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TEAMSTERS LOC. 282 PEN. T. FUND v. ANGELOS

December 20, 1985

TEAMSTERS LOCAL 282 PENSION TRUST FUND, PLAINTIFF,
v.
ANTHONY G. ANGELOS, ET AL., DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

Teamsters Local 282 Pension Trust Fund ("Fund") initially brought this action against ten defendants,*fn1 asserting two counts of securities fraud under federal law and one count each of fraud and negligent misrepresentation under Illinois law. In Teamsters I, 585 F. Supp. at 1405 this Court dismissed the case in its entirety. In "Teamsters II," 762 F.2d 522 (7th Cir. 1985) our Court of Appeals affirmed dismissal of the negligent misrepresentation count but reversed and remanded as to the other three, directing this Court to consider the following questions (id. at 532):

    1. whether Fund had brought suit after the
  expiration of the applicable statute of limitations;
    2. whether the transaction in suit involves a
  security and:
      (a) if so, whether defendants had made false
    statements or material omissions with the degree of
    scienter required by Ernst & Ernst v. Hochfelder,
    425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)
    and Sundstrand Corp. v. Sun Chemical Corp.,
    553 F.2d 1033 (7th Cir.), cert. denied, 434 U.S. 875,
    98 S.Ct. 224, 54 L.Ed.2d 155 (1977), or
      (b) if not, whether there is any other basis for
    federal jurisdiction over the remaining state-law
    fraud claim.

Howe, Jensen, Karkazis, Kirie and Jenner & Block have now moved under Fed.R.Civ.P. ("Rule") 56 for summary judgment based on the statute of limitations. For the reasons stated in this memorandum opinion and order, that motion is granted and this action dismissed as to all defendants.*fn2

Facts*fn3

Bancorporation agreed to make semiannual payments of $125,000 in principal plus accrued interest for 3 1/2 years, with the entire balance falling due in a balloon payment on the Loan's fourth anniversary. Bancorporation also agreed to provide updated financial statements to Fund. As security for repayment of the Loan, Bancorporation pledged all of Bank's stock and Angelos gave his personal guaranty secured by his interest in a Chicago vacant lot. Bancorporation furnished Jenner & Block's opinion letter (the "Opinion Letter") stating there were no actions, suits or proceedings pending against Bancorporation or Bank that would adversely affect the operations of either.

What Bancorporation did not disclose was the fact Bank had been investigated during February 1979 by Federal Deposit Insurance Corporation ("FDIC"). Based upon that investigation, FDIC had concluded (Teamsters II, 762 F.2d at 524):

  Bank was inadequately capitalized, had ineffective
  administration, owned an excessive volume of
  high-risk loans and was insufficiently liquid, and
  was in violation of many banking laws and
  regulations.

Neither the fact nor the results of FDIC's investigation was disclosed in the Opinion Letter.

Bancorporation made three timely payments on the Loan, the last being an August 30, 1980 payment of $228,374. On March 14, 1981 federal and state regulatory officials closed Bank down. That left the Loan uncollectible.

Certain Fund beneficiaries then brought suit against Trustees under 29 U.S.C. § 1104(a) ("ERISA") for breach of their fiduciary duty in connection with approval of the Loan. In 1982 the Secretary of Labor also brought suit against Trustees under ERISA. Fund was joined as a defendant in both actions, which were consolidated for trial in the United States District Court for the Eastern District of New York.

In July 1983, following a bench trial, District Judge Jacob Mishler issued findings of fact and conclusions of law in the consolidated cases. Katsaros, 568 F. Supp. at 362-69, 371.*fn4 In the course of concluding Trustees had violated their ERISA duty to investigate the Loan's propriety, Judge Mishler found an independent investigation and analysis of the ...


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