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McGuire v. Wilson

United States District Court, Southern District of New York


May 4, 1988

RICHARD A. MCGUIRE, INDIVIDUALLY AND DERIVATIVELY ON BEHALF OF JOHN P. TILDEN, LTD., PLAINTIFF,
v.
J. ROBERT WILSON, GERALD I. BENSON, JOHN J. MCGOWAN, JOHN P. TILDEN, LTD., RUSSELL MILLER, INC. AND RUSSELL MILLER INC. OF NEW YORK, DEFENDANTS

The opinion of the court was delivered by: Sweet, District Judge.

MEMORANDUM OPINION

Defendants J. Robert Wilson, Gerald I. Benson, John J. McGowan and John P. Tilden, Inc. (collectively the "defendants") have moved to strike plaintiff Richard McGuire's ("McGuire") jury demand pursuant to Rule 39(a)(2), Fed.R.Civ.P. For the reasons set forth below, the motion is denied.

Background

Plaintiff filed this action to recover for the alleged injury sustained one of the mergers of his wholly-owned corporations, McGuire associates, with John P. Tilden, Ltd. He claims that he was fraudulently induced to enter into the merger, that defendants breached certain warranties, and other improper activities on the part of the defendants.

The complaint states several causes of action: breach of contract for which rescission, injunctive relief and damages are sought; federal securities law fraud pursuant to section 10(b) of the Securities Exchange Act for which damages, rescission and injunctive relief are sought; state securities law claims for which damages, rescission and injunctive relief are sought; common law fraud for which damages, rescission and injunctive relief are sought; negligence; shareholders derivative relief pursuant to the New York Business Corporation Law; and derivative relief for breach of fiduciary duty.

It is the defendants' contention that since many of these claims sound in equity, McGuire is not entitled to a jury on his damage claims. They further assert that any legal claims are truly equitable in nature or are incidental to equitable claims. Finally, they assert that McGuire's federal securities law claims, the only claims under which plaintiff has access to this court, are equitable in nature, and that since all legal claims are state claims, state law, which denies a jury in mixed cases of law and equity, should control.

Discussion

Jurisdiction in this case is predicated on 28 U.S.C. § 1331, federal question jurisdiction, based on McGuire's federal securities law claim. This court may thus retain pendent jurisdiction over McGuire's state law causes of action.

Whether or not a litigant is entitled to a jury for his claim is a matter of federal as opposed to state law. Byrd v. Blue Ridge Rural Electric Co–Op., 356 U.S. 525 (1958); see also Simler v. Conner, 372 U.S. 221 (1963) (per curiam). Under federal law:

where both legal and equitable issues are presented in a single case, "only under the most imperative circumstances, circumstances which in view of the flexible procedures of the Federal Rule we cannot now anticipate, can the right to a jury trial of legal issues be lost through prior determination of equitable claims." That holding, of course, applies whether the trial judge chooses to characterize the legal issues presented as "incidental" to equitable issues or not.

Dairy Queen, Inc. v. Wood, 369 U.S. 469, 473 (1962) (quoting Beacon Theaters v. Westover, 359 U.S. 500, 510–11 (1959)). Thus, McGuire does not forfeit the right to a jury by combining his legal claims with equitable ones, even if the legal claims re incidental to the equitable.

Moreover, McGuire is entitled to a jury on his federal law claims. Damage claims under section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j, may be determined by a jury. See Aid Auto Stores, Inc. v. Cannon, 525 F.2d 468, 469 n. 1 (2d Cir.1975); Cutner v. Fried, 373 F.Supp. 4, 13 (S.D.N.Y.1974). Thus, the argument that the claims that permit access to federal courts do not carry the right to a jury is without merit.

Conclusion

The defendants' motion to strike the jury demand pursuant to Rule 39(a)(2), Fed.R.Civ.P. is denied.

IT IS SO ORDERED.

19880504

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