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Cook v. Avien, Inc.

United States Court of Appeals for the First Circuit

March 28, 1978

Nos. 77-1106, 77-1107

Opinion

 [*689]  LAY, Circuit Judge

These appeals arise from claims brought under the Securities Act of 1933, 2 the Securities Exchange Act of 1934, 3 and Securities Exchange Commission Rule 10b-5, 4 to recover the purchase price of certain securities. In September of 1968 Benjamin A. Cook, Rachel C.  [**2]  Lowe, Gerald J. Eydenberg, Donald A. Conte, Peter A. Consiglio, and Advance Coatings Company purchased Avien, Incorporated six percent convertible subordinated notes. Avien was declared a bankrupt in 1976.

The district court entered judgments for the individual plaintiffs under Rule 10b-5  [*690]  against James F. Pritchard, a stock broker and intermediary on the note sales, based on alleged fraudulent, material omissions made in connection with the sale of the notes. Pritchard has appealed these judgments asserting various defenses including the statute of limitations. The purchasers of the notes have appealed the dismissal of their claims against Leo A. Weiss - president, executive director and the chief operating officer of Avien - Avien's Board of Directors - Pierre A. Alsina, Roy E. Marquardt, Robert A. Weaver, Jr., Robert A. Wiener, and Leo A. Weiss - and [**3]  Robert Weaver, Jr. & Associates, Incorporated, a consulting firm. The plaintiffs assert that the district court erred in denying recovery against all of the defendants under §§ 12(1), 5 12(2), 6 and 17, 7 of the 1933 Act and against Weiss and Avien's Board of Directors under § 10(b) of the 1934 Act. 8

We find that, although violations may have been made out against Weiss and Pritchard under §§ 12(1) and 12(2), the one year statute of limitations in § 13 of the 1933 Act 9 bars plaintiffs' claims against both defendants. We also affirm the trial court's finding that only Pritchard's actions constituted violations of § 10(b) and Rule 10b-5; we nonetheless vacate the judgment against Pritchard and remand for further proceedings on the sole question of whether the statute of limitations had run on the § 10(b)  [**4]  claims against Pritchard. 10

Facts.

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573 F.2d 685 *; 1978 U.S. App. LEXIS 11978 **; Fed. Sec. L. Rep. (CCH) P96,366

BENJAMIN A. COOK, ET AL., Plaintiffs-Appellees, v. AVIEN, INC., ET AL., Defendants-Appellees, JAMES F. PRITCHARD, Defendant-Appellant. BENJAMIN A. COOK, ET AL., Plaintiffs-Appellants, v. AVIEN, INC., ET AL., Defendants-Appellees

Prior History:  [**1]   Appeal from the United States District Court for the District of Massachusetts [HON. WALTER JAY SKINNER, U.S. District Judge].

CORE TERMS

statute of limitations, purchasers, reasonable diligence, omissions, district court, brokers, investor, stock, limitations period, trial court, one year, fraudulent, memorandum, misleading, reckless, cause of action, material fact, registration, seller

Governments, Legislation, Statute of Limitations, Time Limitations, Securities Law, Blue Sky Laws, Offers & Sales, General Overview, Exemptions & Exclusions, Excluded Transactions, Exempt Securities, Registration of Securities, Exemptions, Exempt Classes of Securities, Exempt Transactions, Initial Offerings, False Statements, Securities Exchange Act of 1934 Actions, Implied Private Rights of Action, Deceptive & Manipulative Devices, Torts, Standards of Care, Reasonable Care, Recognition of Risk, Scope of Provisions, Definitions, Securities Act Actions, Civil Liability, Criminal Law & Procedure, Fraud, Securities Fraud, Elements, Postoffering & Secondary Distributions, Recordkeeping & Reporting Requirements, Civil Liability Considerations, Initial Offerings, Civil Procedure, Federal & State Interrelationships, Federal Common Law, Preliminary Considerations, Tolling of Statute of Limitations, Fraud, Tolling, Fraudulent Concealment, Pleadings & Proof, Evidence, Burdens of Proof, Trials, Bench Trials, Appeals, Standards of Review, Fraudulent Interstate Transactions, Express Liabilities, Misleading Statements, Insurance Law, Claim, Contract & Practice Issues, Appraisals