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RMED INTERNATIONAL, INC. v. SLOAN'S SUPERMARKETS

June 27, 2002

RMED INTERNATIONAL, INC., ET AL., PLAINTIFFS,
V.
SLOAN'S SUPERMARKETS, INC., AND JOHN A. CATSIMATIDIS, DEFENDANTS.



The opinion of the court was delivered by: Peter K. Leisure, United States District Judge

OPINION AND ORDER

This class action under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, arises out of the purchase of common stock of defendant Sloan's Supermarkets, Inc. ("Sloan's") by a class of investors who bought the stock at allegedly artificially inflated prices during the period of January 7, 1993 through June 2, 1994.*fn1 Plaintiffs rely on a "fraud on the market" theory, alleging that the company's chief executive officer, defendant John A. Catsimatidis, made materially false and misleading representations and failed to disclose certain material facts regarding a Federal Trade Commission ("FTC") antitrust investigation of Sloan's. Plaintiffs also allege that defendants' conduct constitutes fraud under state common law.

Pursuant to Rule 59(e) of the Federal Rules of Civil Procedure and Rule 6.3 of the Local Rules of the United States District Courts for the Southern and Eastern Districts of New York ("Local Rule 6.3"), defendants now move for reconsideration of the Court's February 21, 2002 Opinion and Order granting in part, and denying in part defendants' motion for summary judgment.*fn2 For the reasons stated below, the motion is denied.

BACKGROUND

The factual and procedural background of this case is described in greater detail in RMED Int'l, Inc. v. Sloan's Supermarkets, Inc., 185 F. Supp.2d 389, 392-97 (S.D.N.Y. 2002) (Leisure, J.), familiarity with which is assumed. For the purposes of clarity, the Court reiterates a few facts from that decision integral to consideration of the issues raised in the instant motion.

Defendant Sloan's is a publicly traded corporation that operates in the New York metropolitan area. Defendant Catsimatidis is and has been chairman of the board, chief executive officer, treasurer and 37% shareholder of Sloan's since July 28, 1988.*fn3 See RMED Int'l, Inc., 185 F. Supp.2d at 393. In addition, at all times relevant to this action, Catsimatidis has been the sole shareholder, president, and chief executive officer of Red Apple Companies, Inc. ("Red Apple"). See id.

Aware of the FTC investigation of defendant Sloan's and Red Apple since its initial stages, from 1991 to 1994, defendant Catsimatidis and his attorneys engaged in discussions with the FTC concerning the possible divestiture of certain supermarkets by Sloan's and Red Apple. See id. at 396. In addition, from September 1993 through May 1994, Catsimatidis and Sloan's engaged in negotiations with the FTC, in which the FTC clearly stated that Sloan's was the target of its inquiry, and demanding divestiture of certain Sloan's supermarkets. See id.

Nevertheless, between February 28, 1993 and January 14, 1994, Sloan's communicated with shareholders and made a number of SEC filings without ever disclosing the existence of the ongoing FTC investigation, including SEC filings on February 28, 1993; April 9, 1993; August 18, 1993; October 11, 1993; and January 14, 1994. See id. In particular, defendant Sloan's (under its former name Designcraft), in its annual report to shareholders as of February 28, 1993, not only failed to disclose the investigation, but affirmatively stated that Sloan's would "continue to actively seek additional businesses, preferably within the food industry." Id.

On February 21, 2002, this Court granted defendants' motion for summary judgment with respect to plaintiffs' state law claim under Article 23-A of the General Business Law of New York, and for plaintiffs' claim of breach of fiduciary duty, but denied the motion with respect to the plaintiffs' claim under Section 10(b) of Securities Exchange Act, and Rule 10b-5 promulgated thereunder, as well as plaintiffs' claim of fraud under state common law. See RMED Int'l, Inc., 185 F. Supp.2d at 406. Defendants now seek reconsideration of this decision, asserting that their motion for summary judgment should have been granted in its entirety.

DISCUSSION

Defendants make two arguments in support of their motion for reconsideration: (1) defendant Sloan's did not materially misrepresent the FTC inquiry of Sloan's because the FTC investigation was disclosed in two publicly available Sloan's filings; and (2) defendants did not have the requisite scienter to violate Rule 10b-5.*fn4 See Defendants' Memorandum of Law in Support of Motion for Summary Judgment ("Defs' Mot."), at 2-4. The Court will address the standard for a motion for reconsideration, and then turn to each of defendants' arguments.

I. The Motion for Reconsideration Standard

The standard for granting a motion for reconsideration is "strict," and such a motion will generally will be denied "unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). Indeed, the decision to grant or deny a motion for reconsideration or reargument is in the "`sound discretion of a district court judge and will not be overturned on appeal absent an abuse of discretion.'" Davidson v. Scully, 172 F. Supp.2d 458, 462 (S.D.N.Y. 2001) (Leisure, J.) (quoting McCarthy v. Manson, 714 F.2d 234, 237 (2d Cir. 1983)). Local Civil Rule 6.3 "precludes a party from advancing new facts, issues or arguments not previously presented to the court." Bank Leumi Trust Co. of N.Y. v. Istim, Inc., 902 F. Supp. 46, 48 (S.D.N.Y. 1995). Moreover, a motion for reconsideration "will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Davidson, 172 F. Supp.2d at 461.

A motion for reconsideration "is not a substitute for appeal and may be granted only where the Court has overlooked matters or controlling decisions which might have materially influenced the earlier decision." Morales v. Quintiles Transnat'l Corp., 25 F. Supp.2d 369, 372 (S.D.N.Y. 1998) (internal quotations omitted). In determining whether a motion for reconsideration should be granted, Local Civil Rule 6.3 "should be narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been ...


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