in mind. Its purpose has nothing to do with preserving the
securities fraud claims of plaintiffs. The court will not apply
the integration doctrine in this situation merely to preserve the
plaintiffs' claims. Statutes of limitations serve a valid and
important function in our judicial system. It is not appropriate
to circumvent them merely to protect plaintiffs who may have been
injured. Therefore, the court holds that the integration doctrine
does not apply to preserve plaintiffs' claims that are barred by
statutes of limitations.
The plaintiffs further contend that even if the integration
doctrine does not apply to the claims in this case, the
plaintiff's claims should not be barred because the equitable
doctrine of "tolling" prevents the defendants from using statutes
of limitations as a defense. The plaintiffs' claims for violation
of the 1953 Illinois Securities Act are governed by a three-year
statute of limitations. Ill.Rev.Stat. ch. 121 1/2, § 137.13(D)
(1987). Section 137.13(D) allows for tolling of the statute of
limitations for claims alleging omissions or misrepresentations.
Paragraph 27, p. 43 of plaintiffs' complaint does allege that the
defendants made omissions and misrepresentations which violate §
12 of the Illinois Securities Act of 1953. The tolling provision
of § 137.13(D) provides for tolling in cases where the plaintiff
neither knew of or should have known of the alleged violation.
This is a fact based determination which the court is not able to
make at this point in time.
The doctrine of equitable tolling also applies to the
plaintiffs' federal causes of action. The plaintiffs allege that
by providing them with false or incomplete information about the
pending bankruptcy proceedings by the general partner Donald R.
Walker, the defendants misled the plaintiffs into delaying
pursuit of their remedies in court. The doctrine of equitable
tolling is read into every federal statute of limitations,
including state statutes adopted by federal law. Sperry v.
Barggren, 523 F.2d 708, 710 (7th Cir. 1975). See also Glus v.
Brooklyn Eastern District Terminal, 359 U.S. 231, 232-33, 79
S.Ct. 760, 761-62, 3 L.Ed.2d 770 (1959). Recognizing that the
doctrine of equitable tolling may apply in this case, the court
at this time is unable to rule whether it should apply in this
case. Equitable tolling is a fact-based decision and cannot be
reached on the record in its present development. Therefore, the
motions to dismiss the plaintiffs' state and federal claims as
time barred are denied with leave to renew the motions at a later
3) WHO IS A "SELLER" UNDER § 12(2) OF THE 1933 ACT?
The defendants also object to the magistrate's recommended
finding that the defendants are "sellers" of securities for
purposes of the Federal Securities Act of 1933. The defendants
argue that they were not "sellers" of securities to the
plaintiffs, and, therefore, that the plaintiffs have no claims
against them under § 12 of the 1933 Act.
The defendants say that they acted merely as a selling agent of
the issuer. As a selling agent, the defendants argue that they
arranged for the sale of limited partnership interests by
introducing the plaintiffs to the sellers. The defendants further
contend that in order for them to be a "seller" privity must
exist between the plaintiff-purchaser and the defendant-seller.
The defendants cite Sanders v. John Nuveen and Company, Inc.,
619 F.2d 1222, 1226 (7th Cir. 1980), cert. denied, 450 U.S. 1005, 101
S.Ct. 1719, 68 L.Ed.2d 210 (1981), in support of this
proposition. The Seventh Circuit does require "strict privity"
between the plaintiff-purchaser and the defendant-seller. Beck v.
Cantor, Fitzgerald & Company, Inc., 621 F. Supp. 1547 (N.D.Ill.
1985). See also Kennedy v. Nicastro, 503 F. Supp. 1116 (N.D.Ill.
1980). The issue for the court is this: Does the requisite
privity between the plaintiffs and the defendants exist to make
the defendants "sellers" within the meaning of the Act?
The defendants contend that in order to be a "seller" the party
must be able to pass title to the purchaser. The court's opinion
in Steinberg v. Illinois Co., Inc., 659 F. Supp. 58 (N.D.Ill.
1987) supports the defendants' contentions. See also Beck v.
Cantor, Fitzgerald & Co., Inc.,
621 F. Supp. 1547, 1561 (N.D.Ill. 1985). However, Ambling v.
Blackstone Cattle Company, Inc., 658 F. Supp. 1459 (N.D.Ill.
1987), holds that the term "seller" for the purposes of
determining § 12(2) liability is "not limited to one who actually
transfers title but extends to those participants who represent
the transferor by actively soliciting the sale of the
transferor's securities." Ambling, 658 F. Supp. at 1466. This
court finds the reasoning in Ambling persuasive.
Although Sanders says the statute explicitly requires privity
for seller liability, it is not inconsistent with the privity
requirement of Sanders to hold that one who actively solicits
sales can be in privity with the purchaser even though someone
else transfers the title to the securities to the purchaser. See
Ambling v. Blackstone Cattle Co., Inc., 658 F. Supp. 1459, 1465-66
(N.D.Ill. 1987). Sanders merely requires privity between the
plaintiff purchaser and the defendant seller. The defendant in
this case acting as an agent for the original issuer could be a
seller within the meaning of the term "defendant seller" used in
Sanders. Although a number of district court cases in the Seventh
Circuit have held that the privity ingredient of Sanders requires
the defendant seller to actually transfer title to the plaintiff,
this court declines to follow those cases. Steinberg v. Illinois
Co., Inc., 659 F. Supp. 58 (N.D.Ill. 1987); Beck v. Cantor,
Fitzgerald & Company, Inc., 621 F. Supp. 1547 (N.D.Ill. 1985);
Riordan v. Smith Barney, No. 84-3216, slip op. at 5-8 (N.D.Ill.
June 30, 1986) [Available on WESTLAW, 1986 WL 7653].
Other circuits follow a less stringent privity requirement in
§ 12 cases than the Seventh Circuit. See SEC v. Seaboard Corp.,
677 F.2d 1289 (9th Cir. 1982); Junker v. Crory, 650 F.2d 1349
(5th Cir. 1981). Furthermore, commentators advocate adopting more
open rules on privity. See generally H. Bloomenthal, Securities
Law Handbook, § 1105 at 281-90 (1986-1987 ed.). This court,
however, is duty bound to follow the Seventh Circuit's decision
in Sanders. Mindful of that duty the court rules that in this
particular case the defendants could be "sellers" within the
meaning of § 12(2) and within the definition set out in Sanders.
Therefore, the defendants' motion for summary judgment on Counts
III, VII, XIII, and XVI is denied.
(1) The plaintiffs' complaint alleging violation of both
Illinois and federal securities laws does satisfy the
particularity requirements for alleging fraud set out in
(2) Although this court will not apply the "integration
doctrine" to cases involving statutes of limitations, it does
feel that the doctrine of equitable tolling applies to both the
plaintiffs' state and federal securities law claims and questions
of fact remain unresolved on that point.
(3) The defendants' motion for summary judgment on Counts III,
VII, XIII, and XVI is also denied. The court concludes that the
defendant could be a "seller" within the meaning of § 12(2) of
the 1933 Act.
IT IS THEREFORE ORDERED that the defendants' motion to dismiss
IT IS FURTHER ORDERED that the defendants' motion for summary
judgment is denied.
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