The opinion of the court was delivered by: MILTON POLLACK
MILTON POLLACK, Senior District Judge:
The plaintiffs Jack Meyerson, Pamela Meyerson, George Froley as trustee, Edith Citron, William Weinberger, and Samuel Schaeffler, members of and representing Class V, Subclass 3 in MDL 732, have moved for an order pursuant to Fed. R. Civ. P. 15(a) granting them leave to amend the Fifth Consolidated Amended Complaint ("the Fifth Complaint") to clarify that defendants Wickes Companies, Inc. ("Wickes") and former Wickes director Sanford Sigoloff ("Sigoloff") are among the defendants against whom the Fifth Complaint asserts claims based on § 10(b) of the Exchange Act and civil RICO. The plaintiffs also ask the Court to deem the proposed amendment to be incorporated into the Fifth Complaint. Both Wickes and Sigoloff deny that the Fifth Complaint as it stands includes Exchange Act or RICO claims against them and object to a proposed addition of their names by amendment of the Fifth Complaint.
The motion will be granted for the reasons set forth below.
Starting in 1986, numerous civil actions arising out of a conspiracy among Ivan Boesky, Michael Milken, and others to violate the federal securities laws were filed in the Southern District of New York. On August 5, 1987, the Judicial Panel on Multidistrict Litigation entered an order pursuant to 28 U.S.C. § 1407 centralizing in the Southern District of New York for coordinated or consolidated pretrial proceedings three actions pending in other districts with nine actions already pending before the undersigned. On October 29, 1987, this Court directed the plaintiffs to file a Consolidated Amended Complaint, which would consolidate the actions centralized by the Multidistrict Panel until then and supersede the complaints in those actions. The First Consolidated Amended Complaint was filed on November 2, 1987. A Second Consolidated Amended Complaint was filed on February 29, 1988. A Third Consolidated Amended Complaint was filed on June 24, 1988. No claims against Wickes or Sigoloff had yet been made part of the proceedings in MDL 732. The claims asserted by the plaintiffs in the instant motion arise out of the forced conversion during the period April 23, 1986 through June 2, 1986 of all shares of $ 2.50 Convertible Exchangeable Preferred issued by Wickes Companies, Inc., ("Wickes Preferred"). Allegedly this was accomplished by inflating the price of Wickes common stock in order to trigger Wickes' right to force the conversion of Wickes Preferred, thereby eliminating the company's obligation to pay annual cumulative dividends to its preferred stockholders.
On December 2, 1988, Edith Citron, a holder of Wickes Preferred who was forced to convert her shares, commenced a class action in Los Angeles Superior Court in which Wickes was named as a defendant ("Citron"). Citron's complaint was amended on January 9, 1990, to add Sigoloff as a defendant. Citron alleged that Wickes and Sigoloff conspired with Michael Milken and Drexel Burnham Lambert, Inc. to violate California securities statutes, common law, and the federal Securities Act of 1933. On December 9, 1988, William Weinberger filed a substantially similar class action in Los Angeles Superior Court in which Wickes was named as a defendant ("Weinberger"). Sigoloff was added as a defendant in Weinberger by amendment on January 9, 1990.
On August 10, 1989, this Court directed plaintiffs to file a Fourth Consolidated Amended Complaint that would include causes of action asserted in several actions filed in this Court during 1989 or transferred here from other districts. The Fourth Consolidated Amended Complaint ("the Fourth Complaint") was filed on November 20, 1989. Jack Meyerson, Pamela Meyerson, and George Froley as trustee, former holders of Wickes Preferred, were joined in MDL 732 as plaintiffs and asserted in the Fourth Complaint their claims against Wickes, Sigoloff, Milken, Drexel, Boesky, and other defendants on behalf of a purported class, Subclass 3 of Class V, consisting of Wickes Preferred holders who redeemed, converted, or sold their shares during the period April 23, 1986 through June 2, 1986. As did Citron and Weinberger, the Meyersons and Froley charged that Wickes and Sigoloff were part of a conspiracy to inflate the price of Wickes common to force the conversion of Wickes Preferred. After service and filing of the Fourth Complaint, Citron and Weinberger also joined MDL 732 as plaintiffs pursuant to an order dated February 15, 1990, with the understanding that they would "pursue in the above-captioned consolidated actions all of their individual and class claims arising out of the conduct alleged by them in the aforesaid California actions." MDL 732 Order No. 55 (emphasis added). Wickes and Sigoloff stipulated to entry of this order. Meanwhile, the California state court cases, Citron and Weinberger, were stayed by consent of the parties on March 7, 1990, and remain pending in California.
On December 20, 1989, the Meyersons and Froley, among other plaintiffs, moved for certification of various classes, including Subclass 3 of Class V as defined in the Fourth Complaint. On February 21, 1990, the proposed class was certified herein for all purposes pursuant to Order No. 56, a stipulated order to which both Wickes and Sigoloff consented. Order No. 56 designated the plaintiffs Meyersons, Froley, Citron, and Weinberger as the representatives of Subclass 3.
A Fifth Consolidated Amended Complaint was then filed on August 2, 1991. It showed that Citron and Weinberger were together with the other plaintiffs herein asserting claims against Wickes and Sigoloff on behalf of Subclass 3 of Class V ("the plaintiffs"), viz.: the same conspiracy to inflate the price of Wickes common alleged in the Fourth Complaint. It is undisputed that Wickes and Sigoloff are named as defendants in three of the counts in the Fifth Complaint: Counts 32 (common law fraud and deceit), 33 (breach of fiduciary duty and unjust enrichment), and 34 (violation of California Corporations Code § 25400).
On Behalf of Class V Plaintiffs (and Teachers as to Wickes)
Against Class V Defendants (and Monzert as to Wickes)
Section 10(b) and Rule 10b-5
Paragraph 134 of the Fifth Complaint defines the term "Class V Defendants" as Boesky, the Boesky-controlled entities, Drexel, Milken, Lowell Milken and Maultasch. The term does not include defendants Monzert, Wickes, or the Wickes Board [i.e., Sigoloff], whom P 134 separately designates as the "Wickes Defendants." Footnote 4 to P 801 modifies P 134's definition of "Class V Defendants" to include Monzert but does not expressly mention defendants Wickes or Sigoloff. Footnote 4 reads:
For the purpose of Counts XXVI, XXVIII, XXX and XXXI, the term "Class V Defendants" shall be deemed to also refer to defendant Monzert with regard to the Wickes transaction.
The plaintiffs seek leave to amend footnote 4 of P 801 in order to add Wickes and Sigoloff to the definition of the term "Class V Defendant" for purposes of Counts 26 and 28, as well as charging them with two pendant state-law counts, Counts 30 and 31, of common law fraud and unjust enrichment against the Class V Defendants. The proposed amendment would change footnote 4 to read as follows:
For the purpose of Counts XXVI, XXVIII, XXX and XXXI and the headings thereof, the term "Class V Defendants" shall be deemed to also refer to the Wickes Defendants, as defined in P 134 of this Fifth Complaint, with regard to the Wickes transaction.
The plaintiffs characterize their motion as one to clarify that Wickes and Sigoloff are already named defendants in Counts 26 and 28 of the Fifth Complaint. Wickes and Sigoloff disagree, insisting that the plaintiffs deliberately drafted the Fifth Complaint to avoid stating any federal claims against them asserted in those Counts. Moreover, adding these names expressly by amendment would be improper, they contend, because the proposed amendment would be futile, would cause prejudice, and is being offered in bad faith.
I. Counts 26 and 28 already express the federal claims against Wickes and Sigoloff.
Counts 26 and 28 of the Fifth Complaint already contain allegations sufficient to express claims arising under § 10(b) and civil RICO against Wickes and Sigoloff. Under Rule 8(a), Fed.R.Civ.P., in order to plead a claim for relief, a complaint need only contain
(1) a short and plain statement of the grounds upon which the court's jurisdiction depends . . . (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks.
The Fifth Complaint already implicitly satisfies all three of these requirements as to the § 10(b) and civil RICO claims against Wickes and Sigoloff. The Fifth Complaint properly names the statutes that confer jurisdiction on this Court to hear § 10(b) and civil RICO claims.
Counts 26 and 28 of the Fifth Complaint incorporate by reference factual allegations under which the plaintiffs would be entitled to relief against the defendants pursuant to § 10(b) and civil RICO.
That the Fifth Complaint does not identify § 10(b) or civil RICO as legal theories under which relief is demanded from Wickes and Sigoloff is immaterial. The Second Circuit does not restrict a complaint to the legal theories specifically identified if the allegations therein would support other theories of relief as well. "The failure in a complaint to cite a statute, or to cite the correct one, in no way affects the merits of a claim. Factual allegations alone are what matters." Albert v. Carovano, 851 F.2d 561, 571 n.3 (2nd Cir. 1988) (en banc) (holding that complaint asserted claim under 42 U.S.C. § 1981 even though the complaint expressly claimed relief under the Fourteenth Amendment and did not also cite § 1981); see also Johnson v. Jackson, 82 F. Supp. 915, 918 (E.D. Pa. 1949) ("If the pleading states a cause of action for relief, the designation of the cause and the prayer for relief, although some indication of the nature of the cause, are not controlling and the appropriate relief under the facts pleaded, will be granted."). Finally, the Fifth Complaint demands relief particular to civil RICO -- treble damages and attorneys' fees -- as well as compensatory damages and any other appropriate relief.
However, Wickes maintains that, absent an amendment to the Fifth Complaint, this Court may not grant plaintiffs relief against those defendants on a § 10(b) or civil RICO theory, because the plaintiffs elected not to rely on federal causes of action. Invoking the well-pleaded complaint rule, Wickes concludes that, because the plaintiffs decided not to expressly assert federal causes of action against those defendants in the Fifth Complaint by citation of the federal statutes, no federal question as to Wickes or Sigoloff appears on the face of the Fifth Complaint. ...