The opinion of the court was delivered by: Haight, District Judge:
Plaintiffs are beneficiaries under the will of the late
Sylvan Lawrence, who died in December, 1981. Defendant Seymour
Cohn, Lawrence's brother, is sole executor of the Lawrence
estate (the "Estate") and trustee of a residuary trust created
by the will. The Lawrence will was admitted to probate by the
Surrogate of New York County on January 29, 1982. On February
1, 1982, Letters Testamentary and Letters of Trusteeship were
issued to defendant as sole executor and sole Trustee.
Plaintiffs accuse defendant Cohn of numerous acts of fraud
and breaches of fiduciary duty. The parties have been engaged
in litigation in the Surrogate's Court (Hon. Renee R. Roth)
In 1990 plaintiffs filed the captioned action in this Court.
They charge Cohn with violations of § 10(b) of the Securities
and Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5
promulgated thereunder, 17 C.F.R. § 240.10b-5; and with
of the RICO statute, 18 U.S.C. § 1962(a)(b) and (c).
To these federal claims plaintiff append claims for common
law fraud, breach of contract, and unjust enrichment. They pray
for the imposition of a constructive trust on certain
partnership interests acquired by defendant; a conveyance of
those interests to plaintiffs and/or the Estate; an accounting;
compensatory damages (trebled under RICO); punitive damages;
and attorneys' fees and costs.
Subject matter jurisdiction in this Court depends on the
viability of the § 10(b) and RICO claims.*fn1 Defendant moves
to dismiss the complaint under Rule 12(b)(6) for failure to
state a claim upon which relief can be granted. In the
alternative, defendant asks that this Court abstain from
exercising jurisdiction in deference to the Surrogate's Court,
or stay proceedings here pending litigation there.
These factual recitations derive from the amended complaint's
allegations, accepted as true on defendant's motion to dismiss.
Prior to the death of Sylvan Lawrence, Lawrence and Cohn were
the sole general partners of a limited partnership known as
Ninety-Five Wall Street Company (the "Limited Partnership").
The Limited Partnership's principal asset was and remains an
office building located 95 Wall Street. At the inception of the
Limited Partnership, Lawrence and Cohn owned at 60% interest as
general partners; Jack R. Aron owned an 11% interest as a
limited partner; Marvin H. Schur owned a 4% interest as a
limited partner; Edward D. Roberts owned a 1% interest as a
limited partner; Schur and Bernard E. Brandes, as trustees for
the benefit of Robert Aron, owned a 12% interest as limited
partners; and Schur and Brandes, as trustees for the benefit of
Peter Arthur Aron, owned a 12% interest as limited partners.
The Limited Partnership agreement provided in ¶ 9:
If either Sylvan Lawrence or Seymour Cohn shall
die, retire, or be adjudicated incompetent, the
partnership shall not terminate and the other of
them shall continue as the sole General Partner.
The retired General Partner or the legal
representatives of the deceased or incompetent
General Partner shall be and become a Limited
Partner and the share of such retired Partner or
of such representatives in the profits, losses
including depreciation, and the distributions
shall be 30%. The interest of the remaining
General Partner shall thereafter be 30%.
Under this provision, upon the death of Sylvan Lawrence his
interest as a general partner in the Limited Partnership was
automatically converted to a 30% limited partnership interest
in favor of his Estate; and Cohn, individually, became the sole
general partner with the exclusive right to manage and control
the affairs of the Limited Partnership.
The Limited Partnership also provided in ¶ 8(b) as follows:
In the event that any one or more of the Limited
Partners (hereinafter called "Offering Limited
Partner") shall receive and wish to accept a bona
fide offer for the purchase of his interest in the
partnership (hereinafter called the "Outside
Offer"), the Limited Partner shall promptly notify
the other Limited Partners thereof giving the name
and address of the offeror ("Outside Offeror") and
a copy of the Outside Offer containing all the
terms and provisions thereof, and the other
Limited Partners shall be privileged to purchase
the interest of the Limited Partner on the same
terms as the Outside Offer in the proportion that
their respective interests bear to the aggregate
interests of all of the Limited Partners other
than the interest of the Offering Limited Partner.
On May 23, 1983, Cohn agreed with all of the then existing
limited partners to purchase their limited partnership
interests, exclusive of the 30% of the limited partnership
interest Cohn held as legal representative of the Estate. As of
that date, the following limited partners held a total 40%
interest in the Limited Partnership: Robert Aron; Peter A.
Aron; Marvin H. Schur; Edward R. Roberts; Jerome A. Manning, as
trustee for the benefit of Tracy Elizabeth Aron, Michael Thomas
Aron and Stephen Jack Aron; and Jacqueline A. Morrison and
Jerome A. Manning as Trustees for the benefit of Sean Patrick
Morrison. Cohn purchased those limited partnerships, totalling
40%, "as nominee for Seymour Cohn, as Executor of the Estate of
Sylvan Lawrence, for Seymour Cohn individually, and for any
By order to show cause dated August 18, 1983, Cohn commenced
a proceeding in the Surrogate's Court seeking the court's
advice and direction (the "advice and direction proceeding")
regarding who, as between him and the Estate, should own the
40% limited partnership interests acquired pursuant to the
limited partners buy-out agreement entered into in ...