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Telesco v. Telesco Fuel and Masons' Materials Inc.

June 18, 1985

ANGELO TELESCO, PLAINTIFF-APPELLANT,
v.
TELESCO FUEL AND MASONS' MATERIALS, INC.; DOMINICK W. TELESCO; WILLIAM C. TELESCO; ROSE M. TELESCO; KATHERINE RAYMOND; THERESA LA RUSSO; AND ELAINE BLACKMAN, DEFENDANTS-APPELLEES



Appeal from an opinion and order of the District Court for the District of Connecticut, Ellen Bree Burns, Judge, granting defendants' motion for judgment dismissing plaintiff's action in all respects. Affirmed.

Author: Bartels

Before PIERCE and MANSFIELD, Circuit Judges, and BARTELS, District Judge.*fn*

BARTELS, District Judge:

Plaintiff-Appellant, Angelo Telesco, appeals from an order of the District Court of Connecticut (Ellen Burns, J.), granting defendants' motion to dismiss the present federal action under the doctrine of "exceptional circumstances" set forth in Colorado River Water Conservation District v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976). This cases arises out of a family feud involving a history of hostility, jealousy and vendetta litigation conducted in the Connecticut state court by appellant Angelo Telesco against the rest of his family and the corporation they own. The facts follow.

STATE COURT ACTIONS

Until 1945, Canio Telesco, father of plaintiff Angelo Telesco and of defendants Dominick and William Telesco, owned and operated a fuel and construction supplies business in Connecticut. Upon his death in 1945, his sons -- Angelo, Dominick, William and Anthony -- organized a partnership to continue operation of the business, with all four brothers apparently taking an active part in the management and operation of the business and all drawing equal compensation for their services. In June, 1953, they incorporated the business as Telesco Fuel and Masons' Materials, Inc. Each brother held an equal one-fourth share and served as an officer, director and salaried employee of the corporation. Angelo received the title of Vice President, and Dominick, his older brother, served as President, and Treasurer. When Anthony died in 1969, his interest passed to his wife, Rose, who did not immediately take any active role in the corporation, and the three surviving brothers continued to operate the business.

In the operation of the business Angelo and his brothers began to have serious disagreements and he conflict surfaced in 1978 when Angelo filed an action in the Connecticut State Superior court against his brothers and the corporation, referred to by the parties and the district court as the "original action." The complaint in the original action in in two counts. Count one alleges generally fraud and gross mismanagement of the corporation by the defendants and in particular their failure to hold meetings, keep records, or seek approval for corporate actions, waste and diversion of assets, as well as failure to pay the plaintiff his share of corporate profits. Count two is a shareholder derivative action also alleging fraud and gross mismanagement, in addition to commingling and diversion of asset by Dominick. It also alleges Dominick's successful coercion of Angelo to execute a shareholder's agreement limiting transferability of shares and Dominick's attempt to coerce Angelo into signing a will hereafter mentioned. As relief the complaint seeks dissolution of the corporation, appointment of a receiver, an audit, an accounting restitution, an injunction against Dominick's participation in the corporation, and any other relief warranted in the case.

According to appellant, the events leading to the suit were Dominick's efforts to edge Angelo out of the family business in retaliation for Angelo's refusal to execute a will under which Angelo's interest in the corporation would pass to his brothers rather than to his wife. Angelo, claiming that he was unable to obtain financial information from his brothers or the corporation in order to draw up his own will, and fearful of losing his proprietary interest in the company, retained counsel and brought suit.

After hearings held at various times during the period from November 20, 1978 to July 24, 1979, the Connecticut Superior Court ordered an audit of business, which was conducted by Price Waterhouse at a cost of $122,000 to the corporation. In May, 1980, that Court issued a memorandum opinion denying Angelo's application for appointment of a temporary receiver and dissolution of the corporation. Defendants thereafter filed answers to the complaint and a motion for summary judgment on the second count. The Superior Court granted motion bases on its earlier, May, 1980 decision denying Angelo's request for preliminary relief. Angelo appealed to the Connecticut Supreme Court which, in August, 1982, reversed and remanded on grounds that it was proper for the Superior Court to decide the merits of the complaints based upon its earlier limited interlocutory hearing and decision of May, 1980, rendered before pleadings had closed. Telesco v. Telesco, 187 Conn. 715, 447 A.2d 752 (1982). As a result of the Connecticut Supreme Court's order, there has yet to be any decision on the merits of either count of Angelo's original action, which is still pending in the Connecticut state court.*fn1

While these proceedings in the original action were going on, hostilities between Angelo and his brothers increased on other fronts. In May, 1981, the directors absent Angelo, held several meetings which Angelo unsuccessfully tried to restrain by court order. At these meetings the directors terminated Angelo as a salaried employee and removed him as an officer and director, replacing him with Rose, the wife of the deceased brother Anthony. The directors notified Angelo of these actions by letter, informing him he no longer had any business at the corporation and advising him to keep off the premises. Angelo nevertheless continued to visit the corporate offices and plant where he allegedly disrupted operations to the extent that at one point the police were called in. In response, the corporation and three shareholders -- namely, Dominick, William and Rose -- filed, in July, 1981, another action in the state court, referred to by the parties as the "injunction action," to enjoin Angelo's alleged acts of harassment and to keep him off the corporate premises. In that action Angelo raised as a defense the illegality of his termination as director, officer and employee of the corporation. The Superior Court of Connecticut issued a temporary restraining order against Angelo in April, 1982, but no final judgment had been entered at the time of Judge Burns' decision in the federal action.*fn2

In addition to the original action and the injunction action, this internecine struggle has involved several other law suits in the Connecticut court initiated by both sides against each other.*fn3 While not directly relevant to this case, they indicate the extent to which the parties have used the courts as a forum in which to vent their deep hostilities.

THE FEDERAL ACTION

In April, 1983, while the original injunction actions were pending in the Connecticut Superior Court, Angelo moved his residence to New York State and, on June 8, 1983, filed the federal diversity action presently before this court. The amended complaint, filed November 3, 1983, sets out three counts. The first is premised on the allegations that, despite the 1953 incorporation, the brothers continued to operate the business as a a partnership in effect. It seeks a declaratory judgment that a de facto partnership exists among the three brothers and Rose, and charges that the others have breached their contractual and fiduciary duties under the alleged partnership. As relief Angelo demands specific performance of the partnership agreement, including an order reinstating him as officer, director, and employee, back pay, an injunction, an accounting, appointment of a receiver and dissolution of the partnership, damages and other relief. The second count, brought as a shareholder's derivative action, seeks repayment of money owed the corporation by defendants as a result of alleged mismanagement and waste of assets by Dominick, William and Rose, as well as dissolution of the corporation and a receivership. The third count claims damages for the alleged illegal ouster of Angelo from the business and from the purported partnership by the others in breach of their contractual and fiduciary duties.

Defendants moved to dismiss the action or for summary judgment in light of the protracted state court proceedings on the same claims. The district court, while acknowledging that the usual grounds for abstention were not present, nevertheless held that, under the principles set out the Supreme Court in Colorado River Water Conservation District v. United States, supra, the case ...


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