Injunction and in Opposition to Defendants' Motion to Dismiss, p.
45). Thus there does not appear to be a reasonable likelihood
that Saemann can show that, through the exercise of reasonable
diligence, he could not have discovered the alleged material
misrepresentations until some time after December 3, 1968.
Saemann asserts that the statute of limitations has not even
now started running because the sale sought to be enforced by E&J
International in the 2217 case has not been completed, and the
2217 case is, itself, part of a continuing violation. Plaintiffs
rely on Silverman v. Chicago Ramada Inn, Inc., 63 Ill. App.2d 96,
211 N.E.2d 596 (1965) (which was adopted in Parrent, supra), for
their theory that the Illinois limitations period does not begin
running until a sale is completed by the transfer of securities.
Silverman involved a sale of securities where payment had been
made in three installments, with the transfer of title taking
place at the last payment. The court held that the statutory
period started running at the time of the last payment. But the
Silverman court was dealing with a situation where the purchasers
discovered the illegality of the sale after it had been
completed. Here, plaintiffs are aware of the alleged fraud and
have sued before the sale is completed. It appears to this Court
that the date of discovery of the alleged fraud is the key
factor. Considering the availability of an action for rescission
or for declaratory judgment, plaintiffs should be required in a
situation such as we have here to bring suit within the statutory
period after they become aware of the alleged fraud.
Plaintiffs cite Studebaker Corp. v. Gittlin, 360 F.2d 692 (2d
Cir. 1966), for the proposition that court action in furtherance
of acts illegal under the securities law is itself violative of
the securities laws. We do not so read the Studebaker opinion. It
makes only brief reference to certain antitrust cases dealing
with this issue. Id. at 698. These cases, e.g., Hoopes v. Union
Oil Co. of Calif., 374 F.2d 480 (9th Cir. 1967) and Winkler-Koch
Engineering Co. v. Universal Oil Products Co., 100 F. Supp. 15
(S.D.N.Y. 1951), are inapposite. In those cases, the alleged
restraints of trade were being implemented by the complained of
litigation. Here, the fraud and nondisclosure alleged in
connection with the February 1968 offer appear to have occurred
before the plaintiffs received financial information concerning
the public offering in March and June of 1968, or at least before
Saemann in September of 1968 refused to perform the alleged
contract. The injury which Rule 10b-5 seeks to prevent —
misleading of investors through misrepresentations and
non-disclosures — could not have occurred after disclosure or
after the person allegedly defrauded refused to go forward with
the questioned transaction. Any injury after such events took
place would simply constitute additional damages from the first
violation, rather than a continuing violation.
In the light of the foregoing, this Court concludes that
plaintiffs have failed to meet their burden. The motion for a
preliminary injunction is accordingly denied.
All further proceedings and discovery in this case will be
stayed pending the disposition of the 2217 case in England,
including all appeals in that action. The power to stay
proceedings is incidental to every court's inherent power to
control the disposition of causes on its docket with economy of
time and effort for itself, for counsel, and for litigants.
Landis v. North American Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81
L.Ed. 153 (1936). Because the A shares and 2217 cases, with
nearly the same parties and issues, were initiated before this
action, it is appropriate for this Court to stay its hand at this
time. Aetna State Bank v. Altheimer, 430 F.2d 750, 755, 758 (7th
Cir. 1970). Even if this Court should eventually decide that
Count II of the
complaint is not barred by the statute of limitations, the long
delay in bringing this action while the closely comparable
English cases were proceeding toward trial would make concurrent
litigation here inequitable as well as wasteful of judicial
Accordingly, all further proceedings herein, including
discovery, are stayed until further order of the Court.
© 1992-2003 VersusLaw Inc.