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DELALANDE, INC. v. FINE

August 2, 1982

DELALANDE, INC., Plaintiff,
v.
WILLIAM M. FINE, et al., Defendants



The opinion of the court was delivered by: BRIEANT

MEMORANDUM AND ORDER

 Brieant, District Judge.

 This diversity action was brought by plaintiff, Delalande, Inc. ["Delalande"], on April 1, 1982, the same day on which the defendants herein served a motion for summary judgment in lieu of a complaint on Delalande in New York Supreme Court, New York County. Delalande removed the state action to this Court pursuant to 28 U.S.C. § 1441(c) on April 20, 1982, and it is now assigned to me as a related case, Fine v. Delalande, Inc., 545 F. Supp. 275 [hereinafter the " Fine action"].

 Plaintiff is a Delaware corporation, organized in May of 1980 for the purpose of acquiring the stock of Frances Denney Corporation ["Denney"] from the defendants who were former stockholders of Denney. A holding company, plaintiff is also a wholly-owned subsidiary of Delalande S.A., which is a French company engaged variously in the pharmaceutical, chemical and cosmetics business, and having subsidiaries throughout Continental Europe, Great Britain, Brazil and the United States. (Affidavit of Denis Simonin, Chairman of Delalande, sworn to May 10, 1982, paras. 1-3, contained in Plaintiff's Notice of Cross-Motion, docketed May 12, 1982).

 A claimed breach of the contract dated May 25, 1980 [the "Purchase Agreement"], pursuant to which Delalande acquired the capital stock of the Denney corporation on July 2, 1980, forms the basis of the Delalande and Fine actions. The Purchase Agreement provided that Delalande would purchase the Denney stock for $3,409,000. to be paid in various installments evidenced by a series of non-negotiable notes executed by Delalande and secured by an Irrevocable Letter of Credit issued by Banque Francaise du Commerce Exterieur of New York City. The separate promissory notes were made payable in amounts proportionate to the holdings of each stockholder.

 In accordance with the notes and the Purchase Agreement, the Denney stockholders agreed to indemnify Delalande in the event of breach of certain express warranties and representations as contained in the Purchase Agreement. The maximum aggregate amount of such indemnification by all the stockholders jointly was limited to $1,800,000., with several liability limited to each stockholder's pro-rata share. Upon the filing of any claim of indemnity, the outstanding principal and interest due to the stockholders under the notes would be reduced by the amount of the indemnity claim with the remaining balance payable to each stockholder according to the pro-rata share.

 On February 26, 1982, Delalande gave notice of such an indemnity claim to the former Denney stockholder-defendants seeking to recover $1,800,000. for the alleged breach of certain representations and warranties which are said to have caused damages to Delalande in the amount of $2,592,920.00. By letter dated March 11, 1982, defendants rejected the indemnity claim and demanded compliance with the payment terms set forth in the Purchase Agreement.

 In its action Delalande now seeks, inter alia, a judgment declaring that the purchase price of the Denney stock be reduced, by the amount of its indemnity claim, to $1,609,000.; declaring that the amounts otherwise due and payable under the notes are no longer owed in light of the indemnity claim; and awarding additional affirmative relief against the stockholder-defendants severally based upon claims of anticipatory breach and unjust enrichment.

 As plaintiffs in the Fine action, the former stockholders of Denney seek to recover $1,252,104.45. plus interest and costs, due on March 1, 1982 in accordance with the Purchase Agreement. Despite timely presentment of the Irrevocable Letter of Credit to Banque Francaise du Commerce Exterieur in New York on that date, the Fine plaintiffs assert that defendant Delalande allegedly caused the bank to refuse to honor its letter and failed to meet subsequent demands for payment.

 By motion docketed April 22, 1982, the stockholder-defendants seek the dismissal of the Delalande action pursuant to Rule 12(b), F.R.Civ.P., on the ground that this Court lacks subject matter jurisdiction in that the controversy is not wholly between citizens of different states. Urging that the principal place of business of Delalande is in New York or Pennsylvania, defendants seek the dismissal of the entire action in view of the citizenship of various defendants in each of these respective states.

 It is not disputed and the Court finds that the following defendants are citizens of the state of New York: Edward Koss; Richard E. Deutsch and Norman L. Dolid, as trustees; Marshall Swartwood; Phyllis Wagner; Richard Deems; Lawrence Lachman; Susan Fine; and Dan Arje. These nine former stockholders of Denney represent 20% of the shares purchased, and 21% of the claims in issue. Plaintiff's Reply docketed June 4, 1982 at 4*.

 Upon the stipulations of the parties and Orders of this Court dated May 21, 1982, and July 12, 1982, the Delalande action was dismissed without prejudice respectively against the defendants Carole Beller and Peter Petro who are also citizens of the state of New York.

 Nor is it disputed and the Court finds that the following defendants are citizens of the state of Pennsylvania: Berwind Corporation; The Lea Company; and Paul Euwer. These defendants represent 36% of the shares purchased, and 37% of the claims in issue. Plaintiff's Reply Mem., supra at 3*.

 Berwind Holdings, Inc., a Delaware Corporation, is a plaintiff in the Fine action, but is not a defendant in the Delalande action since Delalande is also incorporated in that state. In accordance with 28 U.S.C. § 1331(c), the nominee parent corporation, Berwind Corporation, was named as the defendant in Delalande. Plaintiff's Reply Mem., supra at 2; affidavit of W. Michael Garner, sworn to June 3, 1982, para. 2.

 By cross-motion docketed May 12, 1982, plaintiff Delalande seeks alternative relief in the event that it is found that Delalande is a citizen of either New York or Pennsylvania. Urging that jurisdiction should be retained over the remaining diverse defendants, Delalande contends that the non-diverse defendants are not indispensable parties, and that the Court should exercise its ancillary jurisdiction over the diverse defendants who sue or are sued for claims amounting to less than $10,000.

 Relevant to this discussion, but not decided herein, are the stockholder-plaintiffs' motions in the related Fine action. By motions docketed April 23, 1982 and May 3, 1982, the stockholder-plaintiffs seek, respectively, summary judgment pursuant to Rule 56, F.R.Civ.P., and the remand of the Fine action to the New York Supreme Court, New York County on the grounds that removal under 28 U.S.C. § 1441(c) was improper. In addition, the defendant, Delalande, seeks by ...


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