during a period of almost two years, and that during that period the defendants committed various acts of securities fraud and mail or wire fraud. Amended Complaint P 2. The Supreme Court has stated that "[a] RICO pattern may surely be established if the related predicates themselves involve a distinct threat of long-term racketeering activity, either implicit or explicit." H. J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. at 242.
In reading the plaintiffs' complaint liberally, as a court is bound to do in the context of a 12(b)(6) motion, this Court finds that plaintiffs' allegations, at this preliminary stage of the litigation, suffice to meet the relatedness and continuity requirements of a pattern of racketeering activity, and declines to dismiss plaintiffs' RICO claims. For the same reasons, the Court declines to grant summary judgment on plaintiffs' RICO claims as a matter of law.
5. Common Law Claims
Defendants argue that certain common law claims asserted by plaintiffs fail to state a claim as a matter of law and must therefore be dismissed pursuant to Rule 12(b)(6) and/or Rule 56.
In the Amended Complaint, plaintiffs claim that del Campo, Vinolas and Targhetta, as directors and officers of each of the companies comprising the Coal Group, failed to discharge their fiduciary duty to the Coal Group and its shareholders (including, directly KIC, Logostable and Obanos, and, indirectly, Powers, SSC and TCP) to oversee the operations of each company in the Coal Group and insure that those companies properly conducted their businesses. Also, plaintiffs allege that del Campo, Vinolas and Targhetta were negligent and careless in the conduct of their fiduciary duties such that the funds and property of the Coal Group were squandered, grossly mismanaged and wasted which resulted in the inability of the members of the Coal Group to satisfy their obligations to BPA and to each other. Amended Complaint P 203. Furthermore, plaintiffs claim that Asland and Bertran, through their control of del Campo, Vinolas and Targhetta, induced those defendants to breach their fiduciary duties to the Coal Group. Amended Complaint P 202.
Defendants seek dismissal of the claims of SSC, KIC, TCP
and Powers because the directors and officers owed fiduciary duties to the coal Group and not to its shareholders. They contend that KIC, as a shareholder of the three companies comprising the Coal Group, and that Powers (shareholder of KIC), may not bring an action when the company of which they are shareholders has sued for the same relief and, "a fortiori, shareholders of shareholders also have no standing to bring such claims." Defendants' Memorandum of Law at 53. Also, defendants assert that SSC has no standing to assert claims for breach of fiduciary duty because it has not been alleged that the transfer of 66% of the stock of SMC by SSC to DLH, subject to an agreement entered into in March 1986, was ever made. Defendants' Memorandum of Law at 53-54 and Amended complaint P 81(a).
Because fiduciary duties generally are said to be owed to a corporation and not to a particular stockholder, the enforcement of such duties must be in the name of the corporation. 19 William M. Fletcher, Fletcher Cyclopedia of Private Corporations § 5:06 at 573 (1988); see St. Louis Union Trust Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 562 F.2d 1040, 1055 (8th Cir. 1977), cert. denied, 435 U.S. 925, 55 L. Ed. 2d 519, 98 S. Ct. 1490 (1978) ("directors generally do not occupy a fiduciary position with respect to stockholders in face to face dealings.")
However, an exception exists where an individual stockholder suffers an injury separate and distinct from that suffered by other shareholders. Thus, the injury to the plaintiff must arise out of plaintiff's relationship to the transaction complained of other than as a shareholder. 19 William M. Fletcher, Fletcher Cyclopedia of Private Corporations § 5:06 at 573 (1988); ZB Holdings, Inc. v. BBA Group PLC, No. 91 Civ. 4486, 1992 WL 309812, at *3 (S.D.N.Y. Oct. 14, 1992) ("an individual shareholder may bring an action on his own behalf against a corporate officer for breach of fiduciary duty where his loss is 'separate and distinct from that of the corporation.'") (quoting Hite v. Thomas & Howard Co., 305 S.C. 358, 409 S.E.2d 340, 342 (S.C. 1991))
(a) KIC's Claim
With regard to KIC, this Court will allow its individual common law claim to stand. In addition to losses suffered as a shareholder, KIC claims losses of promised royalties of $ 4.00 - $ 4.75 per ton on coal produced and sold to Asland under the Coal Supply Agreement. Amended Complaint P 39d. These alleged losses are separate and distinct from those suffered by the other shareholders. Thus, this Court declines to dismiss KIC's claim for breach of fiduciary duty. Summary judgment regarding this claim is also denied as a matter of law.
(b) SSC's Claim
As to SSC's claim, this Court finds that there is no shareholder relationship between SSC and DLH. Thus, SSC has no standing to sue for breach of fiduciary duty and defendants' motion to dismiss regarding this claim is granted.
(c) Powers' Claim
With regard to Powers' claim, this Court finds that no fiduciary relationship exists between Powers and Vinolas, del Campo and Targhetta as corporate officers and directors of the Coal Group. "'At the heart of the fiduciary relationship' lies 'reliance, and de facto control and dominance.'" United States v. Chestman, 947 F.2d 551, 568 (2d Cir. 1991) (in banc) (quoting United States v. Margiotta, 688 F.2d 108, 125 (2d Cir. 1982)), cert. denied, 112 S. Ct. 1759 (1992). The Chestman court listed attorney and client, executor and heir, guardian and ward, principal and agent, trustee and trust beneficiary, and senior corporate official and shareholder as some examples of fiduciary relations. United States v. Chestman, 947 F.2d at 568. In light of the foregoing, powers, as guarantor of $ 2 million of the Coal Group's obligations to BPA, is not in a traditional fiduciary relationship with the corporate officers and directors of the Coal Group. Furthermore, it is apparent that Powers, in his capacity as a shareholder of KIC (which, in turn, is a shareholder of the Coal Group), has no fiduciary relationship with the defendant corporate officers and directors, as this relationship is too remote, despite the fact that he is the sole stockholder of KIC. "Regardless of the identity of financial interests between corporation and shareholder, he cannot employ the corporate form to his advantage in the business world and then choose to ignore its separate entity when he gets to the courthouse." 12B William M. Fletcher, Fletcher Cyclopedia of Private Corporations § 5910 at 418 (1984). This is precisely what Powers seeks to do here. Therefore, defendants' motion to dismiss with regard to Powers breach of fiduciary duty claim is granted.
For the foregoing reasons, defendants' motion to dismiss pursuant to Rule 12(b), Fed. R. Civ. P., and/or for summary judgment pursuant to Rule 56, Fed. R. Civ. P., is granted in part and denied in part. The parties are directed to complete discovery by March 29, 1993 and to file a joint pretrial order by April 29, 1993.
Settle order on notice.
Dated: New York, New York
December 29, 1992
Robert J. Ward