Court Opinion

ID: 5832737
Source: CourtListenerOpinion
Date Created: 2022-01-12 22:29:35.11201+00
Date Added: 2024-06-11T08:43:30.000632
License: Public Domain

Lane, J. (concurring).
This action was brought by Michael and Deborah Tanzer as trustees of Tanzer Economic Associates, Inc. Profit Sharing Plan (TEA), seeking damages based, inter alia, on breaches of fiduciary duties in connection with the merger of Turbodyne Corporation into Studebaker-Worthington, Inc. (SWI). Our review of this appeal is concerned with whether this action should be maintained as a class action.
TEA acquired 25 shares of Turbodyne class A common stock on May 3, 1973. On July 9, 1976, a statement was issued to Turbodyne shareholders proposing that the corporation merge with SWI and that the shareholders receive $19.50 per share for their stock. SWI was the 82% majority stockholder of Turbodyne, and acquiesced to the voting of its shares in accordance with the preference of the public shareholders. On August 4, 1976, at Turbodyne’s annual meeting, the merger was approved. The merger took place on August 5, 1976.
The Tanzers contend that the true value of the shares was at least $27.40 rather than the $19.50 which was paid. The Tanzers brought this action in the name of all Turbodyne stockholders, including a separate cause of action for those who sold their shares between July 9, 1976 (the date of the proxy statement) and August 4, 1976 (the date of the merger vote). The basis of their claims is that they sold their shares in a market artificially depressed by the defendants’ activities.
Special Term granted class action status. We would reverse, since at least three of the criteria for class action status as *624outlined in CPLR 901 have not been met. CPLR 901 (subd a, pars 2, 3, 4) require that:
"2. there are questions of law or fact common to the class which predominate over any questions affecting only individual members;
"3. the claims or defenses of the representative parties are typical of the claims or defenses of the class;
"4. the representative parties will fairly and adequately protect the interests of the class[.]”
We will review these criteria in their reverse order.
The Tanzers have sued through TEA, a profit-sharing plan subject to the provisions of the Employee Retirement Income Security Act of 1974, which requires the trustees of these plans to discharge their duties solely for the benefit of the participants and their beneficiaries (US Code, tit 29, § 1104, subd [a], par [1]). They cannot, therefore, maintain a class action which will benefit others outside the profit-sharing plan (Norman v Arcs Equities Corp., 72 FRD 502, 504). We must conclude, therefore, that the Tanzers cannot adequately protect the interests of the class (CPLR 901, subd a, par 4).
In addition, the claims of the Tanzers are not typical of those they seek to represent (CPLR 901, subd a, par 3). They purport to bring the action on behalf of those who sold their shares between July 9 to August 4, 1976 in a market artificially depressed by the defendants. This claim is not the same as that pressed by the Tanzers for the group that received the $19.50 per share after merger on August 5, 1976.
In addition, the questions of fact, regarding the state of the market between between July 9 and August 4, would vary on each day, and the "artificial depression” would raise factual issues on an individual basis rather than be susceptible of resolution on behalf of the entire class (see CPLR 901, subd a, par 2; Ross v Amrep Corp., 57 AD2d 99, 102).
Accordingly, the order of the Supreme Court, New York County (Klein, J.), entered November 9, 1978, authorizing maintenance of this action as a class action, should be reversed on the law, on the facts and in the exercise of discretion, and the motion denied, without costs or disbursements.
The Masoneilan action is substantially the same as that described in the companion appeal of Tanzer v Turbodyne Corp. (Action No. 1), except that the activity here involved the merger of the defendant Masoneilan International, Inc. with *625Studebaker-W orthington, Inc., and the dates of the merger, as well as the sale of stock by some shareholders in an artifically depressed market, differ.
The order of Special Term should be reversed for the reasons stated in the companion appeal.
Accordingly, the order of the Supreme Court, New York County (Riccobono, J.), entered July 21, 1978, granting leave to maintain a class action, should be reversed on the law, on the facts and in the exercise of discretion, and the motion denied, without costs or disbursements.
Kupferman, J. P., and Birns, J., concur with Silverman, J.; Lane, J., concurs in a separate opinion.
Order, in Action No. 1, Supreme Court, New York County, entered on November 9, 1978, reversed, insofar as it granted class action status and relief incidental thereto, on the law and the facts and in the exercise of discretion, and the motion to permit this action to be maintained as a class action denied. Appellants shall recover of respondents $50 costs and disbursements of this appeal.
Order, in Action No. 2, Supreme Court, New York County, entered on July 21, 1978, reversed, on the law and the facts, and in the exercise of discretion, and the motion denied. Appellants shall recover of respondents $50 costs and disbursements of this appeal.