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LAWRENCE v. COHN

February 23, 1993

ALICE LAWRENCE, SUZANNE LAWRENCE, RICHARD LAWRENCE, and MARTA JO LAWRENCE, individually, and on behalf of the Estate of Sylvan Lawrence, including the Residuary Trust, Plaintiffs,
v.
SEYMOUR COHN, Defendant.


HAIGHT, JR.


The opinion of the court was delivered by: CHARLES S. HAIGHT, JR.

HAIGHT, District Judge:

 This case is before the Court on plaintiffs' motion under Rule 60(b), Fed. R. Civ. P., to vacate the Court's order of November 12, 1991, dismissing plaintiffs' federal securities claim on statute of limitations grounds and dismissing their other claims without prejudice.

 Plaintiffs are beneficiaries under the will of the late Sylvan Lawrence, who died in December, 1981. The defendant, Seymour Cohn, Lawrence's brother, is the sole executor of the Lawrence estate (the "Estate") and a trustee of a residuary trust created by the will.

 Plaintiffs allege that Cohn committed various acts of fraud and breached his fiduciary duty in connection with his duties as trustee of the Estate. These parties have been litigating the matter in the Surrogate's Court (Hon. Renee R. Roth) since 1983.

 In 1990, plaintiffs filed this federal action. The amended complaint charges 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 violations of the RICO statute, 18 U.S.C. §§ 1962(a)(b) and (c). Plaintiffs also allege pendent state claims for common law fraud, breach of contract, and unjust enrichment.

 They seek imposition of a constructive trust on certain partnership interests acquired by defendant; a conveyance of those interests to the plaintiffs and/or the Estate; an accounting; compensatory damages (trebled under RICO); punitive damages; attorneys fees; and costs.

 Defendant moved to dismiss the amended complaint on a number of grounds. By order dated November 12, 1991, the Court dismissed the 10b-5 claim as untimely under the statute of limitations, and declined to assert jurisdiction over the remaining claims, including the RICO claim, as they were being fully litigated in the state court. The Clerk of the Court entered an order of Judgment dismissing the case on November 25, 1991.

 Plaintiffs noticed their appeal to the Second Circuit on December 12, 1991. A subsequent Order to Show Cause for Vacatur of Judgment and Order pursuant to Rule 60(b) was declined by this Court on January 8, 1992, as this Court was divested of jurisdiction upon the filing of the notice of appeal.

 Upon the advice of staff counsel to the Second Circuit, plaintiffs wrote this Court on January 14, 1991, asking whether this Court would consider plaintiffs' Rule 60(b) motion if the Second Circuit were to remand the case for that purpose. By memorandum opinion and order dated January 24, 1992, this Court responded to plaintiffs' request: "Without expressing any view on the merits of such a motion, I am prepared to state, and do hereby state, that I would be willing to consider such a motion if the case is remanded."

 By order dated February 4, 1992, the Second Circuit remanded the case to this Court for disposition of the Rule 60(b) motion. All other appellate proceedings were stayed pending the disposition of that motion.

 BACKGROUND

 The facts of the case are set forth more fully in the Court's November 12, 1991 opinion, familiarity with which is assumed. For the purposes of this motion, allegations in plaintiffs' amended complaint are taken as true.

 The Limited Partnership agreement provided that upon the death, retirement, or incompetency of one of the general partners (Lawrence or Cohn), the partnership would continue, with the remaining partner as the sole general partner with a 30% interest. The retired, deceased or incompetent partner (or his 'legal representatives) would become a limited partner with a 30% interest. Limited Partnership Agreement, P 9. Accordingly, upon Lawrence's death, his interest as a general partner was automatically converted into a 30% limited partnership in favor of his Estate; Cohen became the sole general partner.

 The Limited Partnership agreement further provided that in the event one of the limited partners wished to sell his interest, the other limited partners had the right of first refusal. (If more than one limited partner wished to partake in the purchase, they would do so in proportion to their respective interests.) If the limited partners did not wish to purchase the interest, the General Partners had the next right of refusal. Limited Partnership Agreement P 8(b).

 On May 23, 1983, defendant Cohn executed an agreement with the limited partners (exclusive of Lawrence's Estate) for the purchase of their partnership interests, which accounted for a 40% interest. On August 18, 1983, Cohn commenced a proceeding in the Surrogate's Court seeking that 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 in his buy-out of the limited partners. In connection with that proceeding, on January 6, 1984, Cohn submitted an affidavit outlining his opinion of the value of the limited partnership interests, and the wisdom of the Estate purchasing all or part of the interests up for sale.

 On or about May 17, 1984, Cohn and the plaintiffs completed the signing of a settlement agreement providing for the disposition of the 40% limited partnership interest; one-half would be acquired by the Estate and one-half would be acquired by Cohn individually. This agreement was approved by the Surrogate on or about May 18, 1984.

 Plaintiffs essentially allege that prior to the May 1984 agreement, Cohn fraudulently concealed from them the true facts regarding the status of negotiations with lessees of space at 95 Wall Street. The effect of those fraudulent omissions was to make the building appear less valuable than it ...


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