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HALPERIN v. EDWARDS & HANLY

April 6, 1977

EUGENE HALPERIN, Individually and as Trustee of the Eugene Halperin Trust, Plaintiff, against EDWARDS AND HANLY, BRUCE ADAM, FRANK ARGENZIO, RAYMOND ARONSON, IRWIN BALKAN, HENRY A. BEHRENS, JR., MARTIN BERMAN, IVAN BOESKY, PATRICK BURKE, ROBERT F. CALABRESE, FRANCIS KEVIN CARROLL, BARRY J. BOCKLETT, HENRY J. CAUCEGLIA, DAVID J. COHEN, LEONARD W. COHEN, WILLIAM J. DAYTON, II, BERT G. EDWARDS, HERBERT G. EDWARDS, SHELDON EPSTEIN, GERALD P. FARBER, ALFRED J. FASULO, RICHARD FLYNN, ARTHUR FOOTE, THOMAS R. J. FRANK, GEORGE FRANKE, MICHAEL GARGANO, RALEIGH L. GILBERT, RICHARD GILLMAN, JOHN HECK, SHELLY IVEY, III, EDWARD KELLY, FRANK KENNEDY, JAMES M. KINGSBURY, FREDERICK LAST, HERBERT J. HECK, JOHN W. LEPARDO, JOSEPH M. LEVINE, ALAN S. MAISS, DONALD R. MENG, MERTON J. MITCHELL, THOMAS MURPHY, WILLIAM D. MURPHY, JR., JOHN J. O'CONNELL, HUGH O'HARE, DANIEL G. OLECKNA, ROBERT F. PANDOLFO, HORATIO PATTI, MARTIN E. ROSENFELD, ARTHUR SABER, MICHAEL SCHWARTZ, HERBERT SHANDER, ANTHONY J. SHIELDS, JAMES SHIELDS, JOHN R. SOLAN, JAMES J. STEAD, JR., SIDNEY STEINBERG, LESTER TALBOT, ROBERT PETER TWOHIG, RONALD H. WALTON, MARTIN S. WEINMAN, IRWIN R. WERBOWSKY, RONALD B. WHITING, THEODORE WILLNER, JOHN ZICARI, ROBERT E. ZOELLNER (Edwards and Hanly's general partners as of August 28, 1975, and its general partners during May - July 1970 and May - July 1973). Defendants.


The opinion of the court was delivered by: PLATT

MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS

MEMORANDUM AND ORDER

 PLATT, D.J.

 The plaintiff in this action, Eugene Halperin, invested $100,000 in cash and securities in a limited partnership in Edwards and Hanly. That partnership became insolvent in August of 1975, and the plaintiff sues under provisions of the securities law discussed below.

 Defendant Edwards moves pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(1), (6) for an order dismissing the complaint for failure to specify the circumstances constituting fraud, for lack of jurisdiction over the subject matter and for failure to state a claim. Defendants Carroll, Meng, and Bocklett move pursuant to Federal Rules of Civil Procedure 12(b)(6) to dismiss as to them for failure to state a claim.

 FACTS

 The plaintiff alleges in his complaint that he is 62 years old and was a retired engineer who looked for investment advice to the brokerage firm of Edwards and Hanly.

 In the spring of 1970 the plaintiff talked to Richard Flynn, a general partner in the firm, and to various other partners about investing his entire life savings and inheritance. The defendants recommended that Halperin invest in a limited partnership in their firm.

 The plaintiff alleges that the defendants "fraudulently failed to inform plaintiff that their recommended investment was speculative, risky, and unsuitable for plaintiff, and failed to inform plaintiff that only an individual with sophistication and experience in financial and investment matters could fully appreciate and comprehend the risks involved."

 As a result, on May 29, 1970 the plaintiff became a limited partner in Edwards and Hanly. On July 16, 1970 the New York Stock Exchange Board of Governors approved the plaintiff's admission as a limited partner.

 On August 22, 1972 the partnership agreement was amended to provide for the continuation of business of the firm until September 30, 1977.

 In April, 1973, the plaintiff requested a termination of his limited partnership and a withdrawal of his investment. On June 4, 1973 the defendants told the plaintiff that the rules of the New York Stock Exchange limited the right of partner to withdraw his capital if such withdrawal would impair net capital requirements.

 On July 13, 1973 the plaintiff executed an amendment to his limited partnership agreement which altered his investment to $83,200 in cash and also agreed with the defendants that he could withdraw from the partnership as soon as substitute capital could be found.

 On July 19, 1973 the defendants confirmed the withdrawal commitment and acknowledged a request by the plaintiff to transfer his interest to a trust of which the plaintiff was the settlor and sole trustee. On March 4, 1974 the ...


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