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Hyman v. New York Stock Exchange

Other Lower Courts

January 3, 2007

Janet Hyman, Plaintiff
New York Stock Exchange, Defendants.

Editorial Note:

This case is not published in a printed volume and its disposition appears in a table in the reporter.


Charles E. Ramos, J.

Defendants, the New York Stock Exchange (NYSE) and John A. Thain 1, move pursuant to CPLR 3013, 3016(b), 3211(a)(1), and/or 3211(a)(7), to dismiss plaintiffs Janet Hyman's, Sylvia Lief's and D. Paul Rittmaster's complaints. 2 In the (now consolidated) complaints it is alleged that defendants have breached their fiduciary duty to plaintiffs by failing to fully disclose merger negotiations between the NYSE and Archipelago Holdings, Inc. 3 (Archipelago), which led to a merger agreement on April 20, 2005. 4 It is also alleged that defendants breached their duty or were negligent in failing to keep the merger negotiations confidential in order to prevent speculative or premature market fluctuations.


Plaintiffs are former members 5 of the NYSE. In the fall of 2004, NYSE management began to explore options to expand and diversify the NYSE's business. On December 2, 2004, at a meeting with the Board of Directors of the NYSE (the Board), management discussed and received approval from the Board to continue the exploration of such alternatives. Toward the end of 2004, Archipelago asked representatives of the investment banking firm Goldman, Sachs Co. (Goldman) to contact the NYSE regarding a possible merger between the two companies. On January 5, 2005, such contact was made by Goldman to the NYSE. At a regularly scheduled meeting held on January 6, 2005, the Board was made aware of the alternative of merging with Archipelago. On January 10 and 20 of 2005, the NYSE and Archipelago met to discuss a possible merger.

On February 3, 2005, the Board was advised by management on the status of negotiations with Archipelago. Additionally on that same day, at a "Town Hall" meeting, Thain discussed with members the theoretical possibility of converting the NYSE from a non-profit to a for-profit entity and becoming a public company. He indicated that an advisory committee of NYSE members would be formed to help evaluate the issues. No statement was made about negotiations with Archipelago.

On February 10, 2005, the NYSE and Archipelago entered into a confidentiality agreement. Concurrently, the companies also entered into letter agreement with Goldman for assistance in the possible merge along with confidentiality agreements. On February 15, 2005, the NYSE publicly announced the formation of the previously mentioned advisory committee and its purpose. On February 14, 16, and 17, due diligence meetings and telephone conferences were held between the NYSE, Archipelago, their respective outside counsel, and Goldman. Advisory committee meetings also commenced on February 17, 2005.

Plaintiffs sold their memberships, by blind auction, on or about March 1, 2005. On April 20, 2005, the Board unanimously voted to approve and adopt a merger agreement with Archipelago and authorized management to enter into the merger agreement. On that same day, a joint press release was issued announcing the transaction which resulted in the price of NYSE memberships dramatically increasing 6 throughout 2005.

NYSE member Thomas Caldwell, who was appointed to the advisory committee in February 2005, sponsored 7, along with his son, the purchase of five memberships between March 1 and April 15, 2005. At least three of these memberships were purchased by people who worked for companies that Caldwell controlled.

Standard on Motion to Dismiss

"Dismissal under CPLR 3211(a)(I) is warranted 'only if the documentary evidence submitted conclusively established a defense to the asserted claims as a matter of law."' Leon v. Martinez, 84 N.Y.2d 83, 88 (1994).

When assessing the adequacy of a complaint on a motion to dismiss pursuant to CPLR 3211(a)(7), a court must afford the pleadings a liberal construction, accept the allegations of the complaint as true, and provide the plaintiff "the benefit of every possible favorable inference." Id at 87-88. Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss. Id. The motion must be denied if from the pleadings' four corners "factual allegations are discerned which taken together manifest any cause of action cognizable at law." 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152 (2002), quoting Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 (1977).

CPLR 3016(b) requires only that the misconduct complained of be set forth in sufficient detail to clearly inform a defendant with respect to the incidents complained of, and is not to be interpreted so strictly as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud. Lanzi v. Brooks, 43 N.Y.2d 778, 780 (1977). In order words, "in determining whether pleadings meet the statutory requirement, appellate courts have subordinated the ...

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