The opinion of the court was delivered by: ASPEN
The named plaintiff, Beverly Otto, brings this class action against Variable Annuity Life Insurance Company and other affiliated companies (collectively referred to as "VALIC"), seeking to recover for alleged violations of, among other things, § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In light of the recent Supreme Court decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 111 S. Ct. 2773, 115 L. Ed. 2d 321 (1991), VALIC renews its motion for summary judgment on the ground that Otto's claims under the 1934 Act are time-barred. In the event that this court grants VALlC's motion, class members Frank DeBoer and Dwain Dedrich have petitioned for leave to intervene as named plaintiffs. For the reasons as set forth below, VALIC's motion for summary judgment is granted in part and denied in part.
DeBoer and Dedrich's petition for intervention in the class action as a matter of right is denied.
I. Summary Judgment Standard
Under the Federal Rules of Civil Procedure, summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). This standard places the initial burden on the moving party to identify "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986) (quoting Rule 56(c)). Once the moving party has done this, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(c). In deciding a motion for summary judgment, the court must read all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986); Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991).
Additionally, Otto asserts that VALIC failed to disclose the method by which a participant in the fixed annuity could potentially earn a higher rate of interest. Otto contends that a "transfer practice" enabled fixed annuity participants to transfer funds to a variable annuity for 120 day, and then transfer the funds back to the fixed annuity. According to Otto, this nondisclosure constitutes a violation of the Securities Act of 1934, breach of contract and common-law fraud.
On January 19, 1990, we denied VALIC's second motion for summary judgment based in part on then-prevailing Seventh Circuit precedent that the three-year limitations period imposed by Ill. Rev. Stat. ch. 121 1/2, para. 37.130 (1977) applied to § 10(b) cases brought in a federal forum in Illinois. Otto v. Variable Annuity Life Ins. Co., 730 F. Supp. 145, 148 (N.D. Ill. 1990). Further, we indicated that the doctrine of equitable tolling potentially delayed the point at which the limitations period began to run.
Once again, VALIC moves this court to enter summary judgment on the ground that Otto's claims are time-barred. In light of the recent Supreme Court decision in Lampf, reconsideration of VALIC's motion is appropriate.
A. VALIC's Motion for Summary Judgment
In Lampf, the Supreme Court held that actions brought pursuant to § 10(b) of the 1934 Act and Rule 10b-5 are governed by a 1-and-3-year limitations period. Lampf, 111 S. Ct. at 2782. Thus, a plaintiff must file suit within one year after the discovery of the facts constituting the violation, and, in any case, within three years after such violation. Moreover, the Supreme Court explicitly refused to apply the doctrine of equitable tolling, concluding that the doctrine was "fundamentally inconsistent with the 1-and-3-year structure." Id.
At the onset, we observe that Otto does not contest the retroactive application of Lampf to the present case. Significantly, the Court in Lampf applied the 1-and-3-year limitation retroactively to the litigation in which the new rule was announced, despite the fact that the plaintiff had justifiably relied on Oregon's 2-year statute under state-borrowing principles. Lampf, 111 S. Ct. at 2782-83. Although this retroactive application was undertaken without any discussion of the retroactivity issue, and was effected over a dissenting opinion that noted that the Court had previously declined to apply new statute of limitations rules to the litigation in which the new rule was announced, id. at 2785-87 (O'Conner, J., dissenting), subsequent Supreme Court pronouncements make clear that Lampf must be give retroactive application. On the same day it issued the Lampf decision, the Court recognized the fallacy in a refusal to apply retroactively to all civil cases pending on direct review a rule of federal law previously applied retroactively in the case announcing the rule. See James B. Beam Distilling Co. v. Georgia, 111 S. Ct. 2439, 115 L. Ed. 2d 481 (1991). Moreover, the Court in Northwest Savings Bank, PaSA v. Welch, 111 S. Ct. 2882, 115 L. Ed. 2d 1048 (1991), specifically confirmed the retroactive application of to all pending actions. In that case, the plaintiffs filed suit under § 10(b), alleging material misrepresentations and omissions in connection with purchases of interests in an oil and gas drilling venture. The district court dismissed the action, applying the 1-and-3-year federal limitations rule. Welch v. Cadre Capital, 735 F. Supp. 467 (D. Conn. 1989). The Second Circuit reversed on appeal, holding that its decision in Ceres Partners v. Gel Associates, 918 F.2d 349 (2d Cir. 1990) (adopting the 1-and-3-year federal limitations rule), should not be applied retroactively. Welch v. Cadre Capital, 923 F.2d 989, 995 (2d Cir. 1991). However, on June 28, 1991, the Supreme Court vacated the judgment of the Second Circuit and remanded the case for further consideration in light of James Beam and Lampf. Northwest Savings, 111 S. Ct. at 2882.
Seizing upon the three-year limitations period adopted in Lampf, VALIC argues that all claimed violations based on purchases that occurred prior to August 2, 1979 are barred. We agree. However, a question remains as to whether Otto's investment activity gave rise to a violation after August 2, 1979. VALIC, citing Klein v. Goetzmann, 770 F. Supp. 78 (N.D.N.Y. 1991), contends that all purchases, whether or not effected more than three year before the suit was filed, are barred because they were allegedly induced by misrepresentations made before August 2, 1979. In Klein, the court concluded that the claims of class members who purchased stock not more than three years before the filing of the suit were nonetheless time-barred. Id., slip op. at 9 n.8. Although not explicit, the court apparently reasoned that the fraudulent activity, and not the subsequent purchases, constitutes the date of the violation for statute of limitations purposes. This rationale finds roots in Lampf : "Litigation instituted pursuant to § 10(b) and Rule 10b-5 therefore must be commenced . . . ...