The opinion of the court was delivered by: SWEET
Defendants Oil Field Systems Corp. ("OFS") and Integrated Energy Inc. ("lntegrated") have moved for summary judgment pursuant to Fed.R.Civ.P. 56. Plaintiff Elfriede Mayer ("Mayer") has cross-moved for summary judgment on the issue of liability against ("OFS") and has also moved pursuant to Fed.R.Civ.P. 23 for certification of this action as a class action. The motion by defendants OFS and Integrated is granted, and the case is dismissed.
In an opinion of January 13, 1983, l granted OFS's and Integrated's motion to dismiss, holding that Mayer lacked standing to bring this securities and common law fraud action. The Second Circuit reversed and remanded, 721 F.2d 59 (1983), holding that Mayer, under the theory enunciated in Vine v. Beneficial Finance Co., 374 F.2d 627 (2d Cir.), cert. denied, 389 U.S. 970, 19 L. Ed. 2d 460, 88 S. Ct. 463 (1967) had the requisite standing. The parties have had substantial discovery, and these crossing motions for summary judgment have resulted.
Mayer's amended complaint alleges that OFS, as general partner of the Mark Energy Partnerships ("MEP"), misallocated Integrated stock received by the Mark Energy Partnerships as a result of an exchange offer. OFS allegedly distributed the stock of MEP among the general and limited partners and breached the partnership agreement by valuing the Integrated stock at the arbitrary $10 exchange rate rather than the substantially lower market price, thereby establishing a fictional "payout" of the limited partners and permitting the general partners of OFS to share improperly in the Integrated stock. The amended complaint also alleges that Integrated failed to disclose OFS' improper intentions and conspired with OFS to defraud Mayer through the concealed misallocation of the Integrated stock.
Specifically, Mayer claims that:
1) OFS and Integrated failed to disclose that they valued the Integrated stock at $10/share knowing that the stock did not have this value;
2) OFS and Integrated failed to disclose that they valued Integrated stock at $10/share to permit an accelerated payout and the consequent misallocation of shares to the general partners;
3) OFS and Integrated failed to disclose that the $10 per share price, and not the market value, was used to compute when payout had been reached;
4) OFS made a materially false and misleading statement in correspondence to the limited partners when it said that Bache Halsey Stuart Shields ("Bache") was underwriting the Exchange Offer; and
5) OFS made a false and misleading statement in correspondence to the limited partners when it stated that the shares' market value might drop initially but would then "zestily rebound."
Mayer alleges that OFS's and Integrated's deceptions constitute violations of 15 U.S.C. § 78j(b); 15 U.S.C. §§ 77k and l, and OFS's and Integrated's common law fiduciary obligations.
Facts sufficient to resolve the motions for summary judgment are undisputed. Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438 (2d Cir. 1980).
Mayer is a citizen and resident of New York. OFS is a New York corporation which owns interests in oil and gas properties and has been a general partner in a number of oil partnerships. Mayer was a limited partner in two MEP partnerships -- the Mark Energy 1979 partnership and Mark Energy 1980 partnership -- of which OFS was the general partner. Integrated is a Delaware corporation formed in 1979 to acquire oil and gas properties.
The limited partnership agreements of both of the Mark Energy Partnerships state that the general partner has complete and exclusive authority to manage and control the partnerships. Section 12.1(a) of the Mark Energy 1979 Partnership limited partnership agreement provides in pertinent part:
Subject to the limitations set forth in this Agreement, the General Partner shall have full, exclusive and complete discretion in the management and control of the affairs of the Partnership for the purposes herein contemplated, and shall make all decisions affecting Partnership affairs.
Section 11.1 provides in pertinent part:
No Limited Partner shall take part in the management of the Partnership's business or affairs or transact any business for the Partnership...
See also Sections 11.1(a) and 10.1 of the Mark Energy 1980 Partnership limited partnership agreement.
Mayer testified at her deposition that she is sure she read the limited partnership agreements for each of the Mark Energy Partnerships before investing in them and understood that the limited partners had no control over management.
The limited partnership agreements describe the procedure for compensation of the general partners. Section 5.2(a)(ii) of the Mark Energy 1979 Partnership limited ...