sufficient factual basis in the complaint for a general allegation of scienter. Accordingly, the Court rejects defendants' argument that plaintiffs' allegation of scienter is inadequate.
VI. ILLINOIS SECURITIES LAW
Count VI claims that defendants have violated § 12 of the Illinois Securities Act, Ill. Rev. Stat. ch. 121 1/2 para. 137.12. That statute permits the injured purchaser to recover "the full amount paid . . . less any income or other amounts received by such purchaser on such securities." Ill. Rev. Stat. ch. 121 1/2 para. 137.13. The only remedy available for a violation of § 12 is rescission; courts have refused to imply a damages remedy. See Renovitch v. Stewardship Concepts, Inc., 654 F. Supp. 353, 359 (N.D. Ill. 1987) (Leighton, J.).
In order to recover pursuant to § 12, the purchaser must give notice of an election of rescission within six months after the purchaser gains knowledge that the securities sales are voidable. Ill. Rev. Stat. ch. 121 1/2 para. 137.13. Where a plaintiff does not allege that he made such an election, a claim for relief pursuant to § 12 cannot stand. See Renovitch, 654 F. Supp. at 359.
The complaint alleges that plaintiffs gave notice of their election within one year of their discovery that the investments were voidable. (Complaint para. 16.) Defendants argue that plaintiffs have failed to plead compliance with the six-month notice requirement. Plaintiffs respond that just as equitable principles have been applied with respect to statute of limitations issues arising under the Illinois Securities Act, the Court should apply equitable principles to construe the Act's notice provisions. Plaintiffs rely on cases which held that the old three-year statute of limitations in the Illinois Securities Act, Ill. Rev. Stat. ch. 121 1/2 para. 137.13(D),
could be tolled where the fraud went undiscovered because the plaintiff remained unaware of the fraud despite the absence of any fault or lack of diligence on plaintiff's part, see Teamsters Local 282 Pension Trust v. Angelos, 815 F.2d 452, 456 (7th Cir. 1987), or where the fraud went undiscovered because the defendant took affirmative steps to conceal the fraud, see Teamsters, 815 F.2d at 456 n. 4; Tomera v. Galt, 511 F.2d 504, 510 (7th Cir. 1975). See also Pucci v. Santi, 711 F. Supp. 916, 922-23 (N.D. Ill. 1989) (Duff, J.).
Plaintiffs cite no authority for their argument that similar principles should apply to toll the six-month notice requirement, nor do they provide any logical basis for this argument. The notice requirement already incorporates the above principles by providing that notice must be given within six months after knowledge of the voidability of the sales. It is true that, in cases not cited by plaintiffs, Illinois courts have been lenient in their interpretation of what constitutes knowledge of voidability. They have held that the time for notice begins to run not from the time of knowledge of the underlying facts, but rather from the time of knowledge that those facts give rise to a right of rescission. See, e.g., Buehl v. Dayson, 127 Ill. App. 3d 958, 965, 469 N.E.2d 403, 408, 82 Ill. Dec. 869, 874 (5th Dist. 1984); Frendreis v. Financial Concepts, Ltd., 106 Ill. App. 3d 438, 441, 435 N.E.2d 1304, 1305-06, 62 Ill. Dec. 332, 333-34 (1st Dist. 1982). See also Gutfreund v. Christoph, 658 F. Supp. 1378, 1396 (N.D. Ill. 1987) (Shadur, J.). This principle, however, does not assist plaintiffs in this case, for they allege only that they were not aware of the misrepresentations "until sometime after May 1989." (Complaint para. 14.) Because this was more than six months before they gave notice of an intent to rescind, they did not comply with § 13, and Count VI must be dismissed.
VII. CONSUMER FRAUD
In Count IV, plaintiffs allege that defendants are liable for violating the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat. ch. 121 1/2 paras. 261 et seq. Defendants argue that this count should be dismissed for failure to allege a public injury or general effect on consumers. This Court -- in a case which, inexplicably, neither party has cited -- has already determined that such an allegation is unnecessary where the plaintiff was itself the consumer affected by the challenged action. W.E. O'Neil Construction Co. v. National Union Fire Insurance Co., 721 F. Supp. 984, 1001 (N.D. Ill. 1989) (Rovner, J.) (noting split in authorities). The Court has been given no reason to alter this view -- indeed, the Court's holding finds implicit support in the Illinois legislature's subsequent amendment of the Act to provide that "proof of a public injury, a pattern, or an effect on consumers generally shall not be required." Ill. Rev. Stat. ch. 121 1/2 para. 270a(a) (effective Jan. 1, 1990). Accordingly, the Court denies defendants' motion to dismiss Count IV for failure to allege public injury.
VIII. STATUTES OF LIMITATIONS
A. Counts II, III, IV and V
Defendants argue that Counts II, III, IV and V are barred by the five-year statute of limitations of Ill. Rev. Stat. ch. 110 para. 13-205 to the extent that the counts are based on sales which occurred more than five years prior to the filing of the complaint. Plaintiffs do not dispute the applicability of para. 13-205, but they assert that they have adequately pled an entitlement to equitable tolling of the limitations period.
In Illinois, a plaintiff is entitled to tolling of a limitations period if she shows both that the defendant fraudulently concealed the existence of the cause of action and that the plaintiff could not have discovered the cause of action through the exercise of due diligence. See Tate v. Beverly Chrysler Plymouth, 182 Ill. App. 3d 830, 837, 538 N.E.2d 663, 667, 131 Ill. Dec. 288, 292 (1st Dist. 1989); Leffler v. Engler, Zoghlin & Mann, Ltd., 157 Ill. App. 3d 718, 721-23, 510 N.E.2d 1018, 1020, 109 Ill. Dec. 950, 952 (1st Dist. 1987).
In order to show fraudulent concealment, a plaintiff must show more than mere silence on the part of the defendant; she must show affirmative acts or representations which are calculated to prevent discovery. Tate, 182 Ill. App. 3d at 837, 538 N.E.2d at 667, 131 Ill. Dec. at 292; Zagar v. Health & Hospitals Governing Comm'n, 83 Ill. App. 3d 894, 898, 404 N.E.2d 496, 500, 39 Ill. Dec. 112, 116 (1st Dist. 1980).
In this case, plaintiffs allege a series of misrepresentations which continued until February of 1989 and which prevented plaintiffs from discovering the fraud until May of 1989, one year prior to the filing of the lawsuit. Plaintiffs further allege that even with the exercise of reasonable care, they could not have learned of the misrepresentations until May of 1989. This is not a case in which defendants are accused merely of remaining silent in light of a past fraud or in which the circumstances apparent in the complaint indicate that the fraud should have been discovered in the exercise of due diligence. Furthermore, at this preliminary stage courts require little beyond general allegations to satisfy the tolling requirements. See, e.g., Tomera v. Galt, 511 F.2d 504, 509 (7th Cir. 1975); Frank E. Basil, Inc. v. Leidesdorf, 713 F. Supp. 1194, 1201 (N.D. Ill. 1989) (Duff, J.). The Court finds that plaintiffs' allegations in this case establish a basis for tolling of the limitations period.
B. Count I
1. Applicability of New Statute of Limitations
With respect to the § 10(b) count, defendants also argue that some of the securities sales described in the complaint are barred by the statute of limitations. Section 10(b) does not contain an express limitations period because it does not include an express private cause of action. The private cause of action for violations of § 10(b) has been implied by federal courts, which have accordingly found it necessary to imply a statute of limitations as well. Until recently, they did so by applying the statute of limitations for the most similar state cause of action. See Davenport v. A.C. Davenport & Son Co., 903 F.2d 1139, 1140 (7th Cir. 1990). In Illinois, this was the "blue sky" law, the statute of limitations of which provided, until recently, that "no action shall be brought for relief under this Section . . . after three years from the date of sale." Ill. Rev. Stat. ch. 121 1/2 para. 137.13(D). See Davenport, 903 F.2d at 1140; Teamsters Local 282 Pension Trust Fund v. Angelos, 815 F.2d 452, 455 (7th Cir. 1987). That statute was amended effective January 1, 1986, to add explicit provisions allowing tolling but also adding a five-year statute of repose.
The Supreme Court cast some doubt on the adoption of state limitations periods in § 10(b) cases when it borrowed federal rather than state limitations periods to govern implied causes of action in the cases of DelCostello v. Teamsters, 462 U.S. 151, 103 S. Ct. 2281, 76 L. Ed. 2d 476 (1983) (borrowing statute of limitations for unfair labor practice charges for use in actions by employees alleging breach of collective bargaining agreement or breach of duty of fair representation), and Agency Holding Corp. v. Malley-Duff Associates, Inc., 483 U.S. 143, 107 S. Ct. 2759, 97 L. Ed. 2d 121 (1987) (borrowing antitrust statute of limitations for use in RICO actions). In light of those opinions, the Third Circuit in 1988 overruled its prior decisions holding that the statute of limitations for § 10(b) actions should be borrowed from the most similar state statute, and concluded that a uniform limitations period should be implied based on the most similar federal express cause of action. In re Data Access Systems Securities Litigation, 843 F.2d 1537 (3d Cir.), cert. denied, 488 U.S. 849, 109 S. Ct. 131, 102 L. Ed. 2d 103 (1988). It determined that the appropriate source for a limitations period was the other provisions of the Securities Exchange Act of 1934, most of which provided a one-year statute of limitations and a three-year statute of repose. See 15 U.S.C. §§ 77m, 78i(e), 78r(c), 78cc(b). Accordingly, the court held that the statute of limitations for § 10(b) actions would be one year, which could be tolled to allow a period of up to three years. 843 F.2d at 1545-51.
In July of 1990, the Seventh Circuit joined the Third Circuit, finding that the Supreme Court's opinions necessitated a departure from the Seventh Circuit's previous cases holding that state statutes of limitations supplied the appropriate limitations period for § 10(b) actions. See Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir. 1990). The court derived a statute of limitations period for § 10(b) actions from § 13 of the Securities Act of 1933, as amended by the Securities Exchange Act of 1934, 15 U.S.C. § 77m, which provides a one-year statute of limitations and a three-year statute of repose. 908 F.2d at 1392.
In reaching the decision to look to federal rather than state law to supply a limitations period, the Court in Short noted several factors which differentiate § 10(b) actions from other areas in which courts have traditionally borrowed limitations periods from state law. First, because Congress did not create an express cause of action, it could not have anticipated that courts would need to imply a statute of limitations and thus that they would turn to state law. 908 F.2d at 1387. Second, Congress had not been silent with respect to limitations periods governing other causes of action under the securities laws, so there could be no presumption that Congress intended courts to look to state law. Id. at 1387-88. Third, looking to state law invariably gave rise to conflict-of-law problems which were inconsistent with Congress' desire for a national framework to govern multi-state securities transactions. Id. at 1388. In the context of § 10(b), the court found it appropriate to look to federal law because it provided a closer analogy than did state statutes, because of the federal policies at stake, and because of the difficulties inherent in choosing an appropriate state statute. Id.
The Short court left open the question of whether the new limitations rule should be applied retroactively. Id. at 1389-90.
That issue is posed by this case. In general, cases are decided in accordance with the law as it exists at the time of the decision. Goodman v. Lukens Steel Co., 482 U.S. 656, 107 S. Ct. 2617, 96 L. Ed. 2d 572 (1987). Whether an exception to this rule is appropriate in a particular instance depends on three factors:
(1) the decision at issue overrules clear precedent on which litigants may have relied or addresses an issue of first impression which was not foreshadowed;
(2) retroactive application of the decision would retard the operation of a federal statute; and (3) retroactive application would result in substantial inequity. Chevron Oil Co. v. Huson, 404 U.S. 97, 106-107, 92 S. Ct. 349, 355-356, 30 L. Ed. 2d 296 (1971).
Smith v. Firestone Tire and Rubber Co., 875 F.2d 1325, 1326 (7th Cir. 1989).
The first factor is satisfied where "the decision to be applied nonretroactively . . . establish[es] a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed." Chevron, 404 U.S. at 106, 92 S. Ct. at 355. Where the decision in question comes from a federal court of appeals, application of this factor focuses on the precedent within that circuit rather than on the nation as a whole. Anton v. Lehpamer, 787 F.2d 1141, 1143 (7th Cir. 1986).
Here, there was clearly established precedent in the Seventh Circuit that the source of the statute of limitations for § 10(b) cases brought in federal courts in Illinois was the Illinois blue sky law. See, e.g., Davenport, 903 F.2d at 1140; Norris v. Wirtz, 818 F.2d 1329, 1331 (7th Cir. 1987); Teamsters, 815 F.2d at 455; Suslick v. Rothschild Securities Corp., 741 F.2d 1000, 1004 (7th Cir. 1984); Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123, 125-27 (7th Cir. 1972). As the court stated in Short, "for many years we have applied to cases under Rule 10b-5 statutes of limitations borrowed from state blue sky statutes." 908 F.2d at 1387.
Defendants might argue that the decision in Short had been foreshadowed by the Supreme Court's opinions in DelCostello and Agency Holding and by language in Seventh Circuit opinions prior to Short indicating the attractiveness of adopting a uniform federal statute of limitations for § 10(b) actions. See Norris, 818 F.2d at 1332-33; Teamsters, 815 F.2d at 455. However, those opinions expressly declined to change the law in this area and reaffirmed the applicability of the Illinois provision. Even after Data Access, the Seventh Circuit did not immediately adopt a uniform federal approach. See Davenport, 903 F.2d at 1141. In light of the Seventh Circuit's consistent use of the Illinois statute until the Short decision, any foreshadowing of Short is too weak to allow this Court to find that Short did not overrule clear past precedent. Accordingly, the first factor for non-retroactive application is satisfied. See also Smith v. Firestone Tire and Rubber Co., 875 F.2d 1325 (7th Cir. 1989) (rule announced in Goodman v. Lukens Steel Co., 482 U.S. 656, 107 S. Ct. 2617, 96 L. Ed. 2d 572 (1987), effectively shortening statute of limitations for Illinois plaintiffs bringing § 1981 actions, would not be applied retroactively); Anton, 787 F.2d 1141 (rule announced in Wilson v. Garcia, 471 U.S. 261, 105 S. Ct. 1938, 85 L. Ed. 2d 254 (1985), effectively shortening statute of limitations for Illinois plaintiffs bringing § 1983 actions, would not be applied retroactively).
The second factor requires the Court to "weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation." Chevron, 404 U.S. at 106-07, 92 S. Ct. at 355. Application of this factor in the context of statutes of limitations generally focuses on two interests: the remedial interest served by the cause of action, and the interest of uniformity and certainty. See, e.g., McCarter v. Mitcham, 883 F.2d 196, 203-04 (3d Cir. 1989); Smith, 875 F.2d at 1327; Anton, 787 F.2d at 1144-45; Landahl v. PPG Industries, Inc., 746 F.2d 1312, 1315 (7th Cir. 1984). Where a judicial decision shortens the statute of limitations, retroactive application tends to further the second interest but hinder the first interest. It has also been noted that placement of undue emphasis on the uniformity interest would "swallow the rule," because new statutes of limitations would always be applied retroactively. McCarter, 883 F.2d at 204. In Smith, the court stated:
Fully retroactive application of Goodman would clearly interfere with the rights of federal litigants who were injured prior to Goodman by shortening the limitations period from five to two years. Further, the interests of uniformity and certainty will be only minimally affected by prospective application of Goodman since only those actions which accrued prior to Goodman would be subject to a different limitations period.
875 F.2d at 1327. For the same reasons, the Court finds that the second factor supports non-retroactivity in this case.
Third, the Court must examine any inequity imposed by retroactive application. Chevron, 404 U.S. at 107, 92 S. Ct. at 355. This factor often incorporates an analysis of whether plaintiffs justifiably relied on the previous law to their detriment. See, e.g., Smith, 875 F.2d at 1327-28; Anton, 787 F.2d at 1145. Where a plaintiff filed a lawsuit immediately upon learning of the violation, courts have found that there was no reliance on the earlier law, and retroactive application of the new law was therefore appropriate. E.g., Short, 908 F.2d at 1390; Flaherty v. Greenblatt, No. 88 C 9755 (N.D. Ill. Oct. 31, 1990) (Marovich, J.) (applying Short retroactively); In re VMS Securities Litigation, 752 F. Supp. 1373 (N.D. Ill. 1990). In this case, plaintiffs waited a year before filing the lawsuit, during which time their attorney engaged in settlement negotiations and conducted a factual investigation.
In light of the consistent precedent in this circuit mandating application of the Illinois statute of limitations, plaintiffs and other litigants were justified in continuing to rely on that provision. "The adoption of a statute of limitations is no less legislative when done by a court than when done by a legislature, and until the handwriting on the wall is unmistakable plaintiffs should be able to rely on the previous limitations period." Malhotra v. Cotter & Co., 885 F.2d 1305, 1309-10 (7th Cir. 1989). The Court finds that the third requirement for non-retroactivity is satisfied.
Because all three of the Chevron factors are satisfied, the Short holding shall be applied prospectively only and will not govern this lawsuit. See also Kayne v. Painewebber Inc., 703 F. Supp. 1334, 1343-44 (N.D. Ill. 1989) (Duff, J.) (adopting Data Access but refusing to apply it retroactively). Cf. Nesbit v. McNeil, 896 F.2d 380, 384 (9th Cir. 1990) (declining to adopt Data Access but noting that court would be "most reluctant" to apply Data Access retroactively).
2. Application of Illinois Statute of Limitations
Having determined that Short shall not be applied retroactively, the Court must apply the limitations period from the Illinois blue sky law. As noted above, the Illinois statute of limitations was amended effective January 1, 1986. Ordinarily, therefore, the Court would first have to determine whether the statute applies in its former or its amended version. In this case, where fraudulent sales allegedly began in 1982 and continued through 1988, the amended statute clearly applies to certain sales. As will be shown below, however, it is ultimately unnecessary to determine whether the amended statute applies to all of the sales.
"Where a limitation period has not expired prior to amendment, the amendatory act controls all actions and remedies not previously barred." Arnold Engineering, Inc. v. Industrial Comm'n, 72 Ill. 2d 161, 165, 20 Ill. Dec. 573, 575, 380 N.E.2d 782, 784 (1978), quoted in Frank E. Basil, 713 F. Supp. at 1200. Accordingly, determination of which securities sales are governed by the amended blue sky provision necessitates an inquiry into "whether the pre-1986 version of para. 137.13D would have cut off the plaintiffs' '34 Act claims prior to January 1, 1986." Frank E. Basil, 713 F. Supp. at 1200.
Sales after January 1, 1986, are governed by the amended statute. Sales which occurred from 1982 through the end of 1985 are governed by the amended statute if they were alive as of January 1, 1986. Sales which occurred between during 1983, 1984 and 1985 were alive as of January 1, 1986, because the old statute provided a three-year limitations period, and therefore they are now governed by the amended statute. Which statute governs the 1982 sales, however, depends on whether the pre-amendment statute permitted tolling -- a question as to which there is some dispute.
If the pre-amendment statute did not allow tolling, then sales occurring during 1982 were stale as of January 1, 1986, are accordingly governed by the old statute, and are thus untimely. If the pre-amendment statute did allow tolling, then the 1982 sales remained alive as of January 1, 1986, and are now governed by the amended statute. However, because the 1982 sales are beyond the five-year statute of repose contained in the amended statute, they are barred even if they are governed by the new statute, unless the new statute's five-year provision is subject to tolling.
The Court thus proceeds to consider whether the five-year statute of repose in para. 137.13D may be tolled beyond the five years when it is borrowed for § 10(b) actions to which Short does not apply. Initially, it is clear from the language of the statute itself that it may not be extended by state tolling principles. See Davenport, 903 F.2d at 1143 ("under the new statute, regardless of tolling, no action could be brought after five years from the date of sale"). The more difficult question is whether the five-year limit may be extended by federal tolling principles. Courts which have addressed this issue -- with respect to both the Illinois statute in particular and other state statutes of repose -- have reached differing conclusions.
Cases which have found or suggested that borrowed statutes of repose are subject to federal tolling principles include United California Bank v. Salik, 481 F.2d 1012, 1015 (9th Cir. 1973) (suggesting that if statute of repose were borrowed for § 10(b) actions, it could be extended by federal tolling), cert. denied, 414 U.S. 1004, 94 S. Ct. 361, 38 L. Ed. 2d 240 (1973); Pucci, 711 F. Supp. at 928 (amended para. 137.13D can be extended by federal tolling); Geeting v. Prizant, 664 F. Supp. 343, 349-50 (N.D. Ill. 1987) (Aspen, J.) (same); and Kirschner v. Cable/Tel Corp., 576 F. Supp. 234, 240 (E.D. Pa. 1983) (Pennsylvania statute of repose borrowed for § 10(b) actions could be extended by federal tolling). These courts reasoned that a statute of repose is inconsistent with the federal policy that "a statute of limitations shall not run until the fraud is, or should be, discovered." Salik, 481 F.2d at 1015; see also Pucci, 711 F. Supp. at 928; Kirschner, 576 F. Supp. at 240. They viewed a strict cut-off even in the absence of any reason to be aware of the fraud as unduly harsh and as contrary to that federal policy. Kirschner, 576 F. Supp. at 240. Furthermore, a statute of repose would violate the "federal policy favor[ing] the broad availability of § 10(b) to redress securities fraud." Pucci, 711 F. Supp. at 928. In Geeting, the court stated that extending a cause of action beyond the repose period is no different than applying tolling principles to a statute of limitations, for in both instances the policies of federal securities law override state legislature's determinations of appropriate limitations periods. 664 F. Supp. at 349. "Moreover, as between the state's interest in repose and federal concerns in addressing securities fraud, the latter must prevail since it is a federal cause of action brought in federal court which is at issue." Id. at 350.
Cases finding that federal tolling principles cannot extend a borrowed statute of repose include Vosbikian v. Wasserstrom, [1986-1987 Tr. Binder]Fed. Sec. L. Rep. (CCH) P 92,709 at 93,449 (E.D.Pa. 1986) (Pennsylvania statute of repose borrowed for federal securities claims could not be extended by federal tolling), and Morley v. Cohen, 610 F. Supp. 798, 820 (D. Md. 1985) (Maryland statute of repose borrowed for federal securities claims could not be extended by federal tolling).
The Vosbikian court reasoned that to adopt only the statute of limitation, without adopting the statute of repose, would be not to apply the state statute, in contravention of the principle that the state statute must be applied. para. 92,709 at 93,452. In Morley, the court held that the similarity between the state statute of repose and the statute of repose contained in § 13 of the Securities Act of 1933 warranted interpretation of the state statute as containing an absolute outside limit on causes of action. 610 F. Supp. at 820.
In light of the Short decision, of which the courts in Geeting and Pucci did not have the benefit, this Court must agree with the approach articulated in Morley. Short made clear that federal policies concerning limitations of actions provide overriding guidance in § 10(b) actions. Furthermore, in Short the court borrowed a provision -- § 13 of the Securities Act of 1933 -- which itself contained a statute of repose. Thus contrary to the discussions in Geeting and Pucci, federal policy is not inconsistent with a statute of repose; rather, it supports a statute of repose. Guidance is also provided by the decision in Norris, which looked to the policies manifested by the federal statute of repose in deciding to read strictly any state tolling principles which were applied to federal securities claims. 818 F.2d at 1333. Based on the federal policy favoring an absolute outside time limit on private causes of action, the Court concludes that § 137.13(D)'s five-year statute of repose cannot be extended by federal tolling principles.
Because the five-year statute of repose cannot be extended, the 1982 sales are barred even if they are covered by the new statute. As noted above, they are also barred if they are governed by the old statute. It is thus unnecessary to determine which version of the statute governs the 1982 sales. All sales from 1983 forward are governed by the new statute. Because the new statute contains an absolute five-year statute of repose, no claims based on sales prior to May 4, 1985, survive.
The question next arises whether plaintiff has adequately pled a basis for tolling the three-year statute of limitations, thus gaining the advantage of the five-year statute of repose. In Cange v. Stotler and Co., Inc., 826 F.2d 581, 586 n. 3 (7th Cir. 1987), the court held that both federal and state tolling principles apply, but in light of Short, state tolling principles are unlikely to remain applicable in § 10(b) actions. In any event, the Court has already held that plaintiffs have satisfied the requirements for tolling under Illinois law.
Under federal common law, there are two instances where tolling of a statute of limitations is justified. The first occurs where the defendant does nothing to conceal the fraud but plaintiff nonetheless fails to discover it despite the exercise of due diligence. Davenport, 903 F.2d at 1142. The second occurs where the plaintiff fails to discover the fraud, even though the plaintiff may not have exercised due diligence, because the defendant took additional affirmative steps to conceal the fraud. Id. Thus the federal tolling principles require examination of the same factors relevant under Illinois law, but in the disjunctive rather than the conjunctive. In holding that plaintiffs have satisfied the requirements of tolling under state law, therefore, the Court has necessarily held that plaintiffs have adequately pled a basis for tolling under federal law. With respect to fraudulent concealment, it is also worth noting that a plaintiff need only allege a continuing scheme to defraud the plaintiffs. Tomera v. Galt, 511 F.2d 504, 509 (7th Cir. 1975). See also Frank E. Basil, 713 F. Supp. at 1201 (adding that failure to allege how the misrepresentations prevented discovery of inaccuracies was not fatal to complaint at stage of motion to dismiss). In Tomera, the court held that for purposes of surviving a motion to dismiss, the following allegation sufficed to plead such a continuing scheme:
During the period commencing on or about January 1, 1968 and continuing to the present, the defendants herein engaged in a continuing scheme and artifice to defraud investors, including plaintiffs, in connection with the purchase, solicitation, offer and sale of the unregistered securities as aforesaid, in further violation of Section 10-b [10(b)] of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission promulgated thereunder.
511 F.2d at 509-10. See also Suslick, 741 F.2d at 1004. In this case, plaintiffs have pled a basis for tolling by alleging that defendants engaged in a series of misrepresentations which continued through February of 1988 and which caused plaintiffs to be unable to discover the fraud until May of 1989. (Complaint paras. 14, 19.) Fraudulent concealment tolls the limitations period until the plaintiff actually discovers the fraud. Suslick, 741 F.2d at 1004; Tomera, 511 F.2d at 510. Because plaintiffs filed their complaint one year after the discovery, the complaint is timely with respect to all sales which occurred during the five years prior to the complaint -- i.e., all sales occurring since May 4, 1985.
C. Count VI
Defendants also contend that portions of plaintiffs' claim under the Illinois Securities Act are barred by the statute of limitations in para. 137.13(D). Having emerged from the labyrinthine excursion through the limitations issues arising in connection with the federal securities claim, the Court's task with respect to the state claim is simple. Because the § 10(b) analysis depended on the state limitations period, the outcome is the same; plaintiff's claims are timely only as to sales which occurred after May 4, 1985. Accordingly, with respect to Count VI, the statute of limitations provides an alternative ground for dismissal of claims arising from sales occurring prior to that date.
For the reasons stated above, Count VI is dismissed. All claims arising from sales occurring prior to May 4, 1985 are also dismissed. Plaintiff is ordered to provide a more definite statement concerning the allegations as to each defendant. In all other respects, defendants' motion to dismiss is denied.