The opinion of the court was delivered by: Nordberg, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiffs have sued numerous defendants under section 10(b) of
the Securities Exchange Act of 1934 ("1934 Act), 15 U.S.C. § 78j,
and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240;
Section 17 of the Securities Act of 1933 ("1933 Act"),
15 U.S.C. § 77q, Section 12 of the 1933 Act, 15 U.S.C. § 77i; and
sections 1406, 1408 and 1410 of the Interstate Land Sales Full
Disclosure Act ("ILSFDA") 15 U.S.C. § 1705, 1707 and 1709.
Plaintiffs allege that defendants operated a real estate fraud
scheme by making misrepresentations and omissions to deceive
plaintiffs into purchasing and making a series of payments on
land located in Colorado City, Colorado.
In the mid-1960's, Colorado City was developed by the Colorado
City Development Company ("CCDC"). In 1969, CCDC was purchased
by Great Western United Corp. ("GWU"). Five years later, in
November, 1974, defendants N.B. Hunt and W.H. Hunt each
purchased approximately 30% shares of GWU and became members of
the Board of Directors of GWU. In February, 1978, HIRCO
acquired all of the stock of GWU.
The five plaintiffs in this case are all purchasers of property
at Colorado City. It is undisputed that each of the land sales
to these plaintiffs took place before February 1, 1969, over 6
years before the Hunts acquired their GWU stock. The two lots
purchased by the Kaliskis and the three lots purchased by the
plaintiff Carole Kovich were fully paid and deeded prior to
1974. The two lots of the two remaining plaintiffs, the
Housers, were fully paid and deeded as of October, 1976 and
In their motion for partial summary judgment, the Hunt
defendants and HIRCO ask for judgment on all claims relating to
contracts entered or payments made prior to November, 1977 for
the Hunt defendants, and prior to February, 1978 for HIRCO.
Defendants essentially assert that they cannot be held liable
for acts committed before they had any interest in or control
over the Great Western Companies.
On a motion for summary judgment, the moving party has the
burden of establishing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter
of law. Cedillo v. International Association of Bridge and
Structural Iron Workers, 603 F.2d 7, 10 (7th Cir. 1979). The
nonmoving party is entitled to all reasonable inferences that
can be made in its favor. United States v. Diebold, Inc.,
369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).
However, a plaintiff may not merely rely on conclusory
pleadings to withstand summary judgment. In responding to a
motion for summary judgment, a plaintiff must set forth
specific facts in affidavits or otherwise showing that there
are genuine issues that must be decided at trial. First
National Bank of Arizona v. Cities Service Co., 391 U.S. 253,
88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Posey v. Skyline Corp.,
702 F.2d 102, 105 (7th Cir. 1983).
The purpose of the summary judgment procedure is to eliminate a
trial in cases where a trial is unnecessary and results in
delay and expense. Mintz v. Mathers Fund, Inc., 463 F.2d 495,
498 (7th Cir. 1972). As the Seventh Circuit Court of Appeals
has noted, with the ever-increasing burden upon the judiciary,
persuasive reasons exist for the utilization of summary
judgment procedures whenever possible. Kirk v. Home Indemnity
Co., 431 F.2d 554, 559-60 (7th Cir. 1970). Courts therefore
will not strain to find the existence of a genuine issue where
none exists. Id.
As defendants point out, it is well established that a person
may not be held liable as a control person for acts occurring
before that person took control. See, e.g., Sennott v. Rodman
& Renshaw, 474 F.2d 32 (7th Cir. 1973), cert. denied,
414 U.S. 926, 94 S.Ct. 224, 38 L.Ed.2d 160 (1973). Plaintiffs do
not contest this point. Instead, they assert that these
defendants are liable for acts performed before they acquired
their interest in GWC as aiders and abettors and
First, plaintiffs assert that the Hunt defendants are liable as
aiders and abettors for all acts of the alleged scheme to
defraud. They argue that, since under federal criminal law,
aiders and abettors are punished as principals, by analogy, one
who aids and abets a civil securities violation is also liable
for all the acts of other participants in the scheme, even if
those acts occurred before the defendant entered the scheme.
Plaintiffs cite no authority for this proposition, and no
authority has been uncovered by the court. To the contrary,
courts have held that a person may not ...