duty. There is also a derivative claim brought on behalf of the class of
partnerships seeking declaratory relief.
Aside from the defendant class of partnerships, named for purposes of
the derivative claim, there are various defendants upon whom liability is
sought to be imposed. The so-called "Patrician Defendants" and "Trust
Defendants" consist of the promoters of the partnerships and allied
parties. In addition, two accounting firms are named — Arthur
Andersen & Co. and Hecht and Company. The complaint also names three
companies which acted as real estate appraisers — Howard Jackson
Associates, Inc., Nationwide Appraisal Company, Inc. and McGraw-Hill,
Inc., acting through a division named McGraw-Hill Information Systems
Company. Finally, two law firms are sued — Summit Rovins &
Feldesman and Carro, Spanbock, Caster & Cuiffo.
The action has been settled in regard to the Patrician Defendants, the
Trust Defendants and Arthur Andersen. Howard Jackson Associates is in
bankruptcy. The remaining defendants are Hecht, Nationwide Appraisal,
McGraw-Hill, Summit Rovins and Carro Spanbock.
Amendments to Complaint
The initial complaint was filed August 9, 1989. An amended complaint
was filed in November 1989.
A conference was held on January 10, 1990, after a settlement agreement
had been made with the Patrician Defendants. At this conference the
remaining defendants objected to the amended complaint and indicated
their desire to move to dismiss. It was readily apparent that the
complaint was deficient, and it was agreed that there would be a further
amendment. The second amended complaint was filed on January 31, 1990.
Motions to dismiss the second amended complaint were filed in April
1990. Counsel have appeared before the court twice to argue these
The moving defendants have asserted a number of arguments, including
lack of standing; failure to plead the elements required to be alleged
for the various causes of action, necessitating dismissal under Rule
12(b)(6); failure to plead fraud with particularity as required by Rule
9(b); an statute of limitations.
The complaint in this case is unusually difficult to deal with. Many
important allegations are lacking in specifics. It is difficult to
discern whether this should be considered a violation of the pleading
rules, or whether there is a reasonable explanation in the fact that this
is a suit dealing with 48 partnerships, in which some degree of
generalization is appropriate.
It now appears that the issue about the sufficiency of pleadings is
largely rendered academic by the problem of standing. For reasons
hereafter set forth, the court has determined that all claims against
three of the moving defendants — McGraw-Hill, Nationwide and Carro
Spanbock — must be dismissed because plaintiffs lack standing to sue
them. As to Hecht and Summit Rovins, plaintiff Rabin lacks standing to
assert any claims against these defendants, and plaintiff Ramos has
standing to sue these two defendants in respect to only one of the 48
partnerships — Woburn Mall Associates.
The result of these rulings is the drastic alteration of the remaining
case. There is no longer a suit relating to 48 partnerships. The present
form of the complaint is wholly inappropriate to a suit regarding one
partnership. Beyond this, it may be, in view of the settlements achieved
thus far with certain defendants, that there will be no desire to pursue
claims against Hecht and Summit Rovins with respect to this one
The court will confer with the appropriate attorneys and discuss the
future course of the case.
Defendants Hecht, Nationwide, McGraw-Hill and Carro Spanbock include in
their motions the argument that plaintiffs Ramos and Rabin lack standing
to sue them. As noted earlier, Ramos invested only in Woburn Mall
Associates, and Rabin invested only in Southroads Mall Limited
Partnership. Nationwide, McGraw-Hill
and Carro Spanbock did no work in connection with either of these
partnerships. Hecht acted as the accountants for Woburn Mall but played no
role in Southroads.
Numerous cases hold that the question of standing must be considered
independently from the question of whether there is a proper class action
under Rule 23. A plaintiff, including one who is seeking to act as class
representative, must have individual standing to assert the claims in the
complaint against each defendant being sued by him. Angel Music, Inc. v.
ABC Sports, Inc., 112 F.R.D. 70, 73 (S.D.N.Y. 1986); Ackerman v. Oryx
Communications, Inc., 609 F. Supp. 363, 377 (S.D.N.Y. 1984); Vulcan
Society v. Fire Department of the City of White Plains, 82 F.R.D. 379,
398-99 (S.D.N.Y. 1979); Leonard v. Merrill Lynch, Pierce, Fenner &
Smith, 64 F.R.D. 432, 434 (S.D.N Y 1974); Weiner v. Bank of King of
Prussia, 358 F. Supp. 684, 694 (E.D.Pa. 1973).
Neither Ramos nor Rabin has standing to sue Nationwide, McGraw-Hill or
Carro Spanbock. There is no allegation that these defendants prepared or
contributed to any of the allegedly misleading materials used in the
partnerships in which plaintiffs invested, and therefore no sufficient
allegation that these defendants injured plaintiffs.
Since Ramos and Rabin have no standing to sue Nationwide, McGraw-Hill
and Carro Spanbock, they cannot act as class representatives in
connection with claims against these three defendants.
As to Hecht, Rabin has no standing to sue this defendant, because Hecht
performed no work for Southroads, the one partnership in which Rabin
invested. Rabin cannot act as class representative on any claims against
Hecht. The other plaintiff, Ramos, invested in Woburn Mall, as to which
Hecht performed the accounting. Therefore, Ramos has standing to sue
Hecht in connection with this partnership. However, Hecht is alleged in
the complaint to have acted as the accountant for 19 partnerships other
than Woburn Mall. Ramos has no standing to sue Hecht on these 19
partnerships. Ramos can act as class representative only for Woburn.
Plaintiffs seek to avoid the effect of the standing requirement by
arguing that all the defendants were in a conspiracy. The idea apparently
is that the conspiracy — and hence all the conspirators —
affected all the partnerships, and therefore an investor in a single
partnership can sue all the conspirators. See DeAllaume v. Perales, 110
F.R.D. 299, 303 (S.D.N Y 1986).
In the complaint, there is a brief and very general allegation that all
the defendants conspired among themselves to commit fraud. This is
contained in paragraph 122, which is part of the RICO claim. However,
this does not constitute a sufficient allegation. A proper allegation of
conspiracy in a civil complaint must
set forth with certainty facts showing particularly
what a defendant or defendants did to carry the
conspiracy into effect, whether such acts fit within
the framework of the conspiracy alleged, and whether
such acts, in the ordinary course of events, would
proximately cause injury to the plaintiff.
Martin Hodas, East Coast Cinematics v. Lindsay, 431 F. Supp. 637, 643-44
(S.D.N Y 1977) (quoting Hoffman v. Halden, 268 F.2d 280, 295 (9th Cir.