Nassau-Suffolk Ice Cream, Inc. v. Integrated Resources, Inc.

114 F.R.D. 684, 6 Fed. R. Serv. 3d 1092, 1987 U.S. Dist. LEXIS 1530
CourtDistrict Court, S.D. New York
DecidedMarch 4, 1987
DocketNo. 86 Civ. 1766 (MP)
StatusPublished
Cited by26 cases

This text of 114 F.R.D. 684 (Nassau-Suffolk Ice Cream, Inc. v. Integrated Resources, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nassau-Suffolk Ice Cream, Inc. v. Integrated Resources, Inc., 114 F.R.D. 684, 6 Fed. R. Serv. 3d 1092, 1987 U.S. Dist. LEXIS 1530 (S.D.N.Y. 1987).

Opinion

[686]*686OPINION

MILTON POLLACK, Senior District Judge.

C.H. Babb Co., Inc. (“Babb”), a former defendant in this case, has moved for sanctions, pursuant to Rule 11 of the Federal Rules of Civil Procedure, against plaintiffs’ attorneys Kaufmann, Caffey, Gildin, Rosenblum & Schaeffer (“Kaufmann”). Babb alleges that Kaufmann signed a complaint and two successive amended complaints in violation of the Rule 11 stricture against attorneys submitting frivolous papers before a federal court.

INTRODUCTION

A brief review of the facts of this case which are relevant to this motion follows. Plaintiffs are franchisees of the “Steve's Ice Cream” chain, having purchased development rights to open up to twenty Steve’s stores in Nassau, Suffolk, Queens, and Kings Counties in New York. Defendants are, among others, Integrated Food Systems, Inc. (“Integrated” or “Steve’s”), which was the franchisor of Steve’s Ice Cream to plaintiffs. Babb, manufacturer of the ice cream machines purchased by plaintiffs for use in their stores, was one of three suppliers of equipment and materials to plaintiffs’ stores, who were named as defendants in the original complaint but have since been dismissed from the suit.

In early 1984, plaintiff Bernard Rodin met with Herbert Goldberg of Integrated concerning franchising rights to Steve’s stores in the New York area. Negotiations between Goldberg and Rodin apparently continued during the Spring of 1984 and the initial franchising agreement between the parties was executed on August 1, 1984. The ice cream business was not kind to plaintiffs. According to their complaint, they encountered numerous problems with design, layout and advertising for their stores. Their ice cream machines violated local health regulations. Plaintiffs eventually closed their stores, suffering significant losses.

Plaintiffs’ original complaint alleged liability of Babb, et. al. under the New York Franchise Act, N.Y.G.B.L. §§ 690-695 (McKinney 1984); the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961-1968 (“RICO”), the antitrust laws, 15 U.S.C. §§ 1-31 (1973) and for fraud and breach of contract under State law. Plaintiffs alleged indeterminate damages, except for a claim of $30 million in punitive damages on the common law fraud claim. This complaint, as well as two later amended complaints, were signed by David J. Kaufmann of the Kaufmann firm and by Theodore Sherbow of the Baltimore firm of Weinberg and Green. Babb has moved, however, only against Kaufmann for sanctions under Rule 11.

A CLOSER LOOK AT THE COMPLAINT

The original complaint, as well as its two successors, named “Babb Company” (its correct name is C.H. Babb Co., Inc.), as a supplier to the plaintiffs of ice cream manufacturing equipment. In the original 60-page, seven-count complaint, a demand was made for a declaration that Babb and its co-defendants “breached their fiduciary duties to plaintiffs and violated the common law;” (p. 59) requiring the defendants to pay damages sustained by the plaintiffs,, including pre-judgment interest; to pay exemplary or punitive damages in the amount of $30,000,000; and to pay an award of costs and disbursements of the action, including reasonable attorneys’ fees, experts’ fees, accountants' fees and expenses; and requesting such other and further relief as may be just and proper.

The complaint and an accompanying memorandum of law asserted vertical price fixing on the part of all of the defendants, tying arrangements (denying the plaintiffs the opportunity to purchase equipment in the open market at competitive prices); depriving suppliers of the opportunity to compete with Babb as well as the other suppliers named in the complaint; and forcing customers to pay higher prices than would [687]*687otherwise have prevailed in a free and open market.

The RICO charges against the defendants, including Babb, charged the effectuation of fraudulent and deceptive correspondence and communications to the plaintiffs, violating the federal statutes barring mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343).

The complaint and memorandum further asserted that the defendants, including Babb, wilfully violated the New York Franchise Act by unlawfully offering and selling unregistered franchises and making misstatements and omissions violative of that Act. Specifically mentioned in the memorandum is an alleged obligation of franchisees such as plaintiffs to buy two or three ice cream machines from a manufacturer who had equipped those machines with certain “improvements” designed by defendant Steve’s. The memorandum asserts that plaintiffs could not locally and economically repair the ice cream machines, but instead were required to ship them to Boston, Massachusetts, presumably a reference to the general location of Babb.

The memorandum further detailed alleged omissions in the franchise offering prospectus and oral misrepresentations allegedly made by the defendants before the execution of the franchise agreements. Finally, the memorandum asserted that the defendants had engaged in conduct constituting common law fraud.

Acting sua sponte upon receipt of a copy of the complaint in this suit, this Court dismissed same, with leave to amend, file, and re-serve, on the ground that the complaint failed the test of a simple concise statement of claim under Rule 8 and the requirement of specificity in alleging fraud under Rule 9. This Court described that complaint as “a redundant, repetitious, argumentative series of allegations duplicating matters that should for clarity and simplicity be consolidated and combined, particularly where identical assertions are separately set forth and reiterated for each plaintiff separately.” (Memorandum of the Court, March 10, 1986, p. 3).

A shortened and abbreviated amended complaint was filed on March 24, 1986, and a further amended complaint on July 16, 1986, each again naming Babb as a defendant. On August 15, 1986 the Court received information that Kaufmann would be substituted by new local counsel for the plaintiffs and that plaintiffs planned to dismiss the claims against the equipment suppliers.

The three supplier defendants, including Babb, were thereafter dismissed from the suit by stipulation of the Baltimore counsel, with the reservation that the dismissals would not constitute a waiver of any right of said defendants to seek sanctions pursuant to Rule 11 against Kaufmann. The motion presently before the Court is such an application, being pressed on Babb’s behalf on the ground that the claims against Babb contained in the complaints filed by Kaufmann were frivolous and were certified without reasonable inquiry, in violation of Rule 11. Sanctions are sought herein in the amount of $36,831.89.

Affidavits and memoranda have been filed, and a hearing was held by the Court thereon.

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Bluebook (online)
114 F.R.D. 684, 6 Fed. R. Serv. 3d 1092, 1987 U.S. Dist. LEXIS 1530, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nassau-suffolk-ice-cream-inc-v-integrated-resources-inc-nysd-1987.