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WISLOW v. WONG

January 20, 1989

LEONARD A. WISLOW, GAYE L. WISLOW and BECO, INC., Plaintiffs,
v.
ARTHUR WONG, BERNARD R. KORNHABER, W-K INVESTMENT CO., WAYNE J. SIEM and SIEM LIMITED PARTNERSHIP, Defendants



The opinion of the court was delivered by: ASPEN

 MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

 Plaintiffs Leonard and Gaye Wislow and Beco, Inc. bring this multi-count action charging defendants Arthur Wong, Bernard Kornhaber, W-K Investment Co., Wayne Siem and Siem Limited Partnership with violating federal and state securities laws and breaching various common law duties. Defendants move to dismiss all but two of the counts. For the following reasons, the motion to dismiss is granted in part and denied in part.

 Factual Background *fn1"

 Failure to Plead Fraud with Particularity

 Defendants move to dismiss the six fraud claims for failure to satisfy the dictates of Fed.R.Civ.P. 9(b). As we have stated frequently, Rule 9(b) places the following burden upon a plaintiff claiming fraud:

 
[A] complaint which alleges . . . fraud must state with particularity specific fraudulent acts comprising fraud. In describing the circumstances constituting fraud, the plaintiff must describe the "time, place and particular contents of the false representations, as well as the identity of the party making the misrepresentation, and what was obtained or given up thereby." (Citations omitted). D & G Enterprises v. Continental Illinois National Bank, 574 F. Supp. 263, 267 (N.D. Ill. 1983).

 See also Harris Trust & Savings Bank v. Ellis, 609 F. Supp. 1118, 1123 (N.D. Ill. 1985), aff'd, 810 F.2d 700 (7th Cir. 1987). Plaintiffs are not required to allege facts that are in the exclusive possession of the defendants. Donato v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 663 F. Supp. 669, 673 (N.D. Ill. 1987). In a case with multiple defendants, "plaintiff need only allege a 'brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants,'" Carter v. Signode Industries, Inc., 694 F. Supp. 493, 500 (N.D. Ill. 1988), quoting Tomera v. Galt, 511 F.2d 504, 509 (7th Cir. 1975). A plaintiff must additionally specify each individual defendant's misconduct. Harris Trust, 609 F. Supp. at 1123. *fn4" This requirement serves the twin goals of giving the defendants adequate notice to allow preparation of a defense and assuring that the plaintiff has a colorable basis for naming each defendant.

 Plaintiffs have satisfied these standards only in part. The complaint adequately sets forth the time frame within which the misrepresentations and omissions occurred and, in most cases, the nature of the fraudulent acts. However, plaintiffs do not identify where the acts occurred and fail to attribute the acts to specific defendants. Rather, plaintiffs allege generally that "the defendants, and each of them, aided and abetted by the others, induced plaintiffs . . . by their fraudulent acts," followed by a list of those acts. Rule 9(b) as we have interpreted it requires the plaintiff at a minimum to notify each defendant of the fraudulent acts for which it is charged. Plaintiffs seek to avoid this requirement by stating that "each defendant either controls or is the agent or partner of the other. As such, each defendant is responsible for the conduct and representations of the other." That each defendant may be liable for the actions of the others does not obviate the need to identify the perpetrator of each alleged fraudulent act. As we stated above, one reason for requiring the plaintiff to attribute the misconduct to specific defendants is to provide adequate notice. The defendants as a group must be informed of the precise actions or inactions that constitute the misrepresentation or omission. The most that we can glean from the complaint is that someone somewhere misrepresented or omitted material facts. Accordingly, we dismiss Counts I through III and VI through VII; but, to the extent any of these claims survive defendants' motion to dismiss under Fed.R.Civ.P. 12(b)(6), we give plaintiffs leave to amend their complaint within ten days to comply with Rule 9(b) as interpreted above, if they so choose.

 Failure to State a Claim

 Defendants also move under Fed.R.Civ.P. 12(b)(6) to dismiss six of the counts for failure to state an essential element of the claim.

 A. Count II: Section 17(a) of the Securities Act of 1933

 In Count II, plaintiffs seek relief for violations of section 17(a) of the 1933 Securities Act. In Bear Stearns & Co., Inc. v. Zeier, 691 F. Supp. 145 (N.D. Ill. 1988), we held without qualification that a private cause of action is unavailable under ยง 17(a). *fn5" Plaintiffs ...


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