Py

allegation of loss causation was permitted to proceed based on the
allegation of a “rollover” fraud or other equally attenuated chain
of causation, The motion to dismiss is GrantzD as to Count VI.

In Count VII, the plaintiffs allege that PwC committed common
law fraud in connection with its 1997 audit. The elements of fraud
are

{1) a false statement of material fact; (2) defendant's

knowledge that the statement was false; (3) defendant's intent

that the statement induce the plaintiff to act; {4)

plaintiff’s reliance upon the truth of the statement; and (5)

plaintiff’s damages resulting from reliance on the statement.
Connick v. Suzuki Motor Co., 675 N,E.2d 584, 591 (Ill. 1997). This
claim fails because the plaintiffs do not allege that PwC intended
to induce action on the part of plaintiffs or anyone else. Nothing
in the case plaintiffs cite, Stein v. D’Amico, No. 86~C9099, 1989
WL 91874 (N.D. Ill. Aug. 8, 1989) (Leinenweber, J.), contradicts
Connick's holding that a fraud plaintiff must allege intent; that
case simply holds that the defendant need not intend to defraud a
particular party. Here, PwC is not alleged to have intended to
mislead anyone at all; the complaint only states that PwC acted
“knowingly.” This is too vague to meet the high pleading standards
of Rule 9. The motion to dismiss is GraNTED as to Count VII.

ENTER ORDER:
Lore Zz ub bh

Elaine E. Bucklo
United States District Judge

Dated: April ¥ , 2004


both that it “would not have invested in the instrument if the
defendant had stated truthfully the material facts” and that “it
was the very facts about which the defendant lied which caused its
injuries.” Caremark, Inc. v. Coram Healthcare Corp., 113 F.3d 645

648 (7° Cir. 1997). In other words, “but for the circumstances that
the fraud concealed, the investment .,. would not have lost its
value,” Bastian, 892 F.2d at 683. In the context of a disputed sale
of stock, plaintiffs must allege both that its value at the time of
the transaction was inflated due to the defendants’
misrepresentations and that the value of the shares declined once
the truth was known. Johnson v. Mut, Sav. Bank, No. 95-C2379, 1996
U.S. Dist. LEXIS 1999, at *10-11 (N.D. Ill. Feb. 21, 1996) (Grady,
J.). Here, plaintiffs clearly allege transaction causation ~ they
state that but for the misrepresentations, they would not have
entered into the transaction. However, they fail to allege loss
causation, Plaintiffs admit in their brief in opposition to the
motion to dismiss that the stock’s drop in value was caused by the
public revelation of misstatements in Anicom’s 1998 and later
financial statements and its subsequent bankruptcy filing, not by
public exposure of the 1997 fraud. However, they argue that there
was an “integral relationship” between the 1997 fraud and the 1998-
2000 frauds, and that the 1997 fraud was “rolled over” and
incorporated into the later misstatements that caused the drop in

value. This argument is unavailing. They cite to no cases where an


suse Orde Fonm (06/97)

United States District Court, Northern District of Lllinois

Name of Assigned Judge inc E Sitting Judge if Other
or Magistrate Judge Elaine E. Bucklo than Assigned Judge
CASE NUMBER 01 C 5526 DATE 4/8/2004
CASE Tricontinental, et al. Vs. Anixter, et al.
TITLE
[In the following box (a) indicate the party filing the motion, ¢-g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented]
DOCKET ENTRY:
(ap) Oo Filed motion of [ use listing in “Motion” box above,]
(2) a) Brief in support of motion due.
(3) a Answer brief to motion due____. Reply to answer brief duc.
{4) oO Ruling/Hearing on set for at
(5) ia Status hearing[held/continued to] [set for/re-set for] on set for at
(6) qa Pretrial conference[held/continued to] (set for/re-sct for]on__-_—sset for__ at =
(7) Oo Trial[set for/re-set for] on at
(8) 0 [Bench/Jury trial] [Hearing] held/continued to at,
(9) oOo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4m) Local Rule 41.1 OFRCP41(aX(1) O FRCP41(a)(2).
ao off [Other docket entry] | Enter Memorandum Opinion and Order granting Pricewaterhousecoopers,
LLP’s motion to dismiss second amended complaint. Accordingly, defendant, Pricewaterhousecoopers,
LLP is dismissed from the case. Defendant, Pricewaterhousecoopers’ motion to modify the discovery
schedule is denied as moot.
(ll) @f [For further detail sec order attached to the original minute order.]
No notices required, advised in open court.
No notices requited,
wv | Notices mailed by judge's staff
Notified counsel by telephone.
Docketing to mail notices,
Mail AO 450 form. —
Copy to judge’ magistrate judge. ul aal oy
arw2004
2 ute ied navige
courtroom wd
MPy deputy's OU Niet
initials
Date/time received in
central Clerk's Office {tailing deputy iis



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

TRICONTINENTAL INDUSTRIES LTD.,
a British Columbia corporation,
and TRICONTINENTAL DISTRIBUTION
LIMITED, formerly known as
TEXCAN CABLES LIMITED, a
Canadian corporation,

Plaintiffs,

v. No. 01 ¢ 5526

ALAN B. ANIXTER, SCOTT C.
ANIXTER, CARL E. PUTNAM, DONALD

WELCHKO, individuals, and
PRICEWATERHOUSECOOPERS, LLP,

peers
APR 09 2004
Defendants.
MEMORANDUM OPINION AND ORDER

Tricontinental Industries Ltd. and Tricontinental Distribution
Ltd., formerly known as Texcan Cables, Ltd. (collectively,
“Tricontinental”), sold assets to Anicom, Ltd. (“Anicom”), in
exchange for Anicom stock, Tricontinental sues individual officers
and directors of Anicom as well as PricewaterhouseCoopers, LLP
(“PwC”), an accounting firm that provided auditing and consulting
services to Anicom in the time surrounding the transaction, for
violations of the Securities Acts of 1933 and 1934 and for
violations of several Illinois laws. I have previously dismissed
the claims arising against PwC, Tricontinental Indus., Ltd. v.
Anixter, 184 F. Supp. 2d 786 (N.D. Ill. 2002), as well as the

claims against the individual officers and directors arising under


”

the Securities Act of 1933, Id, I have further granted the
individual defendants’ motion to dismiss with regard to certain
oral statements and press releases. Tricontinental Indus., Ltd. v.
Anixter, 215 F. Supp.2d 942 (N.D. Ill. 2002). Tricontinental filed
a first amended complaint, adding Counts IV and V, and a second
amended complaint adding Counts VI and VII, I granted the motions
to dismiss Counts IV and V in an order dated January 29, 2004, and
subsequently declined to reconsider that ruling as it applied to
PwC. Now PwC moves for dismissal of Counts VI and VII of the second
amended complaint. I Grant the motion.

On a motion to dismiss, I accept all well-pleaded allegations
in the complaint as true, and grant the motion only if the
plaintiff can prove no set of facts to support its claim. Thompson
v. Til. Dep’t of Prof. Regulation, 300 F.3d 750, 753 (7th Cir.
2002). However, a plaintiff can plead itself out of court by
pleading facts that undermine the allegations set forth in its
complaint. McCormick v. City of Chicago, 230 F.3d 319, 325 (7th
Cir. 2000).

In Count VI, the plaintiffs allege that PwC violated section
10(b) of the Exchange Act in connection with its 1997 audit of
Anicom’s financial statements. In order to maintain a claim for
fraud under this section, plaintiffs must allege both “transaction
Causation” and “loss causation.” Bastian v. Petren Res. Corp., 892

F.2d 680, 685 (7 Cir, 1990). That is, the plaintiff must allege