The opinion of the court was delivered by: Baker, Chief Judge.
On April 15, 1987, the plaintiffs filed a complaint against the
defendant, Dale Cozad and Cozad Investment Services, Inc.,
alleging violations of both Illinois and federal securities laws.
On May 20, 1987, the defendants filed a "motion to strike,
dismiss and for partial summary judgment." On September 17, 1987,
the Honorable Robert J. Kauffman, United States Magistrate,
issued a recommendation regarding the defendants' motion of May
20, 1987. On September 30, 1987, the defendants filed an
objection to the Magistrate's recommendation. The matter is
presently before the district judge upon the defendants'
objections to the magistrate's recommendation. See Fed.R.Civ.P.
On numerous occasions between November 1981 and December 1983,
the plaintiffs purchased interests in limited partnerships from
the defendants. All of these securities were interests in limited
partnerships formed and managed by Donald R. Walker. Sometime
around 1985, Mr. Walker and all of the limited partnerships he
managed filed for bankruptcy. The plaintiffs' complaint alleges
that the defendants, as the "underwriter" of these limited
partnership interests and as the agent of Donald R. Walker,
violated both Illinois and federal securities laws when they sold
these interests to the plaintiffs. The magistrate's
recommendation of September 17, 1987, granted the defendants'
motion to dismiss and for partial summary judgment with respect
to some of the claims and denied the defendants' motion to
dismiss and for summary judgment with respect to other claims.
The defendants object to the portion of the magistrate's
recommendation denying their motion to dismiss and for partial
1) FEDERAL RULE OF CIVIL PROCEDURE § 9(b)
The defendants' motion to dismiss contends that the plaintiffs
have failed to allege fraud with the requisite specificity. See
Fed.R.Civ.P. 9(b). Fed.R.Civ.P. 9(b) states that "in all
averments of fraud or mistake, the circumstances constituting
fraud or mistake shall be stated with particularity. . . ." The
particularity requirement of Rule 9(b) does not, however, render
the general principles of Rule 8 inapplicable to pleadings
alleging fraud. The two rules must be read in conjunction with
each other. 5 Wright & Miller, Federal Practice and Procedure, §
1298 (1969). Rule 9(b) does not require fact pleading. It merely
requires pleading "circumstances." 5 Wright & Miller, Federal
Practice and Procedure, § 1298 (1969).
In the case at hand, the plaintiffs allege that the defendants
violated state and federal securities laws through their
omissions as opposed to their misrepresentations. On pages 9
through 13 of their complaint, the plaintiffs list eight
omissions by the defendant that the plaintiffs contend were
fraudulent. A plaintiff must allege more than conclusory
statements that the defendants' conduct constitutes fraud. Onesti
v. Thompson McKinnon Securities, Inc., 619 F. Supp. 1262, 1267
(N.D.Ill. 1985). The complaint in this case alleges more than
mere conclusions of fraud. The allegations on pages 9 through 13
of the complaint describe the alleged omissions of the defendant
which the plaintiffs contend violate state and federal securities
laws. Those allegations more than satisfy the requirements of
Fed.R.Civ.P. 9(b) when read in conjunction with Fed.R.Civ.P. 8.
D & G Enterprises v. Continental Illinois Nat. Bank & Trust Co.
of Chicago, 574 F. Supp. 263 (N.D.Ill. 1983).
The complaint satisfies the goals of Fed.R.Civ.P. 9(b) and
Fed.R.Civ.P. 8 in that it provides the defendants with notice of
the claims against them and evidences a reasonable belief on the
plaintiffs' part that the complaint has merit. Gilbert v. Bagley,
492 F. Supp. 714 (M.D.N.C. 1980). The plaintiffs' complaint
alleges fraud with sufficient particularity to satisfy the
requirements of Fed.R.Civ.P. 9(b). Therefore, the defendants'
motion to dismiss for failure to allege fraud with the requisite
specificity is denied.
2) THE INTEGRATION DOCTRINE AND STATUTES OF LIMITATION
The defendants' further contend that all but two of the
plaintiffs' claims are barred by the statute of limitations. The
plaintiffs admit that all but two of the sales they contend were
tainted by fraud would be barred by the statute of limitations if
they were "single" sales. However, the plaintiffs contend that
the court should consider all of the sales as a single
"integrated" sale occurring on the date of the last sale. The
defendants argue that the integration doctrine does not apply to
cases involving statutes of limitations. At this point in the
proceedings, the court is only able to decide whether the
integration doctrine applies to statutes of limitations. If the
doctrine does apply to limitation questions, the court will need
more information in order to determine whether the doctrine
applies in this case.