The opinion of the court was delivered by: Jeanne E. Scott, U.S. District Judge
This matter comes before the Court on Defendants Flora B. Kerasotes, Marjorie M. Kerasotes, Harvey B. Stephens, and Marshall N. Selkirk's (Individual Defendants) Motion for Summary Judgment (d/e 30), and Defendant, George G. Kerasotes Corporation's (GKC) Motion for Summary Judgment (d/e 33) (The Individual Defendants and GKC are collectively referred to as the Moving Defendants).*fn1 Plaintiff Michael Patrick Kerasotes alleges in the Complaint that he was forced to relinquish his 1900 shares of GKC stock in 1995 for an amount that was far less than the market value of the shares. The Individual Defendants were GKC's officers and directors at the time of the transaction. First Amended Complaint (d/e 22), ¶¶ 3-6. Michael Kerasotes asserts claims of breach of fiduciary duty, fraud, and punitive damages against the Moving Defendants in connection with the 1995 transaction. For the reasons set forth below, his claims against the Moving Defendants are barred by the statute of limitations in the Illinois Securities Law (Act). 815 ILCS 5/13D.
Michael Kerasotes asks the Court to delay ruling on the Motions for Summary Judgment to give him time to conduct discovery. Plaintiff's Motion for Refusal for Application of Judgment or, Alternatively, for Additional Discovery, Pursuant to Federal Rule of Civil Procedure 56(f) (d/e 37). The Court denies this request because the statute of limitations clearly bars his claims against these Defendants. There is no need for any discovery. Michael Kerasotes further moves to strike certain evidence presented in support of the Motion for Summary Judgment. Plaintiff's Motion to Strike Certain Evidence in Support of Defendants' Motions for Summary Judgment (d/e 40). This request is moot because the objectionable evidence does not affect the Court's ruling. For purposes of this Opinion, the Court will not consider the evidence to which Michael Kerasotes objects. The facts, viewed in a light most favorable to Michael Kerasotes, are set forth below.
In April 1995, Michael Kerasotes owned 1900 shares of GKC stock. Defendant Harvey Stephens sent Michael Kerasotes a letter, dated April 11, 1995 (Letter), which stated that the GKC shares were worth $266,000.00. Plaintiff's Opposition to Defendants' Motions for Summary Judgment (d/e 41) (Plaintiff's Opposition), Exhibit B, Letter Dated April 11, 1995. This representation came from a document entitled, "George Kerasotes Corporation Stock Valuation Michael Kerasotes." Id. Exhibit C, Stock Valuation. This document stated that GKC was worth $7,850,000.00 as of December 31, 1993, and Michael Kerasotes' 1900 shares were worth $266,000.00.
In the Letter, the Individual Defendants, as officers and directors of GKC, offered to redeem Michael Kerasotes' 1900 shares for $266,000.00. The Letter offered to pay the purchase price, plus seven percent interest, over time in bi-monthly installments of $1,000.00. The purchase price would also be reduced by $26,000.00 to satisfy a debt that Michael Kerasotes owed to his late father George Kerasotes. Michael Kerasotes was told that should he die before the payments were completed, GKC would have no obligation to pay any remaining proceeds to his estate. Affidavit of Michael Patrick Kerasotes (d/e 43), ¶ 4; Letter, p. 1.
On or about May 23, 1995, Michael Kerasotes was forced to relinquish his 1900 shares of stock in GKC. First Amended Complaint, ¶¶ 12-13; Affidavit of Michael Patrick Kerasotes, ¶ 3. As part of the transaction, Michael Kerasotes signed a document entitled Stock Redemption Agreement. He did so without being represented by counsel at the time. Affidavit of Michael Patrick Kerasotes, ¶ 4.
In 1999, the Defendants again represented to Michael Kerasotes that GKC was worth $7,850,000.00. Id. at ¶¶ 3, 5. That representation was materially false. In 1998, GKC's value was estimated to be $49,262,962.00. Plaintiff's Opposition, Exhibit A, Ownership Analysis. Michael Kerasotes was not aware of the valuation stated for GKC in the Ownership Analysis until September 24, 2003, when he received a copy of it for discovery in a probate matter. Amended Complaint, ¶ 24; Affidavit of David Patrick Hall, (d/e 42), ¶¶ 2-4. Until that time, Michael Kerasotes was unaware of the true value of GKC. Affidavit of Michael Patrick Kerasotes, ¶ 2.
Michael Kerasotes then brought this action against the Individual Defendants for breach of fiduciary duty as officers and directors of GKC (Count I); fraud against the Moving Defendants (Count II); punitive damages against the Moving Defendants (Count III); professional negligence against Defendant Thomas Lamont who was Michael Kerasotes' attorney in 1999 (Count IV); and breach of contract against Lamont (Count V). The Counts against Lamont are not before the Court at this time.
The Moving Defendants seek summary judgment on several grounds. Among them, they argue that Michael Kerasotes' claims against them are barred by the statue of limitations in the Act. 815 ILCS 5/13D. At summary judgment, the Moving Defendants must present evidence that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). The Court must consider the evidence presented in the light most favorable to Michael Kerasotes. Any doubt as to the existence of a genuine issue for trial is resolved against the Moving Defendants. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Once the Moving Defendants have met their burden, Michael Kerasotes must present evidence to show that issues of fact remain with respect to an issue essential to his case, and on which he will bear the burden of proof at trial. Celotex, 477 U.S. at 322; Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In this case, the Act's statute of limitations bars the actions as a matter of law.
The statute of limitations states, in part, that: 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 3 years from the date of sale; 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 of the action, the 3 year period provided herein shall begin to run upon the earlier of:
(2) the date upon which the party bringing the 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 2 years beyond the expiration of the 3 year period otherwise applicable. 815 ILCS 5/13D. As explained below, § 13G of the Act provided Michael Kerasotes with a remedy for the Moving Defendants' claimed wrongful conduct in the 1995 transaction. Michael Kerasotes, thus, was required under § 13D to bring this action within three years of the date of the transaction in 1995, or when he had knowledge of the facts that would have put him on notice of his claim, but in no event, more than two years beyond the initial three-year period, or no more than five years from the 1995 transaction. Since Michael Kerasotes did not file this action until 2005, the action is barred.
Section 13G of the Act states, in part: Whenever any person has engaged . . . in any act or practice constituting a violation of this Act, any party in interest may bring an action in circuit court . . . . Upon a proper showing, the court shall grant . . . rescission of any sales or purchases of securities determined to be unlawful under this Act, and may assess costs of the proceeding against the defendant. 815 ILCS 5/13G. The alleged forced ...