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.

GOODMAN v. H. HENTZ & CO.

March 13, 1967

LIONEL GOODMAN, DANIEL KLEIN, BERNARD KLEPPEL, FRED DONNENBERG, BARRY L. KROLL, HARRY KROLL, THELMA COHEN, JACK SOLINGER AND DAVID G. HIRSCH, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
H. HENTZ & CO., A PARTNERSHIP, ROBERT POLLACK, WILLIAM SILVERSTEIN, RICHARD F. UHLMANN, FREDERICH UHLMANN, JOHN BENJAMIN AND RICHARD RUBLOFF, DEFENDANTS.



The opinion of the court was delivered by: Napoli, District Judge.

  OPINION AND ORDER

I

FACTS

For purposes of deciding the motion of defendants to dismiss for failure to state a claim upon which relief can be granted, the allegations of the complaint must be accepted as fact. Plaintiffs allege that they were customers of defendant Hentz & Co., a partnership, which is a registered broker-dealer and commission merchant with the Securities and Exchange Commission and the Commodity Exchange Authority, and a member firm of the principal securities exchanges and commodity contract markets. Also named as defendants are five resident partners of Hentz & Co., and Richard Rubloff, a registered representative and agent of Hentz & Co., referred to as a "customers man." Plaintiffs allege that they bought and sold securities and commodities through Hentz, dealing with its representative and agent Rubloff. The jurisdictional allegations that the transactions occurred in this district, and that the United States mails and other instruments of transportation and communication in interstate commerce were used, also appear. Plaintiffs then allege that while acting as defendants' agent and registered representative, Rubloff engaged in a scheme and artifice by which he defrauded Hentz's customers (including plaintiffs) in the purchase and sale of securities and commodities in certain enumerated ways, made certain enumerated false and fraudulent statements to plaintiffs and omitted to state material facts to plaintiffs in the course of the fraud. The alleged transactions occurred during a period from October, 1962 to January, 1965.

Plaintiffs bring this action as a class action on behalf of all defrauded customers of Hentz & Co., seeking recovery of actual and punitive damages. It should be noted that a clerk's default has been entered against the defendant Rubloff on July 7, 1966 for failure to plead or otherwise defend the action. A motion to vacate the default was denied on September 29, 1966.

The other defendants, Hentz & Co., and its resident partners, move this court to strike certain allegations of the complaint for failure to state a cause of action, to dismiss the complaint as a class action, or in the alternative to sever plaintiffs' claims. Also pending is a motion by plaintiffs for an order upon defendants to answer an initial set of discovery interrogatories.

II

FORM OF ACTION

The Court will rule against maintenance of this action as a class action under Rule 23 of the Federal Rules. First of all, there has been no satisfactory showing that the class is so numerous that joinder of all members is impracticable. Secondly, and more important, this court has no jurisdiction over some members of the class. Where jurisdiction is based upon a federal question, as in the case at bar, and a party who presents no substantial federal question joins the other plaintiffs, the court must dismiss the party presenting no substantial federal question. Pearce v. Pennsylvania Railroad Co., 3 Cir., 162 F.2d 524 (1947). Plaintiff Solinger in the case at bar is clearly a member of the proposed class, yet this Court has no jurisdiction over his claim because he presents no substantial federal question, his transactions with Hentz & Co., being only in non-regulated copper futures contracts. Copper is not a "commodity" as that term is defined in the Commodity Exchange Act, 7 U.S.C. § 2. Thus this plaintiff has alleged no facts which could bring the matters complained of within the scope of the act, even if it be assumed that a civil remedy is available in the federal courts under the Commodity Exchange Act. Weinfeld v. Paine, Webber, Jackson and Curtis, D.C., 191 F. Supp. 750 (1961). The class may contain others like Solinger, but even if he is the only member over whom this Court lacks jurisdiction, a class action would not be proper. Any judgment for or against the class would not be binding upon him, since this Court has no jurisdiction over him. Solinger and others like him would be entitled to their day in the state courts. Thus a class action here will not prevent multiple litigation, nor will it remove the risk of inconsistent or varying adjudication with respect to individual members of the class. Only the state courts have jurisdiction broad enough to define in a single class action the rights and liabilities arising from litigous situation created by the misrepresentations made by Rubloff while in the course of his employment with Hentz & Co.

Although limited by the boundaries of federal jurisdiction, the Federal Rules of Civil Procedure are flexible enough to allow plaintiffs other than Solinger substantial procedural advantages, in the interests of judicial economy, similar to the class action device. As an alternative to the class action, plaintiffs request leave for permissive joinder under Rule 20.

The complaint alleges that defendant Rubloff, while in the employment of the other defendants, pursued a consistent course of fraudulent misrepresentations to the plaintiffs concerning their securities and commodities transactions. As the record stands, with all allegations of the complaint deemed admitted, it is not clear that the issues to be tried are so unrelated that severance should be granted on the ground that plaintiffs' right to relief did not arise out of the same transaction, occurrence, or series of transactions or occurrences, as required by Rule 20, Permissive Joinder of Parties. This rule should be given the liberal interpretation needed to implement its apparent purpose: the avoidance of multiple trials involving many similar or identical issues. Consistent failure of the other defendants to maintain adequate standards of supervision over Rubloff, if proved by plaintiffs, would be a continuing act of negligence by defendants, causing the injury to plaintiffs, for which defendants would be liable to plaintiffs.

The allegations of the complaint spell out a course of conduct by the partner defendants which falls within the requirement of Rule 20, Permissive Joinder, allowing joinder of actions based upon the same "series of transactions or occurrences." The purpose of this rule was not to lay a subtle snare for the unwary pleader, but rather to avoid multiple lawsuits involving similar or identical issues, except where a showing of oppression, prejudice or delay is made. No such showing is made by the partner defendants in their brief supporting the motion to sever. After discovery and pre-trial, if a single trial appears prejudicial to the defendants, for example because a jury may be inclined to find in favor of all plaintiffs on the liability issue because of the stronger case made by only some of the plaintiffs, the court will in its discretion under Rule 20(b) and 21 order separate trials. But the court will not order a severance before the parties are at issue, absent a showing of prejudice, merely on the theory that rule 20 sets out technical requirements as a condition precedent to allowing joinder of parties.

III

THE SECURITIES ACT ...


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.