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IOTA INDUS. v. FRIEDLANDER

April 21, 1977.

IOTA INDUSTRIES, INC. (formerly known as Commonwealth United Corporation), a Delaware Corporation, et al., Plaintiffs,
v.
George A. FRIEDLANDER et al., Defendants.



The opinion of the court was delivered by: POLLACK

OPINION AND DECISION

POLLACK, District Judge.

 This suit is posited on alleged violations of the federal securities laws which are claimed to have tainted a purchase and sale agreement of March 11, 1970 that conveyed the assets of the real estate division of plaintiff Iota Industries, Inc.'s predecessor ("Commonwealth") to defendant Exeter Equities for allegedly inadequate consideration. Rescission, a constructive trust, damages and legal fees are sought by plaintiffs.

 The affirmative defense of a prior release was asserted by defendants George A. Friedlander, Robert B. Friedlander, Roger K. Soderberg, Exeter Equities, T.H.E. Investment Corp., and Sidney Kibrick. Every one of those defendants received the release relied on herein as a bar to this suit. On consent of all parties the separate issue of release was heard at a bench trial pursuant to Fed.R.Civ.P. 42.

 Plaintiffs have voluntarily discontinued this suit heretofore as against all defendants except the Friedlanders, Soderberg, Exeter Equities, and T.H.E. Investment Corp. ("defendants" or "Exeter defendants" hereafter). For the reasons appearing in this opinion, the present suit is barred as against all these remaining defendants by the asserted release; accordingly, judgment is to be entered in favor of defendants and dismissing the complaint.

 The trial consisted primarily of jointly stipulated findings of fact and production of documentary evidence. Plaintiffs presented no witnesses. Defendants presented the testimony of the attorney who represented Commonwealth in the Land and Crawford litigations mentioned hereafter and of defendant Soderberg.

 The release upon which defendants rely was given to them by Commonwealth on December 22, 1972 and releases them "from all claims which Releasor asserted or could have asserted against Releasee in the actions settled [by two Stipulations of Settlement, dated May 26, and September 29, 1972]." The Stipulations of Settlement disposed of groups of related cases referred to below, including Land v. Commonwealth United Corp., 69 Civ. 3726 (S.D.N.Y.), Crawford v. Commonwealth United Corp., 71 Civ. 637 (S.D.N.Y.) and Albert Fried & Co. v. Seeburg Corp., 69 Civ. 5736 (S.D.N.Y.). The May 26 Stipulation provided in relevant part that, upon court approval, "each Party [to the Stipulation] shall be released of all claims against him by any other Party which are asserted or could be asserted in the Land complaint."

 In 1969, stockholders of Commonwealth United Corporation (the predecessor to Iota Industries, Inc., the plaintiff herein) brought twelve actions variously asserting claims as representatives of a class composed of all stockholders and derivative claims on behalf of the corporation itself. These actions are referred to as the Commonwealth Cases and included a suit by one, Sherelee Land, as plaintiff. Nine of the twelve actions were instituted in the Southern District of New York, two in the Central District of California and one in the Northern District of Alabama.

 At the same time or shortly thereafter, stockholders of Seeburg Corporation brought like class and derivative suits on behalf of all Seeburg stockholders and on behalf of the corporation itself. These actions were instituted in the Northern District of Illinois, the Southern District of New York and the District of Delaware. This group included a suit by Albert Fried & Co. as plaintiff.

 On February 2, 1970 the parties in most of these actions were ordered to show cause before the Judicial Panel on Multidistrict Litigation why these actions should not be transferred for coordinated or consolidated pretrial proceedings under 28 U.S.C. § 1407.

 Finding that these two groups of cases shared substantial common questions of fact and that Commonwealth was the principal defendant in all actions and that there was substantial commonality of claims, issues and defendants, the Multidistrict Panel ordered the transfer of all of the cases to the Southern District of New York for consolidated or coordinated pretrial proceedings, assigning the Honorable Frank H. McFadden of the Northern District of Alabama to handle such proceedings.

 On September 1, 1970 a further action, entitled Jack B. Crawford v. Commonwealth United Corp., brought originally in state court and removed to the United States District Court for the Central District of California, was conditionally transferred by the Multidistrict Panel to the Southern District of New York for consolidated and coordinated proceedings with the other cases mentioned above. The conditional order was thereafter made final.

 Substantial activity ensued in the transferred cases and a settlement plan emerged from the pretrial proceedings. On August 17, 1972 Judge McFadden entered an order, after having held an evidentiary hearing and having conditionally approved the plan of settlement, directing notice to all persons who between October 16, 1968 and August 1, 1969 had purchased Commonwealth securities and to all stockholders of Commonwealth of a settlement hearing and for other purposes stated in the notice.

 The notice briefly summarized as class claims that during the period October 16, 1968 to August 1, 1969, certain defendants in concert and conspiracy embarked upon a course of dealings which operated as a fraud upon plaintiffs and their class, entered into financial transactions which had no legitimate business purpose, disseminated false information, withheld material information and "dressed up" Commonwealth's financial statements which artificially manipulated and influenced the market price of Commonwealth's securities. The notice further stated that the Court had permitted claims to be asserted derivatively by stockholder plaintiffs for the benefit of Commonwealth and that these claims asserted that certain acts and omissions of certain defendants had resulted in or threatened damage to Commonwealth.

 The notice set out terms of the Stipulation of Settlement dated May 26, 1972 which included the provision that any party in the transferred cases not already a party to the Stipulation might become a "New Party" by signing a separate "Stipulation of Concurrence" and making or receiving such settlement contribution as may be negotiated between such New Party ...


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