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SUSMAN v. LINCOLN AMERICAN CORP.

October 22, 1982

MICHAEL SUSMAN, PLAINTIFF,
v.
LINCOLN AMERICAN CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

In 1973 Michael Susman ("Susman") brought this class and derivative action on behalf of Consumers National Corporation ("Consumers") and its minority stockholders. Susman asserts various violations of the Securities and Exchange Act of 1934 in connection with the "going private" merger of Consumers into Lincoln American Life Insurance Company ("Lincoln Life"), a wholly-owned subsidiary of Lincoln American Corporation ("Lincoln American"). In the latest chapter of this seemingly interminable litigation, defendants have moved for:

    (1) summary judgment on Susman's individual
  claims;

(2) summary judgment on the derivative claims;

    (3) an order (or other appropriate relief)
  barring Susman from serving as class
  representative; and
    (4) summary judgment against three class
  members (not named plaintiffs).

For the reasons stated in this memorandum opinion and order, defendants' first and second motions are granted, while the third and fourth motions are denied.

Procedural History

Three earlier opinions of this Court*fn1 have provided a more detailed account of the source of this litigation than is needed here. More appropriate for current purposes is a brief account of the complicated procedural history underlying just one fragment of this case — the class certification issue.

At a relatively early date Judge Flaum (to whom the case was then assigned) denied Susman's motion for class certification because his family relationship with class counsel threatened Susman's ability to protect the interests of absent class members. 72 F.R.D. 187. That decision was affirmed at 561 F.2d 86 (7th Cir. 1977) (Susman I).

After retaining new counsel, Susman renewed his motion. In response, defendants tendered the full amount of Susman's individual claim to him. When he rejected the offer, defendants filed a motion to dismiss. Judge Flaum granted defendants' motion on the ground the tender had mooted the controversy between the named parties. This time, however, our Court of Appeals reversed, 587 F.2d 866 (7th Cir. 1978), cert.denied, 445 U.S. 942, 100 S.Ct. 1336, 63 L.Ed.2d 775 (1980) (Susman II).

Inspired by this victory, Susman persevered with his quest for certification. This Court's February 12, 1981 memorandum opinion and order rejected the class designation he had tendered but provided a road map for redefinition of the proposed class. Susman accepted the invitation, and this Court certified the redefined class March 10, 1981.

        Summary Judgment Against Susman on His Individual
                             Claims

Defendants advance two reasons for summary judgment against Susman individually:

    1. Susman could not possibly have relied on
  alleged misrepresentations and omissions in the
  proxy materials at issue — even if there is a
  rebuttable presumption of reliance ...

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