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September 27, 1982


Sweet, D.J.

The opinion of the court was delivered by: SWEET


Plaintiff State Teachers Retirement Board ("State Teachers") in this action against defendants Fluor Corporation ("Fluor") and Manufacturers Hanover Trust Company ("Manufacturers") moved pursuant to Fed.R.Civ.P. 15(a) to file its fourth amended complaint in accordance with this court's opinion dated March 30, 1982, and pursuant to Fed.R.Civ.P. 23(c) (2) for an order approving notice to the individual class members in the manner prescribed in State Teachers' motion papers. Fluor and Manufacturers oppose the motion to amend and stated their intention to move to dismiss portions of the amended complaint pursuant to Fed.R.Civ.P. 12(b) in the event that leave to amend the complaint is granted. Argument was heard on April 30, 1982 where, in an effort to simplify the procedural issues, perhaps unsuccessfully, the court directed one submission on all motions. An additional briefing schedule was therefore agreed upon. The memoranda relating to the defendants' motions to dismiss were submitted on June 25, 1982. For the reasons set forth below leave to file the fourth amended complaint will be granted, the motion to dismiss certain causes of action will be granted, and an order certifying the class action and approving the form of notice will be submitted on notice within thirty (30) days.

 This class action litigation arose out of alleged improprieties concerning Fluor's handling of information concerning its award of a $1 billion construction contract and certain other alleged material inside information. The factual and procedural background is recounted in this court's prior grant of summary judgment, the Court of Appeals' decision on appeal affirming the dismissal in part and remanding certain issues for trial, State Teachers Retirement Bd. v. Fluor Corp., 500 F. Supp. 278 (S.D.N.Y. 1980), aff'd in part, rev'd in part, 654 F.2d 843 (2d Cir. 1981), as well as in this court's recent conditional grant of class certification on March 30, 1982. Familiarity with the facts, terminology and the previous opinions is assumed.

 State Teachers' complaint alleges that Fluor gave Manufacturers material nonpublic information concerning the South African Coal, Oil and Gas Corporation Limited ("SASOL") contract executed on February 28, 1975 but not announced until March 10, 1975, as well as certain other items of information (the "miscellaneous items"). Three of the causes of action remained after the remand of the Court of Appeals: (1) a claim of securities fraud for Fluor's alleged conduct in tipping the information under Section 10(b) of the Securities Exchange Act of 1934 ("the Act"), 15 U.S.C. § 78j(b) and Rule 10b-5 of the Securities Exchange Commission, 17 C.F.R. § 240.10b-5, (2) similar claims against Manufacturers as a tippee, and (3) a pendant state law claim for breach of fiduciary duty against Fluor.

 In a prior opinion in this case dated December 2, 1976, the Honorable Marvin E. Frankel conditionally granted class certification for State Teachers to represent parties who sold Fluor shares from March 3 to March 13, 73 F.R.D. 569 (S.D.N.Y.1976), a grant I declined to alter at a later date, no circumstances having changed. 80 F.R.D. 142 (S.D.N.Y. 1978). In the March 30, 1982 opinion this court denied without prejudice State Teachers' motion for leave to file its then fourth amended complaint (the "old fourth amended complaint") and conditionally granted class certification to State Teachers as a representative of the class of those shareholders who sold their shares of Fluor stock from March 3 to March 6, 1975, the period during which State Teachers sold its shares. State Teachers was decertified as a representative of Fluor shareholders that sold shares from March 7 to March 13.

 I. The Motion To Amend the Complaint

 State Teachers seeks to amend its complaint to include Manufacturers as a defendant in the third cause of action under state law, based on an aider and abetter theory of liability and to allege representation of shareholders who purchased stock from March 10 to March 13, inclusive, for purposes of appeal of the March 30, 1982 decision.

 The Court of Appeals has clearly enunciated the standard for reviewing proposed amendments to a complaint:

Rule 15(a) Fed.R.Civ.P. provides that leave to amend "shall be freely given." Reasons for a proper denial of leave to amend include undue delay, bad faith, futility of the amendment, and perhaps most important, the resulting prejudice to the opposing party. Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1963). Mere delay, however, absent a showing of bad faith or undue prejudice, does not provide a basis for a district court to deny the right to amend. Howey v. United States, 481 F.2d 1187, 1190-91 (9th Cir. 1973); Middle Atlantic Utilities Co. v. S.M.W. Development Co., 392 F.2d 380, 384 (2d Cir. 1968).

 State Teachers Retirement Bd. v. Fluor, 654 F.2d at 856.

 Although the complaint has been pending for a long time, no real prejudice has resulted to Manufacturers from the delay in the amendment. Exhaustive discovery has been completed which would amply address the state law claim. Although additional discovery could be granted, Part II of this opinion obviates the need for any such discovery. Consequently, leave to file the proposed fourth amended complaint is granted.

 II. The Motion to Dismiss Count Three

 In its third cause of action State Teachers claims that Fluor breached a fiduciary duty owed to the shareholders under state law (1) by failing to disclose the SASOL agreement and the miscellaneous items to the market or to stop the trading of Fluor shares on the market and (2) by allowing the selective dissemination of material nonpublic information to employees of Fluor and their tippees who purchased shares of Fluor. The claim, as now amended, also asserts that Manufacturers was aware of and aided and abetted Fluor's breach of its duty. Fluor and Manufacturers contend that under these circumstances a corporation as an institution does not owe such a duty to its shareholders and that the corporation is not liable to selling shareholders for such actions perpetrated by its insiders. Manufacturers further contends that even if there were such a cause of action against Fluor, there is no liability for aiding and abetting such a breach of fiduciary duty.

 The parties agree that under the circumstances here presented State Teachers would not have a cause of action under New York law, since in this jurisdiction the corporation does not stand in a fiduciary relationship to its shareholder. Verplank v. Mercantile Ins. Co., 1 Edw. Ch. 84 (N.Y. 1831); Karnes v. Rochester Genessee Valley R.R., 4 Abb.N.S. 107 (N.Y. 1867); Thompson v. Erie R. Co., 11 Abb.Prac. N.S. 188 (N.Y. 1871); Parsons v. Hayes, 18 J. & S. 29 (N.Y. 1884); 11 N.Y. Jur., Corporations § 319 at 480-81 (1971) ("Ordinarily, however, no trust or fiduciary relationship exists between the corporation and its stockholders"). However, the appropriate choice of law requires the application of the law of the state of incorporation to allegations of a ...

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