## Facts

- Uniroyal, Inc. sold its wholly owned subsidiary, Uniroyal Plastics Company, Inc., to Polycast Technology Corporation and a Polycast-formed acquisition entity, with closing on October 31, 1986.
- Polycast alleged it relied on materially misleading information about Plastics’ financial condition, earnings potential, and operations, and paid an excessive price.
- Polycast’s core nondisclosure theory centered on adverse business developments before closing, including the mid-September 1986 cancellation of a major Northrop Corporation contract.
- Polycast asserted federal securities claims (including § 10(b)/Rule 10b-5 and § 12(2)), civil RICO, and related state-law fraud and transaction-based claims, seeking compensatory and punitive relief and variants of rescission.
- After extensive discovery, defendants moved for summary judgment under Rule 56 to dismiss the complaint.

## Issues

1. Whether the record created triable issues of material misrepresentation or omission, scienter, reliance, and causation sufficient to defeat summary judgment on the federal securities and related fraud claims.
2. Whether allegations tied to a single acquisition transaction could satisfy civil RICO requirements, including a pattern of racketeering activity and cognizable RICO injury distinct from ordinary deal-loss theories.
3. Whether, and to what extent, Polycast’s asserted damages theories (including punitive and rescission-based remedies) were legally available on the evidentiary record and governing standards.
4. How the summary-judgment record—developed through extensive discovery disputes involving auditors and privilege assertions—bore on reliance, materiality, and intent.

## Decision

- The court granted summary judgment in part and denied it in part.
- The court preserved a core set of fraud and securities-disclosure disputes for trial, including claims tied to alleged nondisclosure of significant adverse developments affecting Plastics before closing.
- The court narrowed or rejected portions of Polycast’s broader theories, including aspects of the civil RICO claim and certain damages requests, where legal standards were not met or evidence was insufficient.
- The ruling functioned to streamline the case by eliminating unsupported components while allowing fact-dependent claims to proceed.

## Legal Principles

- Summary judgment is inappropriate where the evidence permits a reasonable factfinder to conclude that alleged omissions or misstatements were material and made with the requisite state of mind, and that the purchaser’s reliance and loss connection present genuine factual disputes.
- In acquisition-related fraud litigation, courts distinguish actionable deception from nonactionable post-closing business risk and “buyer’s remorse”; intent and materiality typically turn on transaction-specific facts.
- Civil RICO in a corporate-acquisition setting is closely scrutinized; alleged predicate acts overlapping with a single securities-fraud transaction may be insufficient to establish a RICO pattern or a RICO injury distinct from overpayment or contract-type losses.
- Damages theories in fraud/securities cases are subject to legal limits at summary judgment; remedies such as punitive and rescission-based relief may be narrowed where not supported by applicable standards or the developed record.
- Discovery and privilege determinations affecting access to contemporaneous communications, audit work, and related materials can materially shape the summary-judgment record on reliance, disclosure, and intent.

## Conclusion

The court partially granted defendants’ Rule 56 motion, rejecting or limiting parts of the RICO and damages theories, but denied summary judgment as to key securities and fraud allegations where disputed facts—especially regarding pre-closing nondisclosures tied to major adverse developments—required resolution at trial.


Polycast Tech. Corp. v. Uniroyal, Inc., 792 F. Supp. 244 (S.D.N.Y. 1992)