United States Court of Appeals
FOR THE EIGHTH CIRCUIT

_____________ No. 96-2751

_____________ Great Rivers Cooperative of * Southeastern Iowa, an Iowa * farm cooperative; Sawyer * Cooperative Equity Exchange, * a Kansas farm cooperative, * * Plaintiffs, * * Roger Tacey, a Nebraska * resident, on behalf of * themselves and others * similarly situated, * * Plaintiff - Appellant, * Appeal from the United States * District Court for the
v. * Southern District of Iowa. * Farmland Industries, Inc., a * Kansas farm cooperative; Harry * D. Cleberg; H. Wayne Rice; * Albert Shively, * * Defendants - Appellees. *The Honorable Michael J. Melloy, Chief Judge, United Sta tes District Court for 1 the Northern District of Iowa, sitting by designation. The Honorable Harold D. Vietor, United States District Judge for the Southern 2 District of Iowa.
2 _____________ Submitted: February 13, 1997 Filed: July 29, 1997

_____________ Before HANSEN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and MELLOY, District Judge.

1

_____________
HANSEN, Circuit Judge.

Roger Tacey, a named plaintiff in this class action, appeals the district court's 2 grant of summary judgment to defendants as to his claims of securities fraud agains t Farmland Industries, Inc., as time barred. We affirm.

I.

Inreviewing the district court's grant of summary judgment, we view the facts in the light mos t favorable to Tacey, the nonmoving party. Kopp v. Samaritan Health System, Inc. , 13 F.3d 264, 269 (8th Cir. 1993). Tacey alleges the following facts. Farml andIndustries, Inc., (Farmland) is an agricultural cooperativ e headquar tered in Kansas City, Missouri, and incorporated in Kansas. In August o f 1990, Farm

land implemented a business plan known as the Base Capital Plan (BCP).3

As part of the BCP, Farmland planned topurchase the outstanding equity of its wholly
owne d subsidiary, Farmland Foods (Foods), with newly created Type 12 Capita l Credits. Farmland distributed a letter discussing the BCP. Farmland also hel d informa tional meetings ("help sessions") concerning the BCP and, in particular , Farml and's offer to exchange Farmland equity for Foods equity. (Appellant's App. at 240.) In August of 1991, Farmland tendered its exchange offer.
Roger Tac ey, a hog farmer from Nebraska, owned equity in Foods. Tace y received the Farmland prospectus a nd the letter discussing the BCP. He also attended
an informational meeting. At the meeting, Tacey inquired about what would happen if he declined Farmland's offer to exchange Foods equity for Farmland equity. When the Far mland representatives would or could not inform him about the value of hi s Foods equity, he concl uded that the only way to retain any equity value was to accept the exchange offer. Taceytraded approximately $1100 of equity certificates in Foods forappro ximately $900 of Farmland's Type 12 Capital Credits and $222.93 in cash

. In making this trade, Tacey relied on F armland's representations that (1) within one to tw o years of August 1991, the owners of the capital credits would be able to recou p theirinvest ment, either through redemption or by sale in a secondary market to b e created by Farmland; (2) the value of the capital credits would be similar to the equity the offerees already held in Foods; and (3) the face value of the capital credits would be equal to the redemption value or the secondary market value.

InJuly of 1992, a complaint was filed against Farmland in the United State s District Court for the District of Colorado. Consumers Gas & Oil, Inc. v. Farmlan d Indus., Inc. , No. 92-K-1394 (D. Colo.)[hereinafter Consumers ]. This class actio n involved small, liquidated cooperatives that, pursuant to Farmland's bylaws, ha d exchanged common stock for capital credits and allegedly later had discovered tha t Farmland would not redeem the capital credits. The plaintiffs claimed Farmland had engaged in "freeze-out" schemes that adversely impacted its holders of capital credits.4

The plaintiffs alleged RICO violations, se curities fraud, breach of fiduciary duties, and unjust enrichment.
Tacey read about the Consumers case in a Farmland newsletter in October o f 1992. In the article, which was entitled "Co-op sues Farmland over stock issue, " Farmland described the Consumers case as "ridiculous" and "ludicrous." (Appellant's App. at 235-36.) The article stated Farmland's policy and priority schedule fo r redeeming its outstanding equity. The article explained that Farmland had place d capital credits quite low on its priority schedule, prese ntly planning to redeem only five percent annually, subject to the Board of Directors' discretion based upon "earnings , capital needs and other factors." ( Id. at 236.)

In late 1992, Tacey contacted a class representative in the Consumers suit and counsel for the class with regard to redemption of stock. Tacey was a member of a Nebraska cooperative that held common stock in Farmland. Tacey inquired whether the Nebraska cooperative would have to go through th e Consumers ' process to have its Far mland stock redeemed. Tacey did not inquire or discuss any issue regarding th e Foods transaction or the possible redemption of his Type 12 Capital Credits.

The Consumers case settled in June 1993. Tacey first learned of the details of the case when he obtained a copy of the complaint and settleme nt papers in early 1994. In m id-1994, Tacey contacted a Farmland representative to inquire about redeemin g his Typ e 12 Capital Credits. Tacey learned then that Farmland would redeem th e capital credits for not more than three cents on the dollar and that the promise d secondary market was a failure.The three individual defendants are Harry Cleberg, H. Wayne Rice, and Albert 3 Shively. Cleberg is the CEO, President, and a director of Farmland Industries. Rice is a former dir

ector of Farmland Foods. Shively serves as a director on and the Chair of the Farmland Industries Board of Directors. The other two named plaintiffs are two small farm cooperatives -- Great Rivers 4 Cooper ative of Southern Iowa, an Iowa corporation, and the Sawyer Cooperativ e Equity Exchange, a Kansas corporation. 5 This cl ass action was filed on July 29, 1994, against Farmland and thre e ind ividuals who had served as officers and directors of either Farmland or Foods. 3 Tacey is one of three named plaintiffs in the action, seeking relief under variou s theo ries of securities fraud and breach of state law fiduciary duties. Relevant to this 4 appeal are the claims alleged in Count 1 (violation of Securities Exchange Act § 10(b) and Rule 10b-5), Count 4 (v iolation of Securities Exchange Act § 14(e)), and Count 5 (violation of Securities Exchange Act § 12(2)).

Farmland moved for summa ry judgment against Tacey on the basis of time bar. The district court granted this motion as to the securities fraud claims, finding as a matter of law that Tacey had inquiry notice of Farmland's alleged misrepresentations more than a year before he filed his claims. The court also dismissed the section 14(e) claim in its entirety, holding it could not go forward because the only clas s repr esentative named for that claim (Tacey) no longer had a viable cause of action

. Tacey appeals.

II.

We revie w a grant of summary judgment de novo, using the same standard s under Federal Rule of Civil Procedure 56( c) as applied by the district court. Summary judgment is appropriate when there is no genui ne issue of material fact and the moving6

part y is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett , 477 U.S. 317, 322-23 (1986).
A. Inquiry Notice
The applicable statute of limitations for federal securities fraud claims is the oneyear period set forth in section 13 of the 1933 Securities Act, 15 U.S.C. § 77m (1994). Lampf, Ple va, Lipkind, Prupis & Petigrow v. Gilbertson , 501 U.S. 350, 361 (1991)

. Section 13 provides:

No a ction shall be maintained to enforce any liability created unde r section 77k or 771(2) of this title unless brought within one year after the discovery of the untrue statement or th e omission, or after such discovery should have been made by the exercise of reasonabl e diligence . . . . In no event shall any such action be brought to enforce a liability . . . more than three years after the security was bona fide offered to the public, or . . . more than three years after the sale.

15 U.S.C. § 77m (1994) (emphasis added). Under this provision, even if a victim does not actuall y know of a misrepresentation, the one-year limitation period begins to run when the victim shoul d have discovered the misrepresentation through the exercise of reasonable diligence. This objective standard is commonly referred to as the doctrine of "inquiry notice." See Davidson v. Wilson , 973 F.2d 1391, 1402 (8th Cir. 1992). We have held that inquiry notice exists when there are "storm warnings" that would alert
areasonable person of the possibility of misleading information, relayed either by an act or by omission. Id. When uncontroverted evidence irrefutably demonstrates that
a plaintiff had inquiry notice of fraudulent conduct, the issue of notice is amenable to summary judgment. Davis v. Birr, Wilson & Co. , 839 F.2d 1369, 1370 (9th Cir. 1988).7

At the core of the parties' first argument is a dispute over how to apply th e standard of inquiry notice. Farmland argues th at because inquiry notice is an objective standard, knowledge of all the facts available to the public is automatically imputed to the inju red party. Thus, the argument goes, because the Consumers case was filed in Colorado, Tacey wa s on inquiry notice of Farmland's allegedly untrue statements as a matter of law. Tacey, on the other hand, argues that he was not on inquiry notice , desp ite having read about the Consumers case, because he did not have sufficien t notice that Farmland would refuse to redee m the type of capital credits he owned. We disagree with both of these versions of the inquiry notice standard.
The determination of whether inquiry notice exists is an objective standard based upon the f acts known to the victim. Inquiry notice exists when the victim is aware of facts that would lead a reasonable person to investigate and consequently acquire actual knowledg e of the defendant's misrepresentations. Davidson , 973 F.2d at 402

. Break ing this standard into its components, a court must determine: (1) the facts o f which the victim was aware; (2) whether a re asonable person with knowledge of those facts would have investigated the situation further; and (3) upon investigation, whether the reas onable person would have acquired actual notice of the defendant' s mi srepresentations. If a reasonable person aware of the facts known to the victi m would h ave investigated, that is, exercised reasonable diligence, and consequentl y discover ed the misrepresentations, the victim had inquiry notice. Accord Whirlpoo l Fin. Corp. v. GN H oldings, Inc. , 67 F.3d 605, 610 (7th Cir. 1995) (describing inquiry notice as "when the victim of the alleged fraud became aware of facts that would have led a reaso nable person to investigate whether he might have a claim") (interna l quotations omitted); Jackson Na t'l Life Ins. Co. v. Merrill Lynch & Co. , 32 F.3d 697, 701 (2d Cir. 199 4) (describing inquiry notice as when the plaintiff acquires "notice of the facts , which in the exercise of reasonable diligence, would have led to actua l knowledge"); Menowitz v. Brown , 991 F.2d 36, 41-42 (2d Cir. 1993) (same); Jensen v. Snellings , 841 F.2d 600, 606-07 (5th Cir. 1988) (same).8

Farmland argues that we should engage only in the second and third prongs of the analysis we have set forth, because, according to Farmland, the question of what
a vic tim actually knows is immaterial to our objective standard for inquiry notice

. Thus, Farmland would have us automatically impute to Tacey constructive knowledge of any information available to the public, including all articles published on, and the public r ecords available in, the Consumers case, regardless of Tacey's actua l
awareness. We cannot adopt this analysis. As the Seventh Circuit recently stated in rejecting this s ame argument, "an open door is not by itself a reason to enter a room." Fujisawa Phar. Co. v. Kapoor , 1997 WL 324433, *3 (7th Cir. June 16, 1997) . A victim must be aware of some suspicious circumstances, some "storm warnings ," to trigger the duty to investigate. See Davidson , 973 F.2d at 1402 ("The Court must determin e whether the plaintiff possessed such knowledge as would alert a reasonable investo r to the possibility of fraud.") (internal quotations omitted). We pause to note that this requirement of some awareness does not mean that an injured p arty will necessarily avoid the statute of limitations by turning a blind eye to wh at is obviously in full view. The determination of awareness is by its terms a factual anal ysis, and a fact finder may decide that a victim of fraud was indeed aware of publ ic information. Further, there might be circumstances where the evidence o f awareness is so overwhelming that there is no genuine dispute on the is sue for purposes of summary judgment. Cf. Whirpool Fin. Corp. , 67 F.3d at 610 (imputing to Whirlpool knowl edge of dramatic discrepancies between defendants' projections and actua l perfo rmance); Eckstein v. Balcor Film Investors , 58 F.3d 1162, 1168-69 (7th Cir

. 1995) (imp uting knowledge to investors where the information was contained in th e reg istration statement filed with the SEC, was widely reported, and was noted in a quart erly report that was filed with the SEC and sent to investors). We express n o opinion today as to when such circumstances may exist. We simply note that we will not automatically

impute public information to an injure d party without a determination of some awareness of "storm clouds" on the horizon. More specifically, we will not9

automatically

impute to Tacey, a hog farmer in Nebraska, the details of a class action litigated in Colorado.

We therefore turn to the first prong of our analysis. In this summary judgment
co ntext, we assume the facts of Tacey's knowledge as he alleges them. He kne w Farmland had been either unable or unwilling to answer his questions about the value of his Foo ds equity if he were to refuse to exchange it for Farmland equity. He knew he had traded approximately $1100 of equity credits in Foods for approximately $900 in Farmland's Type 12 Capital Credits and $222.93 in cash. Tacey was upset with the deal, feeling that he had been "bribed" by the cash portio n of the offer, especially given the larg e salaries the executives of Farmland were being paid, and that Farmland was "trying to scr__ [him] out of a thousand." (Appel lant's App. at 242-43.) He had called Farmland representatives "you son-of-a -b____es" at the informational meeting. ( Id. at 243.) In October of 1992, through the article in the Farmland newsletter, Tacey learned that Farmland was subject to a class action suit in Colorado based o n Farmland's failure to redeem other types of Farmland capital credits. Under the second prong of our analysis, we conclude Tacey had sufficien t informationto trigger the duty to investigate. Given the circumstances, the article in the Farmland news letter would make a reasonable person in Tacey's shoes suspicious th atFarmland's representations regarding the redemption of Type 12 Capital Credit s migh t be false. According to the article, the plaintiffs in the Consumers case wer e alleging that Farmland "deliberately ha[d] refused to redeem the capital credits of small, defunct or liquidated co operatives" and had diverted money due to these cooperatives to la rge cooperatives in which Farmland's directors had a stake. (Appellant's App. at 235.) The article explains Farmland's priority schedule and reveals that, as a general matt er, Farmland had prioritized the redemption of capital credits quite far behin d several other types of equity interests in the schedule. The article states that the Board had scheduled the redemption of capital credits at only about five percent annually, and redemption of those credits was subject to the Board's discretion based upon "earnings,10

capital needs and oth er factors." ( Id. at 236.) Nowhere in the article is there any hint that a ny particular type of capital credits (such as the Type 12 Capital Credits owned by Tacey) were to be excepted from the general policy statements and thereb y redeemable after a certain period of time. After reading this article and learning that redemption of Farmland's capital credits was not only a low priority, but also wholly discretionary on the part of Farmland's board of directors, a reasonable person who had been told (as Tacey says he was) that his capital credits would defin itely be redeemable wit hin a year or two would be suspicious that some misrepresentation had occurred

. Tacey's initial and continuing dissatisfaction with the equity exchange deal, including Fa rmland's inability or unwillingness to predict the future value of Foods equity an d Farm land's unwillingness to tender full cash payment for the Foods equity, woul d heighten a reasonable person's suspicion. Considering the totalityof the circumstances, particularly the

contents of the Farmland article, this information triggered the duty to exercise due diligence. See Fujisawa Pharm. , 1997 WL 324433, at *2-3. Tacey argues that the article in the Farmland newsletter was not a sufficien t "s torm warning" of Farmland's fraud. He contends the article did not put him o n inquiry notice because it described the Con sumers suit as "ludicrous" and "ridiculous"; Farmland's self-serving statements about the invalidity of the suit do not, however , negate the ot

her pertinent information presented in the article. Tacey also claims that the title of the articl e, "Co-op sues Farmland over stock issue," led him to believe that Consumers involved the redemption of stock, not o f capital credits; because he admits readi ng the article, Tacey had actual notice of the article's contents, which clearl y
explained that capital credits were at issue. We also reject Tacey's argument that his duty t o investigate would not be triggered in this case because he was not a sophisticated investor an d he had capital credits worth only approximately $900. Our inquiry as to whether a duty to investigate arose is an objective standard, and w e conclude that a reasona

ble person would be suspicious of possible misrepresentations upon seeing the article in the Farmland newsletter. Finally, we reject Tacey' s contention t

hat the Consumers case did not put him on notice because that case aroseAltho ugh Tacey contacted a Consumers representative, he failed to exercis e

5 reasonable diligence when he did not inquire about the redemption of capital credits.

This striking similarity is not surprising, as the plaintiffs in Consumers wer e 6 represented by the same counsel representing the class in this case.
11 out of a different transaction and in volved a different type of capital credits; the article Tacey read described a general policy regarding capital credits, and that informatio n was sufficient to trigger the duty to investigate.
Lastly, we turn to the third prong of our inquiry. We conclude that upon th e exercise of reasonable diligence, a reasonable person would have acquired actual notice of Farm land's alleged misrepresentations. Our hypothetical person would hav e acquire d information regarding the Consumers suit from the representatives an d attor neys of that case. The claims in the Consumers case mirror those in this clas s 5 action, d iffering only in that the plaintiff class here owns a different type of capita l

6 credits t han the plaintiff class in Consumers . Had Tacey exercised reasonabl e diligen ce, the facts underlying his claims under Counts 1, 4, and 5, all allegin g securities fraud under federal law, would have become apparent to him.
Thus, Tacey had inquiry notice shortly after reading the article in the Farmland newsletter in October 1992, and the one-year statute of limitations began to run at that time. Because Tacey was on inquiry notice more than o ne year before he filed this suit in July 1994, his claims are time barred.
B. Dismissal of the 14(e) Claims as to the Entire Class

The district court dismiss ed Count 4, which alleged securities fraud in violation of section 14(e) of the Secur ities Exchange Act, in its entirety, on the basis that Tacey12

was the only n amed plaintiff for that count and his claim was moot pursuant to th e statute of limitations. Tacey argues that the district court erred in dismissing Count 4 as t o the entire class. He contends that he remains a proper class representative both because hi s claim is not moot and because of the nature of class actions. Farmlan d argu es that the class fails because Tacey's claim became moot before the class wa s certified.

Fa rmland correctly points out that whether the mootness of a clas s representative's claim w arrants dismissal of the entire class on that count is a question of timi ng. Compare Sosna v. Iowa , 419 U.S. 393, 400-01 (1975) (holding tha t postc ertificationmootness of representative's claim does not render class members ' claims moot) with Shipman v . Missouri Dep't of Family Serv. , 877 F.2d 678, 682 (8th Cir. 1989) (affirming dismissal of class action complaint without a ruling on clas s
ce rtificationwhere class representative had not filed a motion requesting clas s certification prior to his own claim becoming moot), cert. denied , 493 U.S. 104 5 (1990). However, Tacey's claim does not technically suf fer from a mootness problem;

r ather, he has a live controversy that is barred by the statute of limitations. Thus, we find the discussions in the mootness cases and their reliance on Article III limitations unhelpful.

Rul e 23 of the Federal Rules of Civil Procedure, which sets forth th e requirements for class certification, provides an answer to t his puzzle. Inherent in Rule 23 is the requirement that the class representatives be members of the class. Fed. R. Civ. P . 23(a) (stating that "one or more members of a class may sue or be sued a s representative parti es . . . ."); Vervaecke v. Chiles, Heider & Co. , 578 F.2d 713, 719- 20 (8t h Cir. 1978) ("The plaintiff- or defendant- representative (in a class action suit) must be a member of the class which he purportedlyrepresents.") (quoting 3B Moore's Federal Practice ¶ 23.04, at 23-254 ( 2d ed. 1977)); see also Fed. R. Civ. P. 17(a) (real par ty in interest requirement); 7A Wright, Miller & Kane, Federal Practice an d Proce dure § 1761 (2d ed. 1986) (discussing requirement that representatives must be13

members of the class). Here, Tacey is not and cannot be a class member because his clai m is time barred; consequently, he cannot represent the class. See Weinberger v. Retail Credit Co. , 498 F.2d 552, 55 6 (4th Cir. 1974); Mason v. Anheuser-Busch, Inc. , 579 F. Supp. 871, 873 & n.1 (E.D. Mo 1984). Because Tacey is the only name d repr esentative in Count 4, the putative class lacks a representative on that count

. Without a class representative, the putative class cannot be certified and its claim s cannot survive. The district court's dismissal was therefore proper. Cf. Vervaecke , 578 F.2d at 719-20 (holding district court did not abuse its discretion in striking class claims prior to class certification where class representative's claims failed).

III.
For the above reasons, we affirm the judgment of the district court.
A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.