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DEPT. OF ECON. DEV. v. ANDERSEN & CO.

May 1, 1990

DEPARTMENT OF ECONOMIC DEVELOPMENT, PLAINTIFF,
v.
ARTHUR ANDERSEN & CO. (U.S.A.), ARTHUR ANDERSEN & CO. (REPUBLIC OF IRELAND), AND ARTHUR ANDERSEN & CO. (UNITED KINGDOM), DEFENDANTS-THIRD-PARTY PLAINTIFFS, V. ALEX H. FETHERSTON, C. SHAUN HARTE, RONALD J. HENDERSON, ANTHONY S. HOPKINS, AND JAMES SIM, THIRD-PARTY DEFENDANTS.



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

MEMORANDUM DECISION

By Memorandum Decision dated January 8, 1990 ("January 8th Decision"), this court dismissed the second, third, fourth and fifth causes of action alleged in defendants/third-party plaintiffs' Arthur Andersen & Co. (USA), Arthur Andersen & Co. (Republic of Ireland) and Arthur Andersen & Co. (United Kingdom) (hereinafter collectively "AA") amended third-party complaint. In addition, we dismissed claims for indemnity in the first cause of action for violations of the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. § 1962(a), (b) and (c), the federal securities laws and common law fraud, as well as claims for contribution as to RICO and the federal securities laws. Finally, we dismissed third-party defendant Ronald J. Henderson from the action for lack of personal jurisdiction.

AA now moves pursuant to Rules 15(a) and 54(b) of the Federal Rules of Civil Procedure, and Rule 3(j) of the Civil Rules for the United States District Court for the Southern District of New York ("Local Rule 3(j)") for the following relief: (1) leave to replead in a second amended complaint their claim for contribution under the federal securities laws; (2) leave to replead their cause of action alleging that the third-party defendants aided and abetted one or more violations of RICO; (3) entry of final judgment as to the second and fifth causes of action (the RICO and negligence causes of action), all causes of action against third-party defendant Ronald J. Henderson, and that portion of their first cause of action seeking contribution under RICO; and, if leave to replead is denied, that portion of the first cause of action seeking contribution under the federal securities laws.

The factual background to this action has been recited in previous decisions and will not be reiterated. Familiarity with the relevant background is assumed.*fn1

DISCUSSION

We begin with a brief review of the principles relevant to AA's motion to replead. The Supreme Court has stated with regard to Rule 15(a):

In the absence of any apparent or declared reason — such

  as undue delay, bad faith or dilatory motive on the part of the
  movant, repeated failure to cure deficiencies by amendments
  previously allowed, undue prejudice to the opposing party by
  virtue of allowance of the amendment, futility of amendment,
  etc. — the leave sought should, as the rules require, be
  "freely given."

Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962).

The Second Circuit has stated that a district court may deny leave to replead when the proposed amendments would be futile. See Albany Insurance Company v. Esses, 831 F.2d 41, 45 (2d Cir. 1987), overruled on other grouds, United States v. Indelicato, 865 F.2d 1370 (2d Cir. 1989). However, complaints dismissed for failure to plead fraud with requisite particularity pursuant to Fed.R.Civ.P.9(b) are generally dismissed with leave to amend, particularly if the plaintiff had no opportunity to plead fraud with greater specificity. See Luce v. Edelstein, 802 F.2d 49, 56 (2d Cir. 1986).

Aiding and Abetting RICO

In our January 8th Decision we dismissed AA's second cause of action alleging aiding and abetting of RICO on two grounds: (1) that the third-party plaintiffs had no standing to bring their aiding and abetting RICO claim; and, (2) that the third-party complaint failed to allege sufficient facts as to how each defendant aided or abetted the predicate acts alleged to have been committed by DeLorean. January 8th Decision at 40-41.*fn2 Although AA makes no express request for leave to replead the aiding and abetting RICO claim, it apparently seeks leave to amend the first amended complaint on the basis that we based our dismissal on a "curable pleading deficiency." Memorandum in Support of Third-Party Plaintiffs' Motion, etc. ("AA Brief") at 11. However, the second cause of action was not only dismissed for pleading deficiencies, but on substantive grounds as well — AA's lack of standing to assert the aiding and abetting RICO claim.*fn3 Therefore, since amendment would be futile, we deny leave to amend the complaint to replead the aiding and abetting RICO cause of action.

Contribution under federal securities laws

In our January 8th Decision we also dismissed AA's claim for contribution as to violations of the federal securities laws alleged in the main complaint. January 8th Decision at 16-22. The right of contribution for violations of the federal securities laws exists among "joint tortfeasors." See Greene v. Emersons, Ltd., 102 F.R.D. 33, 36 (S.D.N.Y. 1983), aff'd sub nom. Kenneth Leventhal & Co. v. Joyner Wholesale Co., 736 F.2d 29 (2d Cir. 1984). There are varying definitions of "joint tortfeasor" articulated by various lower courts in this context. The majority view, at least among the district courts in this circuit, appears to be that contribution among "joint tortfeasors" under the federal securities laws is limited to joint participants in the fraud alleged by plaintiff. Cf. Connecticut National Bank v. Reliance Insurance Co., 704 F. Supp. 506, 509 (S.D.N.Y. 1989). Other courts have held that contribution among "joint tortfeasors" under the federal securities laws is available among independent, concurrent tortfeasors. See, e.g., Marrero v. Abraham, 473 F. Supp. 1271, 1277-78 (E.D.La. 1979). However, ...


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