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March 5, 1996


The opinion of the court was delivered by: CONNER

 Conner, Sr. D.J.

 Plaintiffs bring this class action on behalf of all individuals who purchased common stock of The Leslie Fay Companies, Inc. ("Leslie Fay" or "the Company") between February 4, 1992 and April 5, 1993 (the "Class Period"). The Amended Complaint asserts claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against a number of Leslie Fay's officers and directors and BDO Seidman ("BDO"), the Company's outside auditor.

 This court denied BDO's motion to dismiss pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. See In re The Leslie Fay Companies, Inc. Securities Litigation, 871 F. Supp. 686 (S.D.N.Y. 1995); In re The Leslie Fay Companies, Inc. Securities Litigation, 835 F. Supp. 167 (S.D.N.Y. 1993). BDO then filed cross-claims and third-party claims against officers and directors of Leslie Fay. *fn1"

 The action is presently before the court on various TPDs' motions to dismiss pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons discussed below, TPDs' motions are granted in part and denied in part.


 The overall result of this scheme was that in the years 1990 through 1992, respectively, Leslie Fay's gross profits were overstated by $ 3 million (1.1%), $ 12.4 million (5.1%), and $ 35 million (18.9%), and its per-share earnings by $ 0.15 (10.9%), $ 0.48 (44.9%), and $ 1.84 (347.2%), while its pretax income over the three-year period was overstated by a total of $ 75 million.

 Leslie Fay retained BDO to provide independent auditing services for the years ending December 29, 1990 and December 28, 1991. BDO issued unqualified opinions for each of those years, which were included in Leslie Fay's 1990 and 1991 Form 10-K reports and 1990 and 1991 Annual Reports to Shareholders, respectively, attesting to the accuracy of Leslie Fay's financial statement schedules and their conformity with Generally Accepted Accounting Principles ("GAAP"). In addition, BDO certified that it performed its audits in accordance with Generally Accepted Auditing Standards ("GAAS"). Based on the pervasiveness of the manipulation described above, plaintiffs allege that BDO either knew or was reckless in failing to discover that its unqualified opinions were wholly unfounded.

 On February 1, 1993, the Company announced that it had requested that the board of directors' audit committee commence an investigation into "accounting irregularities" which might cause Leslie Fay to restate previously reported earnings for 1991 and to eliminate any profit for 1992. The Company suspended Corporate Controller Donald Kenia pending the outcome of the investigation, but Leslie Fay's CEO, John Pomerantz, insisted, in a widely distributed press release, that the financial viability of the Company was not in jeopardy. On the same day Leslie Fay's General Counsel, Herman Gordon, announced that the audit committee would investigate inaccurate entries involving an overstatement of inventory and a reduction of the cost of goods sold. As a result of this announcement, trading in Leslie Fay stock was suspended and at the end of the trading day the stock had fallen to $ 7 3/8 per share from its close of $ 12 per share on the previous day. On February 2, 1993, it was reported that Kenia had admitted that he and 15 other employees of the Company's Wilkes-Barre, Pennsylvania offices had been falsifying invoices for over one year, and the Company announced that the false entries began in the last quarter of 1991 and continued through all of 1992. Upon announcing his fraud, Kenia stated that he was coming forward because the discrepancies caused by the falsifications had become too large to hide. On February 16, 1993, Leslie Fay announced that it had commenced an investigation into possible false SEC filings made by the Company, and on March 26, 1993, it was announced that Leslie Fay was the subject of a Commission investigation as well. On March 22, 1993, Paul Polishan, CFO of the Company, took a leave of absence pending the final outcome of the Audit Committee report. Finally, on April 5, 1993, Leslie Fay filed a voluntary bankruptcy petition under Chapter 11 of the Federal Bankruptcy Code, and in response, its common stock price fell to $ 2.75 per share. After the overstatements were revealed by the Audit Committee on February 26, 1993, BDO withdrew its 1991 opinion. Plaintiffs' class action followed.


 On motions to dismiss, we have a limited task. The factual allegations in the cross-claims and third-party claims must be accepted as true, and must be construed favorably to third-party plaintiff BDO. A motion to dismiss pursuant to Rule 12(b)(6) should be granted only if it appears beyond doubt that third-party plaintiff can prove no set of facts entitling it to relief. Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974); Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985).

 I. Statute of Limitations

 As a preliminary matter, we address Odyssey's statute of limitations defense to BDO's claim for contribution under section 10(b). Odyssey argues that the Supreme Court's holdings in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S. Ct. 2773, 115 L. Ed. 2d 321 (1991), and Musick, Peeler & Garrett v. Employers Ins. of Wausau, 508 U.S. 286, 113 S. Ct. 2085, 2090-92, 124 L. Ed. 2d 194 (1993), "mean that the common law rule on the accrual of a cause of action for contribution is not applicable to claims for contribution by a violator of § 10(b) of the 1934 Act." Mem. of Law in Support of the Motion of Third-Party Defendants Steven M. Friedman, Jack Nash, Lester Pollack and Odyssey Partners, L.P. to Dismiss the Third-Party Complaint of BDO Seidman, at 12 ("Odyssey Motion"). In Lampf, the Supreme Court held that the applicable statute of limitations for a section 10(b) suit was to be borrowed from section 9(e) of the 1934 Act. 111 S. Ct. at 2782 n.9. Section 9(e) provides:

Any person who willfully participates in any act or transaction in violation of subsections (a), (b), or (c) of this section, shall be liable to any person who shall purchase or sell any security at a price which was affected by such act or transaction . . . . Every person who becomes liable to make any payment under this subsection may recover contribution as in cases of contract from any person who, if joined in the original suit, would have been liable to make the same payment. No action shall be maintained to enforce any liability created under this section, unless brought within one year after the discovery of the facts constituting the violation and within three years of such violation.

 15 U.S.C. § 78i(e) (emphasis added). In the present case, BDO filed its cross-claims and third-party claims on March 29, 1995. Odyssey argues that (1) BDO had notice of the facts underlying its claims more than one year prior to March 29, 1995; and, (2) in any case, the statute of limitations bars all claims arising out of events that occurred before March 30, 1992 (effectively barring all claims asserted by BDO because all relevant events purportedly occurred prior to March 30, 1992).

 In the only case known to this court that has addressed the issue of the applicable statute of limitations for a claim of contribution under section 10(b), Ades v. Deloitte & Touche, 1993 U.S. Dist. LEXIS 12901, 1993 WL 362364 (S.D.N.Y. Sept. 17, 1993), Judge Sweet rejected the same argument that is asserted now by Odyssey. In Ades, investors alleged section 10(b) claims against Deloitte & Touche which, in turn, filed third-party claims against others. Some of the third-party defendants moved to dismiss based on the argument Odyssey makes here: The Supreme Court, in Lampf, had created a new statute of limitations for contribution claims. Id. at *15. Judge Sweet distinguished Lampf on the ground that "Lampf does not address the question of the statute of limitations for a contribution claim or in any other way change the existing rule, which is that an action for contribution accrues at the time a judgment is entered against the direct defendant and is paid by him." Id. at *16.

 Odyssey urges that Judge Sweet did not properly read Lampf in conjunction with Musick, Peeler to arrive at the conclusion that federal law has displaced common law principles with respect to contribution and limitations questions under section 10(b). In Musick, Peeler, the Supreme Court held that there was an implied right of action for contribution under section 10(b). 113 S. Ct. at 2092. The Supreme Court found support for its conclusion in sections 9 and 18 of the 1934 Act. Odyssey argues that the one year after discovery/three years after violation limitation in section 9(e) -- the limitation period applied in Lampf -- must therefore apply to contribution claims under section 10(b).

 Odyssey may be correct that Lampf displaced common law principles with respect to limitations questions involving direct section 10(b) claims, and that Musick, Peeler ruled that there is an implied federal right of action for contribution arising out of section 10(b). That does not mean, however, that these cases displaced common law principles with respect to limitations questions as they relate to section 10(b) contribution claims. The Lampf Court chose to apply the language of section 9(e) rather than that of section 18(c) (three years after violation, not three years after such cause of action accrued), Lampf, 113 S. Ct. at 364 & n.9, but that Court addressed only the statute of limitations applicable to section 10(b) direct claims, not section 10(b) contribution claims. The Musick, Peeler Court inferred a cause of action for contribution from both sections 9 and 18 of the 1934 Act; the Court did not reach the question whether one section or the other would control the applicable statute of limitations for contribution claims. *fn2" The section 18(c) rule that begins the limitations period upon accrual is consistent with the long-standing rule governing the accrual of contribution claims. In the absence of any authority supporting the idea that Lampf alters the long-standing rule governing the accrual of contribution claims, we decline to change that rule. Ades, 1993 U.S. Dist. LEXIS 12901, 1993 WL 362364, at *16. We agree with Judge Sweet that Lampf, even when read in conjunction with Musick, Peeler, does not compel a conclusion that the applicable statute of limitations for a section 10(b) contribution claim is the one-year/three-years from the time of violation rule of section 9(e).

 The Division Presidents seem to think that the facts that the plaintiffs (1) dismissed their action as to Ward and Zipp and (2) never named Levine a defendant somehow affect the statute of limitations issue. These facts do not change the outcome as to them. For the reasons just discussed, BDO's right to contribution has not yet accrued so that the statute of limitations has not yet begun to run on BDO's section 10(b) contribution claim. Furthermore, "the goal of the securities laws is not just to compensate persons who have been defrauded but also to deter violations of those laws. This goal is advanced by a recognition of liability for contribution among joint offenders and by a recognition that liability does not depend on the plaintiff's having elected to proceed against all those who have offended." Ades, 1993 U.S. Dist. LEXIS 12901, *29, 1993 WL 362364, at *9 (citing Tucker v. Arthur Andersen & Co., 646 F.2d 721, 727 n.7 (2d Cir. 1981)).

 II. Section 10(b) and Rule 10b-5 Contribution

 Rule 10b-5, promulgated under section 10(b), makes it unlawful "for any person, directly or indirectly . . . to employ any device, scheme, or artifice to defraud, . . . to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made . . . not misleading, or . . . to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." 17 C.F.R. § 240.10b-5. This provision provides an implied cause of action where defendants made a knowing misrepresentation or omission of material fact in connection with the purchase or sale of a security which caused plaintiffs' loss. To state a claim under section 10(b), a plaintiff must allege acts indicating an intent to deceive, manipulate, or defraud. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 192 n.7, 47 L. Ed. 2d 668, 96 S. Ct. 1375 (1976). Furthermore, a claimant must show scienter by proving either actual knowledge or recklessness. Aaron v. S.E.C., 446 U.S. 680, 696, 64 L. Ed. 2d 611, 100 S. Ct. 1945 (1980); Sirota v. Solitron Devices, Inc., 673 F.2d 566, 575 (2d Cir.), cert. denied, 459 U.S. 838, 74 L. Ed. 2d 80, 103 S. Ct. 86 (1982).

 It is well established that the right of contribution for violations of the federal securities laws exists among "joint tortfeasors." See Greene v. Emersons, Ltd., 102 F.R.D. 33, 36 (S.D.N.Y. 1983), aff'd sub nom. Kenneth Leventhal & Co. v. Joyner Wholesale Co., 736 F.2d 29 (2d Cir. 1984); see also Tucker, 646 F.2d at 727 n.7 ("Under the securities laws, a person who has defrauded the plaintiff in violation of those laws may be liable for contribution to another person who has similarly defrauded the plaintiff."). Considerably less well-settled, however, is the question of how to define "joint tortfeasor" in this context. The Second Circuit has expressly declined to reach this issue in at least one opinion. See Kenneth Leventhal & Co., 736 F.2d at 31 n.1.

 A. Joint Tortfeasors

 District court cases have defined "joint tortfeasors" in one of two ways. According to Connecticut National Bank v. Reliance Insurance Co., 704 F. Supp. 506 (S.D.N.Y. 1989), the majority view among the district courts in the Second Circuit appears to be that contribution among "joint tortfeasors" under the federal securities laws is limited to "joint participants" in the fraud alleged by plaintiff. 704 F. Supp. at 509; see also Advanced Magnetics Inc. v. Bayfront Partners, Inc., 1993 U.S. Dist. LEXIS 16152, *14, 1993 WL 478115, *5 (S.D.N.Y. Nov. 12, 1993) ("The standard for contribution under § 10(b) requires that the defendants allege that [the third-party defendant] 'knowingly participated' in the fraud against the plaintiff."); In re Crazy Eddie Securities Litigation, 740 F. Supp. 149, 152 (E.D.N.Y. 1990) ("The courts in this circuit have interpreted [the joint tortfeasor] requirement to limit contribution to 'joint participant[s] in the fraud alleged by plaintiff,' and not to embrace also concurrent, independent actors.") (citing Connecticut Nat. Bank, 704 F. Supp. at 509; Greene, 102 F.R.D. at 36; Stratton Group, Ltd. v. Sprayregen, 466 F. Supp. 1180, 1185 (S.D.N.Y. 1979)). Several courts outside this Circuit also have concluded that contribution in section 10(b) cases is only available among parties who knowingly participate in the same fraud. See Stowell v. Ted S. Finkel Investment Servcs., Inc., 641 F.2d 323, 325-26 (5th Cir. 1981) (for contribution under federal securities laws there must be allegations of joint securities act wrongdoing); Alexander Grant & Co. v. McAlister, 669 F. Supp. 163, 166 (S.D. Ohio 1987) (allegation of independent and concurrent action not sufficient under federal securities laws for contribution).

 Other district courts, including this court, have applied a more expansive definition, holding that contribution among "joint tortfeasors" under the federal securities laws is available among independent tortfeasors so long as the parties are concurrently liable for damages. See, e.g., Ades, 1993 U.S. Dist. LEXIS 12901, 1993 WL 362364; McCoy v. Goldberg, 778 F. Supp. 201 (S.D.N.Y. 1991) (Conner, J.); Marrero v. Abraham, 473 F. Supp. 1271, 1277-78 (E.D. La. 1979). These courts reason that there is no logical distinction between joint participants and parties who concurrently but independently cause damage by violating section 10(b). Of course, TPDs urge this court to adopt the more restrictive definition, and BDO the more expansive.

 On the other hand, in Marrero, 473 F. Supp. at 1277-78, the court concluded that contribution under federal securities laws was available among independent, concurrent tortfeasors. It reasoned that since the purpose of contribution is to allow a fair allocation of damages among wrongdoers, a distinction between joint participants working on a common scheme and those who concurrently and independently cause damage to a party made no logical sense. 473 F. Supp. at 1277-78. See also Jordan v. Madison Leasing Co., 596 F. Supp. 707, 711 (S.D.N.Y. 1984) (a finding of "joint liability" under the federal securities laws is based "on common liability to the injured party and not necessarily upon the same tort").

 We do not disagree with Judge Haight's analysis that a purpose of the federal securities laws is to deter the commission of fraud in connection with the sale and purchase of securities. We therefore agree that an expansive definition of "joint tortfeasor" under the federal securities laws to include independent tortfeasors who are unconnected to the underlying fraudulent securities scheme is inappropriate. The more expansive definition adopted in Marrero and its progeny, however, do not conflict with Judge Haight's analysis.

 In Marrero, unlike the cases applying the more restrictive definition of "joint tortfeasors," the third-party complaint alleged a violation of the federal securities laws by the third-party defendants. Marrero, 473 F. Supp. at 1276. *fn3" The court held that these concurrent though independent violations of federal securities laws merited a more expansive definition of "joint tortfeasors" than one requiring joint participation. It was the allegation that two independent violations of Rule 10b-5, one alleged in the complaint and one alleged in the third-party complaint, had combined to produce a single injury to the plaintiff which formed the basis for the district court's reasoning. Marrero, 473 F. Supp. at 1277. Allowing contribution in such circumstances is consistent, we believe, with Judge Haight's concern that contribution under the federal securities laws be limited to those engaged in the kind of fraud that the securities laws contemplate. Cf. Tucker, 646 F.2d at 727 n.7 (contribution available from one who "similarly defrauded" plaintiff).

 As this court noted in McCoy, at least one court in the Southern District of New York has interpreted Tucker to mean that the definition of "joint tortfeasor" for the purpose of a claim for contribution under the federal securities laws does not necessarily require joint participation. In Department of Economic Development v. Arthur Andersen & Co., 747 F. Supp. 922 (S.D.N.Y. 1990), Judge Stewart explained Tucker as follows:

In stating that the securities law contribution claim in Tucker was proper, Judge Kearse implicitly had to have also concluded that an independent securities law violation committed by the Tucker third-party defendants against the plaintiff was also adequately alleged.

 747 F. Supp. at 934.

The Third-Party Complaint clearly alleges that 'Third-Party Defendants, in connection with plaintiff's purchase of the units . . . employed devices, schemes or artifices to defraud, made untrue statements of material facts and omitted to state other material facts . . . all in violation of Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder.' T.P.C. P 39. The Third-Party Complaint also alleges that Phoenix Leasing 'had actual knowledge' of its allegedly false and misleading statements and that 'plaintiff's losses were proximately caused by third-party defendants' representations and omissions.' Id.
. . . .
As Judge Haight noted in Greene, the wrong to be deterred by the federal securities laws is fraud in the connection with the sale and purchase of securities. See Greene, 102 F.R.D. at 36; see also Department of Economic Dev., at 933. Here, the Third-Party Complaint alleges just such a fraud on the part of third-party defendants. Thus allowing contribution in the present matter is entirely consistent with Greene and Stratton. To require, as third-party defendants urge, a definition of 'joint tortfeasor' that is narrow enough to eliminate Phoenix Leasing would be virtually to eviscerate the right of contribution under Section 10(b). Accordingly, the Court denies the instant motion to dismiss third-party plaintiff's contribution claim under Section 10(b).

 McCoy, 778 F. Supp. at 204-05.

 At least one court has explicitly endorsed our view expressed in McCoy. See Ades, 1993 U.S. Dist. LEXIS 12901, 1993 WL 362364. In Ades, the third-party defendant (relying on Connecticut National Bank, Greene, and Stratton) asserted the same argument pressed by TPDs in the instant case: "Because it and [third-party plaintiff] did not knowingly commit the same fraud upon the Plaintiffs, [third-party defendant] and [third-party plaintiff] do not qualify as 'joint' tortfeasors and [third-party plaintiff] is barred from asserting a right of contribution against [third-party defendant]." Ades, 1993 U.S. Dist. LEXIS 12901, 1993 WL 362364, at *14. The court applied this court's reasoning articulated in McCoy:

Bolar, like the partnerships in McCoy, attempts to rely on the language in two older cases, Stratton Group, Ltd. v. Sprayregen, 466 F. Supp. 1180, 1187 (S.D.N.Y. 1979) ("a necessary predicate for contribution . . . is an allegation that [the third-party defendant] was a joint participant in the fraud alleged in the main action"), and Greene v. Emersons, Ltd., 102 F.R.D. 33, 36 (S.D.N.Y. 1983) (holding "that contribution lies only between knowing participants in the same fraud"), aff'd on other grounds by Kenneth Leventhal & Co., 736 F.2d 29 (in which, as noted above, the Second Circuit declined to reach this issue). However, these decisions are distinguishable: "in each, third-party plaintiffs failed to allege that the third-party defendants had violated the securities laws and had participated in the underlying fraud." McCoy, 778 F. Supp. at 204-05.

 Id., at *14. Because we conclude that the definition of joint tortfeasors includes independent and concurrent tortfeasors who similarly defrauded plaintiffs, we dismiss TPDs' arguments that BDO has failed to state a cause of action for contribution under section 10(b) for failure to allege joint participation.

 We conclude that defining "joint tortfeasors" to include independent tortfeasors who concurrently cause the same harm to plaintiffs furthers the purposes of federal securities laws. It is well established that recklessness is sufficient to constitute scienter under section 10(b). See, e.g., Breard v. Sachnoff & Weaver, Ltd., 941 F.2d 142, 144 (2d Cir. 1991); IIT v. Cornfeld, 619 F.2d 909, 923 (2d Cir. 1980) (Friendly, J.); Rolf v. Blyth, Eastman, Dillon & Co., 570 F.2d 38, 44 (2d Cir.), cert. denied, 439 U.S. 1039, 58 L. Ed. 2d 698, 99 S. Ct. 642 (1978). As we previously ruled, the Amended Complaint's "red flag" warnings about certain accounting irregularities and BDO's failure to investigate these irregularities support plaintiffs' allegations of recklessness on the part of BDO in a manner sufficient to survive a motion to dismiss. See In re The Leslie Fay Companies, Inc. Securities Litigation, 871 F. Supp. 686 (S.D.N.Y. 1995). To bar contribution on the ground that one of the alleged tortfeasors acted with recklessness and therefore could not be a knowing joint participant would make no sense given that an allegation of recklessness is sufficient to assert a cause of action for direct liability.

 Indeed, the Supreme Court, in focusing upon the harm which the securities laws were designed to deter, did not imply a need to find a deliberate conspiracy among tortfeasors. "The violation of the securities laws gives rise to the 10b-5 private cause of action, and the question before us is the ancillary one of how damages are to be shared among persons or entities already subject to that liability," Musick, Peeler, 113 S. Ct. at 2088. Therefore, "the approach to the issue should not turn on how 'joint tortfeasor' is defined but rather on an assessment of the goals of both the securities laws and contribution." Department of Economic Development, 747 F. Supp. at 933. Here BDO alleges that all TPDs participated in material fraudulent misrepresentations about Leslie Fay -- the same fraud on which liability is asserted against BDO -- made to the plaintiffs, upon which the plaintiffs relied and which affected the market price of Leslie Fay's stock. Although the alleged joint participation of BDO and TPDs in the misrepresentations about Leslie Fay's financial condition may not have been "knowing" according to the allegations in BDO's cross-claims and third-party claims, they are "joint" in the sense that the alleged actions of both similarly defrauded plaintiffs.

 TPDs' implication that BDO's action for contribution should be dismissed for lack of standing is meritless. TPDs make reference to the fact that the Connecticut National Bank court held, in the alternative, that the third-party plaintiff did not have standing to sue under the securities laws because third-party plaintiff was not alleged to have purchased or sold any securities. This "alternative holding" conflicts with the Supreme Court's holding in Musick, Peeler that a defendant in a securities fraud case has a claim for contribution as a matter of right. In addition, Second Circuit decisions which have held there is a right to contribution under section 10(b) have assumed without discussion that the party asserting the right need not be a purchaser or seller of securities. Tucker, 646 F.2d at 727 (accountants permitted to bring third-party complaint against officer of issuer corporation); Sirota, 673 F.2d at 578 (right of accountants to assert contribution claims against issuer upheld). "A claim for contribution is a derivative claim. Contribution is concerned only with the apportionment of liability among persons all liable for the plaintiffs' harm, not to liability for wrongs committed by such against each other." Ades, 1993 U.S. Dist. LEXIS 12901, *49, 1993 WL 362364, at *15.

 Finally, TPDs invoke relief under Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., U.S. , 114 S. Ct. 1439, 128 L. Ed. 2d 119 (1994), where the Supreme Court eliminated aiding and abetting liability under section 10(b). The Supreme Court left unanswered, however, where to draw a line between secondary and primary liability. Although it made clear that giving aid to a ...

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