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PAY TEL SYS. v. SEISCOR TECHS.

April 26, 1994

PAY TEL SYSTEMS, INC., Plaintiff,
v.
SEISCOR TECHNOLOGIES, INC., and RAYTHEON COMPANY, Defendants. TRIDENT TECHNOLOGIES, INC., TRIDENT TELECOMMUNICATIONS SYSTEMS I, and TRIDENT TELECOMMUNICATIONS SYSTEMS II, Plaintiffs, v. SEISCOR TECHNOLOGIES, INC., and RAYTHEON COMPANY, Defendants.



The opinion of the court was delivered by: VINCENT L. BRODERICK

 VINCENT L. BRODERICK, U.S.D.J.

 These cases brought pursuant to the diversity of citizenship jurisdiction of the court present issues concerning alleged defects in private pay telephones manufactured by defendant Seiscor Technologies, Inc. ("Seiscor"), an indirect subsidiary of defendant Raytheon Company ("Raytheon"). Defendants have moved for summary judgment dismissing the complaints in both cases. The motions are conditionally granted, and the complaint will be dismissed unless plaintiffs take the actions described below within forty-five (45) days to correct deficiencies in their claims and the evidence submitted in support of them outlined in this memorandum order.

 II

 Complete diversity of citizenship as required under 28 U.S.C. 1332 is lacking in 88 Civ 5676 (the "Trident case") because both plaintiff Trident Telecommunications Systems I ("Trident I") and Raytheon are citizens of Massachusetts. Trident I is a partnership, the general partner of which, and many of the limited partners of which reside in that state; Raytheon's principal place of business is in that state, making it a citizen of that state under 28 U.S.C. 1332(c). In order to avoid dismissal of the Trident case on that ground, plaintiffs must file an amended complaint dropping Trident I, Raytheon or both as parties. If plaintiffs elect to make such an amendment, they shall also show cause why they should not be required to pay defendants' legal costs in connection with the diversity of citizenship issue pursuant to 28 U.S.C. 1927 or Fed.R.Civ.P. 11, or both. *fn1"

 III

 Numerous assignments have been executed by plaintiffs with regard to claims at issue in these cases. Where complete assignments have been made, the assignee is the real party in interest and a necessary party under Fed.R.Civ.P. 19. To omit such parties would risk generating subsequent duplicative litigation. Assertion of residual overlapping claims by the assignor without joining the assignee or establishing waiver of such claims by an assignee is improper and their pursuit would be an abuse of the litigation process. In some cases it is not clear that all assignees are parties to the suits now pending. In order to be permitted to proceed, plaintiffs must:

 (a) Eliminate from the respective complaints all claims by an assignor with respect to rights assigned to another person or entity absent an express reservation of any claims retained;

 (b) Add as voluntary or involuntary plaintiffs any assignee or financing entity having or which may assert title to any claims asserted by plaintiffs in the case involved. This must be done regardless of whether or not existing plaintiffs have or claim to have a residual or reserved right of any kind to sue on a claim. In the alternative, plaintiffs may drop the claim involved. If additional necessary parties would destroy diversity of citizenship, one or more parties with the same citizenship must be omitted from the case or the relevant claims dropped from the complaint involved.

 Affidavits (subject to Fed.R.Civ.P. 11 and 28 U.S.C. 1927) must be submitted by a knowledgeable person that the steps called for by this part III have been taken with completeness.

 IV

 The defendant Raytheon has offered evidence that its indirect subsidiary Seiscor operates as an independent entity, but has not provided information concerning whether or not Seiscor is insolvent or undercapitalized. This is a relevant consideration where piercing the corporate veil is requested. See generally Lowen v. Tower Asset Management, 653 F. Supp. 1542, 1551-56 (SDNY), aff'd 829 F.2d 1209 (2d Cir 1987); Gelb, "Piercing the Corporate Veil - the Undercapitalization Factor," 59 Chi-Kent L Rev 1 (1982); Practising Law Institute, Responsibility of the Corporate Parent for the Activities of a Subsidiary (1990); 1 Fletcher, Cyclopedia of Corporations § 44.1 (perm ed 1983); Note 99 Harv L Rev 986 (1986).

 Plaintiffs have made arguments that when analyzed amount to implying that Seiscor is acting as an agent for Raytheon because customers were aware of or told of the connection between the two companies. Mention of Raytheon during negotiations between Seiscor and plaintiffs, forwarding of communications to and from Raytheon, references to Seiscor as part of the Raytheon family, and similar events are insufficient to make Raytheon responsible for Seiscor's contracts. Statements supported by the appearance of authority to speak for Raytheon, and which specifically purport to commit Raytheon would be sufficient to do so. See IBM v. United Home, 848 F. Supp. 495 (SDNY 1994), describing and vacating pursuant to settlement, IBM v. United Home, 1994 WL 86597 (SDNY March 3, 1994). No evidence of this kind has been set forth.

 In each case, plaintiffs must drop Raytheon as a defendant, provide information which would justify piercing the corporate veil, or specify discovery needed to establish a basis for such piercing. In the latter instance, plaintiffs must simultaneously serve and attach whatever ...


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