reimburse plaintiff" for his "reasonable expenses" and for his "reasonable attorneys and accountants fees".
Defendants claim that since plaintiff's complaint was filed more than three years after the ITT Series O stock "was bona fide offered to the public", plaintiff's claims are time barred.
Defendants' statement filed pursuant to Rule 9(g) recites the pertinent facts as follows:
"1. The complaint in this action was filed with this Court on April 15, 1974.
"2. In 1971, Lazard and Kuhn, Loeb & Co., another New York investment banking firm (hereinafter referred to as the 'Representatives') managed a group of investment banking firms which acted as underwriters of the offering of one million shares of International Telephone and Telegraph Corporation Cumulative Preferred Stock, $5.00 Convertible Series O (the 'Series O Stock'). Additionally, Lazard participated in the underwriting in the amount of 110,250 shares.
"3. On March 18, 1971, International Telephone and Telegraph Corporation ('ITT') filed with Securities and Exchange Commission ('SEC') a Registration Statement covering the one million shares of Series O Stock.
"4. Subsequent to the filing of the Registration Statement and before its effective date, Lazard and the other underwriters orally solicited from various potential investors 'indications of interest' in the purchase of shares of the Series O Stock when, as and if they were issued. Additionally, Lazard and the other underwriters distributed to various selected dealers and banking institutions, under cover letters dated March 18, 1971, copies of the Preliminary Prospectus. By April 9, 1971, the Representatives had effected distribution of in excess ...