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In re Cendant Corp. Litigation

November 9, 1999

IN RE CENDANT CORPORATION LITIGATION


The opinion of the court was delivered by: William H. Walls, U.S.D.J.

FOR PUBLICATION

OPINION

This document relates to:

ERNST & YOUNG LLP Defendant and Third- Party Plaintiff, v. CENDANT MEMBERSHIP SERVICES, INC, CASPER SABATINO, STEVEN SPEAKS, KEVIN T. KEARNEY, and MARY SATTLER Third-Party Defendants. CASPER SABATINO, Third-Party Defendant, Counterclaimant and Cross-Claimant v. ERNST & YOUNG LLP, et al. Counterclaim and Cross-Claim Defendant.

Walls, District Judge

This matter is before the Court on defendant and third-party plaintiff Ernst & Young LLP's motion to dismiss Casper Sabatino's counterclaims and cross-claims for contribution and indemnification. Pursuant to Fed. R. Civ. P. 78, the Court decides the motion without oral argument. Defendant's motion is granted.

Factual Background

Ernst & Young LLP ("E&Y") is a defendant in the amended and consolidated class action complaint ("Cendant class action") filed by purchasers of Cendant Corporation ("Cendant") and CUC International, Inc. securities ("Cendant class action plaintiffs"). E&Y has filed a third-party complaint against Cendant Membership Services, Inc. ("CMS") and several individuals, including Casper Sabatino. Mr. Sabatino was Vice President of Accounting and Financial Reporting for CUC before its merger with HFS, Inc. ("HFS") to form Cendant in December 1997. After the merger, Sabatino held the same position at CMS until he was promoted to Vice President of Business Development for Cendant.

E&Y's third-party complaint seeks damages from third-party defendant Sabatino for fraud (Count II), fraudulent inducement of contract (Count III), negligent misrepresentation (Count IV), and contribution under 15 U.S.C. § 78j (Count VI). In response, Sabatino filed an answer and counter- and cross-claims for contribution and indemnification against all defendants, cross-claim defendants and third-party defendants, including E&Y.

E&Y has moved to dismiss Sabatino's counter- and cross-claims for contribution and indemnification. It argues that (1) Sabatino's claim for contribution is legally impermissible because E&Y is the plaintiff in this action; (2) Sabatino's claim for indemnification is not cognizable under federal securities laws; (3) any common-law indemnification claim is unavailable because E&Y is not a third-party to the action; and (4) even if Sabatino's claims against E&Y had legal basis, his factual allegations are insufficient to support them. Sabatino responds that E&Y's status as plaintiff is irrelevant because E&Y is a defendant in the consolidated class action pending before this Court. Thus, he argues, as a potential tortfeasor, E&Y may be liable for contribution and indemnification claims brought by other potential tortfeasors, including Mr. Sabatino. See Sabatino Brf. at 4 ("While technically a third-party `plaintiff,' for all intents and purposes E&Y is a defendant, and the claims alleged by Mr. Sabatino are for contribution and indemnification.").

Analysis

A. Motion to Dismiss

On a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), the court is required to accept as true all allegations in the complaint, and all reasonable inferences that can be drawn therefrom, and to view them in the light most favorable to the non-moving party. See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 (3d Cir. 1994). The question is whether the claimant can prove any set of facts consistent with his/her allegations that will entitle him/her to relief, not whether that person will ultimately prevail. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 2232, 81 L. Ed. 2d 59 (1984). The claimant, however, must set forth sufficient information to outline the elements of his claims or to permit inferences to be drawn that these elements exist. See Fed. R. Civ. P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-102, 2 L. Ed. 2d 80 (1957). The Court may consider the allegations of the complaint, as well as documents attached to or ...


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