Source: https://law.justia.com/cases/federal/district-courts/FSupp/940/1168/2355850/
Timestamp: 2020-01-22 08:34:05
Document Index: 643245499

Matched Legal Cases: ['§ 10', '§ 107', '§ 1961', '§ 107', '§ 1964', '§ 402', '§ 102', '§ 402', '§ 402', '§ 108', '§ 2923', '§ 2923', '§ 2923', '§ 2305', '§ 2923', '§ 2923', '§ 1962', '§ 1962', '§ 2923', '§ 2923', '§ 2713', '§ 107', '§ 1961', '§ 41', '§ 2305', '§ 2305', '§ 2305']

Baker v. Pfeifer, 940 F. Supp. 1168 (S.D. Ohio 1996) :: Justia
Justia › US Law › Case Law › Federal Courts › District Courts › Ohio › Southern District of Ohio › 1996 › Baker v. Pfeifer
Baker v. Pfeifer, 940 F. Supp. 1168 (S.D. Ohio 1996)
U.S. District Court for the Southern District of Ohio - 940 F. Supp. 1168 (S.D. Ohio 1996)
940 F. Supp. 1168 (1996)
*1169 *1170 *1171 John Hamrick Burtch, Baker & Hostetler, Columbus, OH, for Harold D. Baker, M. Curtiss McKee, Emile C. Ott.
Plaintiffs Harold D. Baker, Emile C. Ott and M. Curtiss McKee are Mississippi residents who invested in oil and gas wells in Ohio. The Complaint names the following *1172 individuals and entities as defendants: Tiger Oil, Inc., J & P Oil, J & P Salvage, Mid-Ohio Historical Museum, Herbert Pfeifer, Gerald Pfeifer and Henrietta Pfeifer. Tiger Oil, Inc. ("Tiger"), is an Ohio corporation engaged in the development and operation of oil and gas wells. First Amended Complaint ("Compl.") at ¶ 7. J & P Oil, also doing business as J & P Salvage and J & P Salvage, Inc., is an Ohio corporation also involved in the oil and gas industry. Compl. at ¶ 9. (These entities are referred to collectively in this opinion as "J & P"). Mid-Ohio Historical Museum ("Mid-Ohio") is an Ohio not-for-profit corporation run by Henrietta Pfeifer that operates a doll and toy museum. Compl. at ¶ 8. Defendant Herbert Pfeifer ("Herbert") is a director and shareholder of Tiger. Compl. at ¶ 4. Gerald Pfeifer ("Gerald"), Herbert's brother, is President and a shareholder of Tiger. He is also an owner and officer of J & P. Compl. ¶ 6. Henrietta Pfeifer ("Henrietta"), Herbert's wife, is the Treasurer of Tiger and operates Mid-Ohio. Compl. ¶ 5.
During the 1970's and 1980's, Plaintiff Harold Baker entered into a series of oil and gas "Development Agreements" with Tiger. Under these agreements, Baker[1] agreed to fund Tiger's drilling of specific oil and gas wells in Ohio. In exchange, Tiger promised to assign to Baker an undivided, fractional working interest in the revenues from each of the wells. Tiger agreed to operate the wells and arrange for the sale of the oil and gas produced. As compensation, Tiger also received a portion of the wells' revenues. Compl. ¶¶ 14-16.
Third, Plaintiffs allege that Defendants engaged in fraud in connection with two natural gas leases in Washington County: the Stockport Sand & Gravel Lease and the Schott Unit Lease. According to the Plaintiffs, in 1978, Baker entered into a Development Agreement with Tiger, in which he would *1173 receive a 75% working interest in the two leases after the first well was drilled. Although the leases cover a total of approximately 150 acres, Tiger only assigned to Baker a 75% interest in an 80 acre parcel. Compl. at ¶¶ 29-30. Further, Plaintiffs contend that Tiger subsequently drilled a second well on the property in violation of the terms of the Development Agreement. Tiger did not inform Plaintiffs of this well, nor has it shared any of the revenues from the well. Compl. at ¶ 31.
Plaintiffs assert that they first discovered that Defendants had defrauded them during the summer of 1992. At that time, Tiger was negotiating the sale of several wells to K Petroleum. K Petroleum contacted Baker regarding his apparent interests in some of these wells. This contact apparently caused Plaintiffs to question their dealings with Defendants and to launch an investigation. Compl. at ¶ 36. Plaintiffs commenced this litigation on February 2, 1994, asserting causes of action for, inter alia,[2] securities fraud, breach of contract and RICO violations. Defendants have now moved for summary judgment.[3]
Summary judgment[4] should be granted only when, based on the pleadings, depositions, affidavits and other evidence, the Court determines that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment...." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986) (emphasis in original).
*1174 On those issues for which it shoulders the burden of proof, the moving party must make a showing that is "`sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party.'" Calderone v. United States, 799 F.2d 254, 259 (6th Cir. 1986) (quoting W. Schwarzer, Summary Judgment Under the Federal Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 487-88 (1984)) (emphasis omitted). For those issues where the moving party will not have the burden of proof at trial, the movant must "point[] out to the district court ... that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). The non-moving party then must make a showing sufficient to establish a genuine dispute of fact with respect to that element. Id. This showing must amount to more than pointing once again to the pleadings the movant "`must set forth specific facts showing that there is a genuine issue for trial.'" Anderson, 477 U.S. at 248, 106 S. Ct. at 2510 (quoting First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S. Ct. 1575, 20 L. Ed. 2d 569 (1968)). Thus, "[i]f the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50, 106 S. Ct. at 2511 (citations omitted).
A. THE THIRTEENTH CLAIM FOR RELIEF RULE 10b-5.
Claims for securities fraud pursuant to § 10b of the Securities Exchange Act of 1934 and Rule 10b-5 must be brought within one year of discovery and, in any, case no more than three years after the violation. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 364, 111 S. Ct. 2773, 2782, 115 L. Ed. 2d 321 (1991). Plaintiffs do not dispute that they discovered the fraud underlying their Rule 10b-5 claim approximately fourteen months before they commenced this litigation. Accordingly, Plaintiffs' Rule 10b-5 claim is time-barred and Defendants' motion for summary judgment is GRANTED as to the Thirteenth Claim for Relief.
B. THE FOURTEENTH AND FIFTEENTH CLAIMS FOR RELIEF RICO AND CONSPIRACY TO VIOLATE RICO.
On December 22, 1995, Congress enacted the Private Securities Litigation Reform Act of 1995 (the "Securities Reform Act") which amended numerous portions of the Securities Act of 1933 (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934 Act"). The legislation, which was "prompted by significant evidence of abuse in private securities lawsuits ... implement[ed] needed procedural protections to discourage frivolous litigation." H.R.Conf.Rep. No. 369, 104th Cong., 1st Sess. 31-32 (1995) [hereinafter "H.R.Conf.Rep."]; see also In re Prudential Securities Incorporated Limited Partnerships Litigation, 930 F. Supp. 68, 77 (S.D.N.Y.1996) ("The new law is designed to protect corporations against the filing of frivolous securities actions.") (hereinafter Prudential Securities). Among other things, the Securities Reform Act strengthened pleading requirements for securities fraud claims and significantly altered the rules governing the conduct of private class action litigation.
In addition to redrafting numerous aspects of the 1933 and 1934 Acts, Congress also included § 107, which amended a portion of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, et seq. (The Court will refer to the amendments contained in § 107 as the "RICO Amendments.") The RICO Amendments were an attempt to close what Congress perceived as a loophole in the former version of RICO.[5] Prior to the RICO Amendments, a *1175 plaintiff could use RICO with its provisions for treble damages and its longer limitations period to pursue claims for securities fraud. Section 107, however, amended RICO to remove securities fraud as a permissible predicate act for purposes of establishing a pattern of racketeering activity.[6] Specifically, the Act amends 18 U.S.C. § 1964(c) to state that "no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of Section 1962." Section 107 (Pub.L. No. 104-67, 109 Stat. 737, 758 (Dec. 22, 1995)).[7]
It is well-established that, as a general rule, legislation will not be given retrospective application absent a clear expression of Congress' intent that the statute should be so applied. See e.g., Landgraf v. USI Film Prod., 511 U.S. 244, ___, 114 S. Ct. 1483, 1497, 128 L. Ed. 2d 229 (1994) ("the presumption against retroactive legislation is deeply rooted in our jurisprudence, and embodies a legal doctrine centuries older than our Republic.").[8] Defendants, as the parties arguing that the statute should be applied retroactively, bear the burden of demonstrating that Congress expressed such an intent. Taliaferro v. Stafseth, 455 F.2d 207, 209 (6th Cir.1972) ("It is incumbent upon the person who argues for retrospective application to show that Congress intended for the Act to be applied in that fashion.").
The first step in determining whether or not a statute should be given retroactive application is to examine the terms of the statute "to determine whether Congress has expressly prescribed the statute's proper reach." Landgraf, 511 U.S. at ___, 114 S. Ct. at 1505. If Congress did not express clearly its intent regarding the prospective or retrospective application of the statute, the court must then resort to certain judicial default rules to determine whether or not the statute should be applied retroactively. Id. In particular, "the court must determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed." Id. If the statute would have a retroactive effect, the general presumption against retroactively applies, the court must find that the statute has only prospective application. Id. If, however, the new statute confers or ousts jurisdiction, or changes procedural rules, the court need not apply the general presumption in favor of *1176 prospective application, and may instead apply the statute retroactively. Id. at ___ - ___, 114 S. Ct. at 1501-02.[9] Finally, if the Court finds that Congress did intend for the statute to have retroactive application, the Court must determine whether or not such retroactive application is constitutional.
Thus, the Court first must examine the Securities Reform Act "to determine whether Congress has expressly prescribed the statute's proper reach." Id. at ___, 114 S. Ct. at 1505. The RICO Amendments themselves do not address their prospective or retrospective applicability. The Securities Reform Act, however, does include a section entitled "Applicability", which expressly addresses Congress's intent that the amendments to the 1933 and the 1934 Acts should be applied prospectively only. Specifically, Section 108 of the Act states that
Defendants further rely on the canon of statutory construction known as expressio unius est exclusio alterius the expression of one thing is the exclusion of another. That is, Defendants argue that because Congress specifically listed those portions of the Securities Reform Act that should be given prospective application, its failure to include the RICO Amendments in this list must signify that Congress did not intend the RICO Amendments to be applied prospectively. Retroactivity, according to Defendants, is the only other option.
A similar argument was made and rejected in Landgraf,[10] In particular, Landgraf cited to § 402(a) of the 1991 Civil Rights Act to support her claim that § 102 of the Act *1177 should be applied retroactively. Section 402(a) provides that "[e]xcept as otherwise specifically provided, this Act and the amendments made by this Act shall take effect upon enactment." Id. at ___, 114 S. Ct. at 1493. Plaintiff argued that the introductory language of this section refers to §§ 402(b) and 109(c) of the Act, which both expressly provide that they are to be given prospective application only. Landgraf argued that Congress's reference in § 402(a) to two sections that are expressly prospective "create[s] a strong negative inference that all sections of the Act not specifically declared prospective apply to pending cases that arose before November 21, 1991." Id. The Supreme Court rejected this argument, stating that "[g]iven the high stakes of the retroactivity question, ... it would be surprising for Congress to have chosen to resolve that question through negative inferences drawn from two provisions of quite limited effect." Id. at ___ - ___, 114 S. Ct. at 1493-1494.
Likewise, the two courts that have addressed the asserted retroactivity of the RICO Amendments have also rejected this argument. See District 65 Retirement Trust for Members of the Bureau of Wholesale Sales Representatives v. Prudential Securities, Inc., 925 F. Supp. 1551, 1569 (N.D.Ga. 1996) [hereinafter District 65]; Prudential Securities, 930 F. Supp. at 80-81. In both cases, the district court refused to adopt defendants' proposed negative inference. Instead, as Judge Pollack explained in Prudential Securities,
Prudential Securities, 930 F. Supp. at 81.
This Court agrees with the trailblazing judges in District 65 and Prudential Securities. As in Landgraf, it is unlikely that Congress chose to indicate its desire for retroactive application of the RICO Amendments which will likely affect hundreds of pending cases by such a roundabout method. Indeed, given the default rule in favor of prospective application, see infra at 1178-1179, it strains logic to argue that this "negative inference" creates the necessary express statement in favor of retroactivity.[11] This Court will not presume to eviscerate the presumption against retroactive application of statutes by inferring Congress's intentions based on such tenuous evidence.
Defendants further rely upon their interpretation of the legislative history of the Securities Reform Act and in particular the RICO Amendments to impart the necessary clear expression of Congressional intent. Such a reliance on the statements of legislators in the heat of battle, however, is fraught with difficulties.[12] Moreover, as the Court will explain, in this case the legislative history simply does not supply the necessary evidence of an intent to apply the statute retroactively.
[t]he amendment offered by the gentleman from California will begin the process of *1178 restoring the civil RICO statute to the uses that Congress intended. This amendment will put an immediate stop to one of the greatest abuses of the civil RICO statute.
Pl.Exh.B. at 108.[13] Defendants argue that this statement evinces a clear Congressional intent to retroactively amend and restore civil RICO. This statement (as well as the other comments cited by the Prudential Securities Court) is ambiguous at best. Nothing in it can be said to contain a clear expression of Congressional intent, as required by Landgraf.
Further, Mr. McCollum's statement that the RICO Amendments would "restor[e] the civil RICO statute to the uses that Congress intended...." does not provide the required explicit statement of intent. It simply expresses Congress's desire to change the course of RICO litigation. Whether these changes should apply to cases already pending on the date of enactment is a wholly separate matter. See Rivers v. Roadway Express, Inc., 511 U.S. 298, ___ - ___, n. 7, 114 S. Ct. 1510, 1516-17, n. 7, 128 L. Ed. 2d 274 (1994) ("We do not suggest that Congress's use of the word `restore' necessarily bespeaks an intent to restore retroactively. ... Instead, `to restore' might sensibly be read as meaning `to correct, from now on.'") (emphasis in original); DeVargas v. Mason & Hanger-Silas Mason, Co., Inc., 911 F.2d 1377, 1385 (10th Cir.1990) (finding Congress' statement that it intended to "`restore' section 504 [of the Rehabilitation Act of 1973] to its pre-Grove City College [v. Bell, 465 U.S. 555, 104 S. Ct. 1211, 79 L. Ed. 2d 516] [(1984)] interpretation" was not a clear expression that Congress intended the amendment to be applied retroactively). As the DeVargas court explained, "an ambiguous statement in the Senate report on the need for action does not amount to the clear intent required to invoke retroactivity." Id. at 1386.
Likewise, the procedural history surrounding the inclusion of the RICO Amendments in the Securities Reform Act militates against a finding that Congress considered and affirmatively decided to create legislation that would be applied retrospectively. To the contrary, the legislative history indicates that the RICO Amendments were an eleventh hour addition to the Securities Reform Act. Prudential Securities, 930 F. Supp. at 78 (discussing the genesis of the RICO Amendments and noting that the "Committee on Rules [had] a special hearing last night to put in order a nongermane amendment to a piece of legislation that has nothing to do with the business, ..."). The RICO Amendments did not go through the normal legislative hearings process and were not subject to the usual level of discussion. Pl.Exh.B. at 109 ("We are amending a statute ... without ever having a word of hearings or a bit of evidence or testimony taken on the subject ...") (comments of Mr. Dingell).
The late inclusion of the RICO Amendments makes this Court even less inclined to find that Congress was expressing a desire that the RICO Amendments be applied retrospectively. To the contrary, this history of eleventh hour additions to the Act detracts from Defendants' negative inference argument.[14] Given the rushed, last-minute nature of the RICO Amendments, it beggars credulity for Defendants to argue that Congress *1179 intended to create the fine distinction upon which their negative inference argument is based. It is far more likely that § 108's express statement of prospectively was simply overlooked. The Court, therefore, finds that Congress did not express a clear intent to endow the RICO Amendments with retrospective effect. Because the language of the statute does not itself clearly resolve the question, the Court must determine which default rule of statutory construction should apply by looking to the effect of the statutory amendment. If the court finds that the statute will operate retroactively, it must apply the traditional presumption against retroactivity. See Landgraf, 511 U.S. at ___, 114 S. Ct. at 1505. A statute is said to operate retroactively if it will "impair rights a party possessed when he acted, or increase a party's liability for past conduct, or impose new duties with respect to transactions already completed." Id. at ___, 114 S. Ct. at 1505. If the statute will not operate retroactively, for example if it merely alters the procedural rules to be applied in a case, then the court should apply the law in effect at the time of decision. See id. at ___ - ___, 114 S. Ct. at 1501-02.
In this case, the RICO Amendments operate retroactively by impairing a right that the Plaintiffs possessed when they acted.[15] That is, when Plaintiffs filed their complaint securities fraud was a viable and permissible predicate act for RICO. Further, when Plaintiffs commenced this litigation, the statute of limitations for securities fraud had already run. See supra, section A at 7-8. Thus, when Plaintiffs filed their Complaint, civil RICO was the only federal avenue left open to redress Defendants' alleged frauds. If the RICO Amendments are applied retroactively to withdraw securities fraud as a permissible predicate act in this case, "plaintiffs' ability to recover for actions which may have violated federal law" will be impaired. District 65, 925 F. Supp. at 1570. Accordingly, the Court finds that the RICO Amendments operate retroactively.
Defendants, nevertheless, argue that the presumption against retroactivity does not apply because the RICO Amendments constitute a mere procedural change. This contention takes an overly cramped view of the meaning of the RICO Amendments. Defendants base this argument on their belief that the impetus driving the RICO claims in this case is Plaintiffs' desire for attorney's fees which Plaintiffs could not obtain if they had pursued their claims under the securities laws. Whether or not this is what is motivating these Plaintiffs is a matter that is in dispute and is of little concern to the Court. The determination of whether the RICO Amendments have retroactive application must be driven by the effect of the law in all cases, not simply by the underlying motivations of one set of litigants. Simply because, in this case, RICO claims may (or may not) have been added to the Complaint solely in order to enable the Plaintiffs to obtain attorney's fees does not mean that the amendment of the statute will always have such an effect.
Even if Plaintiffs' RICO claims were not retroactively vitiated by the RICO Amendments, Defendants argue that Plaintiffs' RICO claims must be dismissed as time-barred. Specifically, Defendants argue that, because the predicate acts of securities *1180 fraud under Rule 10b-5 are time-barred, Plaintiffs' RICO claims are also time-barred.
Defendants' position misapprehends the law in this matter. Civil RICO claims are subject to a four year statute of limitations. Agency Holding Corp. v. Malley-Duff & Assoc., Inc., 483 U.S. 143, 156, 107 S. Ct. 2759, 2767, 97 L. Ed. 2d 121 (1987). A RICO claim "accrues when `the plaintiff knew or should have known of the last injury or the last predicate act which is part of the same pattern of racketeering.'" Gurfein v. Sovereign Group, 826 F. Supp. 890, 909 (E.D.Pa.1993). The fact that one or more of the predicate acts that constitute the pattern of racketeering activity are themselves time-barred and thus cannot support an independent claim for relief is of no consequence.[16] As Judge Louis Pollak explained,
Id., n. 23 (quoting Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 925 (3d Cir.1992)). Here, Plaintiffs allege and for the purposes of this motion Defendants do not dispute that they first discovered the alleged fraud underlying their RICO claims in the summer of 1992, less than two years before they commenced this litigation. Accordingly, notwithstanding the fact that their Rule 10b-5 claim is time-barred, Plaintiffs' RICO claims were brought within the limitations period and are therefore timely. Accordingly, Defendants' motion for summary judgment on this ground is DENIED.
C. THE SIXTEENTH AND SEVENTEENTH CLAIMS FOR RELIEF THE OHIO CORRUPT ACTIVITIES ACT.
No Ohio court has directly addressed when a claim accrues under the Ohio Corrupt Activities Act. In fact, the only case that addresses the statute of limitations provisions of the Ohio Corrupt Activities Act at all, does so in dicta. See Cincinnati Gas & Elec. Co. v. General Elec. Co., 656 F. Supp. 49, 80-81 (S.D.Ohio 1986). In Cincinnati Gas & Elec., Judge Spiegel briefly analyzed the limitations periods in § 2923.34(K) in order to determine when a federal RICO cause of action "accrues." The court held that "the statute begins to run [on a federal RICO claim] from the time the plaintiffs knew or should have known of the fraud because it is *1181 consistent with our analysis regarding plaintiffs' state common law fraud claims as well as with the second alternative set forth in Ohio Rev.Code § 2923.34(K)." Id. at 81. Thus Judge Spiegel indicated his view that under § 2923.34(K), a cause of action accrues triggering the running of the statute of limitations when the Plaintiff knows or should have known of the fraud.
Further, under Ohio law a cause of action for fraud does not accrue triggering the beginning of the limitations period "until the fraud is discovered." R.C. § 2305.09; see also Burr v. Stark Cty.Bd. of Commrs., 23 Ohio St.3d 69, 76, 491 N.E.2d 1101 (1986) ("[t]he cause does not accrue until the fraud and wrongdoer are actually discovered"). Given that various forms of fraud such as mail fraud and wire fraud serve as the underlying predicate acts for racketeering claims under the Ohio Corrupt Activities Act, it seems likely that the General Assembly intended to include a discovery and accrual rule similar to the one that is applied to general fraud claims.
Moreover, Defendants' argument would render the second portion of the limitations provision mere surplusage. Section 2923.34(K) provides two possible events that may trigger the running of the limitations period the termination of the unlawful conduct or the accrual of the cause of action. If, as Defendants seem to argue, the cause of action must begin to accrue when the wrongful conduct terminates, there would be no reason for the General Assembly to have included the second possible triggering event the accrual of the cause of action.
It appears that an Ohio court would apply a form of the discovery rule applied to fraud cases and hold that a claim for relief under the Ohio Corrupt Activities Act accrues triggering the running of the limitations period when the fraud or wrongful conduct has been or should have been discovered. Accordingly, there is at least a dispute of fact as to whether Plaintiffs' claims under the Ohio Corrupt Activities Act were brought within the limitations period.
Defendants further argue that summary judgment on these claims is appropriate because Plaintiffs cannot produce any evidence to establish that Defendants committed the alleged predicate acts. Ohio Revised Code § 2923.34(B) provides that a private party seeking to recover under the Ohio Corrupt Activities Act must allege a pattern of corrupt activity that includes at least one predicate act that is not a form of securities fraud, mail or wire fraud, or the interstate transportation of stolen property or securities. R.C. § 2923.34(B).[17] Defendants argue that, while Plaintiffs have included a "bald claim of theft by deception" in the Complaint, Plaintiffs cannot produce any evidence of this alleged predicate act.[18]
D. THE FIRST THROUGH TWELFTH CLAIMS FOR RELIEF BREACH OF CONTRACT, FRAUD AND BREACH OF FIDUCIARY DUTY.
Defendants next argue that the First through Twelfth Claims for Relief are all time-barred. In particular, Defendants *1182 argue that the two-year limitations period found in the Ohio Blue Sky Law should apply to bar these claims. Section 1707.43 of the Revised Code provides, in pertinent part, that
Id. at *4; see also Toledo Trust Co. v. Nye, 392 F. Supp. 484, 491 (N.D.Ohio 1975) ("It is clear after examining the statutory scheme that the Ohio Blue Sky Law has no provision for the action complained of by the plaintiff, which is an action by a seller claiming fraud by a purchaser in the sale of a security").
This Court agrees with the Plantation Housing Partners Court that the two year statute of limitations found in the Ohio Blue Sky law does not apply to the claims of a defrauded seller. Thus, the limitations periods that would normally apply to claims for common law breach of contract, fraud and breach of fiduciary duty will be applied in this case.[19] Defendants do not argue that Plaintiffs' claims are time-barred under these limitations periods. Accordingly, Defendants' motion for summary judgment as to the First through Twelfth Claims for Relief *1183 is DENIED as it relates to the applicability of the statute of limitations.
E. THE FOURTH CLAIM FOR RELIEF FRAUD IN CONNECTION WITH THE UNDERPRODUCTION OF WELLS
In support of their claim, Plaintiffs offer production records for two wells, the No. 5 Chickwak well and the Chickwak-Saling No. 3 well. Pl.Exhs. E1 and E2. These records show that the production levels from the wells steadily decreased prior to Plaintiffs' transfer of their interests. After Plaintiffs had transferred their interests, however, the production figures for these wells appear to have increased. Plaintiffs argue that, based on these figures, a rational jury could determine that Defendants intentionally depressed the production levels for these wells until after Plaintiffs had parted with their interests in the wells. Defendants counter that Plaintiffs are reading too much into these figures. Defendants explain that in fact, the apparent rise in production is basically an accounting matter, due to a change in the way that the production from these wells was metered after Plaintiffs parted with their interests in the wells.[20]
F. THE SECOND AND ELEVENTH CLAIMS FOR RELIEF BREACH OF CONTRACT AND FRAUD.
G. THE SIXTH, SEVENTH AND EIGHTH CLAIMS FOR RELIEF BREACH OF CONTRACT, FRAUD AND BREACH OF FIDUCIARY DUTY IN CONNECTION WITH THE STOCKPORT-SCHOTT DEVELOPMENT AGREEMENT.
Defendants next move for summary judgment on Plaintiffs' Sixth, Seventh and *1184 Eighth claims for relief on the grounds that the undisputed facts establish that Defendants are not liable for breach of contract, fraud or breach of fiduciary duty as alleged in these claims for relief.
Defendants Mid-Ohio, Henrietta Pfeifer, J & P and Gerald Pfeifer additionally argue that summary judgment is appropriate on all claims that attempt to charge them with personal liability.[21] These defendants argue that they played no role in any of the allegedly improper conduct underlying Plaintiffs' claims for relief in this case.[22] Defendants' argument appears to boil down to one simple (although legally incorrect) proposition that they cannot be held liable for any fraud-based claims for relief because they did not actively play a role in inducing the Plaintiffs to act.
A defendant may be held liable for fraud notwithstanding the fact that the defendant did not himself make the fraudulent statement or omission.[23] For example, a corporate officer may be held personally liable for frauds committed by the corporation. Centennial Ins. Co. of New York v. Vic Tanny Int'l of Toledo, Inc., 46 Ohio App.2d 137, 141 (Lucas Cty.1975) ("Directors and corporate officers generally may be personally liable for fraud even though the corporation may be liable also."). In order to hold the officer liable, "it must be shown that he knew the statement was false, that he intended it to be acted upon by the parties seeking *1185 redress, and that it was acted upon to the injury of the party." Id. Both Henrietta and Gerald Pfeifer were officers or directors of Defendant Tiger Oil, and thus might be held liable for frauds committed by Tiger. Whether or not Henrietta or Gerald had the requisite knowledge and intent to render them liable for Tiger's alleged misconduct is a question of fact that is in the province of the jury. However, based on the fact that both Henrietta and Gerald were officers of Tiger, as well as close relations of Herbert Pfeifer, a reasonable jury could infer that they did in fact know of Tiger's alleged frauds and tortiously remained silent. Accordingly, summary judgment will be DENIED in connection with the motions of Henrietta Pfeifer and Gerald Pfeifer.
Likewise, the Court finds that there are disputed issues of fact regarding Mid-Ohio's and J & P's participation in and potential liability for frauds committed by Tiger. For example, both Mid-Ohio and J & P were the beneficiaries of the alleged frauds and misconduct. Further, Mid-Ohio and J & P were operated by Henrietta and Gerald Pfeifer (respectively) who were also officers and directors of Tiger Oil. Under these circumstances, a reasonable jury could find that Mid-Ohio and J & P were aware of and participants in any misconduct committed by Tiger Oil or Herbert Pfeifer. Accordingly, the Court also will DENY summary judgment in connection with the motions of Mid-Ohio and J & P.
[1] After entering into these agreements, Baker assigned portions of his interests in the projects to other investors, including Plaintiffs Ott and McKee. Compl. ¶ 15.
[2] The Complaint alleges the following causes of action: 1 Breach of Contract; 2 Breach of Contract; 3 Fraud; 4 Fraud; 5 Breach of Fiduciary Duty; 6 Breach of Contract; 7 Fraud; 8 Breach of Fiduciary Duty; 9 Breach of Contract; 10 Breach of Contract; 11 Fraud; 12 Breach of Fiduciary Duty; 13 Violation of Rule 10b-5; 14 Violation of RICO, 18 U.S.C. § 1962(c); 15 Violation of RICO, 18 U.S.C. § 1962(d); 16 Corrupt Activity in violation of Ohio R.C. § 2923.31; 17 Violation of Ohio R.C. § 2923.34(B).
[3] Different Defendants have moved for summary judgment on different combinations of claims. Except as expressly stated, the Court assumes that each Defendant joins in the motions of the other Defendants.
[4] Plaintiffs argue that Defendants have employed the wrong procedural vehicle in connection with several of the issues in this motion. Specifically, Plaintiffs argue that Defendants should have moved for judgment on the pleadings under Rule 12(c) and not for summary judgment as a matter of law under Rule 56(c). This argument need not detain the Court at this stage. See 10 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure: Civil 2d § 2713 at 594 ("Of course, a summary judgment motion may be made on the basis of the pleadings alone, and if this is done it is functionally the same as a motion to dismiss for failure to state a claim or for a judgment on the pleadings.").
[5] The Conference Committee cited the testimony of SEC Chairman Arthur Levitt:
H.R.Conf.Rep. at 43; see also Prudential Securities, 930 F. Supp. at 77 (Congress included § 107 "[i]n response to Congressional concerns that civil RICO served as a loophole for attorneys to bring stale securities actions....").
[6] Under prior law, racketeering activity included "any offense involving ... fraud in the sale of securities ..." as well as "any act which is indictable under any of the following provisions of title 18, United States Code: ... Section 1341 (relating to mail fraud), Section 1343 (relating to wire fraud) ..." 18 U.S.C. § 1961.
[7] The legislative history of the Securities Reform Act indicates that Congress intended this language to preclude other offenses such as mail fraud and wire fraud as permissible predicate acts of racketeering "if such offenses are based on conduct that would have been actionable as securities fraud." H.R.Conf.Rep. at 43.
[8] See also Velsicol Chem. Corp. v. Enenco, Inc., 9 F.3d 524, 528 (6th Cir.1993) ("It is a well-established statutory presumption that a new congressional enactment will not be construed to have retroactive effect unless its language requires that result."); Sutherland Stat Const § 41.04 at 349 (5th ed.) ("Retrospective operation is not favored by the courts, however, and a law will not be construed as retroactive unless the act clearly, by express language or necessary implication, indicates that the legislature intended a retroactive application.").
[9] In Landgraf the Court also addressed and resolved what had been perceived by many as an apparent tension between several of its previous retroactivity decisions. Specifically, in Bradley v. Richmond School Bd., the Court explained that "a court is to apply the law in effect at the time it renders its decision ..." 416 U.S. 696, 711, 94 S. Ct. 2006, 2016, 40 L. Ed. 2d 476 (1974). On the other hand, in Bowen v. Georgetown Univ. Hosp., the Court stated that "congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result." 488 U.S. 204, 208, 109 S. Ct. 468, 471, 102 L. Ed. 2d 493 (1988). The Court explained that, in fact, there is no tension between these two cases because in Bradley, as opposed to Bowen, the statute enacted a merely procedural change affecting the ability to recover attorney's fees and thus was not subject to the general presumption.
[10] In Landgraf, which is the Supreme Court's most recent major statement on retroactivity, Plaintiff sued her employer alleging that she had been subjected to sexual harassment by a co-worker. After Plaintiff complained to her superiors about this harassment, the co-worker was transferred to another office. Nevertheless, Plaintiff quit her job and brought suit against her employer. The district court found that Plaintiff had been subjected to illegal sexual harassment, but that Plaintiff had not been constructively discharged. Therefore, the court found that Plaintiff was not entitled to injunctive relief the only remedy available under Title VII at the time. During the pendency of Plaintiff's appeal, the 1991 Civil Rights Act was enacted. Section 102 of that Act amended Title VII to permit an intentional discrimination plaintiff to recover compensatory and punitive damages.
[11] Clearly, Congress knows how to express clearly its intention that a statute should be applied retroactively. See, DeVargas v. Mason & Hanger-Silas Mason Co., Inc., 911 F.2d 1377, 1385 n. 7 (10th Cir.1990) (citing statutes that expressly indicate Congress's desire for retroactive application).
[12] As Justice Robert Jackson stated:
United States v. Public Util. Comm'n of California, 345 U.S. 295, 319, 73 S. Ct. 706, 719, 97 L. Ed. 1020 (1953) (Jackson, J., concurring).
[13] In addition to this statement, the Court in Prudential Securities cited several additional comments of the same ilk in the legislative history. For example, Representative Conyers stated that "[w]hat we are saying is that all of the major fraud cases in which RICO busted people who were bilking millions of dollars ... is now going to be thrown in the trash heap and we will not need it anymore." Prudential Securities, 930 F. Supp. at 78. Representative McCollum is also quoted as saying that "I intend to introduce RICO reform. It is my hope that the subcommittee will bring forward legislation to help ensure that the RICO statutes are used in the manner that Congress originally intended. In the interim, however, this amendment will stop some of the most egregious abuses of the civil RICO statute." Id. None of these statements, however, expressly indicates an intent regarding the potential retrospective or prospective application of the RICO Amendments.
[14] At oral argument Defendants countered that the fact that this was a last minute amendment means that the RICO Amendments stuck out like a sore thumb and received additional attention from the members of Congress who were asked to vote on the Securities Reform Act.
[15] Clearly, the RICO Amendments neither impose new duties with respect to transactions nor increase Defendants' liability for past conduct. See District 65, 925 F. Supp. at 1569.
[16] Indeed, the Prudential Securities Court noted this fact when it found that the RICO Amendments were not merely procedural changes. As the court explained, the RICO Amendments "impair the plaintiffs' ability to recover for actions which may have violated federal law because it would strip the plaintiffs' complaint of RICO claims after the statute of limitations for securities fraud claims has likely expired." Prudential Securities at 79.
[17] Specifically, Section 2923.34(B) states that the pattern of corrupt activity alleged by an injured person or person threatened with injury shall include at least one incident other than a violation of division (A) (1) or (2) of section 1707.042 [1707.04.2] or division (B), (C) (4), (D), (E), or (F) of section 1707.44 of the Revised Code, of 18 U.S.C. 1341, 18 U.S.C. 1343, 18 U.S.C. 2314, or any other offense involving fraud in the sale of securities.
[18] The parties do not dispute that theft by deception would be a proper predicate act under the statute.
[19] Under Ohio law, claims for breach of a written contract are subject to a 15 year statute of limitations. R.C. § 2305.06. Breach of an oral contract is subject to a six year statute of limitations. R.C. § 2305.07. Claims for common law fraud must be brought within four years of discovery of the fraud. R.C. § 2305.09. Finally, claims for breach of fiduciary duty also are subject to a four year statute of limitations. Id.; Nixon v. Bank One of E. Ohio, N.A., 74 Ohio App.3d 550, 554, 599 N.E.2d 742 (Franklin Cty 1991).
[20] Defendants, while asserting that Herbert Pfeifer testified to this, have not cited to the appropriate portions of his testimony or attached excerpts from the deposition transcript. The Court is not required to comb through the record looking for this evidence. See Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989) ("`[t]he trial court no longer has a duty' to search the entire record to establish that it is bereft of a genuine issue of material fact.").
[21] In particular, Defendants Henrietta Pfeifer and Mid-Ohio argue that summary judgment is appropriate as to 4th, 13th, 14th, 15th, 16th, and 17th claims for relief. Defendants Gerald Pfeifer and J & P argue that summary judgment is appropriate in their favor as to all claims.
[22] In essence, these Defendants are arguing that, while they contest that there was any fraud or misconduct involved in Tiger's transactions with the Plaintiffs, if there was an impropriety Tiger and Herbert Pfeifer alone are liable for it.
[23] A party may be held liable for fraud based on that party's silence under circumstances that would require the party to speak. See Miles v. McSwegin, 58 Ohio St.2d 97, 99, 388 N.E.2d 1367 (1979). "[A] party is under a duty to speak, and therefore liable for non-disclosure, if the party fails to exercise reasonable care to disclose a material fact which may justifiably induce another party to act or refrain from acting and the non-disclosing party knows that the failure to disclose such information to the other party will render a prior statement or representation untrue or misleading." Id. at 100, 388 N.E.2d 1367.