Saylor v. Lindsley

456 F.2d 896 (2nd Cir. 1972)

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Nature of the Case

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Facts

P charged that a sale to Mines Incorporated, in 1951 and 1953, by the Tonopah Mining Company of Nevada (Tonopah) of the stock of Tonopah Nicaragua Company (Tonopah Nicaragua), owner of the Rosita copper mine, violated both state law of fiduciary obligations and the Investment Company Act of 1940. The judge dismissed the claim under the Investment Company Act and required the furnishing of $50,000 of security pursuant to Sec. 61-b of the New York General Corporation Law (McKinney's Consol.Laws, c. 23 Supp. 1971-72); and that when P failed to post security, Judge Ryan, on July 27, 1961, ordered dismissal with prejudice. P failed to take a timely appeal, and other efforts to vacate Judge Ryan's order of dismissal were rejected in the opinion cited. In 1965, P began this action. Federal jurisdiction was based on violations of the federal securities laws, and state claims were alleged merely as pendent. Lindsley (D) moved for summary judgment on the basis that this new action was barred by res judicata and by the applicable statute of limitations. The motion was granted, but the appeals court reversed on the ground that the dismissal for failure to post security was not 'on the merits' for purposes of res judicata. On remand, the judge determined that on the federal claims, there were factual questions whether the applicable statute of limitations had run, and therefore denied summary judgment. With regard to the pendent state claims, he granted summary judgment on the basis of the running of the applicable limitations period unless within thirty days of the court's order P amended his complaint in certain material respects. The 'attorney for plaintiff,' entered into a stipulation of settlement with the attorneys for the various individual and corporate defendants and the attorneys for Tonopah. The settlement provided for the payment of $250,000 less the costs of notice of the settlement hearing and the fees and disbursements of P's counsel. P did not authorize the settlement but was eventually informed of it on November 4, 1970. After deduction of fees and expenses, the distribution to Tonopah stockholders would be something less than $166,000, or about 19 cents a share, as against the many millions of dollars in damages alleged to have been suffered. At the settlement hearing, P appeared with new counsel and opposed the settlement. The court issued an opinion approving the settlement and P appealed.