BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE:
Frank E. Basil, Inc., the Guinness Flight Trust Corporation, and the Lenacks (Maurice, Adele and Jack) filed suit against Arthur D. Leidesdorf, John J. Robinson, Allan Esrine, and (ITI) Glendale, Inc. in this court on December 4, 1987. They amended their complaint on March 17, 1988, which this court dismissed for want of specificity on May 5. The plaintiffs filed their Second Consolidated Amended Complaint on July 14, 1988, and the defendants have made several motions to dismiss this one too.
The suit concerns the sale of convertible income debentures by R.V. Finance Corporation, N.V. and Rio Verde Energy Corporation. These debentures were to pay 7.5% interest and carried a right to receive 2.5 cents per ton of coal mined from properties owned by Heather Mining Company, Inc., a wholly owned subsidiary of Rio Verde. The plaintiffs allege that Leidesdorf, a Florida citizen and chairman of the boards of both of the debenture-issuing companies, and Robinson, the president of the companies, retained Esrine and Glendale as agents and financial advisors for the companies in the sale. Esrine and Glendale prepared an analysis of the operations and financial performance of Rio Verde, describing how the debentures would work and what they would yield. This analysis allegedly contained false and misleading statements. Leidesdorf and Robinson then mailed the Esrine/Glendale analysis to prospective purchasers of the debentures, many of whom acted upon its information (as well as other materials, some of them allegedly fraudulent) to purchase debentures between November 1981 and February 1982.
The Second Consolidated Amended Complaint (hereafter the "Complaint") consists of four counts. Count 1 is a claim of securities fraud under § 10(b) of the Securities Exchange Act of 1934 ("'34 Act"), 15 U.S.C. § 78j(b) (1982), and Rule 10b-5 issued thereunder, 17 C.F.R. § 240.10b-5 (1987). Count 2 is a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962 (1982). Count 3 alleges fraud in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill.Rev.Stat. ch. 121-1/2, Para. 262 (Smith-Hurd Ann. 1988 supp.), while Count 4 alleges common law fraud.
The first motion comes from Leidesdorf, who contends that venue is improper here. Leidesdorf is correct, in a sense. The strongest argument that this venue is proper stems from the '34 Act. The venue provision of the '34 Act reads in part:
Any suit or action to enforce any liability or duty created by this chapter or rules or regulations thereunder . . . may be brought in any . . . district [wherein any act or transaction constituting a violation of the '34 Act occurred] or in the district wherein the defendant is found or is an inhabitant or transacts business . . . .
15 U.S.C. § 78aa. The plaintiffs concede that Leidesdorf is neither found in nor inhabits this district, and that he does not transact business here. They rely principally on § 78aa's provision for venue where "any act or transaction constituting a violation" of the '34 Act occurs in the district.
When § 78aa speaks of "any act or transaction" constituting a violation, it does not mean any act. That act must be an act "'which represents more than an immaterial part of the allegedly illegal events.'" Bath Industries, Inc. v. Blot, 427 F.2d 97, 114 (7th Cir. 1970), quoting Puma v. Marriott, 294 F. Supp. 1116, 1120 (D.Del. 1969). The Complaint states that the following acts occurred in Illinois: (1) Leidesdorf and Robinson "enlisted the aid and assistance of Moshe Shaltiel, a broker whose principal place of business is in Chicago, Illinois . . . to identify and introduce the defendants to prospective purchasers of the Debentures, including [the] plaintiffs." Complaint, Para. 16. (2) The defendants transmitted false and misleading statements to Shaltiel, with the intent that Shaltiel pass them to the plaintiffs and others. One transmission was the mailing of the Esrine/Glendale analysis in 1981. The defendants allegedly sent the analysis "to Shaltiel in Chicago, and through Shaltiel to plaintiffs and other persons residing in this district and elsewhere . . . ." Id. at Para. 17. (3) Leidesdorf, Robinson, and Esrine misrepresented Rio Verde's having secured $ 4.5 million in outside financing "during the course of telephone conversations with Shaltiel in Chicago;" Shaltiel passed these misrepresentations to the Lenacks and Guinness.
Id. at Para. 21. Shaltiel passed on other misrepresentations as well. Id. at Paras. 22-24.
None of these acts forms a material part of the scheme that is alleged to have violated the '34 Act. The essence of the plaintiffs' '34 Act claims is that the defendants misrepresented certain facts to the plaintiffs. How the defendants got to know the plaintiffs, as alleged in (1) above, is immaterial to this scheme. Similarly, the route which the misrepresentations took is immaterial to the scheme for purposes of venue under the '34 Act. The plaintiffs never suggest that Shaltiel was privy to the defendants' misrepresentations. There are hints that he mailed fraudulent materials to persons in this district, but none of those persons is a plaintiff here, nor do the plaintiffs suggest how a mailing to other persons, some of whom may live in this district, was a material part of a scheme to defraud them.
The plaintiffs cite many cases in which a single mailing from or to a district helped establish venue in that district, but in all of these cases the mailing was one of many factors that made for proper venue. See Lefever v. Vickers, 613 F. Supp. 352, 353 (D. Colo. 1985) (venue existed where defendant wrote letter to stock transfer service which operated in forum's district; transfer service followed instructions in the letter, which resulted in an illegal benefit to defendant); City of Harrisburg v. Bradford Trust Co., 621 F. Supp. 463, 467-68 (M.D. Pa. 1985) (defendant misrepresented fact to plaintiff over telephone lines; plaintiff resided in forum's district); Savin v. CSX Corp., 657 F. Supp. 1210, 1215 (S.D.N.Y. 1987) (venue proper in forum where some of the members of plaintiff class received allegedly fraudulent material, and where events which defendant misrepresented actually took place).
This district is thus an improper venue under the '34 Act, when one looks at Leidesdorf alone.
This said, Leidesdorf should not think that he has prevailed. This is because defendants Robinson, Esrine, and Glendale have not objected to venue. Their acquiescence puzzled this court, and thus it asked Esrine and Glendale if they indeed wished to abide by the plaintiffs' choice of forum (defendant Robinson was missing when the court made this query). They replied yes, a trial in Chicago or New York would suit them fine. This court takes this as an admission that Esrine and Glendale are found, inhabit, or transact business in this district, as 15 U.S.C. § 78aa defines those terms. In Burkhart v. Allson Realty Trust, 363 F. Supp. 1286, 1292-93 (N.D. Ill. 1973), the court determined that where venue was proper for one defendant in a case brought under the '34 Act, venue was proper for all defendants. As the Burkhart court observed, this serves "to avoid unnecessary multiplicity of suits and fragmentation of issues . . . ." Requiring Leidesdorf to answer the plaintiffs in this court achieves those very goals.
The next motion is one raised by all of the defendants.
They argue that the plaintiffs fail to plead fraud in each of their counts with the particularity required by Rule 9(b), Fed.R.Civ.P. That rule provides:
In all averments of fraud or mistake the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge and other conditions of mind of a person may be averred generally.
Rule 9(b) governs all of the plaintiffs' claims. See Tomera v. Galt, 511 F.2d 504, 508 (7th Cir. 1975); Schaefer v. First National Bank of Lincolnwood, 509 F.2d 1287, 1297 (7th Cir. 1975) (Rule 9(b) covers and § 10(b) and Rule 10b-5 claims); Moss v. Morgan Stanley, Inc., 719 F.2d 5, 19 (2d Cir. 1983) (Rule 9(b) applies to fraud allegations in civil RICO complaints); Onesti v. Thomson McKinnon Securities, Inc., 619 F. Supp. 1262, 1265 (N.D. Ill. 1985) (Rule 9(b) applies to common law fraud claims).
Rule 9(b) ensures that allegations of fraud are concrete and particularized enough to give notice to the defendant of the conduct complained of, and to enable the defendant to prepare a defense. See Gross v. Diversified Mortgage Investors, 431 F. Supp. 1080, 1087 (S.D.N.Y. 1977), aff'd 636 F.2d 1201 (2d Cir. 1980). Rule 9(b) also protects the defendant from harm to his or her reputation or good will, and deters strike suits. See Decker v. Massey-Ferguson Ltd., 681 F.2d 111, 114 (2d Cir. 1982).
Courts read Rule 9(b) in harmony with Rule 8, Fed.R.Civ.P. See Tomera, 511 F.2d at 508. Rule 8 requires only a "short and plain statement of the claim showing that the pleader is entitled to relief," in addition to short statements of jurisdiction and the relief demanded. But because of Rule 9(b), it is insufficient to set forth general allegations when pleading fraud. See Bennett v. Berg, 685 F.2d 1053 (8th Cir. 1982) (conclusory language which asserts fraud, without a description of fraudulent conduct, does not satisfy Rule 9(b)); Bartels v. Clayton Brokerage, 631 F. Supp. 442 (S.D.N.Y. 1986) ("slightly more" is needed for Rule 9(b) than for Rule 8); Tomera, 511 F.2d at 508. Read together, the rules require a party to plead the time, place and contents of the fraud, but do not require the party to plead all of his or her evidence. Id. In fact, it is not necessary for a party to allege evidentiary details that will be used to support a claim of fraud at later date. See Caliber Partners, Ltd. v. Affeld, 583 F. Supp. 1308, 1311 (N.D. Ill. 1984) (plaintiffs need set forth only the basic outline of the scheme).
Generally a complaint of fraud or misrepresentation is sufficient under Rule 9(b) when it sets forth the time, place, and manner of false representations, identities of parties, and the consequences of misrepresentations. See Baselski v. Paine, Webber, Jackson & Curtis, Inc., 514 F. Supp. 535, 540 (N.D. Ill. 1981). In the present case, plaintiffs have sufficiently set forth the time period when the defendants allegedly made misrepresentations and omitted material facts. They have done this with both specific dates and approximate monthly time frames, both of which are proper ways of stating allegations under Rule 9(b). See Complaint, Paras. 21-26; Onesti, 619 F. Supp. at 1265 ("approximate time frame" is sufficient); Trak Microcomputer Corp. v. Wearne Bros., 628 F. Supp. 1089, 1092 (N.D. Ill. 1985) ("general time period" is sufficient). The Complaint also separately lists and sufficiently details the defendants' alleged misrepresentations. It identifies Liedesdorf, Robinson, Esrine and Glendale as the parties who made these misrepresentations, where the defendants made them, and what their consequences were. See Complaint at Paras. 15-28.
The plaintiffs' allegations are specific enough even for purposes of RICO. Plaintiffs who file civil actions under RICO need not present allegations as specific as a criminal bill of particulars, nor establish probable cause to believe that a defendant committed predicate racketeering offenses. See Haroco v. American Nat. B. & T. Co. of Chicago, 747 F.2d 384, 405 (7th Cir. 1984), aff'd 473 U.S. 606, 87 L. Ed. 2d 437, 105 S. Ct. 3291 (1985) (per curiam) (complaint adequately specified the transaction, the content and the identity of those involved; plaintiff need not prove predicate acts in complaint). The Complaint here sketches the specific times, places and contents of the alleged acts of mail and wire fraud, the identity of the parties engaging in this fraud, and the consequences of that fraud. The plaintiffs also allege the use of the mails, through the defendants' delivery of letters containing misrepresentations to the plaintiffs, and the use of the wires, through telephone conversations between plaintiff Basil and the defendants with regard to the purchase and sale of the debentures. The Complaint further identifies the mailings, their dates, and the role which they played in the fraud. This is sufficient to meet Rule 9(b). See Harris Trust & Savings Bank v. Ellis, 609 F. Supp. 1118, 1123 (N.D. Ill. 1985), aff'd on other grounds, 810 F.2d 700 (7th Cir. 1987); Dunham v. Independence Bank of Chicago, 629 F. Supp. 983, 986 (N.D. Ill. 1986).
The defendants argue that in each count the plaintiffs have grouped the defendants together, and thus the complaint is not specific enough as to each defendant's involvement. This argument is not persuasive, given the facts of this complaint. Where there are allegations of a fraudulent scheme with multiple defendants, the complaint need only "inform each defendant of the specific fraudulent acts" which constitute the basis of the action against the particular defendant. See Lincoln Nat. Bank v. Lampe, 414 F. Supp. 1270, 1274 (N.D. Ill. 1976); see also Bruss Co. v. Allnet Communication Services, Inc. 606 F. Supp. 401, 405 (N.D. Ill. 1985). The present complaint adequately apprises the defendants of the claimed fraud in a manner sufficient to permit adequate responsive pleadings. The Complaint names Liedesdorf, Robinson, Esrine and Glendale. It connects them to the alleged false and misleading statements in the Esrine/Glendale analysis and subsequent oral misrepresentations on or about November 1981 to February 1982. The Complaint thus alerts each defendant to the pertinent allegations.
Defendants' reliance on D&G Enterprises v. Continental Ill. Nat. Bank, 574 F. Supp. 263 (N.D. Ill. 1983), in this regard is misplaced. In D&G Enterprises, the court dismissed the complaint under Rule 9(b), noting that the plaintiffs had lumped together non-defendants into the complaint. Continental thus could not accurately discern its role in the alleged violations. The complaint also did not inform Continental of the specific fraudulent acts, the times or dates of the fraud, or the circumstances under which the alleged violations took place. Id. at 267-68. By contrast, the Complaint in this case has stated the required times, places and manner in which the four defendants allegedly carried out their scheme. In a similar case dealing with material misrepresentations in the sale of debentures, the court held that allegations like those in this suit stated fraud with particularity. See, Elliott Graphics Inc. v. Stein, 660 F. Supp. 378 (N.D. Ill. 1987).
In sum, the Complaint particularly alleges the purchase and sale of debentures offered to the plaintiffs by Rio Verde and R.V. Finance through Leidesdorf and Robinson. The plaintiffs have identified the documents which are alleged to contain misstatements and misrepresentations on which the plaintiffs relied in the purchase of these securities during the period of November 1981 through February 1982. The plaintiffs have detailed the precise relationship among the defendants, what documents plaintiffs received from defendants, and what each defendant knew or should have known about the truthfulness of these documents. Finally, the plaintiffs have sketched out the adverse consequences of the fraud to plaintiffs as a result of the purchase of the debentures. The plaintiffs thus have alleged enough facts in each count to meet the requirements of Rule 9(b).
' 34 Act Claims
The defendants next contend that the plaintiffs' claims under Count 1 are untimely and move to dismiss them under rule 12(b)(6). They submit first that the limitation for § 10(b) claims discussed in In re Data Access Systems Securities Litigation, 843 F.2d 1537 (3d Cir. 1988) (en banc), bars the claims in Count 1 because the violations alleged in this case took place more than three years before the plaintiffs filed the Complaint. This court noted in Kayne v. PaineWebber Incorporated, 703 F. Supp. 1334, 1989 U.S. Dist. LEXIS 450 (N.D. Ill. 1989), that Data Access was correct in light of the decision in Agency Holding Corp. v. Malley-Duff & Associates, 483 U.S. 143, 107 S. Ct. 2759, 97 L. Ed. 2d 121 (1987). This court went on to hold, however, that it would not apply Data Access retroactively. See Kayne, 703 F. Supp. 1334, 1989 U.S. Dist. LEXIS 450, 27-29.
The plaintiffs' claims in Count 1 are thus subject to the limitations set forth in the Seventh Circuit's pre-Malley-Duff decision of Norris v. Wirtz, 818 F.2d 1329 (7th Cir. 1987). There the court reaffirmed that § 10(b) and Rule 10b-5 claims are subject to the limitations period of analogous state law. The analog appropriate to this case is the Illinois Securities Act, Ill.Rev.Stat. ch. 121-1/2, Para. 137.13D (Smith-Hurd Ann. 1988 supp.). Prior to January 1, 1986, Para. 137.13D read as follows:
No action shall be brought for relief under this Section or upon or because of any of the matters for which relief is granted by this Section after three years from the date of sale.
Ill.Rev.Stat. ch. 121-1/2, § 137.13D (1983). After January 1, 1986, the law had this added provision:
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 subsection E, F, G, H, I, or J of Section 12 of this Act which is the basis for the action, the three-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 two years beyond the expiration of the three-year period otherwise applicable.