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MARX & CO. v. DINERS' CLUB

September 23, 1975

MARX & CO., INC., et al., Plaintiffs,
v.
The DINERS' CLUB, INC., et al., Defendants, v. William D. FUGAZY and Louis V. Fugazy, Third-Party Defendants. William D. FUGAZY and Louis V. Fugazy, Plaintiffs, v. The DINERS' CLUB, INC., et al., Defendants, Marx & Co., Inc., et al., Additional Defendants on the Counterclaims


Robert J. Ward, District Judge.


The opinion of the court was delivered by: WARD

ROBERT J. WARD, District Judge.

Plaintiffs commenced these actions in 1970 and 1972, respectively, alleging, inter alia, that defendant The Diners' Club, Inc. ("Diners'") breached a contract to register certain unregistered Diners' stock held by them. In addition, plaintiffs asserted two claims alleging violations of § 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)), and Rule 10b-5 promulgated thereunder. Defendants denied plaintiffs' allegations and asserted various counterclaims. Following a trial which began on May 6, 1975 and concluded on May 28, 1975, the jury returned a verdict for plaintiffs on their contract claim and on defendants' counterclaims, awarding a total of $533,000 in damages on the former. The Court dismissed one of the plaintiffs' § 10(b) claims at the end of their case and the jury returned a verdict for defendants on the other § 10(b) claim.

 Diners' moves pursuant to Rules 50 and 59, Fed.R.Civ.P., for judgment notwithstanding the verdict on plaintiffs' contract claim or, in the alternative, for a new trial or remittitur. In addition, defendants Diners' and Diners' World Travel, Inc., formerly known as Diners'/Fugazy Travel, Inc. ("DWT") move for judgment notwithstanding the verdict and a new trial with respect to their counterclaims.

 Defendants base their motion for judgment notwithstanding the verdict on the grounds that plaintiffs failed to produce sufficient evidence to meet their burden of proof; that the verdict of the jury necessarily involved an erroneous determination of law; and that the evidence was overwhelmingly in their favor. A new trial is sought on the grounds that the verdict is contrary to the weight of the evidence; and that the Court made prejudicial errors in its rulings during trial, principally in permitting Stanley Friedman, a witness not identified in the pre-trial order, to testify as a rebuttal witness. A new trial or remittitur is sought on the ground that the jury made an erroneous determination of plaintiffs' damages. For the reasons set forth below, the motions are in all respects denied.

 The facts, briefly, are these. Under an agreement dated October 10, 1967, Diners' acquired the assets of Fugazy Travel Bureau for unregistered Diners' stock and other consideration. Paragraph 10.2(b) of the agreement provided that Diners', upon receipt of notification from plaintiffs that they desired registration, would promptly file a registration statement for the unregistered Diners' stock held by plaintiffs and would use its best efforts to cause the registration statement to become effective. *fn1"

 On April 16, 1969, plaintiffs wrote a letter requesting Diners' to file a registration statement with respect to their Diners' stock. Instead of directing the preparation of a registration statement, George Faunce, then president of Diners', forwarded a copy of plaintiffs' letter containing the following notation to Harold Johnson, one of its directors, and executive vice president of The Continental Insurance Company ("Continental") which held a controlling interest in Diners':

 
"Harold -- Alfred [Bloomingdale, Diners' board chairman] asked me to send this to you and [Victor] Herd [Continental's board chairman]. He wants to know your position -
 
George"

 A letter dated April 24, 1969 from Johnson to Herd enclosing a copy of the April 16, 1969 request contained the following statement:

 
"The attached letter, I believe, is an effort on the part of Otto Marx, Jr. to have Continental purchase his shares.
 
"To my way of thinking there is nothing that needs to be done at the present time. Mr. Bloomingdale may discuss this at a later date but my reaction is to do nothing."
 
(emphasis added)

 Although Diners' was requested to file a registration statement in mid-April, 1969, it is undisputed that Diners' did nothing to register the stock until late July, 1969, more than three months after receiving the letter requesting registration and almost two months after its financial statement for the fiscal year ended March 31, 1969 became available. From the foregoing, the jury could reasonably infer that Diners', with the urging and approval of Herd and Johnson, decided to do nothing and thereby avoid its obligations under paragraph 10.2(b) of the agreement.

 It is clear that the motion for judgment notwithstanding the verdict on the ground that it is against the weight of the evidence and that the verdict of the jury necessarily involved an erroneous determination of law must be denied. The standard on such a motion is the same as the standard for a directed verdict, that is, whether there was evidence from which the jury could have properly found for plaintiff, against whom the motion is made, viewing the evidence most favorable to him and giving him the benefit of all reasonable inferences. 9 Wright and Miller, Federal Practice and Procedure § 2524 (1971); ...


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