Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_09-cv-08162/USCOURTS-azd-3_09-cv-08162-13/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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 The Underwriters are Robert W. Baird & Co. Inc., Southwest Securities Inc., and

Edward D. Jones & Co., L.P.

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

In re: Allstate Life Insurance Company

Litigation

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Lead Case No. CV-09-8162-PCT-GMS

Consolidated with:

Case No. CV-09-8174-PCT-GMS

ORDER

Pending before the Court is the Underwriters’1

 request to discover certain

communications between Allstate Life Insurance Co. and Wells Fargo Bank, N.A. and their

respective counsel. For the reasons discussed below, the Court will allow the Underwriters

to conduct the requested discovery, subject to certain limitations.

Allstate and Wells Fargo have asserted a claim against several defendants, including

the Underwriters, pursuant to the Illinois Securities Law of 1953. They allege that these

defendants violated the Illinois Securities Law by making statements in connection with a

bond offering which omitted critical demographic information and were misleading. Any sale

of securities that violates the Illinois Securities Law of 1953 is voidable at the election of the

purchaser. See 815 Ill. Comp. Stat. § 5/13(A). Should the purchaser make this election,

Case 3:09-cv-08162-GMS Document 538 Filed 08/08/12 Page 1 of 2
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however, he must do so “within 6 months after the purchaser shall have knowledge that the

sale of the securities to him or her is voidable.” 815 Ill. Comp. Stat. § 5/13(B). What a

party’s counsel knows “is imputed to his client.” Ansbro v. Southeast Energy Group, Ltd.,

658 F. Supp. 566, 572 (N.D.Ill.,1987). In this case, Allstate elected to rescind the Bonds on

May 18, 2009. Six months prior to May 18, 2009 was November 19, 2008. Whether Allstate

knew that the sale of securities was voidable prior to November 19, 2008 is therefore

material to its Illinois Securities Law claim. 

Allstate asserts that it was not “aware of historic demographic information that was

not disclosed in the Official Statements” until December 2008 at the earliest, and that

therefore the Underwriters’ discovery request is “moot.” (Doc. 533 at 5). Allstate’s assertion

that it was not aware of this information until December of 2008, however, is precisely the

assertion that the Underwriters wish to refute using the requested discovery. Moreover, even

if Allstate did not formally receive the demographic information until December, there is

evidence that Allstate’s counsel was aware of the existence of this information well prior to

December, and may have been on inquiry notice that the Bonds were voidable. (Doc. 534 at

2–3). See Martin v. Orvis Bros. & Co., 25 Ill. App. 3d 238, 245–46 (1974) (stating that under

§ 5/13 “one who has sufficient knowledge to be put on inquiry cannot escape the

consequences of his knowledge by failing to make inquiry”). Because the Court does not

accept Allstate’s mootness argument, the Court will allow the Underwriters to conduct the

requested discovery, subject to the limitations stated below. 

IT IS THEREFORE ORDERED that the Underwriters may conduct discovery into

communications between Allstate and/or Wells Fargo and their respective in-house or outside

counsel. This discovery is limited to communications that relate to the bond offering at issue

in this case and that occurred between June 1, 2008 and November 19, 2008. Any

supplemental depositions conducted by the Underwriters are limited to two hours.

DATED this 7th day of August, 2012.

Case 3:09-cv-08162-GMS Document 538 Filed 08/08/12 Page 2 of 2