The opinion of the court was delivered by: BUCKLO
The plaintiff, Ihor Kleban, filed suit against the defendant, John Terzakis, alleging violation of the Securities Exchange Act of 1934 ("Rule 10b-5 "), 15 U.S.C. § 78j, 17 C.F.R. § 240.10b-5, the Illinois Securities Law of 1953 ("Illinois Securities Law "), 815 ILCS 5/1 et seq., and common law fraud. Mr. Terzakis moves for summary judgment. For the following reasons, the motion is granted.
Mr. Kleban invested in a limited partnership, Southwest Double Drive-Thru, L.P. ("Southwest Partnership"), which was formed to own and operate Checkers restaurants. Mr. Kleban's investment lost its value and he blames this loss on the fraud of Mr. Terzakis.
In 1990, Thomas Singer formed Chicago Double-Drive Thru, Inc. ("CDDT"), to develop Checkers restaurants in the northern Chicago area. The Southwest Partnership was formed to help facilitate the development of Checkers restaurants. The Southwest Partnership had a General Partner and several limited partners, including Mr. Kleban.
Mr. Kleban made his first investment in the Southwest Partnership in late November, 1991. He again met with Mr. Terzakis in January, 1992. Mr. Terzakis told Mr. Kleban that "he felt [the Bellwood Checkers restaurant] would do two million based on traffic flow and the density of the population and a lot of other demographics." (Kleban Dep. at 223). Mr. Kleban also states that Mr. Terzakis represented that the limited partners could expect a thirty percent yearly return on their investment. (Kleban Dep. at 223-24). Mr. Terzakis says the thirty percent yearly return was only discussed regarding the Checkers restaurant in Bellwood.
It is undisputed that Mr. Terzakis told Mr. Kleban that there might be additional opportunities for investors to loan funds to CDDT and that a fourth Checkers restaurant to be located at a busy intersection in Elmhurst was being negotiated. (Kleban Dep. at 224). Mr. Terzakis also informed Mr. Kleban that he was working with the Illinois Department of Transportation to get driveways for the Oak Lawn Checkers to conform to the PPM. Mr. Terzakis told Mr. Kleban that he expected the Bellwood Checkers to cost $ 575,000 and that restaurant costs were under control. Mr. Terzakis did not inform Mr. Kleban that he had received a one-time property management fee of one hundred dollars for services rendered at possible restaurant sites.
On February 1, 1992, Mr. Kleban invested an additional $ 150,000 in Southwest Partnership. Mr. Kleban also invested funds in Southwest Partnership in May, 1992, and August, 1992. In July, 1992, Mr. Kleban loaned $ 200,000 to CDDT. In September, 1993, Mr. Kleban renewed the $ 200,000 loan and extended an additional $ 100,000 loan to CDDT. Ultimately, a proposed buyout by Checkers of the restaurants allocated to the Southwest Partnership failed and the investment lost money. This suit followed.
Mr. Kleban filed a motion to strike all or portions of Mr. Terzakis' Local Rule 12(M) Statement. Mr. Kleban argues that all of Mr. Terzakis' Rule 12(M) paragraphs that are not cited in Mr. Terzakis' summary judgment brief are necessarily irrelevant and must be stricken. A requirement that each Rule 12(M) paragraph be cited in a summary judgment brief is not found in the text of Local Rule 12(M) and Mr. Kleban has not cited any law that indicates such a requirement exists. To the extent portions of Mr. Terzakis' Rule 12(M) statement are irrelevant, they have been disregarded by the court.
Mr. Kleban also argues that five of Mr. Terzakis' Rule 12(M) paragraphs and three of his appendices contain inadmissible hearsay. Mr. Terzakis has withdrawn the five paragraphs and two of the appendices Mr. Kleban found objectionable. The remaining appendix, "I," consists of two letters and a fax cover sheet. They are offered for the truth of the matter asserted and Mr. Terzakis has not argued that they fall within an exception to the hearsay rule. Only evidence admissible at trial may be considered in a summary judgment proceeding. Whitted v. General Motors Corp., 58 F.3d 1200, 1204 (7th Cir. 1995). Thus, appendix I is stricken.
Mr. Kleban also argues that certain Rule 12(M) paragraphs contain material that are unsupported by the personal knowledge of the declarant. Having read the disputed paragraphs and underlying support, only paragraph 63 is deficient. Jennifer LaSota's affidavit does not indicate she knew of all of Mr. Terzakis' business entities and thus, she does not have the proper foundation to testify regarding whether "any" of Mr. Terzakis' entities provided construction goods or services to the Southwest Partnership. The other cited materials do not support paragraph 63 either.
Finally, Mr. Kleban argues that any reference to a memo written from Mr. Kleban to his former counsel, John Galarnyk, should be stricken as violating the attorney-client privilege. The memo was written to Mr. Galarnyk to introduce him to Mr. Kleban's dealings and investments in Checkers restaurants and the Southwest Partnership. The memo was turned over to Mr. Terzakis during discovery and was used at Mr. Kleban's deposition. The attorney-client privilege was not raised until Mr. Kleban's response to summary judgment. Mr. Kleban has presented no evidence that the disclosure of the document was inadvertent. See Harmony Gold U.S.A., Inc. v. FASA Corp., 169 F.R.D. 113, 116 (N.D. Ill. 1996)("The party claiming inadvertent disclosure has the burden of proving that the disclosure was truly inadvertent."). Additionally, Mr. Kleban did not object to the use of the memo during his deposition, at which time he undisputably became aware the document had been produced to Mr. Terzakis. Further, Mr. Terzakis has relied on the document in his summary judgment motion. It is simply too late in the day to claim the attorney-client privilege for Mr. Kleban's memo.
Federal Securities Claims
To establish liability under Rule 10b-5, Mr. Kleban must demonstrate ...