that Marinelli withheld information and failed to adequately disclose the financial instability of the company.
Federal Rule of Civil Procedure 56(c) provides for the granting of summary judgment where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. The burden of establishing that there is no genuine issue of material fact lies with the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Additionally, the court must view the evidence presented on the motion in the light most favorable to the opposing party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). On the basis of the evidence presented by Defendant, we cannot conclude that he has met his burden with respect to 10b-5 liability. Thus, we must deny Defendant's motion for summary judgment on the 10(b) and Rule 10b-5 claims.
3. Breach of Contract :
The breach of contract claim stands or falls with the underlying claims of securities violation. Because the 1933 Act and 1934 Act claims remain unresolved, we cannot grant summary judgment on the breach of contract claim at this time.
4. Claim Against Marie Marinelli Under 1933 Act:
Defendant Marie Marinelli seeks dismissal of the 1933 Act claims against her on the grounds that she did not own any of the ACC stock at issue in this case. It appears that the only connection she had to the transaction was that Plaintiff Hendel was instructed to wire the money for the stock to her account.
At oral argument, Plaintiffs' counsel represented that he had only included Marie Marinelli as a party on the 1933 Act claims out of an abundance of caution to prevent Gino Marinelli from arguing, in the event his liability was established and the remedy of rescission sought, that Marie Marinelli had the funds received for the stocks.
In light of the circumstances of this case and the admission of Plaintiffs' counsel that Mrs. Marinelli was added to the case out of an abundance of caution, this court does not find that Mrs. Marinelli was sufficiently connected to the transaction to warrant imposing liability upon her.
In the event, however, that Plaintiffs prevail on their Section 12 claims and seek rescission of the sale, this court does not expect that Defendant Gino Marinelli will claim that the stock transaction proceeds are actually the property of his wife and therefore, unavailable to Plaintiffs through this action.
5. Counterclaim for $ 60,000 :
Defendant Marinelli seeks a ruling that he is entitled to payment of the $ 60,000 note issued by Plaintiff Gendel in his favor for the ACC stock transferred from Marinelli. Despite the fact that the note did not include a due date, Marinelli claims that such a note is due upon demand according to California law. Cal. Comm. Code § 3108.
Plaintiff has introduced evidence that there is substantial confusion over the status of the note. There is a dispute regarding whether the document was a note or a stock pledge agreement, which would have limited Marinelli's recovery in the event of a breach to return of the stock, to which Mr. Gendel would be happy to agree. In addition, the attorney who drafted the instrument claims that the parties had not completed their negotiations over the note before it was signed. Thus, this court concludes that there is sufficient material dispute regarding the exact nature of this document and the intent of the parties in entering into this agreement, to warrant the denial of Defendant Gino Marinelli's claim for summary judgment seeking its enforcement.
In addition, if Plaintiffs succeed with their 1933 and 1934 Act claims, Gendel may have a defense to his liability under the note.
In light of the foregoing,
1. Defendant Gino Marinelli's motion for summary judgment in his favor on the Plaintiffs' claims under Sections 12(1) and 12(2) of the 1933 Act, Section 10(b) and Rule 10b-5 of the 1934 Act and breach of contract is denied;
2. Defendant Marie Marinelli's motion for summary judgment seeking dismissal of Plaintiffs' 1933 Act claims against her is granted; and
3. Defendant Gino Marinelli's motion for summary judgment on his counterclaim for monies owed to him by Plaintiff Hedden is denied.
IT IS SO ORDERED.
Dated: Jan 28, 1992
United States District Judge