Opinion ID: 316528
Heading Depth: 2
Heading Rank: 1

Heading: Vesco & Co.'s Preliminary Defenses

Text: 62 In attacking the preliminary injunction, Vesco & Co. contends-- as did the Fairfield Group-- that the district court lacked subject matter jurisdiction under the 1934 Act. It adds that this jurisdictional basis is essential here because in personam jurisdiction over Vesco & Co., a Delaware corporation doing no business in New York, can only be sustained under the nationwide service of process authorized by the 1934 Act, 15 U.S.C. 78aa-- an issue raised also in the Fairfield Group appeal. The district court denied this claim holding that, as a court of equity, it could pierce the corporate veil and treat Vesco & Co. as the equivalent of its dominant shareholder, Vesco. Thus, since ICC had unquestionably stated a claim under 10(b) against Vesco, the court had jurisdiction as well over Vesco & Co. We agree. 21 63 Although we need not labor the principle that the law will ordinarily treat the corporation as an entity distinct from its shareholders, it is equally well-established that 'whenever it is necessary to relieve or to protect from frauds, the corporation may be disregarded as against the responsible parties.' 1 Fletcher Cyc. Corp., Perm.Ed. 44; Cf. In re Gibraltor Amusements, Ltd., 291 F.2d 22 (2d Cir.), cert. denied, 368 U.S. 925, 82 S.Ct. 360, 7 L.Ed.2d 190 (1961). In this case, we note that ICC's detailed allegations of fraud against Vesco, personally, have now ripened into a default judgment. 22 Moreover, the virtual identity of interest between Vesco and Vesco & Co. is uncontroverted, as is the fact that Vesco actually transferred his ICC common stock to Vesco & Co. at a time when he was actively engaged in his allegedly fraudulent scheme. Finally, we have sustained 1934 Act jurisdiction over a corporation that participated in the fraudulent scheme solely as transferee for the illicit fruits. SEC v. Manor Nursing Centers, Inc., supra (jurisdiction over defendant Capital Cities Nursing Centers, Inc.). Thus, although ICC does not claim that the ICC common stock itself represents the fruits of Vesco's fraudulent conduct, nevertheless, we believe that the district court had ample power, as a court of equity, to reach those assets under the jurisdictional purview of the 1934 Act. 64 Vesco & Co. also contends that the complaint was defective in failing to state a valid claim against it. Admittedly, the solitary reference to Vesco & Co. in P5(r) of the complaint-- 'a Delaware corporation to which defendant Vesco and his children have transferred certain of their assets'-- is not replete with detail. Yet, the 'notice pleading' mandated by Rule 8(a) of the Federal Rules of Civil Procedure requires that the complaint be construed liberally, Conley v. Gibson, 355 U.S. 41, 79 S.Ct. 99, 2 L.Ed.2d 80 (1957); Dioguardi v. Durning, 139 F.2d 774 (2d Cir. 1944); and 'jurisdiction . . . is not defeated . . . by the possibility that the averments might fail to state a cause of action on which . . . (the pleader) could actually recover.' Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946). See A. T. Brod & Co. v. Perlow, 375 F.2d 393, 398 (2d Cir. 1967). Accordingly, in view of the more than adequate allegations of fraud against Vesco, the allegation that he transferred certain assets to Vesco & Co. was sufficient to suggest that ICC would urge a piercing of the corporate veil as the basis for judgment against Vesco & Co. 23 Moreover, in light of the allegations in the affidavits accompanying the applications for the preliminary injunctions, the interstices of the complaint have been filled in. We would be acting contrary to the spirit of the Federal Rules if we did not recognize the ease with which the complaint may be amended under these Rules to supply any additional allegations required to make the complaint more informative.