The opinion of the court was delivered by: EUGENE H. NICKERSON
NICKERSON, District Judge:
There have now been nine actions filed in this court by the various plaintiffs alleging violations of law concerning Crazy Eddie, Inc., a now bankrupt electronics retailer.
The court has before it motions to dismiss all or some part of the complaints brought under the Securities Act of 1933 (the Securities Act), 15 U.S.C. § 77 et seq., the Securities Exchange Act of 1934 (the Exchange Act), 15 U.S.C. § 78 et seq., the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., and state law.
Plaintiffs also appeal from a discovery order of Magistrate Judge Carter.
The court assumes familiarity with its previous published memoranda and orders dated December 30, 1988, Bernstein v. Crazy Eddie, Inc., 702 F. Supp. 962 (E.D.N.Y. 1988) (the 1988 Order); June 16, 1989, In re Crazy Eddie Sec. Litig., 714 F. Supp. 1285 (E.D.N.Y. 1989) (the 1989 Order); June 19, 1990, In re Crazy Eddie Sec. Litig., 131 F.R.D. 374, 740 F. Supp. 149 (E.D.N.Y. 1990) (the June 1990 Order); September 19, 1990, In re Crazy Eddie Sec. Litig., 747 F. Supp. 850 (E.D.N.Y. 1990) (the September 1990 Order); and March 6, 1991, In re Crazy Eddie Sec. Litig., 135 F.R.D. 39 (E.D.N.Y. 1991) (the 1991 Order).
The first complaint with which the court dealt was styled "consolidated and amended complaint," Bernstein v. Crazy Eddie, Inc., 87-CV-33, and will be called the First Complaint. It alleged claims by plaintiffs, as purchasers of the common stock of defendant Crazy Eddie, Inc. (Crazy Eddie), against Crazy Eddie and various of its former officers, directors, accountants, and underwriters. That pleading invoked the Securities Act of 1933 (the Securities Act), 15 U.S.C. § 77 et seq. (1982 & Supp. IV 1986), the Securities Exchange Act of 1934 (the Exchange Act), 15 U.S.C. § 78 et seq. (1982 & Supp. IV 1986), the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. (1982 & Supp. IV 1986), and state law.
The First Complaint asserted, among other things, that defendants made or aided and abetted the making of materially false and misleading statements and omissions in connection with three public offerings of Crazy Eddie securities, two offerings of stock, one in March 1985 and one in March 1986, and one offering of debentures in 1986, and in connection with the sale of Crazy Eddie securities in general, causing plaintiffs to purchase the securities at a price higher than they would have paid had the truth about Crazy Eddie been known.
In substance the allegations were that Crazy Eddie, a New York corporation founded by Eddie Antar and controlled by his family, first sold shares to the public in September 1984. Between that time and November 1987, although not in all cases throughout that period, the individual defendants were its directors or officers. During that period defendant Peat Marwick Main & Co. (Peat Marwick) and its predecessor certified the financial statements that Crazy Eddie filed with the Securities and Exchange Commission (SEC) and disseminated to the public.
Crazy Eddie made three public offerings of securities underwritten by defendants Oppenheimer & Co. (Oppenheimer), Wertheim Schroder & Co. (Wertheim), Bear, Stearns & Co. (Bear Stearns) and Salomon Brothers, Inc. (Salomon). Crazy Eddie offered shares of common stock in March of 1985 and 1986, and convertible subordinated debentures in June of 1986.
The First Complaint described defendants' alleged participation in (1) material misstatements and omissions in registration statements and prospectuses, in violation of Sections 11 and 12 of the Securities Act, (2) the employment of devices, schemes, and artifices to defraud and the making of material misstatements and omissions falsely assuring investors of Crazy Eddie's financial condition, in violation of state law and Section 10(b) of the Exchange Act and Rule 10(b)-5 adopted under it, and (3) the commission of violations of RICO.
In 1988 those who purchased Crazy Eddie in 1987 filed a separate complaint against Peat Marwick and various individuals associated with Crazy Eddie during the time of the alleged fraud. Oppenheimer-Palmieri Fund v. Peat Marwick, 88-CV-3481. That complaint made claims similar to those alleged in the First Complaint under the Securities and Exchange Acts and state law and joined as defendants Peat Marwick and various prior officers and directors of Crazy Eddie. The complaint asserted that between May and October 1987 the Oppenheimer-Palmieri plaintiffs, in reliance on misleading statements and omissions of defendants made in 1986 and 1987, bought substantial amounts of Crazy Eddie stock and were damaged as a result.
In May 1989 the Oppenheimer-Palmieri case was consolidated for pre-trial purposes with Bernstein v. Crazy Eddie, Inc., and the consolidated action bears the title In re Crazy Eddie Securities Litigation.
In addition, on January 17, 1989 James R. Schwebel, an alleged purchaser of the June 1986 debentures during the class period, filed a separate class action, Schwebel v. Crazy Eddie, Inc., 89-CV-165 (the Schwebel Complaint). Schwebel alleged claims under Sections 11 and 12 of the Securities Act, Sections 10(b) and 20 of the Exchange Act, and state law against many of the defendants named in the First Complaint for misconduct relating to the sale of the debentures.
The next complaint in In re Crazy Eddie Securities Litigation, filed in October 1989, was called "second amended consolidated and supplemental complaint," and will be referred to as the Second Complaint. It was in substantial part identical to the First Complaint, but also dropped Crazy Eddie, then in bankruptcy, as a defendant, added and amended certain claims, and added new defendants, including Penn & Horowitz, an accounting firm that performed auditing and other services in the early 1980's, and its successor J. Liebman & Co. The Second Complaint also added Schwebel, Krim, Stepak and Abrams as plaintiffs and repleaded the Securities Act, Exchange Act and state law claims based on the debenture offering. In the 1988 Order the court had dismissed these claims because none of the then plaintiffs was a debenture holder. See 702 F. Supp. at 972.
While Schwebel was added as a plaintiff to the Second Complaint his action was consolidated with In re Crazy Eddie Securities Litigation for purposes of discovery only. 747 F. Supp. at 853. The court has also treated the actions brought by Krim, Stepak and Abrams as part of the consolidated action.
In the September 1990 Order, 747 F. Supp. 850, the court, among other things, dismissed as time-barred the Securities Act claims against the underwriter Oppenheimer based on the Oppenheimer Sales and the claims against Eddy Antar, Zimel, Wertheim, Bear Stearns, Salomon, and Peat Marwick based on the 1986 debenture offering, and dismissed with leave to replead the Exchange Act claims against Penn & Horowitz and the RICO claims against Solomon E. Antar.
That Order also dismissed from the Schwebel Complaint the Securities Act claims against various defendants with leave to replead.
The plaintiffs commenced yet another action, Bernstein v. Rose Antar, 90-CV-3181, naming as defendants family members and business associates of Eddy Antar and alleging violations of federal securities laws, RICO and state law. This action is not consolidated in In re Crazy Eddie Securities Litigation.
On November 8, 1991 plaintiffs, without obtaining leave of court, filed what they called a third amended and consolidated complaint (the Third Complaint). Five days thereafter plaintiffs filed a new action, Bernstein v. Antar, 91-CV-4450, making allegations in the complaint (the New Complaint) virtually identical to those in the Third Complaint.
The most recent case, Crazy Eddie, Inc. v. Peat Marwick Main & Co., 92-CV-75, was transferred to this court from the United States Bankruptcy Court for the Southern District of New York, where the Crazy Eddie bankruptcy proceeding is pending. In that action Crazy Eddie as debtor and debtor in possession seeks to recover from its accountant Peat Marwick for fraudulent conveyance, breach of contract and negligence.
The court has before it motions addressed to the Second Complaint and made before the filing of the Third Complaint and the New Complaint, as well as motions directed to the latter complaints. The court will discuss first the motions relating to the Second Complaint.
MOTIONS FOR SUMMARY JUDGMENT