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January 28, 1986

Annibal CUBAN et alia, Plaintiffs,
KAPOOR BROTHERS, INC. et alia, Defendants

The opinion of the court was delivered by: SIFTON


 SIFTON, District Judge.

 Plaintiffs, newsstand operators at various New York City subway stations, allege injury due to violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964(c); violations of the Securities Exchange Act of 1934, 15 U.S.C. § 78(j)(b); and Rule 10b-5 of the Securities Exchange Commission, and a conspiracy to deprive plaintiff's of their civil rights under 42 U.S.C. § 1985(2). *fn1" Plaintiffs allege a scheme by defendants Kapoor Brothers, Inc., Bhawnesh Kapoor and Suresh Kapoor (collectively, the "Kapoors"), the Metropolitan Transit Authority ("MTA"), and the New York City Transit Authority ("NYCTA") (collectively the "city defendants"), and directors of the Subway News Corporation ("SNC defendants") to deprive plaintiffs of their newsstands. The matter is before the Court on motions of the Kapoors, the city defendants and SNC defendants for dismissal of the complaint, *fn2" and on the subsequently filed motion of plaintiffs for leave to file a second amended complaint pursuant to Rule 15(a) of the Federal Rules of Civil Procedure seeking damages and injunctive relief under the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2, 3; and the Clayton Act, 15 U.S.C. §§ 15, 26. City defendants also seek an award of attorneys' fees pursuant to Rule 11.

 The essentially undisputed facts have been set forth in this Court's Memorandum and Order dated September 6, 1984, but are restated herein for the sake of clarity. In late 1982, the MTA issued a request for proposals for the operation of 142 existing newsstands in the New York City subway system, as well as for the construction and operations of newsstands at certain new locations. Up to that time, the newsstands had been licensed to Ancorp National Service Corp., which sublicensed its individual stands to others. In response to the request for proposals, there were several bidders. Among them were Subway Newsdealers Corporation, Kapoor Brothers, Inc., and Citiwide News, Inc. It appears that SNC was formed solely for the purpose of bidding for the master license. Its 90 shareholders were persons who had previously operated newsstands under subleases from Ancorp.

 On April 15, 1983, the MTA awarded the master license to Kapoor. In May 1983 SNC and Citiwide challenged the propriety and legality of the procedures by which the MTA awarded the master license to Kapoor in separate Article 78 proceedings in New York Supreme Court, New York County. In the Matter of the Application of Subway News Dealers Corporation, Index No. 12099/83, and In the Matter of the Application of Citiwide News, Inc., Index No. 14469/83. These proceedings sought the cancellation of the award of the master license to Kapoor, challenging the procedural propriety of the grant of the license to Kapoor, and Kapoor's qualifications to be the recipient of the license award. SNC asserted that portions of the MTA master license which required the expenditure of approximately $2.5 million by the licensee for improvements and reconstruction of the existing subway newsstands constituted "an expenditure" requiring the use of the competitive bidding procedures provided under the New York Public Authorities Law. Additionally, numerous alleged improprieties by Kapoor and the MTA concerning the financing and negotiation of the master lease were asserted.

 During May 1983, the same month during which two state actions were brought, SNC filed a suit in the United States District Court, Southern District of New York, seeking, inter alia, a preliminary injunction enjoining the implementation of the master license award to Kapoor and permitting SNC's shareholders to continue operating their newsstands. The MTA, NYCTA, and Kapoor Brothers, Inc. were named as defendants.

 In that suit, SNC contended that, by failing to act on plaintiffs' application for certification of SNC as a "Minority Business Enterprise" ("MBE"), the MTA and NYCTA failed to comply with Title VI of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000d et seq.; Section 19 of the Urban Mass Transportation Act of 1964, 49 U.S.C. § 1615; and the Department of Transportation ("DOT") regulations promulgated thereunder governing participation of MBE's in DOT-funded programs. Judge Lasker denied the requested injunction on May 25, 1983. See Subway Newsdealers Corporation v. Metropolitan Transportation Authority, 563 F. Supp. 319 (S.D.N.Y.1983). The action was discontinued "with prejudice" on July 19, 1983.

 SNC was more successful in the state proceeding in which a preliminary injunction was obtained which enjoined the operation of Kapoor-MTA contract. Thereafter, SNC agreed to the lifting of the injunction in exchange for a settlement agreement which permitted the shareholders of SNC to retain their respective newsstands under agreed terms and conditions. Fifteen SNC members who are plaintiffs herein signed general releases pursuant to the settlement agreement in May 1983.

 A special meeting of the shareholders of SNC was held on June 24, 1983, for the purpose of ratification of the agreement. Notice of the meeting was given on June 21. Some 70 of the 90 shareholders were present, of whom 28 objected to the calling of the meeting on short notice. At the meeting, the agreement was ratified by a margin of two votes, including ten proxy votes.

 Dissatisfied with the terms of the SNC-Kapoor settlement, a dissident group of SNC shareholders (all but four of the instant plaintiffs) instituted a third Article 78 proceeding, Patel v. SNC, against the MTA, SNC and Kapoor Brothers seeking (1) to vacate the settlement based upon alleged improprieties in the procedure of ratification of the settlement by SNC shareholders, and (2) to revoke the award of the MTA master license to Kapoor based essentially on the substantive objections of the Kapoor-MTA agreement asserted by SNC in the original Article 78 proceeding.

 The identical dissident shareholders also commenced a fourth action in state court against defendants for damages based on virtually identical allegations.

 Patel v. SNC was settled "with prejudice" in open court on September 1, 1983, before Justice Evans. The settlement provided that the defendant SNC members would maintain their sublicenses and provided that the disposition of the Citiwide action would be binding on Kapoor if unfavorable to Kapoor, but that plaintiffs would still be entitled to the benefits of the SNC settlement with Kapoor and the MTA if the grant of the contract to Kapoor was upheld. The settlement additionally required that the dissident shareholders' damages action be discontinued with prejudice except that "nothing herein contained shall act as any type of release or settlement of the action by petitioners against such directors for personal wrongdoing" and that "within 30 days each of the petitioners herein shall deliver his general release in favor of all respondents and counsel for SNC, except that such general release shall except directors of SNC from such release from any and all personal wrongdoings claimed against them."

 Finally, the settlement stated that, in the event that each petitioner does not deliver a general release to Kapoor, then at Kapoor's option this agreement shall be null and void.

 On September 30, 1983, the dissident faction commenced a new proceeding, this one to set aside the September 1, 1983 stipulation, and Kapoor cross-moved for an order enforcing the terms of the stipulation. Lalita Patel v. ...

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