Opposition Brief — Zerman v. Melton

. Supreme Court, U.S.

PILED

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No. 85-83 SEB ne Ieee

IN THE

Supreme Court of the Unite? States

October Term, 1985

EVELYN ZERMAN,

Petitioner,

v.

ANDREW J. MELTON, Jr.,. ROBERT M. GARDINER,

PETER BYRNE and DEAN WITTER REYNOLDS, INC.

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR RESPONDENTS

ANDREW J. MELTON, Jr.,. ROBERT M. GARDINER,

PETER BYRNE & DEAN WITTER REYNOLDS, INC.

IN OPPOSITION

JOHN F. X. PELOSO

SAGE Gray TopD & SIMS

Two World Trade Center

100th Floor

New York, New York 10048

(212) 466-9600

Counsel for Respondents

Of Counsel:

DOROTHY E. HUGHES

BEST AVAILABLE COPY

QUESTIONS PRESENTED

Whether Petitioner's failure to present

good or sufficient reasons for granting

of a writ of certiorari warrants denial

of the petition.

Whether the frivolous nature of this

petition supports an award of appropriate

damages.

(1)

TABLE OF CONTENTS

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TABLE OF AUTHORITIES

Cases:

Bivens v. Six Unknown Fed. Narcotics

peenee, 405 U.5. 368 (1970) ........

zerman v. Jacobs, 459 U.S. 811

i

zerman v. Jacobs, 104 S.Ct. 183

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zerman v. Jacobs, 104 S.Ct. 399

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Statutes:

Securities Act of 1933,

section 12(2), 15 U.S.C. §771(2)

0, ES a ee ae

10

10

10

(iv)

Section 17(a), 15 U.S.C. §77q

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Rules of the Supreme Court of the United

States:

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Federal Rules of Civil Procedure:

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IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1985

No. 85-83

EVELYN ZERMAN,

PETITIONER

Vv.

ANDREW 2. MELTON, JR., ROBERT M. GARDINER,

PETER BYRNE and DEAN WITTER REYNOLDS, INC.,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE SECOND CIRCUIT

BRIEF FOR RESPONDENTS ANDREW J. MELTON, JR.,

ROBERT M. GARDINER, PETER BYRNE AND

DEAN WITTER REYNOLDS INC. IN OPPOSITION

OPINIONS BELOW

The order of the court of appeals

(Pet. App. A.5-A.6) is unreported. A prior

1

2

opinion of the court of appeals (Pet. App.A)

is reported at 735 F.2d 751. The order of the

district court (Pet. App. B) is unreported.

JURISDICTION

The order of the court of appeals

was entered on March 25, 1985, and the peti-

tion for a writ ef certiorari was filed on

June 24, 1985. The jurisdiction of this Court

is invoked under 28 U.S.C. 1254(1).

STATEMENT

In October 1982, Petitioner Evelyn

Zerman filed suit against Respondents for

alleged wrongs committed by them in connection

with her securities account at Dean Witter

Reynolds Inc. ("Dean Witter"). Respondents'

subsequent motion to dismiss was granted by

1 The two other cases to which the petition

relates do not involve Respondents but

will be addressed infra, in connection

with Respondents’ request for an award of

damages.

3

the district court (Pet. App. B) and the

dismissal affirmed by the court of appeals

(Pet. App. A-A.4). A petition for rehearing

was denied by the court of appeals (Pet. App.

A.5-A.6). |

Petitioner's claims against Respon-

dents arose primarily out of her purchase of a

Government National Mortgage Association

("GNMA") Certificate and United States Trea-

sury Bonds (Pet. App. B.3). Her numerous

claims, made under a variety of federal and

state laws, were primarily dismissed for

failure to satisfy Rule 9(b) of the Federal

Rules of Civil Procedure, Fed. R. Civ. P. 9(b)

(Pet. App. A.2-A.4). The district court

dismissed the claim made under section 12(2)

of the Securities Act of 1933 (the "Securities

Act"), 15 U.S.C. §$771(2) because, for that

purpose as well as others, GNMA Certificates

and U.S. Treasury Bonds are exempt securities

+

and thus not susceptible to a sestion 12(2)

Claim (Id.). Neither the correctness of the

section 12(2) decision, nor the validity of

the statute pursuant to which it was made,

ever was addressed in the court of appeals

(Pet. App. A-A.4).

Because of the “repetitive actions

alleging similar fraud by various brokerage

houses" which she and her husband had fiied

over a period of time long enough to have

instructed them in the "complexities of their

investment transactions" and their "peculiar

vulnerability to fraudulent conduct," the

court of appeals denied Mrs. Zerman the “usual

opportunity" to amend her complaint before

dismissal under Fed.R.Civ.P. 9(b) (Pet. App.

A-3, A-4).

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ARGUMENT

1. The considerations governing the

granting of a writ of certiorari are contained

in Rule 17 of this Court, and make clear that

review will be granted "only when there are

special and important reasons therefor."

Reasons given by the Rule, not an exclusive

listing, include a conflict among courts of

appeals and an egregious departure by such a

court from "the accepted and usual course of

judicial proceedings." Review may also be

granted when a court of appeals has decided

"an important question of federal law" which

either has not Létn but should be determined

by this Court, or which conflicts with a

decision of this Court.

The petition meets none of these

requirements. Moreover, to the extent that

the petition raises an issue regarding the

availability of a private cause of action

6

under §17(a) of the Securities Act, 15 U.S.C.

§77q, not only was it not raised in the court

of appeals (Pet. App. A-A.4), but it is

largely irrelevant to Petitioner's case. Mrs.

zerman's fraud claims were dismissed because

they were not pleaded with the particularity

required by Fed. R. Civ. P. 9(b) (Pet. App.

B - B.4). Since any claim under §17(a) is a

fraud claim also subject to the requirements

of Fed. R. Civ. P. 9(b), the availability of

such a remedy would have been and is of no

matter to her. The court of appeals agreed

with the district court that none of

Mrs. Zerman's fraud claims were pleaded with

sufficient particularity, and denied to her

the opportunity to amend prior to dismissal

(Pat. App. A.3-A.4).

As to the issue raised by Petitioner

concerning the exemption of securities issued

Or guaranteed by the United States from

i

Fi

various provisions of the Securities Act, that

issue was not raised by the petitioner in

either the district court or the court of

appeals (Pet. App. B -B.4, A = A.4) and

should thus not be reviewed in this Court.

Bivens v. Six Unknown Fed. Narcotics Agents,

403 U.S. 388, 397 (1970). Petitioner's

attempt to use the current publicity this

question has received as an afterthought for

obtaining review by this Court should not be

countenanced. Moreover, the exemption only

prevented Mrs. Zerman from asserting a claim

pursuant to §12(2) of the Securities Act. Her

claims asserted pursuant to other federal as

well as state laws, regulating securities and

otherwise, were fully considered below. She

-was thus in no manner prevented from recover-

ing for perceived wrongs. The petition should

be denied.

8

ae In addition to denial of the

petition, damages should be awarded to Respon-

dents based upon the frivolous nature of this

petition.

The case involving Respondents is

but one of three lawsuits, all filed in the

United States District Court for the Southern

District of New York against brokerage houses,

which Petitioners would have this Court

review. The two matters not involving Respon-

dents concerned Petitioner Ernest Zerman's

securities account at Prudential-Bache Securi-

ties, Inc. ("Prudential"). The conduct of

their litigation may be described as follows.

Petitioners are husband and wife,

the former an attorney (Pet. App. A.2, D.2).

In June of 1980 Mr. Zerman commenced an action

against Prudential and was ordered to arbi-

trate his claims after Prudential moved to

compel arbitration. (Pet. App. D.2-D.3). The

9

order to arbitrate was affirmed by the court

of appeals (Id.). Thereafter, Ernest Zerman

filed a series of motions to resist arbitra-

tion and, after twenty months, was enjoined by

the district court from filing any further

motions until arbitration was had (Id.). Mr.

Zerman failed to appear at the arbitration

hearing, an award was rendered against him

and, on March 8, 1983, the award was confirmed

by the district court and a judgment entered

thereupon (Id.).

Over a year later Mr. Zerman moved

before the district court to set aside that

final judgment (Id.). That motion was denied

as patently frivolous and, on December 13,

1984, that denial was affirmed by the court of

appeals (Pet. App. + oe D.3-D.4, D.6,

D.9-D.10). Zerman was assessed double costs

plus $2,500 damages for taking a frivolous

appeal (Pet. App. D.5-D.6). Two prior

10

petitions for writs of certiorari filed by

Zerman in that matter had been denied by this

Court on October 3 and November 7, 1983.

german v. Jacobs, 104 S.Ct. 183 (1983); Zerman

v. Jacobs, 104 S.Ct. 399 (1983). His motion

to direct the Clerk of this Court to file his

petition had been denied on October 2, 1982.

zerman v. Jacobs, 459 U.S. 811 (1982).

In early November, 1983, suspicious-

ly close in time to when Mr. Zerman's second

petition had been denied by this Court, his

second litigation against Prudential was filed

in the United States District Court for the

Southern District of New York (Pet. 6). The

New York Stock Exchange, under whose auspices

Prudential had conducted its court-ordered

arbitration against Mr. Zerman, was included

as a defendant (Id.). By Order dated May 7,

1984, the district court granted the defen-

dants' motions to dismiss (Id. at 6-7). The

emery

11

court of appeals affirmed by decision dated

January 31, 1985 (Id. at 7) and assessed

attorneys’ fees of all appellees against

zZerman (Pet. App. C.2,C.4). Claims for

attorneys’ fees of $7,937.50 and $4,000 were

approved accordingly in favor of The New York

Stock Exchange, and Prudential, Loren P. Lyon

and Irene Schonzeit, respectively (Id.). A

petition for rehearing was denied by the court

of appeals on March 20, 1985 (Pet. App.

C.5,.6}.

It was on October 22, 1980, shortly

after her husband filed suit against Pruden-

tial, that Evelyn Zerman opened her account

with Respondent Dean Witter and, two years

later, filed suit against it as well as the

three remaining Respondents (Pet. App. B,

S.a)-

Thus, the court of appeals’ has

assessed double costs, damages of $2,500. and

12

a total of $11,937.50 in attorneys' fees

against Petitioner Ernest Zerman for the

filing of frivolous appeals. This occurred

because Zerman failed to heed the warning

given to him in his wife's case by that Court,

in affirming the dismissal obtained by Respon-

dents, that "repetitive and baseless claims

brought to recoup investment losses may lead

to such an award" (Pet. App. A.4; D.6, n. 2).

Rule 49 of the Rules of this Court

provides in pertinent part that:

é. When an appeal or petition for writ

of certiorari is frivolous, the

Court may award the appellee or the

respondent appropriate damages.

It is respectfully submitted that the Zermans'

petition supports an award of damages against

them and in favor of Respondents. This Court

is requested to do so.

as

CONCLUSION

For the foregoing reasons, the

petition for a writ of certiorari should be

denied, with an award of attorneys’ fees to

Respondents.

September 26, 1985

Respectfully submitted,

John F.X. Peloso

Sage Gray Todd & Sims

Dorothy E. Hughes Two World Trade Center

of Counsel 100th Floor

New York, New York

(212) 466-9000

Counsel for Respondents