Farr v. DESIGNER PHOSPHATE AND PREMIX INTERN.

804 F. Supp. 1190

Sophia FARR, et al., Plaintiffs, v. DESIGNER PHOSPHATE AND PREMIX INTERNATIONAL, INC., et al., Defendants, v. Lloyd FARR, Third Party Defendant.

No. 8:cv91-666.

United States District Court, D. Nebraska.

October 9, 1992.

Stanley Parker, Alan V. Johnson, Thomas J. Wilder, Sloan, Listrom, Eisenforth, Sloan & Glassman, Topeka, Kan., and Dale M. Shotkoski, Shotkoski & Mellor, Central City, Neb., for plaintiffs.

Darren R. Carlson, Walentine, O'Toole, McQuillan & Gordon, Omaha, Neb., for defendants Designer Phosphate and Premix Intern., Inc., Tim Tobiason, Emil Tobiason & Wayne Loeske.

William J. Crampton, Joe Rebein, Shook, Hardy & Bacon, Kansas City, Mo., for defendants Terry Vavrina, Kenneth Bach, Daniel Kellner, James Kellner, Thomas Kaiser and Lavine Kumm.

Rudolph H. Beese, Richmond M. Enochs, Robert A. Mintz, Overland Park, Kan., for defendant Margaret Allphin, personal representative of the estate of Charles W. Allphin, III.

MEMORANDUM AND ORDER

KOPF, District Judge.

Some of the defendants (Kumm, Bach, Kaiser, Kellner, and Vavrina) (sometimes referred to as the "moving defendants") have moved (Vol. 5, filing 43) to dismiss, or, in the alternative, for summary judgment, contending that statutes of limitations bar the assertions in count II and count IV of the second amended complaint (Vol. 5, filing 20). I shall deny the motion as it regards count II, but grant the motion as it regards count IV.¹

I. Procedural and Factual Background

A.

This case was started in the United States District Court for the District of Kansas when Sophia Farr, and others, filed a complaint against Tim Tobiason (Tobiason) (Vol. 1, filing 1)² and others on October 5, 1990. The complaint did not name the moving defendants as parties.

Among other things, the complaint alleged that the defendants made certain misrepresentations of material fact to induce plaintiffs to purchase stock in defendant Designer Phosphate and Premix International, Inc., (DPPI), a Nebraska corporation. The complaint was predicated upon alleged violations of the Securities Act of 1933, 15 U.S.C. § 77a et seq., the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., the Kansas Securities Act, K.S.A. § 17-1252 et seq., common law fraud, negligent misrepresentation, negligence and breach of fiduciary duty.

1.

On May 1, 1991, pursuant to permission granted by the Kansas court, plaintiffs filed their first amended complaint (Vol. 1, filing 99). In this complaint plaintiffs named the moving defendants and others as defendants. The moving defendants were served with process on or about May 1, 1991 (Vol. 2, filing 107, ¶¶ 1 and 2). The moving defendants were said to be responsible for plaintiffs' damage in some, but not all, of the counts of the first amended complaint.

In counts I and II of the first amended complaint plaintiffs asserted theories of recovery based upon alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. These theories of recovery were factually based, in part, upon alleged misstatements of material fact and omissions of material fact. The moving defendants were not named as defendants in counts I or II.

The moving defendants were said to have liability in count III as officers and directors of DPPI under the Kansas Securities Act. This liability under the Kansas Securities Act arose because the moving defendants were allegedly responsible for the sale of the securities, aided in the sales, and were aware or should have been aware of untrue statements and omissions of fact that also constituted a part of the basis for plaintiffs' assertions in counts I and II that the federal securities laws had been violated.

In count IV the moving defendants, and others, were named as defendants in a theory of recovery entitled "common law fraud". This theory of recovery was based upon the same untrue statements and omissions which formed a portion of the factual basis for counts I, II, and III.

In count IV the moving defendants, and others, were named as defendants in a theory of recovery entitled "common law negligent misrepresentation". This theory of recovery was based upon the same untrue statements and omissions which formed a portion of the factual basis for counts I, II, III and IV.

In count VI the moving defendants, and others, were named as defendants in a theory of recovery entitled "common law breach of fiduciary duty". This theory of recovery was based, in part, upon the same untrue statements and omissions which formed a portion of the factual basis for counts I, II, III, IV and V.

In count VII the moving defendants, and others, were named as defendants in a theory of recovery entitled "common law negligence". This theory of recovery was based, in part, upon the same untrue statements and omissions which formed a portion of the factual basis for counts I, II, III, IV, V and VI.

2.

On September 23, 1991, the plaintiffs moved (Vol. 4, filing 224) to amend their complaint to, among other things, state a cause of action against "several of the defendants" for secondary liability under the Securities Act of 1934, 15 U.S.C. § 78a, et seq., to add a cause of action under the Nebraska Securities Act, Neb.Rev.Stat. § 8-1101, et seq., and to clarify the Kansas court's jurisdiction over the defendants.

On November 12, 1991, the Kansas District Court, without addressing the motion to amend, granted the moving defendants' motion to dismiss (Vol. 2, filing 136) for the reason that the court lacked personal jurisdiction over them under the Kansas "long arm" statute since the moving defendants were Nebraska residents and they were not alleged to have committed affirmative acts in Kansas (Vol. 4, filing 247). In their motion to dismiss the moving defendants (Vol. 2, filing 136) had alternatively requested that the Kansas court transfer the case to the District of Nebraska under 28 U.S.C. § 1404(a). The Kansas court did not address this alternative request for transfer apparently because the dismissal made the request moot.

3.

On November 13, 1991, the Kansas court, pursuant to 28 U.S.C. § 1404(a), transferred this case to the District of Nebraska (Vol. 4, filing 248). 777 F.Supp. 895. The Kansas court acted on the motion to transfer (Vol. 2, filing 132) filed by the only remaining defendants, DPPI and Tobiason (Vol. 4, filing 248 at 2), as all other defendants had been dismissed for lack of personal jurisdiction. The Kansas court did not address the September 23, 1991 motion to amend the complaint described above (Vol. 4, filing 224).

B.

1.

In due course this case was docketed with the clerk's office in the United States District Court for the District of Nebraska. It came to my³ attention that plaintiff's motion to amend the complaint was pending. I held a status conference regarding this case on February 19, 1992. On February 20, 1992, I granted the motion to amend (Vol. 4, filing 224) which had been pending in the Kansas court, and ordered plaintiff to file a new amended complaint (Vol. 5, filing 16). I did not determine whether or not the amended complaint would "relate back", and that omission was intentional on my part.

2.

Plaintiffs filed their second amended complaint on February 28, 1992 (Vol. 5, filing 20). Service was obtained within the time provided by Rule 4(j) (Vol. 5, filings 33-41). In the second amended complaint plaintiffs asserted theories of recovery against the moving defendants in counts II and IV.

In count II of the second amended complaint, plaintiffs allege that the moving defendants aided and abetted a primary violation of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, specifically Section 10(b) and Rule 10b-5, when they knew or recklessly failed to know of certain misstatements and omissions of material fact which Tobiason and others made to plaintiffs in connection with the sale of the securities.

The misstatements and omissions of material fact in count II of the second amended complaint (Vol. 5, filing 20, ¶¶ 41 and 45 (incorporating by reference ¶¶ 30, 31, 32, 33 and 35)) regarding the Securities Exchange Act of 1934 claims, were nearly identical to the misstatements and omissions of material fact alleged in count II of the first amended complaint filed May 1, 1991 (Vol. 1, filing 99, ¶ 42 (incorporating by reference ¶¶ 29, 30, 31, 32, and 34)).⁴

In count IV of the second amended complaint, predicated upon the Nebraska Securities Act, Neb.Rev.Stat. § 8-1101 et seq., the plaintiffs allege that the securities were offered by means of untrue statements of facts and omissions of material facts, and that the moving defendants were liable to plaintiffs pursuant to Neb.Rev. Stat. § 8-1118(2) because the moving defendants were said to have aided the primary violations.

Once again, the untrue statements of fact and omissions of material fact in count IV of the second amended complaint regarding the Nebraska Securities Act claims (Vol. 5, filing 20, ¶¶ 57 and 60 (incorporating by reference ¶¶ 30, 31, 32, 33 and 35)) were nearly identical to the misstatements and omissions alleged under the Kansas Act claim in count III of the first amended complaint (Vol. 1, filing 99, ¶ 50 (incorporating by reference ¶¶ 29, 30, 31, 32, and 34)).

C.

On December 9, 1991, plaintiffs filed suit in the District Court of Merrick County, Nebraska. The suit named these moving defendants, and others, as defendants. It is uncontroverted that the "gist" of the federal court action and the Nebraska state court action is the same. Compare Brief in Support of Defendants' Motion to Dismiss or Alternative Motion for Summary Judgment (Defendants' Brief), at ¶ I-4, page 3, with Plaintiffs' Brief in Opposition to Defendants' Motion to Dismiss or Alternatively for Summary Judgment (Plaintiffs' Brief), at ¶ A-4, page 3.

D.

It is uncontroverted that the stock at issue was purchased at various times between 1985 and April of 1989. Compare Defendants' Brief, at ¶ I-5, page 3, wi...