and unreasonable rates or prices, that the affairs and operations of Atlantic and Warner would be and were being mismanaged, and that said earnings and income and worth of Atlantic and Warner would be and were being incorrectly and improperly stated. Warner intended to deceive and did deceive Brann & Stuart and also failed to exercise the proper degree of care required under the circumstances in regard to said sales, charges, management and statement of earnings.'
Brann & Stuart claims to have suffered damage in the amount of $ 2,250,000, because of Warner's alleged acts and omissions.
Warner's motion to dismiss avers that the third count does not state a cause of action; that it lacks the necessary averments if it purports to constitute a claim by Brann & Stuart as a stockholder of Warner; that if the Court should conclude that the averments are sufficient to support a stockholder's derivative claim, Brann & Stuart should be ordered to post the required bond.
We understand from Brann & Stuart's oral and written arguments that the third count of its counterclaim was not intended as a derivative claim for alleged mismanagement by Warner of the affairs of Warner or Atlantic. Warner contends that, in that event, the only possible claim contained in the third count must be a claim for the value of 10,000 additional shares of Warner stock on the theory that mismanagement of Atlantic's affairs by Warner subsequent to Warner's acquisition of all of Atlantic's stock affected Atlantic's profits in a manner which deprived Brann & Stuart of Warner's stock which Brann & Stuart was to receive if Atlantic's profits attained certain levels. This claim, Warner contends, is already embraced in the first and second counts, supra, and therefore Warner's motion to dismiss should be granted in its entirety, or, at least, the third count should be dismissed except as it alleges a claim identical with the claims in the first and second counts.
Brann & Stuart argues that the count sufficiently avers 'that there was fraudulent misrepresentation and deceit in a situation where Warner owed a duty to disclose secret profits, and the true income and worth of the enterprise as well as not to commit the acts enumerated in the count under a confidential relationship arising as a co-adventurer in a business enterprise or confidential relationship arising from the terms of the contract for the sale of stock.' It asserts that its damages could include additional damages of $ 2,000,000 which it has suffered 'because of this fraud and gross negligence through the loss of credit and financial standing.'
We are bound to say that the pleading, which is scarcely a model, does not comply with the requirements of F.R.Civ.P. 8. Nevertheless, it is too late to order a more definite statement under Rule 12. It is the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim which would entitle it to relief. Conley v. Gibson, 1957, 355 U.S. 41, 78 S. Ct. 99, 2 L. Ed. 2d 80. Applying that test, we must deny Warner's motion to dismiss.
Direct actions, of course, do not fall within the purview of the Pennsylvania statutes relating to the giving of security in derivative actions. Reifsnyder v. Pittsburgh Outdoor Advertising Co., 1961, 405 Pa. 142, 149, 173 A.2d 319.
Now, October 23, 1961, it is ordered and decreed that:
1. Plaintiff's motion to quash the writ of foreign attachment is granted.
2. Plaintiff's motion to dismiss the third count of the counterclaim, or to require the posting of bond in connection therewith, is denied.
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