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Dann v. Chrysler Corp.

Court of Chancery of Delaware, New Castle County

October 3, 1961

Sol A. DANN, Karl S. Horvath, Samuel S. Schwartzberg, Julius R. Reiver, Iona P. Reiver, Ann Gelbard and Robert Markewich, Plaintiffs,
CHRYSLER CORPORATION, a corporation of the State of Delaware, et al., Defendants.

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[40 Del.Ch. 104] Daniel O. Hastings, Clarence W. Taylor, and Russell J. Willard, Jr., of Hastings, Taylor & Willard, Wilmington, Lewis M. Dabney, Jr., New York City, and Dann, Rosenbaum & Bloom, Detroit, Mich., for plaintiffs.

Richard F. Corroon, of Berl, Potter & Anderson, Wilmington, for defendants Brady, Dodge, Jones, Love, McCollum, McElroy, McNeill, Page, Trippe and Warren.

James M. Tunnell, Jr., and S. Samuel Arsht, of Morris, Nichols, Arsht & Tunnell, Wilmington, for defendants Colbert, Jacobson, Leary, Misch, Quinn, Row, Townsend, and Woolson.

Daniel L. Herrmann, of Herrmann, Bayard, Brill & Gallagher, Wilmington, for defendants Ackerman, Bright and Laughna.

[40 Del.Ch. 105] Aaron Finger and Robert H. Richards, Jr., of Richards, Layton & Finger, Wilmington, for defendant Chrysler Corp.

Clair John Killoran and Clyde England, of Killoran & VanBrunt, Wilmington, for defendants K. T. Keller and Robert Keller.

Albert W. James, of Morris, James, Hitchens & Williams, Wilmington, for defendant Minor.

William Prickett, Jr., of Prickett & Prickett, Wilmington, for defendant W. C. Newberg.

John J. Morris, Jr., of Morris, James, Hitchens & Williams, Wilmington, for defendant Nafi.

The other defendants are not subject to this court's jurisdiction.

SEITZ, Chancellor.

This is a derivative action brought on behalf of Chrysler Corporation, a Delaware corporation, by certain of its shareholders. There are at present ninety-seven defendants some of whom were or are directors, officers, officials, or employees of the corporation. The balance of the defendants are firms supplying goods or services to Chrysler and certain persons connected with these companies who are accused of participating in frauds against the corporation.

Twenty-three of the defendants now move for a dismissal of the complaint or in the alternative for a more definite statement. One of these defendants, R. P. Laughna, has raised supplemental grounds for dismissing parts of the complaint as to him. Two other defendants, Robert T. Keller and K. T. Keller, in addition to moving separately for dismissal or in the alternative for a more definite statement, have moved for summary judgment. Defendants, Minor and Nafi, are not involved in any of the motions.

Before reaching its present form, the original complaint was amended three times. The complaint sets forth in eighteen numbered paragraphs general allegations of fraud and gross negligence on the part of 'certain directors, officers, and officials' and participation therein by 'certain suppliers of Chrysler and other persons or corporations'. Under Paragraph 7 'all claims and allegations [40 Del.Ch. 106] made * * * against individuals are made also against the members of the families, agents and business associates of such individuals.' Plaintiffs have not specified which of the defendants fall within any of these respective categories. The wrongs complained of are alleged to have begun in 1941.

Plaintiffs' general allegations contained in the numbered paragraphs are followed by twenty-seven lettered claims A to Z and AA) which purport to particularize the wrongs with which defendants are charged. (There are also numerous sub-claims.) While defendants' objections to the numbered paragraphs challenge the complaint

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as a whole, specific attack is also made on ten of these lettered claims.

I first turn to the motions to dismiss and for more definite statement raised by all the moving defendants. It can fairly be said that defendants do not challenge the complaint on the grounds that plaintiffs have failed to indicate legal principles upon which they might recover. Defendants instead attack the alleged lack of specificity in the complaint. In particular they contend that plaintiffs should be required to designate which of the defendants are chargeable with each of the alleged wrongs and to detail their acts of participation. Defendants also rely on Rule 9(b) which requires that the circumstances constituting fraud be particularized.

I shall first deal with certain other contentions made by defendants. Defendants urge that the court should here adopt the 'Big Case' theory of pleading. As I understand it, plaintiffs would thereby be required to plead with more particularity than is otherwise required by the rules. Compare Baim & Blank, Inc. v. Warren-Connelly Co., D.C.S.D.N.Y., 19 F.R.D. 108. Defendants have not cited any Delaware authority for such an approach. Indeed, in the Second Circuit where this practice had previously found some favor the Court of Appeals subsequently rejected it. Nagler v. Admiral Corp., 2 Cir., 248 F.2d 319.

I conclude that the nature of this case does not call for a different pleading requirement.

Defendants also urge that Rule 10(b) requires that the claims be separately stated and numbered so that the particular wrong [40 Del.Ch. 107] with which each defendant is charged will clearly appear. The fact is that the claims are separately stated and numbered. Actually defendants are complaining that the statement of each claim is not stated with sufficient particularity as to each defendant. That is another issue. There is no violation here of the requirements of Rule 10(b).

Defendants say that the complaint does not allege, as required by our statute and Rule 23(b), that plaintiffs were stockholders of Chrysler at the time of the transactions of which they complain. Plaintiffs allege that 'A plaintiff herein has been a stockholder of Chrysler at all times during the wrongs complained of in this complaint.' Defendants point out that under the language of the complaint it is possible that none of the plaintiffs has been a stockholder continuously since 1941 when the first wrong is alleged to have occurred. This is true. What is the consequence? Neither the statute (8 Del.C. § 327) nor the rule literally requires that the stockholder bringing a derivative action must allege that he owns the same stock which he owned at the time of the transaction of which he complains. Thus, there is no basis for defendants' objection at this stage.

I do think it implicit in the statute and rule that a stockholder-plaintiff must at the time he files his complaint have been the continuous owner of some of the stock held at the time of the alleged wrongful transaction. Compare Saks v. Gamble,35 Del.Ch. 378, 118 A.2d 793, affirmed, 35 Del.Ch. 503, 122 A.2d 120. I do not understand that plaintiffs argue to the contrary. But such information need not appear in the complaint under ...

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