Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

WESTMONT INDUS. v. WEINSTEIN

December 18, 1989

WESTMONT INDUSTRIES, INC., Plaintiff
v.
MICHAEL WEINSTEIN and PHILIP KAGAN, Defendants


EDWIN M. KOSIK, UNITED STATES DISTRICT JUDGE.


The opinion of the court was delivered by: KOSIK

EDWIN M. KOSIK, UNITED STATES DISTRICT JUDGE

 This matter is before the court on the motion to dismiss of defendant Philip Kagan. For the reasons that follow, the motion will be denied.

 Background

 The plaintiff commenced the instant civil action pursuant to 18 U.S.C. § 1964(c) and 28 U.S.C. § 1332(a)(1) by filing the complaint on May 18, 1989. For the purposes of this motion we shall accept as true the factual allegations contained in the complaint. Wisniewski v. Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir. 1985). The facts are as follows. The plaintiff, a Pennsylvania corporation, was in the fabric dying and finishing business, including the dying and finishing of camouflage material. Defendant Weinstein was chief executive officer of Coated Sales, Inc. [hereinafter "Coated Sales"] which was in the business of manufacturing clothing from material which it had dyed or finished or caused to be dyed or finished by subcontractors. Defendant Kagan was both general counsel and a director of Coated Sales as well as counsel for the plaintiff. Kagan, in his capacity as counsel for the plaintiff, gained detailed knowledge of the plaintiff's business dealings, financial position and potential and contingent liabilities.

 In the Fall of 1987, as a result of an ongoing business relationship between the plaintiff and Coated Sales, Coated Sales through defendants Weinstein and Kagan indicated a desire to acquire the plaintiff corporation. To that end, on May 26, 1987, Coated Sales issued a letter of intent confirming that it would purchase within one hundred and eighty [180] days the assets and liabilities associated with or owned by the plaintiff and its parent company, Poughkeepsie Dying and Finishing of Paterson, New Jersey. The agreement was to remain confidential and none of the terms of the Letter of Intent were to be disclosed without the prior written consent of both parties.

 The terms of the Letter of Intent were violated when defendants Kagan and Weinstein made known to Coated Sales' investment banker, Wertheim & Co., the terms of the acquisition of the plaintiff by Coated Sales. In addition, defendant Kagan directed that a press release be disseminated by Wire Services announcing that a Letter of Intent had been entered into and that the acquisition called for payment of a combination of cash and restricted common stock. As a result of these disclosures, the plaintiff began to lose customers who were unwilling to do business with the plaintiff in the face of the acquisition by their competitor, Coated Sales. Thereafter, Coated Sales also began to cease doing business with the plaintiff so that by August of 1987 the plaintiff was in severe financial difficulty and facing the possibility of bankruptcy.

 Meanwhile, in May of 1987, the plaintiff's auditors, Parente, Randolph, Orlando, Carey & Associates [hereinafter "Parente"], had requested that defendant Kagan and his firm respond to their inquiry regarding potential liabilities so that Parente could complete its audit of the plaintiff and render its opinion on the certified financial statements to be used in Coated Sales' acquisition of the plaintiff. Defendant Kagan not only failed, but intentionally refused to respond to the auditor's inquiry. Lacking this information, Parente could not render an opinion or certify financial statements, and closing on the acquisition by Coated Sales was impossible. Thereafter, defendant Kagan sent a letter to the plaintiff on behalf of Coated Sales terminating the Letter of Intent for unexplained reasons.

 The plaintiff claims that the motive behind the defendants' actions was to drive the plaintiff into bankruptcy and then acquire the plaintiff's assets at a substantially lower price. The plaintiff bases this assertion on discussions held in December of 1986 between defendant Weinstein and Industrion, which was a customer of the plaintiff. The plaintiff claims this position was reiterated in the summer of 1987 in conversations between defendant Kagan and principals of Parente.

 As a result of these activities, the plaintiff filed the instant complaint asserting claims against defendants Weinstein and Kagan for business tort, fraud, negligent misrepresentation and violations of the Racketeer Influenced and Corrupt Organizations Act [hereinafter "RICO"]. In addition, the plaintiff asserts a claim against defendant Kagan for negligence and breach of contract arising out of his actions as the plaintiff's counsel. Defendant Kagan filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(7), 12(b)(6) and 12(e). After appropriate briefing by the parties, this matter is now ripe for disposition.

 I.

 Federal Rule of Civil Procedure 12(b)(7) permits a motion to dismiss when there is absent a party without whom complete relief cannot be granted or whose interest in the dispute is such that to proceed in his absence might prejudice him or the parties already before the court. McDonald v. General Mills, Inc., 387 F. Supp. 24, 37 (E.D.Ca. 1974); 5 Wright & Miller, Federal Practice and Procedure, § 1359 p. 628. F.R.C.P. 19(a) states:

 
Persons to be Joined if Feasible. A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if [1] in his absence complete relief cannot be accorded among those already parties, or [2] he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may [i] as a practical matter impair or impede his ability to protect that interest or [ii] leave any of the persons already parties subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations by reason of his claimed interest. . . .

 Coated Sales has claimed no interest relating to the subject of this action. In addition, the defendant has not established that he may be subject to multiple or inconsistent obligations if Coated Sales is not joined. Although it is true that the plaintiff's complaint alleges that Coated Sales breached its contract with the plaintiff, it seems obvious that in the present action the plaintiff seeks to impose individual liability on the defendants for their own tortious and ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.