Richard W. Bosse v. Crowell Collier and MacMillan

This is a certified interlocutory appeal under Fed.R.Civ.P. 54(b) from the district court’s order dismissing seven of plaintiffs’ nine claims for relief alleged in their complaint. Accepting as true the allegations in the complaint, as we must, the relevant facts of record are as follows.

Plaintiffs are former officers, directors and controlling shareholders of Coinart Corporation [Coinart], a manufacturer of musical instruments, mainly saxophones. C. G. Conn, Ltd. [Conn], a manufacturer and retailer of musical instruments, was acquired in 1969 by defendant Crowell Collier and Macmillan [Macmillan], 4 large diversified conglomerate. Through various contractual dealings, which are outlined below, Conn and its parent Macmillan became the primary suppliers, customers and creditors of Coinart. In late 1970, a written contract [Supply-Purchase Contract] was executed by Coinart and Conn, whereunder Coinart agreed to sell and Conn to buy certain saxophone instruments pursuant to specific orders. Payment by Conn to Coinart was to be made within ten days of shipment. The contract also required Conn to furnish specified tooling and a current work-in-progress inventory of “good and usable”…

dissenting:

I respectfully dissent to that portion of the majority’s opinion which reverses the district court’s order dismissing plaintiff’s seventh claim for relief based on section 10(b) of the 1934 Securities Exchange Act (15 U.S.C. § 78j(b)) and Rule 10(b)-5 thereunder ( 17 CFR § 240 .10b-5). In all other respects, I concur with the majority.

*614 As to the seventh claim for relief, the majority held that allegations of an undisclosed purpose of a secured party (Macmillan) to gain control of a debtor’s company (Coinart) by having the debtor pledge its controlling shares of stock to the secured party as security for a loan while the debtor was in financial difficulty, rather than the secured party merely financing the debtor with a view toward helping the debtor gain financial stability, states a claim for relief under Rule 10(b)-5. Such allegations cannot and do not state a claim. If they did, every business transaction between sophisticated business persons involving stock as security, could give rise to a securities fraud claim when default by the debtor required foreclosure of the security. Under the majority’s holding, a debtor need only make allegations of an…

565 F.2d 602 Fed. Sec. L. Rep. P 96,295, 1978-1 Trade Cases 61,830 , 23 UCC Rep.Serv. 830 Richard W. BOSSE et al., Plaintiffs-Appellants, v. CROWELL COLLIER AND MACMILLAN et al., Defendants-Appellees. No. 75-1298. United States Court of Appeals, Ninth Circuit. Dec. 6, 1977. Thomas J. Trimble (argued), of Jennings, Strouss & Salmon, Phoenix, Ariz., for plaintiffs-appellants. Terence F. Gilheany (argued), of Cadwalder, Wickersham & Taft, New York, N.Y., for defendants-appellees. Appeal from the United States District Court for the District of Arizona. Before CHAMBERS and GOODWIN, Circuit Judges, and CONTI, * District Judge. CHAMBERS, Circuit Judge: 1 This is a certified interlocutory appeal under Fed.R.Civ.P. 54(b) from the district court's order dismissing seven of plaintiffs' nine claims for relief alleged in their complaint. Accepting as true the allegations in the complaint, as we must, the relevant facts of record are as follows. 2 Plaintiffs are former officers, directors and controlling shareholders of Coinart Corporation (Coinart), a manufacturer of musical instruments, mainly saxophones. C. G. Conn, Ltd. (Conn), a manufacturer and retailer of musical instruments,…