2013 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-6-2013

Samuel Yarosh Jr. v. Carole Salkind

Precedential or Non-Precedential: Non-Precedential

Docket No. 08-3872

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Recommended Citation

"Samuel Yarosh Jr. v. Carole Salkind" (2013). 2013 Decisions. Paper 1246.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 08-3872

_____________

SAMUEL YAROSH, Jr., 

both individually and derivatively on 

behalf of Fox Development, Inc., 

 Appellant

v.

CAROLE SALKIND; STEVEN SALKIND; MORTON SALKIND; PETER ROSEN; 

ROSEN & AVIGLIANO; BARBARA COHEN; JOHN HARRIS; MALLER, EDIDIN 

COMPANY, P.C.; ANSEL EDIDIN; INFRAME, INC.; DAN BATES; ULYSSES 

CORPORATION; LIBERTY SPEEDWAY; MAPLE INDUSTRIES; GIANT 

ASSOCIATES; ACME ASSOCIATES, INC.; LEISURE HEIGHTS, INC.; SABAL 

INDUSTRIES

_____________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

(D.C. Civil No. 2-04-cv-01816)

District Judge: Honorable Dennis M. Cavanaugh

____________

Submitted Under Third Circuit LAR 34.1(a)

January 17, 2013

____________

Before: SMITH, CHAGARES and BARRY, Circuit Judges

(Opinion Filed: February 6, 2013)

____________

OPINION

____________
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BARRY, Circuit Judge

Samuel Yarosh, Jr., appeals the District Court’s grant of defendants’ motions for 

summary judgment as to his individual claims and his derivative claims on behalf of Fox 

Development, Inc. (―Fox‖) against Carole Salkind (―C. Salkind‖), Morton Salkind (―M. 

Salkind‖), Steven Salkind (―S. Salkind‖), Barbara Cohen, John Harris, John Quinn, 

InFrame, Inc., Dan Bates, Ulysses Corporation, Sabal Industries, Liberty Speedway, 

Maple Industries, Giant Associates, Acme Associates, Inc., and Leisure Heights, Inc. We 

will affirm.

I. Factual Background

On or about May 1, 1995, Yarosh met M. Salkind, an introduction arranged by 

Peter Rosen, Yarosh’s attorney. At this meeting, or shortly thereafter, Yarosh and M. 

Salkind allegedly entered into an oral agreement to be equal partners in the development 

of a property in Rockaway Township known as ―Lot 48.‖ The development was to be run 

out of Fox, one of M. Salkind’s existing companies. M. Salkind’s wife, C. Salkind, was, 

at all relevant times, the sole shareholder of Fox; M. Salkind, the sole Director; and C. 

Salkind and the Salkinds’ son, S. Salkind, Officers. The claims in this case stem from the 

more than fifteen-year-old alleged oral agreement. 

Yarosh originally planned to develop Lot 48 as a retail mall. When Yarosh and 

M. Salkind were unable to secure the required zoning change for a mall, the two decided 

to develop Lot 48 as a senior housing development called ―Fox Hills.‖ From 1995 
3

through 1997, Yarosh and M. Salkind worked on developing Fox Hills. In 1997, 

Rockaway Township approved the construction of Fox Hills on Lot 48, and Yarosh and 

M. Salkind began selling units. Construction on Fox Hills began on September 7, 1997. 

Yarosh alleges that throughout the period of their relationship, M. Salkind, at times 

with the assistance of other defendants, engaged in a scheme to defraud Yarosh of 

millions of dollars in profits from Fox Hills, loot Fox of its assets, unlawfully divert Fox 

funds to other persons and entities, alter Fox’s books, and invest the money diverted from 

Fox into purchases of real estate to the detriment of Yarosh and Fox.1 

II. Procedural Background

Yarosh’s 33-count Second Amended Complaint asserted derivatively on behalf of 

Fox, and individually on his own behalf, federal claims under the Racketeer Influenced 

and Corrupt Organizations Act of 1970 (―RICO‖), state RICO claims, and additional state 

tort and statutory claims. On March 25, 2006, the District Court bifurcated the case and 

ordered that the first phase of discovery proceed only on ―the question of whether 

[Yarosh] either owned an equity interest in [Fox] as a shareholder, partner or otherwise, 

or was somehow cheated out of such an interest.‖ At the conclusion of phase one 

discovery, the parties moved for summary judgment. Yarosh moved for partial summary 

judgment on the issue of shareholder status. Defendants moved for summary judgment 

on all claims. On August 19, 2008, the Court granted defendants’ motions for summary 

 

1 On May 28, 2008, M. Salkind pled guilty to tax evasion in connection with Fox’s tax 

filings. 
4

judgment. 

Yarosh timely appealed. We stayed the appeal pending resolution of M. Salkind 

and C. Salkind’s bankruptcy proceedings. On January 10, 2012, we lifted the stay after 

the Bankruptcy Court granted Yarosh’s motion for relief from the automatic stay in both 

bankruptcy proceedings so that this appeal could go forward, and because resolution of 

the bankruptcy proceedings is years away and, in any event, would likely have no impact 

on our decision. 

III. Standard of Review

The District Court had subject matter jurisdiction under 18 U.S.C. § 1965 and 28 

U.S.C. § 1331, and supplemental jurisdiction over Yarosh’s state claims. We have 

jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over the Court’s grant 

of summary judgment. In re Sunrise Sec. Litig., 916 F.2d 874, 878 (3d Cir. 1990). 

Applying the same standard as applied by the District Court, we will affirm a grant of 

summary judgment only when the pleadings, depositions, answers to interrogatories, 

admissions, and affidavits, viewed with all inferences in favor of the non-moving party, 

show there is no genuine dispute as to any material fact and the moving party is entitled to 

judgment as a matter of law. Fed. R. Civ .P. 56(a); see Celotex Corp. v. Catrett, 477 

U.S. 317, 330 (1986); Azur v. Chase Bank, USA, Nat’l Ass’n, 601 F.3d 212, 216 (3d Cir. 

2010) . 
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IV. Analysis

A. Derivative Claims 

A plaintiff bringing a derivative action on behalf of a corporation must allege that 

he or she was ―a shareholder or member at the time of the transaction complained of, or 

that [his] share or membership later devolved on [him] by operation of law.‖ Fed. R. Civ. 

P. 23.1(b)(1); Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 735 (3d Cir. 1970) 

(―[S]tock ownership in a corporation [is a] prerequisite for bringing a derivative action in 

its behalf.‖). 

Yarosh was never a shareholder of Fox and, therefore, lacks standing to bring 

derivative claims on its behalf. Fox only ever had one shareholder—C. Salkind. Yarosh 

admits he has no proof of stock ownership or a proprietary interest in Fox. There is no 

stock certificate. There is no written shareholder agreement. There is no written 

agreement between Yarosh and M. Salkind defining Yarosh’s connection to Fox. There 

is no Fox document listing Yarosh as an owner or possessing an ownership interest. 

Yarosh never spoke to C. Sikland about ownership and there is no documented request 

for a stock certificate or other written document evidencing an ownership interest. There 

is no evidence Yarosh was ever represented to others as a shareholder or possessing an

ownership interest, and in no personal document (e.g., tax return, financial statement, 
6

personal loan) does Yarosh declare an ownership interest in Fox.2

Yarosh has, therefore, failed to set forth any facts supporting even an inference 

that he was a shareholder. He argues, however, that he was to be ―equal partners‖3 with 

M. Salkind under the terms of their oral agreement, which, in his view, meant a 50% 

ownership interest in Fox. Yarosh’s purported understanding of ―equal partners‖ as 

involving an ownership interest, however, is belied by his own testimony distinguishing

―partner‖ from ―shareholder.‖ Yarosh testified that when he discovered evidence of tax 

fraud and knew an IRS investigation was imminent, he ―[did] not want to be a 

shareholder. [He] want[ed] to be a partner. If [he] was a shareholder [he] would be 

involved with the IRS and the U.S. Attorney’s office, because [he] found . . . massive 

Internal Revenue fraud.‖ (J.A. 778). He testified that before he discovered the fraud, he 

was asking for stock certificates, but stopped after becoming aware of the potential 

investigation because he feared liability and, thus, wanted no ownership interest in the 

company. 

Yarosh also contends that a $250,000 loan he made to Fox—and which was repaid 

with interest—was a shareholder loan and supports his purported ownership interest. 

There is no evidence that this was a shareholder loan. The corporate tax forms Yarosh 

 

2 Furthermore, in unrelated collection proceedings, Yarosh claimed under oath that his 

relationship with Fox was that of an employer/employee and that his assets in Fox did not 

include an ownership interest. (J.A. 1314–1318, 1320). 

3

The original complaint only spoke of a ―partner‖ relationship between M. Salkind and 

Yarosh. The Second Amended Complaint redefined their relationship as one of ―equal 

shareholders.‖
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points to list one lump sum for shareholder loans; the constituent loans are not delineated. 

To conclude that this shareholder loan line item includes Yarosh’s loan would be pure 

speculation. 

Finally, Yarosh states he was listed as a joint client with M. Salkind on Fox’s legal 

bills and was listed as a 10% owner of Fox on a Fox-drafted loan application. Rosen, 

Fox’s attorney, testified that a client name is used only as a filing and reference aid and is 

of no consequence. Rosen said he simply included Yarosh’s name because he often 

worked directly with Yarosh on Fox-related matters. In terms of the document to which 

Yarosh refers, it was not a loan application at all but a proposal, and it was prepared by 

Summit Bank, not Fox. Finally, and most importantly, it proposed that Yarosh guarantee 

10% of the loan; there is no mention of ownership. 

B. Individual Claims 

Yarosh also asserts that the District Court erroneously dismissed his individual 

claims and criticizes the Court for not providing separate analyses of his derivative claims 

and individual claims. However, Yarosh himself failed to clearly separate his individual 

claims from his derivative claims in his 140-page Second Amended Complaint. 

Likewise, on appeal, he fails to even identify his individual claims, much less explain 

why their dismissal was erroneous. Indeed, we are unclear what the individual claims are, 

much less if any of them remain following the dismissal of the derivative claims based on 

a finding of no ownership interest. Given this lack of clarity, we can no more perform a 
8

separate analysis of the purported individual claims than could the District Court. 

VI. Conclusion

The Order of the District Court will be affirmed.