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.

WESTINGHOUSE ELEC. CORP. v. FRANKLIN

April 21, 1992

WESTINGHOUSE ELECTRIC CORPORATION, derivatively by JOSEPH H. LEVIT; GEORGE M.D. RICHARDS, individually and on behalf of all others similarly situated, Plaintiffs,
v.
B. H. FRANKLIN; JOHN C. MAROUS; R. M. MORROW; HAYS T. WATKINS; DONALD F. HORNIG; JOHN B. CARTER; ROBERT W. CAMPBELL; R. C. MCPHERSON; R. R. PIVIROTTO; D. T. MCLAUGHLIN; P. E. LEGO; WILLIAM A. POWE, Defendants, and WESTINGHOUSE ELECTRIC CORPORATION, Nominal Defendant



The opinion of the court was delivered by: STANLEY S. BROTMAN

BROTMAN, District Judge.

 Presently before the court is the motion on behalf of all defendants to dismiss Count I of the complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and to dismiss Counts II and III of the complaint for failure to make an adequate pre-suit demand or to adequately allege with particularity why demand should be excused as required by Rule 23.1 of the Federal Rules of Civil Procedure and applicable state law.

 I. FACTS AND PROCEDURE

 Plaintiffs Joseph H. Levit and George M. D. Richards bring this federal securities law derivative suit and class action against eleven directors and senior officers of Westinghouse Electric Corporation ("Westinghouse") and seek legal and equitable relief. The complaint in this action was originally filed on December 2, 1988. *fn1" Count I of the complaint alleges violations of Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. § 78n(a)) and Rule 14a-9 (17 C.F.R. § 240.14a-9) promulgated by the Securities and Exchange Commission thereunder, and Section 20 of the Securities Exchange Act of 1934 (15 U.S.C § 78t). Plaintiffs claim that defendants disseminated false and misleading Proxy Statements to shareholders in 1987 and thereafter. *fn2" They contend that defendants omitted material information about Westinghouse's alleged criminal activity in the construction of a nuclear power plant in the Philippines. Complaint at P39(D). *fn3" Moreover, plaintiffs allege that the Proxy Statements failed to disclose: 1) that Richards' counsel, Arnold Levin and Levit's counsel, Richard Greenfield, made demands upon Westinghouse's Board of Directors requesting that legal action be commenced against certain of the defendants and others arising out of the conduct in the Philippine matter, Complaint at P39(A); *fn4" and 2) that Westinghouse made substantial expenditures for costs involved in being the principal lobbyist for the Pennsylvania "Directors Liability Act," effective January 27, 1987, which was procured to protect defendants from liability for the wrongdoing alleged in the Philippine matter, Complaint at P39(C).

 The information allegedly omitted in the Proxy Statements concerned the defendants "inability to manage and incompetence in operating and/or overseeing the business of the Company, including their handling of the Philippine fiasco and that the proxy materials were intended to deceive plaintiffs and other shareholders of the company . . . into voting as requested by management." Complaint at P39. As a result, the defendants solicited votes of its shareholders for approving the reelection of directors and amending its Articles of Incorporation and By-laws relating to indemnification and director liability ("Raincoat Provisions") which was contrary to the best interest of the shareholders and Westinghouse. Plaintiffs state that defendants "thus having been re-elected, they continued their mismanagement of the Company, causing further damage to the Company. . . . Further the Raincoat Provisions were enacted under false pretenses at the 1987 Annual Meeting." Complaint at P40.

 Plaintiffs also allege pendent state law claims of breach of fiduciary duty in Counts II and III of the complaint.

 II. DISCUSSION

 Motion to Dismiss

 The court may dismiss a case pursuant to Rule 12(b)(6) if it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle him to relief. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990). The plaintiff is afforded the safeguard of having all its allegations taken as true and all inferences favorable to plaintiff will be drawn. Boyle v. Governor's Veterans Outreach & Assistance Center, 925 F.2d 71, 74 (3d Cir. 1991).

 1) Statute of Limitations

 Defendants argue that because of the Supreme Court decisions at the end of last term in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 115 L. Ed. 2d 321, 111 S. Ct. 2773 (1991) and in James B. Beam Distilling Co. v. Georgia, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991), *fn5" the plaintiffs' federal securities claims are time barred and the complaint should be dismissed. *fn6"

 In Lampf, the Supreme Court held that where:

 the claim asserted is one implied under a statute that also contains an express cause of action with its own time limitation, a court should look first to the statute of origin to ascertain the proper limitations period. We can imagine no clearer indication of how Congress would have balanced the policy considerations implicit in any limitations provision than the balance struck by the same Congress in limiting similar and related provisions.[citations omitted] When the statute of origin contains comparable express remedial provisions, the inquiry usually should be at an end. Only where no analogous counterpart is available should a court then proceed to apply state-borrowing principles.

 Lampf at 2780. The court went on to find that litigation instituted pursuant to Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C § 78j) and Rule 10b-5 (17 C.F.R. § 240.10b-5), promulgated by the Securities and Exchange Commission thereunder, must be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation, see Section 9(e) of the Securities Exchange Act of 1934 (15 U.S.C. § 78i), *fn7" since the claims asserted are implied under a statute which also contains similar express causes of action with their own time limitations. Id. at 2780-2782.

 In J. I. Case Co. v. Borak, 377 U.S. 426, 84 S. Ct. 1555, 12 L. Ed. 2d 423, the Supreme Court held that Section 14(a) provides an implied private right of action. Section 18 of the Securities Exchange Act of 1934 (15 U.S.C § 78r(c)) relating to misleading statements in applications, reports and filings is similar to Section 14(a) in that it protects individuals from misleading statements. Although Section 14(a) primarily protects current investors from being misled by way of proxy materials *fn9" and Section 18 protects current and potential investors from being misled by way of applications, reports and filings, *fn10" both sections are aimed at protecting investors, whether they are current shareholders or individuals contemplating whether to become shareholders, from misleading statements by those who control a corporation. As such, the Lampf decision dictates that since Section 18 provides an express private right of action with a statute of limitations, the same statute of limitations should apply for Section 14(a) and Rule 14a-9.

 Section 18(c) provides that "no action shall be maintained to enforce any liability created under this section unless brought within one year of discovery of the facts constituting the cause of action and within three years after such cause of action accrued." Thus, the one year/three year limitation applicable to Section 10(b) and Rule 10b-5 according to Lampf also applies to ...


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.