(a) conducted the business . . . for their own personal gain; and
(b) failed to disclose to plaintiffs . . . the true financial condition of Fruit of the Loom. . . .
The first allegation is insufficient as a matter of law because there are simply no factual allegations whatsoever to support such a charge. The second paragraph above is legally insufficient because plaintiffs make no allegations that any duty was breached after they became shareholders. The allegations in the Complaint state that any misrepresentations or omissions came before plaintiffs became shareholders and, thus, before defendants owed them a fiduciary duty. Therefore, Count Nine fails to state a claim upon which relief can be granted and is dismissed.
J. Rule 9(b) Requirements
As well as recommending dismissal for failure to allege material omissions or untrue statements, Magistrate Judge Rosemond also found that the allegations of Counts One, Two, Four, Five and Seven failed to meet the particularity requirements of FED. R. CIV. P. 9(b). He stated that the "fraud counts set forth the time, place, particular contents of the false representations and the consequences of the misrepresentations. However, the Complaint does not set forth with particularity the identity of the party making the misrepresentations." R&R, at p. 30. While we agree in part and disagree in part with the reasoning, we do not accept the conclusions of the R&R.
The purpose of Rule 9(b) is to apprise the party alleged to have committed fraud of the charges against him or her and to permit an adequate response. See Towers Financial Corp. v. Solomon, 126 F.R.D. 531, 535 (N.D. Ill. 1989); Elliott Graphics, Inc. v. Stein, 660 F. Supp. 378, 380 (N.D. Ill. 1987); Ross v. A.H. Robins Co., 607 F.2d 545, 557 (2d Cir. 1979). The allegations in the Complaint meet this requirement.
The Complaint does not impermissibly "lump" the defendants together. Plaintiffs need not allege facts which are in the exclusive knowledge or control of the defendants. In re United Telecommunications, Inc. Sec. Litig., 1992 U.S. Dist. LEXIS 11226, 1992 WL 176430, slip op. at *2 (D. Kan. 1992) (recognizing exception to strict Rule 9(b) pleading requirements where "a group of defendants is responsible for a document or statement containing fraudulent misrepresentations"); In re Sahlen & Assocs., Inc. Sec. Litig., 773 F. Supp. 342, 362 (S.D. Fla. 1991). Here, the plaintiffs have no way of knowing which defendant made which misrepresentations or omitted which material facts. It is sufficient here that, as the Magistrate Judge found, the allegations set forth the time, place, contents and consequences of any misrepresentations. The court and the defendants are fully able to adequately respond to these charges. Therefore, the fraud counts will not be dismissed for "lumping together" the defendants.
The Magistrate Judge found it significant, for example, that "many of the allegations directed against Arthur Andersen relate to a time period during which Andersen was no longer the auditor for Fruit of the Loom." R&R, at p. 30. This is true. It is not, however, a reason to dismiss the entire Complaint. The Complaint does allege, inter alia, that
In addition to its participation in and approval of the above enumerated actions, defendant Arthur Andersen, Fruit of the Loom's independent auditors, certified the consolidated financial statements of Fruit of the Loom without qualification and allowed its qualifications to be incorporated in Fruit of the Loom's 10-K Report for 1986 and the Registration Statement and Prospectus Fruit of the Loom filed in connection with the 1987 public offering.
Complaint, at p. 19, P 36(a). This paragraph indicates that plaintiffs have alleged specific facts against AA&Co. and other defendants. The fact that plaintiffs also allege that AA&Co. participated in other acts of other defendants when they were no longer affiliated with Fruit of the Loom is not dispositive. The time, place, contents and consequences of the alleged fraudulent statements and omissions have been alleged. They are thus able to answer the pleadings which is what is important. If the defendants could not identify the statements made, or the time or place they were made a different result may be warranted. Here, however, the allegations of plaintiffs' Complaint meet the requirements of Rule 9(b).
Based on the foregoing, we hold that the allegations of paragraphs 34(c), (d), (e), (f) and 35(a) and (b) fail to allege material misrepresentations or omissions of material fact and, as such, order these allegations stricken from plaintiffs' Complaint. Therefore, all counts in the Complaint are dismissed to the extent the allegations relied on these paragraphs. Furthermore, Count III is dismissed as to the accounting firm defendants, Fruit of the Loom and its Officer and Director defendants (except for Leon Black as agent of Drexel Burnham). Counts VI, VII, VIII and IX are dismissed for failure to state a claim which relief can be granted.
Date: JAN 29 1993
JAMES H. ALESIA
United States District Judge