Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

KELLEHER v. REICH

February 22, 1982

Denis P. KELLEHER, Plaintiff,
v.
Seymour REICH, Edward L. Grayson, Discount Brokerage Corporation and TBK Partners, Ltd., Defendants



The opinion of the court was delivered by: LEVAL

ORDER

My opinion of June 19, 1981, upon which my order of July 27, 1981, is based, is hereby replaced by the opinion I file today. The new opinion reflects the New York Court of Appeals reversal of Dunay v. Weisglass, 78 A.D.2d 444, 435 N.Y.S.2d 265 (1981), as well as correction of typographical errors.

 SO ORDERED.

 OPINION AND ORDER

 Plaintiff brings this action under the federal securities laws, with pendant New York State statutory and common law claims. Plaintiff seeks rescission of a voting trust agreement, restitution of certain common stock, reinstatement to his position as President of defendant Discount Brokerage Corporation (or, in the alternative, damages), and compensatory and punitive damages.

 The defendants have moved for a stay pending arbitration, pursuant to 9 U.S.C. § 3, and for an order directing the parties to arbitrate. Plaintiff contends that all, or at least part, of this action is not properly arbitrable.

 Defendants have demonstrated that the issues in this action should be referred to arbitration. See Nederlandse Erts-Tankersmaatchappij, N. V. v. Isbrandtsen Co., 339 F.2d 440, 441 (2d Cir. 1964); Miletic v. Holm & Wonsild, 294 F. Supp. 772, 775 (S.D.N.Y.1968). Defendants' motion is therefore granted. 9 U.S.C. §§ 2, 3 (1976).

 Allegations in Plaintiff's Complaint *fn1"

 The facts, as alleged in the complaint, are as follows:

 Defendant Discount Brokerage Corporation, organized in 1976, is a brokerage firm that buys and sells securities, charging discounted commission rates. It is a member corporation of the New York Stock Exchange (N.Y.S.E.). Plaintiff was its Chief Executive Officer. In October of 1976, plaintiff and defendants Reich and Grayson and others contributed capital to Discount and received shares of its common stock.

 Tweedy Browne Clearing Corporation (TBCC), Discount's wholly owned subsidiary, is a clearing house that Discount formed to clear its transactions so as to avoid having to pay commissions to a New York Stock Exchange member broker. In late fall 1976, defendant TBK Partners, Ltd., (TBK) contributed capital to TBCC; in return, TBK received the benefit of TBCC's clearing services and a share in Discount's profits.

 In the winter of 1977, TBK contributed $ 500,000 to TBCC's capital account; this contribution was to be for a six month period. In the summer and fall of 1978, Reich, supposedly acting on behalf of Discount's shareholders, negotiated a deal with TBK under which TBK was to receive a fifteen percent equity interest in Discount in return for its capital contribution to TBCC. The agreement provided that if this transfer of shares was not consummated, TBK's capital contribution to TBCC was to be returned to it.

 Reich, with Grayson's knowledge and consent, induced plaintiff to enter into a voting trust agreement (the VTA) with Reich and Grayson, to enter into a shareholders' agreement with all of Discount's common stock owners, and to sell part of his voting stock in Discount to TBK.

 This inducement, according to plaintiff's allegations, was fraudulent, the real purpose of the VTA having been to enable Reich and Grayson to deprive plaintiff of effective participation in Discount's management, and to eventually oust ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.