The opinion of the court was delivered by: SPRIZZO
MEMORANDUM OPINION AND ORDER
Plaintiffs JSC Securities, Inc. ("JSC"), Aircast, Inc., the Flanagan Trust, Jane Flanagan, Daniel Flanagan and Raymond Mando (collectively the "JSC plaintiffs") bring the instant action, JSC Securities, et al. v. Gebbia, et al., 91 Civ. 8647 (JES) (the "JSC action"), against defendants Securities Settlement Corporation ("SSC"), John J. Gebbia ("Gebbia"), Daniel Cunningham ("Cunningham"), Robert Mannion ("Mannion"), Howard F. Curd, Jr. ("Curd, Jr."), and Martin Kaplan
("Kaplan") (collectively the "Securities Group Defendants"), against defendants Howard R. Curd, Sr. ("Curd, Sr."), Keith E. Johnson,
Thomas E. Constance, Ronald P.E. Leeds, Robert Weninger (collectively, the "Jesup Group Defendants"), and Jonathan R. Furer,
and against defendants The Jesup Group, Inc. ("The Jesup Group"), Uniroyal Plastic Acquisition Corp. ("UPAC"),
and Community National Bank & Trust Company of New York, N.A. ("CNB").
Plaintiffs Dorothy Horgan, Carol Levine, Max Levine, Steven B. Jossem and Richard Schwartzkopf
(collectively the "Horgan plaintiffs") bring the instant related action, Horgan, et al. v. Gebbia, et al., 92 Civ. 7101 (JES) (the "Horgan action"), against the Securities Group Defendants, the Jesup Group Defendants and The Jesup Group.
Plaintiffs Betty Beatus, Ida Z. Small and Howard Beatus (collectively the "Beatus plaintiffs") bring the instant related action, Beatus, et al. v. Gebbia, et al., 92 Civ. 6503 (JES) ("the Beatus action"), against Jesup Josephthal Securities Group, Inc. ("JJSG"), Jonathan R. Furer, the Securities Group Defendants, and the Jesup Group Defendants.
In each related action, plaintiffs assert, inter alia, that defendants violated Section 10(b) of the Securities and Exchange Act ("the Exchange Act"), Title 15 U.S.C. § 78(b), and Rule 10b-5 promulgated thereunder ("Rule 10b-5"); Section 20(a) of the Exchange Act, Title 15 U.S.C. § 578(e); the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961(a), (b) and (c), and conspired to violate RICO, 18 U.S.C. § 1962(d); committed common law fraud and fraudulently converted assets.
Pursuant to Fed. R. Civ. P. 56(c), the Securities Group Defendants, The Jesup Group, UPAC, and the Jesup Group Defendants move for summary judgment on the grounds of res judicata and collateral estoppel in the JSC and Horgan actions. For the reasons set forth below, defendants' motions for summary judgment are granted.
On May 4, 1990, Josephthal & Co., a New York corporation engaged in the retail securities business and a member of the New York Stock Exchange ("NYSE"), entered into a purchase and sale agreement with defendant JJSG, a Delaware holding company, and its subsidiary Jesup & Lamont, Inc. ("J&L"). See JSC Amended Complaint ("JSC Am. Compl.") PP 11, 12, 31. Thereafter, on May 25, 1990, Josephthal & Co. sold its operating assets to J&L in exchange for $ 6 million in cash and a $ 3 million contingent note issued by JJSG
(hereinafter the "JSC Transaction"). See JSC Amended Complaint ("JSC Am. Compl.") PP 5, 11, 27, 31. Upon the closing, Josephthal & Co. changed its name to JSC Securities, Inc. (herein plaintiff JSC). See id. P 31.
Pursuant to the purchase agreement, the individual JSC and Horgan plaintiffs sold and rolled over their subordinated debentures issued by Josephthal & Co. in order to purchase subordinated debentures from JJSG, see Defendants' Local Civil Rule 3(g) Statement ("Def. 3(g) Stmt.") PP 22-24; see also JSC Am. Compl. P 27, Horgan Complaint ("Horg. Compl.") P 23, and the Beatus plaintiffs exchanged their secured demand notes issued by Josephthal & Co. for secured demand notes issued by defendant SSC, a Delaware corporation engaged in the business of acting as a clearing broker and the wholly-owned subsidiary of JJSG. See Beatus Amended Complaint ("Beatus Am. Compl.") PP 7, 24(c); JSC Am. Compl. PP 11, 12. In January 1991, JJSG defaulted on all of its obligations incurred under the JSC Transaction. See The Jesup Group Defendants' Supplemental Notice of Motion for Summary Judgment dated August 30, 1995 ("Defs.' Supp. Not. Mot."), Exh. F (Jesup, Josephthal Sec. Inc., et al. v. JSC Inc., et al., Index No. 108219/95 Final Disposition dated July 12, 1995) (hereinafter the "July 12, 1995 Decision"). At all times relevant times, individual defendants Gebbia, Cunningham, Mannion and Curd, Jr., were officers and directors of JJSG, see id. at PP 11, 13-15, and Gebbia and Curd, Jr. were, at some or all relevant times, shareholders of JJSG's parent company. Id. at PP 11, 15.
Plaintiffs allege that in order to induce Josephthal & Co. to sell its assets and acquire this contingent note, and to induce the JSC and Horgan plaintiffs to invest in JJSG's debentures and to induce the Beatus plaintiffs to invest in SSC's secured notes, certain defendants made material and fraudulent misrepresentations regarding JJSG's and SSC's operating and financial conditions. See JSC Am. Compl. PP 28-29, 42-44; Horgan Compl. PP 24-25, 38-40; Beatus Am. Compl. PP 26-28, 39-41. Plaintiffs further assert that certain defendants failed to disclose that JJSG was secretly controlled by, inter alia, defendants The Jesup Group, UPAC, Furer, and the Jesup Group Defendants. See JSC Am. Compl. PP 52, 74-79; Horgan Compl. PP 48, 61-66; Beatus Am. Compl. PP 29, 67-70. Plaintiffs claim that in September 1988, The Jesup Group, a Delaware holding company, through its wholly-owned subsidiary UPAC, a Delaware corporation engaged in the manufacture and sale of plastics and rubber-based products, sold all of its stock in JJSG to Jesup Securities Acquisition Corp., a holding company equally owned by Gebbia, Curd, Jr. and Furer. See JSC Am. Compl. PP 17, 26; Horgan Am. Compl. P 62; Beatus Am. Compl. P 67; see also Plaintiffs' Exhibit Binder # 1 to Memorandum in Opposition to Motions of Defendants ("Pls.' Exh. Binder") Exh. 16 at 3-4.
Plaintiffs claim that this sale was not a bona fide arm's length transaction but was instead intended to create a mechanism by which The Jesup Group, UPAC and Curd, Sr. could secretly retain control of JJSG and later reacquire the record ownership of its stock or assets at no cost, while defrauding JJSG's and SSC's creditors for their personal benefit. See JSC Am. Compl. PP 26, 77; Horgan Compl. P 64; Beatus Am. Compl. P 69. Plaintiffs claim that throughout the events at issue Gebbia, Cunningham, Curd, Sr., Curd Jr., The Jesup Group, and UPAC continued to secretly control JJSG and are therefore vicariously liable to plaintiffs for JJSG's acts. See JSC Am. Compl. PP 26, 30, 44, 74, 81-84; Horgan Compl. PP 26, 40, 61, 69; Beatus Am. Compl. PP 22, 41, 74-76.
At all relevant times, the Jesup Group Defendants were the officers and directors of both The Jesup Group and UPAC, see id. at PP 19-21, 23, 24, and Curd, Sr. was a principal shareholder of The Jesup Group. Id. at P 19. At one time co-defendant Mannion was the chief financial officer of UPAC. Id. at P 14. Until on or about October 2, 1988, co-defendant Jonathan R. Furer was an officer and director of The Jesup Group, see id. at P 22, and between on or about October 2, 1988 and April 12, 1990, Furer was an officer of JJSG and a shareholder in JJSG's ...