The opinion of the court was delivered by: NORGLE
CHARLES R. NORGLE, UNITED STATES DISTRICT JUDGE:
Before the court is the defendants', Frale and Phelps, Ltd. and Frank K. Phelps, motion to dismiss. See Fed. R. Civ. P. 12(b)(6). For the following reasons, the motion is granted.
The facts, as alleged in the Complaint, are as follows. In 1978, plaintiff invested $ 90,000 in a limited partnership (the "partnership") organized and managed by defendants Phelps and R. Alan Berggren, who served as general partners. The partnership was formed to acquire, construct and operate certain real property. The partnership property has been sold, and in 1987 the partnership ceased operations and distributed its assets. Plaintiff received distribution payments totalling only $ 30,000.
Plaintiff alleges that defendants made material misrepresentations about plaintiff's percentage interest in the partnership, estimated cash flow, return on equity, and projected occupancy, rent, and fair market value of the property contributed by the general partners. Plaintiff filed his eight-count complaint on November 2, 1988. Count I alleges violation of the Securities Exchange Act, see 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder; Count VII alleges violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), see 18 U.S.C. § 1962(c), (d), and Counts II through VI and Count VIII allege pendent state law claims.
On a motion to dismiss, the allegations of the complaint as well as the reasonable inferences to be drawn from them are taken as true. Doe v. St. Joseph's Hosp., 788 F.2d 411 (7th Cir. 1986). The plaintiff need not set out in detail the facts upon which a claim is based, but must allege sufficient facts to outline the cause of action. Id. The complaint must state either direct or inferential allegations concerning all of the material elements necessary for recovery under the relevant legal theory. Mescall v. Burrus, 603 F.2d 1266 (7th Cir. 1979). The court is not required to accept legal conclusions either alleged or inferred from pleaded facts. Carl Sandburg Village Condominium Ass'n No. 1 v. First Condominium Development Co., 758 F.2d 203, 207 (7th Cir. 1985). Dismissal under Rule 12(b)(6) is improper unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Papapetropoulous v. Milwaukee Transport Services, Inc., 795 F.2d 591, 594 (7th Cir. 1986).
SECTION 10(b) AND RULE 10b-5 CLAIM
Defendants argue that plaintiff's Rule 10b-5 claim is barred by the statute of limitations and should therefore be dismissed. To evaluate this argument, the court must determine the appropriate statute of limitations for a Rule 10b-5 claim, and to what extent, if any, the limitations period may be equitably tolled.
The relevant Illinois securities law provides as follows:
No action shall be brought for relief under this Section after 3 years from the date of sale, provided, that if the party bringing the action neither knew nor in the exercise of reasonable diligence should have known of any alleged violation of this Act which is the basis for the action, the 3 year period provided herein shall begin to run upon the earlier of (1) the date upon which the party bringing such action has actual knowledge of the alleged violation of this Act, or (2) the date upon which the party bringing such an action has notice of facts which in the exercise of reasonable diligence would lead to actual knowledge of the alleged violation of this Act; but in no event shall the period of limitation so extended be more than 2 years beyond the expiration of the 3 year period otherwise applicable.
Ill.Rev.Stat. ch. 121 1/2, § 137.13(D) (1985) (emphasis added). Defendants argue that pursuant to Seventh Circuit holdings, this court must apply both the 3 year limitation period of Illinois law, and the 2 year limitation on extending that limitation period for equitable reasons, as stated in the Illinois statute. See id. Thus, defendants argue, an absolute 5 year limitation applies to an action under Rule 10b-5, and because plaintiff filed his claim approximately 9 years after the alleged misrepresentations and omissions of material facts, his Rule 10b-5 claim is time-barred. Plaintiff argues that while the Illinois 3 year limitation period is applicable to Rule 10b-5 actions, the 2 year limitation on equitable tolling is not applicable, but rather the limitation period can be tolled indefinitely.