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PIERSON v. DEAN

November 23, 1982

WAYNE E. PIERSON AND RUTH E. PIERSON, PLAINTIFFS,
v.
DEAN, WITTER, REYNOLDS, INC., DEFENDANT.



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

  ORDER

Plaintiffs (the PIERSONS) filed this eight count complaint alleging statutory violations of the Securities and Exchange Act of 1934 ("ACT"), together with various common law counts. Subject matter jurisdiction is based on section 27 of the Act, 15 U.S.C. § 78aa. The common law counts are before this Court under the doctrine of pendent jurisdiction.

The facts in this case are still sketchy. On May 20, 1977, the Piersons opened a "non-discretionary margin account" with the Defendant (DEAN, WITTER) and placed $25,000 in the account. Through this account the Piersons traded in the purchase and sale of stocks and options on margin. All trading in this account was completed by February 28, 1979. Among the actions the Piersons complain of are:

  1. That sales and purchases were not properly made
     and transmitted;
  2. That Dean, Witter made sales and purchases
     contrary to specific instructions from the
     Piersons;
  3. That options were allowed to expire as worthless
     when they were in fact "covered";
  4. That sales and purchases were not properly posted
     to the account;
  5. That the Piersons' margin account and margin
     position was therefore misrepresented to them by
     Dean, Witter;
  6. That calls were made against the account which
     caused Dean, Witter to liquidate the account; and
  7. That Dean, Witter promised to perform an audit of
     the account and later refused to perform the
     audit.

On these facts the Piersons allege violations of the following sections of the Securities Exchange Act of 1934:

    I. Section 10(b) (15 U.S.C. § 78j) and Rule 10b-5
       (17 C.F.R. § 240 10(b)-5);
   II. Section 15(c)(1) (15 U.S.C. § 78o(c)(1)) and the
       rules promulgated thereunder;
  III. Section 15(c)(3) (15 U.S.C. § 78o(c)(3)) and the
       rules promulgated thereunder;

IV. Section 7 (15 U.S.C. § 78g) and Regulation T (12 C.F.R. § 220); and

    V. Sections 6(b) (15 U.S.C. § 78f(b)) and 15A
       (15 U.S.C. § 78o-3).

In addition, the Piersons allege common law counts of breach of fiduciary duty, negligence and fraud.

Dean, Witter has filed a motion to dismiss each of these counts pursuant to Fed.R.Civ.P. 12(b)(6). The applicable standard is that the complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101, 2 L.Ed.2d 80 (1957) and Weissbuch v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 558 F.2d 831, 833 (7th Cir. 1977). Dean, Witter has also requested this court to sever and compel arbitration of the common law claims.

    Motion to Dismiss the Entire Complaint as Time-Barred by
                   the Statute of Limitations

Dean, Witter contends that the entire complaint is time-barred by the statute of limitations. Both parties agree that the applicable Illinois statute of limitations provides three years from the date of the transactions complained of in which to bring the action. Ill.Rev.Stat., Ch. 121 1/2, Sec. 137.13(D); Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123, 125-128 (7th Cir. 1972); and Tomera v. Galt, 511 F.2d 504, 508-509 (7th Cir. 1975). They also agree that all trading in the account was completed by ...


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