United States District Court, Northern District of Illinois, E.D
April 29, 1982
PHILLIP ISSEN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, AND DERIVATIVELY ON BEHALF OF GSC ENTERPRISES, INC., PLAINTIFFS,
GSC ENTERPRISES, INC., THE BANK OF LINCOLNWOOD STEINWAY DRUG COMPANY, FORD HOPKINS COMPANY, RICHARD GOODMAN, SAMUEL BERGMAN, EGMONT SONDERLING, WALTER GOODMAN, ERWIN HORWITZ, MASON LOUNDY, RAYMOND EIDEN, EDWARD GORENSTEIN, MARSHALL D. LIEB AND HAIG PEDIAN, DEFENDANTS. SEYMOUR ABRAMS, INDIVIDUALLY AND ON BEHALF OF HIMSELF AND ALL OTHER PERSONS SIMILARLY SITUATED, AND DERIVATIVELY ON BEHALF OF GSC ENTERPRISES, INC. AND THE SHAREHOLDERS THEREOF, PLAINTIFFS, V. GSC ENTERPRISES, INC., A CORPORATION, THE BANK OF LINCOLNWOOD, A CORPORATION, MILLER, COOPER & COMPANY, A PARTNERSHIP, RICHARD GOODMAN, WALTER GOODMAN, SAMUEL BERGMAN, EGMONT SONDERLING, ERWIN HORWITZ, MASON LOUNDY, RAYMOND EIDEN, EDWARD GORENSTEIN, MARSHALL D. LIEB, HAIG PEDIAN, RAYMOND EIDEN, CLYDE WM. ENGLE, ROGER L. WESTON, SIERRA CAPITAL GROUP, A LIMITED PARTNERSHIP, THE TRUSTEES OF THE JANICE L. ENGLE CHILDREN'S TRUST, MICHAEL D. COUGHLIN, WILLIAM N. WEAVER, JR., AND RONALD K. ZUCKERMAN, DEFENDANTS.
The opinion of the court was delivered by: Aspen, District Judge: Eight years have elapsed since this litigation commenced between plaintiffs Phillip Issen ("Issen") in 74 C 0346, Seymour Abrams ("Abrams") in 74 C 2215, and a host of corporate and individual defendants related to Gsc Enterprises, Inc. ("gsc") and its wholly-owned subsidiaries. A detailed review of the substance and progress of this securities litigation can be found in this Court's prior opinions.[fn1] Presently before the Court are six separate motions. In Abrams, 74 C 2215: (1) Defendant Miller, Cooper & Co. ("Miller, Cooper"), certified public accountants for Gsc, has moved for reconsideration of its prior order certifying a class for Abrams' claims under § 10(b) of Securities Exchange Act of 1934 and Sec Rule 10b-5. (2) Abrams has moved to obtain approval of its proposed class action notice prepared pursuant to that prior order. (3) Various other Abrams defendants have moved for summary judgment on Abrams' claims under Sec Rule 10b-5 as they relate to defendants' duty to disclose material information in GSC's annual reports. (4) Those same defendants have moved to dismiss the final derivative count on behalf of Gsc shareholders remaining in Abrams' complaint. In Issen, 74 C 0346: (5) Various defendants have moved to dismiss the entire complaint for want of prosecution. (6) Issen has moved to amend his first amended complaint. The Court will deal with each of these motions in seriatim. Motions In Abrams 1. Defendants' Motion for Reconsideration On August 28, 1981, pursuant to Rule 23, Fed.R.Civ.P. this Court certified a plaintiff class consisting of "purchasers of Gsc common stock exclusive of defendants and their families . . . for the period between January 1, 1969 and April 10, 1970."[fn2] Issen v. Gsc Enterprises, Inc., 522 F. Supp. 390, 404 (N.D.Ill. 1981). Defendant Miller, Cooper now moves the Court to reconsider this class certification on the theory that Abrams' underlying complaint, initially filed in 1974, did not expressly include as members of the plaintiff class purchasers of Gsc common stock in 1969. That complaint simply identified the class as those individuals who purchased Gsc common stock after January 1, 1970 and before the filing of the complaint.[fn3] Abrams complaint, ¶¶ 10, 19, 22. Thus, Miller, Cooper argues the class certified by this Court in August includes as class members persons who are outside the scope of the underlying cause of action and cannot now join that action after the running of the statute of limitations.[fn4] In our view, Miller, Cooper reads the complaint too narrowly. Although it is true that Abrams initially brought this action on behalf of purchasers of Gsc common stock after January 1, 1970, it is also correct that the wrongdoing alleged in that complaint commenced at some time "prior to December 31, 1968." Complaint, ¶ 12. The theory underlying Abrams' cause of action, therefore, applies with equal force to 1969 purchasers of Gsc common stock. That Abrams did not originally identify such purchasers as members of the plaintiff class does not alter the substantive nature or scope of Abrams' initial cause of action. It is well settled that a plaintiff can amend its complaint at any time to add real parties in interest to the original cause of action. Fed.R.Civ.P. 17(a). Because the cause of action asserted in Abrams' initial complaint effectively encompassed the claims of these 1969 purchasers, their addition to the plaintiff class does not constitute the initiation of a separate cause of action. Accordingly, the claims of such purchasers are not barred by the statute of limitations. Even if the addition of 1969 purchasers to the plaintiff class rises to the level of a separate cause of action against Miller, Cooper, an amendment asserting such a claim would relate back to the date of the original complaint. Fed.R.Civ.P. 15(c). However narrowly Abrams' initial complaint is read, there can be no dispute that the claims of 1969 purchasers fall within the ambit of the conduct, transaction or occurrence set forth in the original pleading. Cf. Barnes v. Callaghan & Co., 559 F.2d 1102, 1106 (7th Cir. 1977). See generally 6 Wright and Miller, Federal Practice and Procedure, §§ 1496-97, 1501 (1971). Abrams' original complaint, taken as true for purposes of this motion, gave Miller, Cooper full notice of a claim arising from conduct which would have influenced 1969 as well as 1970 purchasers of Gsc common stock. Thus, Miller, Cooper cannot establish any prejudice resulting from the addition of these plaintiffs, even if their claim technically constitutes a separate cause of action.[fn5] Cf. Staren v. American National Bank & Trust Co. of Chicago, 529 F.2d 1257, 1263 (7th Cir. 1976); Paskuly v. Marshall Field & Co., 494 F. Supp. 687, 688-89 (N.D.Ill. 1980), aff'd
MEMORANDUM OPINION AND ORDER
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