Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

SPIER v. ERBER

March 18, 1991

WILLIAM SPIER, MAX WEIL, BERNARD HOCHSTEIN, HOWARD SCHRAUB, ESTATE OF C. RAY GREENE AND THOMAS H. GREENE, PLAINTIFFS,
v.
LESLIE N. ERBER, PERICLES CONSTANTINOU, ROCCO VELOCCI, ORVAL E. GOULD, MORTON S. ROBSON, JACK CASAGRANDE, G.G.C., INC. D/B/A THE ENTERPRISE COMPANY, A CALIFORNIA CORPORATION, WASTE TECHNOLOGY CORP., A DELAWARE CORPORATION, IWS OF MARION COUNTY, INC., A FLORIDA CORPORATION, STUART BECKER & CO., P.C., A NEW YORK PROFESSIONAL CORPORATION, RUFFA AND HANOVER, P.C., A NEW YORK PROFESSIONAL CORPORATION, JOHN DOE AND RICHARD ROE, INC., DEFENDANTS.



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

ORDER AND OPINION

This is an action for damages arising out of an alleged fraudulent scheme to sell interests in a limited partnership. Plaintiffs allege that defendants have violated section 29(b) and section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc(b) and 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. Plaintiffs also seek recovery under the doctrines of common law fraud, accountant malpractice and attorney malpractice.

Defendant Waste Technology Corporation ("Waste Tech")*fn1 has answered the complaint and filed cross-claims against defendants G.G.C., Inc., d/b/a The Enterprise Company ("Enterprise")*fn2 and its president Orval E. Gould ("Gould")*fn3 (collectively, the "Enterprise Defendants"), for breach of contract and for fraud. The Enterprise Defendants have now filed a motion to dismiss all of Waste Tech's cross-claims pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(3), and, in the alternative, to dismiss Waste Tech's fraud cross-claim pursuant to Fed.R.Civ.P. 9(b).

BACKGROUND*fn4

In December 1984, Ocala Waste Disposal Associates ("Ocala Associates") purchased a pyrolytic waste disposal system (the "Equipment") from Enterprise that was to be delivered and installed by Enterprise at a landfill site in Marion County, Florida (the "Site"). Affidavit of Leslie N. Erber, sworn to on January 3, 1991 ("Erber Affidavit" or "Erber Aff."), ¶ 3.*fn5 The price for the Equipment was $3,500,000, part of which was paid in cash, and the balance of which was paid by the delivery of a non-recourse promissory note payable to Enterprise (the "Ocala Note"). Answer ¶¶ 76, 77.*fn6 In addition, Ocala Associates granted Enterprise a lien on the Equipment, pursuant to a written security agreement (the "Security Agreement"). Answer ¶ 78.

In or about February 1986, Waste Tech's bank, Manufacturers and Traders Trust Company ("M & T"), agreed to lend Enterprise $1,900,000 (the "Loan"), provided that Waste Tech would guarantee the loan. The Loan was evidenced by a non-recourse promissory note (the "Enterprise Note") in the amount of $1,900,000, dated February 1, 1986, Affidavit of Stuart A. Jackson, Esq., sworn to on October 11, 1990, ("Jackson Aff."), Exhibit G, and a written loan agreement between Enterprise and M & T, also dated February 1, 1986 (the "Loan Agreement"). Jackson Aff., Exhibit G. Enterprise also executed a written assignment (the "Collateral Assignment"), dated March 19, 1986, assigning to M & T the Ocala Note, as well as Enterprise's rights and interests under the Security Agreement, as security for the performance of its obligations under the Enterprise Note and the Loan Agreement. Jackson Aff., Exhibit H.

On or about February 17, 1987, Waste Tech entered into a general guaranty agreement with M & T (the "Guaranty"), whereby it guaranteed Enterprise's obligations under the Loan Agreement and Enterprise Note. Jackson Aff., Exhibit I. Waste Tech alleges that it had agreed to guarantee Enterprise's obligations — without which M & T would not have made the Loan — in exchange for Enterprise's promise to install the Equipment at the Site and complete the pyrolytic system by the end of June 1986. Erber Aff., ¶ 10.*fn7 Waste Tech considered the installation, of the Equipment to be a critical factor in its decision to enter into the Guaranty, because the lien on the Equipment had been transferred to M & T — along with Enterprise's other rights under the Security Agreement — pursuant to the Collateral Assignment, and if the Equipment were properly installed and operational it would have a far higher value than it otherwise would. Erber Aff. ¶ 10.

Thereafter, Enterprise apparently defaulted on its obligations to M & T under the Enterprise Note and the Loan Agreement. Pursuant to the Guaranty, Waste Tech was compelled to pay M & T $1,900,000 as the principal sum of the Enterprise Note, plus a total of $136,880.88 in interest thereon. Enterprise also apparently did not install the Equipment at the Site, and did not complete the pyrolytic system. Answer ¶ 103. After this action was commenced, Waste Tech filed an answer, including four cross-claims. The first, second and fourth cross-claims, asserted solely against Enterprise, seek damages for Enterprise's alleged breach of the Enterprise Note, the Loan Agreement and the Collateral Assignment, and for Enterprise's alleged breach of its agreement to install the Equipment at the Site. The third cross-claim, asserted against the Enterprise Defendants, alleges that the Enterprise Defendants fraudulently induced Waste Tech to enter into the Guaranty with M & T by misrepresenting that Enterprise would manufacture and install the Equipment.

DISCUSSION

1)  Personal Jurisdiction

In this diversity action, the existence of personal jurisdiction

  is determined by reference to the law of the
  jurisdiction in which the court sits. The burden
  of establishing jurisdiction over a defendant, by
  a preponderance of the evidence, is upon the
  plaintiff. Until an evidentiary hearing is held,
  however, the plaintiff need make only a prima
  facie showing that jurisdiction exists, and this
  remains true notwithstanding a controverting
  presentation by the moving party. In the absence
  of an evidentiary hearing on the jurisdictional
  allegations, or a trial on the merits, all
  pleadings and affidavits are construed in the
  light most favorable to plaintiff, and where
  doubts exist, they are resolved in the plaintiff's
  favor.

Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985) (citations omitted).*fn8

With respect to jurisdiction over Enterprise, Waste Tech argues that, having discharged the obligations of Enterprise to M & T pursuant to the Enterprise Note and the Loan Agreement, Waste Tech is subrogated to M & T's rights and remedies under those agreements and under the Collateral Assignment given to secure Enterprise's obligations to M & T. In each of those documents, Enterprise consents to the jurisdiction of this Court.*fn9 Accordingly, Waste Tech argues, this ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.