Court Opinion

ID: 3016743
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:16:02.191451+00
Date Added: 2024-06-11T11:39:56.972643
License: Public Domain

_____________

                          Nos. 95-1456 and 95-2356
                                _____________

William Alpern and Russell D.          *
Miller, on behalf of themselves        *
and all others similarly               *
situated,                              *   Appeal from the United States
                                       *   District Court for the
     Appellants,                       *   Western District of Missouri.
                                       *
           v.                          *
                                       *
UtiliCorp United, Inc.,                *
                                       *
     Appellee.                         *

                                  __________

                          Submitted:    December 11, 1995

                              Filed:    May 17, 1996
                                  __________

Before MAGILL, GOODWIN*, and MURPHY, Circuit Judges.
                                __________

MURPHY, Circuit Judge.

     William D. Alpern and Russell D. Miller filed this securities fraud
suit against UtiliCorp United Inc. (UtiliCorp) on behalf of themselves and
similarly situated stock purchasers.   Employees of a second-tier subsidiary
of UtiliCorp reportedly misappropriated some twenty-one million dollars
beginning in September 1990.      The misappropriations were not publicly
revealed by UtiliCorp until June 1992, along with a $11.6 million charge
against its second-quarter earnings and an anticipated $5.2 million loss.
Alpern and Miller claim that UtiliCorp knew or should have known of the

     *
      The HONORABLE ALFRED T. GOODWIN, United States Circuit
     Judge for the Ninth Circuit, sitting by designation.
material misappropriations by at least November 1991, when it commenced its
internal investigation, and that certain financial statements made prior
to its June 1992 disclosure were misleading.          In a series of orders, the
district court declined to certify a class, dismissed all claims, and
denied two motions for reconsideration.        Alpern and Miller now appeal from
the judgment entered in the district court and from the order denying their
motions for reconsideration.        We affirm in part, reverse in part, and
remand.

                                          I.

     UtiliCorp is a public utility company which wholly owns a subsidiary
called    Aquila   Energy   Corporation    (Aquila   Omaha),   located   in   Omaha,
Nebraska.     Aquila Omaha in turn owns a subsidiary named Aquila Energy
Resources Corporation (Aquila), formed in 1989 to acquire oil and gas
reserves and gathering and processing systems.        Aquila is headquartered in
Omaha and has an office in Houston, Texas.

     Appellants Alpern and Miller sued as holders of UtiliCorp common
stock.    Russell Miller purchased 200 shares on the open market on November
13, 1991.   William Alpern made open market purchases for approximately two
years before joining UtiliCorp's Dividend Reinvestment and Stock Purchase
Plan (the DRIP plan).        This plan allows participants to reinvest cash
dividend payments from their common stock at a price discounted from the
market price.      Alpern reinvested his dividends in return for more shares
seven times between September 12, 1990 and March 12, 1992.2         He asserts he
made these investment decisions based on a September 4, 1990 prospectus
about the DRIP plan, incorporated by UtiliCorp's

     2
      Alpern purchased shares of UtiliCorp stock at the
discounted DRIP price on September 12, 1990, December 12, 1990,
March 12, 1991, June 12, 1991, September 12, 1991, December 12,
1991, and March 12, 1992.

                                          2
August 14, 1990 registration statement, and on subsequent financial updates
from the company on September 12, 1990, December 12, 1990, March 12, 1991,
June 12, 1991, September 12, 1991, December 12, 1991, and March 12, 1992.

     Appellants contend that two Aquila officers, Vincent F. Marquez, Jr.
and Richard D. Stegall, embezzled company funds from September 1, 1990
until they were fired in early 1992.       During this time, Marquez served as
vice president of Aquila in Houston and as a member of Aquila's board of
directors.   Richard D. Stegall was Aquila's vice president in charge of
acquisitions and a member of its board of directors.

     UtiliCorp acquired Aquila Omaha in 1986, and the latter's rapid
growth led to internal control problems and reported employee misconduct.
In June 1988, an Aquila Omaha employee named Lyn Maddox wrote a memorandum
to Marc Petersen, president of both Aquila Omaha and Aquila, stating that
investments lacked complete documentation and required better management.
Maddox was fired a month later.   In an exit interview on July 28, 1988,
with UtiliCorp's chairman and chief executive officer, Richard Green,
Maddox and Green discussed these internal control problems and an alleged
kick-back scheme on an Aquila Omaha project.       Petersen had fired the four
employees allegedly involved, but Maddox told Green that Petersen had
instructed him to keep quiet about the incident.

     On October 29, 1991, long after Maddox had been fired, he again
informed UtiliCorp management about reported kickbacks and bidrigging, this
time occurring at Aquila's offices in Houston.     Maddox said his information
came from a UtiliCorp shareholder named Jim Walzel.     UtiliCorp also learned
that a former Aquila employee named Sheila McDonald could have further
related information and that Vince Marquez could have been a silent partner
in a Houston company that had done business with Aquila.

                                       3
        UtiliCorp immediately hired a private investigative firm named Risk
Prevention Group, Inc. (RPG).    RPG talked with Walzel on November 1, 1991,
and with his source, Jim Sheeler, on November 6.       Sheeler, an off-shore
services company owner who had previously submitted an unsuccessful bid for
an Aquila project, had been told that someone had overheard Marquez telling
another bidder that "If I get my condo, you get the bid" (the bidder
reportedly agreed).      In addition, Sheeler had noted that Marquez had
recently paid for an extravagant wedding and reception in Hawaii.

        Upon receiving this information, UtiliCorp CEO Richard Green met on
November 11 with Gail Hudek, a partner at Blackwell Sanders Matheny Weary
& Lombardi L.C. (Blackwell), UtiliCorp's long-time outside law firm and
counsel for it in the case before the court.    Green told Hudek to talk with
Aquila president Marc Petersen, and she interviewed him on November 22.
Petersen did not believe that Marquez was involved in inappropriate
activity and speculated that Sheila McDonald was the possible source of the
information.    Efforts to contact McDonald continued throughout December;
she was finally located in Houston and interviewed by Hudek on January 8,
1992.

        According to McDonald, "Marquez was engaged in self-dealing on a
large scale, including the receipts of kickbacks on operations contracts
and property acquisitions."     She described in detail how Marquez obtained
authority from Aquila to purchase a property based on an inflated report
of the oil and gas reserves it held, used a middleman to negotiate a lower
price with the seller, and then split the difference with the middleman
between the purchase price and the approved price.   McDonald estimated that
the losses ranged between thirty and ninety million dollars and had grossly
inflated the real value of Aquila's assets.

        After Hudek informed Green and other UtiliCorp management on January
13, 1992 of McDonald's disclosures, UtiliCorp greatly

                                       4
expanded the scope and size of its investigation.          Benjamin Mann, a
Blackwell partner, headed the investigative team comprised of several
Blackwell attorneys, Arthur Andersen accountants, and UtiliCorp officers.
They interviewed current and former Aquila employees and reviewed thousands
of documents.     UtiliCorp's investigators discovered further evidence of
wrongdoing during the next few weeks.     Sometime before January 20, 1992,
Lynn Marquez, a former wife of Vince Marquez, produced several cancelled
checks totalling approximately $90,000, made out to Vincent Marquez and
signed by a principal in several companies that had done business with
Aquila Houston.   Mann concluded that these checks constituted evidence of
a kickback to Vincent Marquez.    Arthur Andersen also informed UtiliCorp on
January 27, 1992, that the vice president in charge of Houston operations,
or someone immediately below him, had transferred large amounts of money
without clear authorization.

     Blackwell submitted a written report of its findings to UtiliCorp on
January 22, 1992.     It concluded that "significant evidence of wrongdoing
and irregularities" by Marquez clearly provided UtiliCorp management with
a sufficient legal basis to terminate him.    Moreover, it advised that the
evidence was "so strongly indicative of not merely irregular but illegal
conduct that [UtiliCorp] management is nearly compelled or obligated, based
on its fiduciary responsibility to the Company and its shareholders, to
terminate Marquez."    Blackwell similarly concluded that discharge of Aquila
president Marc Petersen would be legally justified based on his significant
management deficiencies, especially given his prior management problems.
UtiliCorp fired Marquez two days later and reprimanded Petersen.3

     Blackwell updated its findings in a January 29, 1992 report.         It
again stated that there was "substantial circumstantial

     3
      Petersen was relieved of his duties in February 1992 and
fired in December 1992.

                                      5
evidence" indicating that Marquez was receiving kickbacks, including
numerous irregularities regarding middlemen and lack of documentation.
Blackwell estimated that the amount of kickbacks could range up to four to
five million dollars, but noted that company accountants and outside
auditors did not believe this amount needed to be reported.

      In the meantime, during the fall and winter, UtiliCorp conducted four
public offerings and issued numerous financial statements of record
earnings and growth.        Five million shares of UtiliCorp common stock were
sold at $26 per share on October 29, 1991.                Two days later, UtiliCorp
announced that third quarter financial results exceeded those from the
previous year and that continued growth was expected.              Approximately $150
million of unsecured senior notes were sold at a coupon rate of nine
percent on November 19, 1991.

      December and early January public statements similarly emphasized
UtiliCorp's strong financial status.        UtiliCorp's press release on December
19, 1991 predicted "record financial results for both the fourth quarter
and   1991"   and   also    noted   Aquila's   dramatic    growth.      Richard   Green
proclaimed UtiliCorp's performance to be "another milestone," attributing
the success to the company's growth strategy.                 On January 3, 1992,
UtiliCorp estimated that fourth quarter net income for 1991 would be up
$4.5 million from the same period the previous year.

      On January 22, 1992, UtiliCorp began its third public offering,
issuing $130 million of senior notes due January 15, 2007, priced to yield
8.20%.   On January 30, 1992, UtiliCorp announced that its 1991 net income
had   increased     25%    to   $73.5   million,   which   Green     stated,   "further
demonstrates the soundness of UtiliCorp's growth strategy which calls for
reducing risk through expansion. . . ."            Aquila's 1991 growth was also
reported in conjunction with its continued strategic acquisitions.                This

                                           6
statement was made about the same time that UtiliCorp filed a registration
statement with the SEC relating to a fourth public offering of up to $25
million in preferred stock which was completed in February 1992.

     By March 11, 1992, UtiliCorp's investigation team had reported the
estimated loss to be between eight and eleven million dollars.   At the same
time, UtiliCorp's financial report on March 18 continued to report record
earnings for 1991, noting it was the ninth consecutive year of record net
income and attributing part of its success to Aquila.   A similar report was
filed on May 13.   UtiliCorp did not publicly disclose its investigation or
any misappropriation until June 15, 1992.

                                    II.

     Alpern filed his first complaint on June 17, 1992, two days after
UtiliCorp's public disclosure.      He alleged, on behalf of a class of
UtiliCorp common stock purchasers during the period from January 30 through
June 15, 1992, that UtiliCorp had violated § 10(b) of the 1934 Securities
Act, 15 U.S.C. § 78j, and Rule 10b-5, by fraudulently concealing adverse
material information in order to maintain inflated stock prices.   After the
June 1992 announcement, UtiliCorp stock declined from $28.13 per share on
June 12, to $23.63 on June 15, and then to $22.88 on June 16.

     On August 6, 1992, Alpern filed an amended complaint which enlarged
the class period for the § 10(b) and Rule 10b-5 claims to include September
1, 1990 through June 15, 1992.    He also added a claim under § 11 of the
1933 Securities Act, 15 U.S.C. § 77k, on behalf of a subclass of persons
who purchased UtiliCorp common stock through its DRIP plan based on
UtiliCorp's September 4, 1990 prospectus and its financial updates on one
or more of the following dates:    September 12, 1990, December 12, 1990,
March 12, 1991, June 12, 1991, September 12, 1991, December 12, 1991, and

                                     7
March 12, 1992.

      The district court dismissed the first complaint on July 20, 1993,
for   failure    to   plead    scienter    with    particularity,    as    required     by
Fed.R.Civ.P. 9(b).      The complaint was reinstated on November 3, however,
after appellants filed a motion for relief from the judgment based on newly
discovered      evidence      suggesting    that     UtiliCorp      knew       about   the
                                                                           4
misappropriations four months prior to its public disclosure.                   The court
granted the motion, stating that Alpern "should be given an opportunity to
make use of the discovery process to support the allegation of scienter."

      Alpern and Miller then filed a second amended complaint on December
6, 1993.   Count I alleged the § 11 claim, and Count II alleged the § 10(b)
and Rule 10b-5 claims.          On March 30, 1994, they moved to certify the
§ 10(b) and Rule 10b-5 class and the § 11 subclass.

      On May 9, 1994, UtiliCorp moved for dismissal or summary judgment on
the § 11 claim, for summary judgment on Miller's § 10(b) and Rule 10b-5
claim, and for partial summary judgment on Alpern's § 10(b) and Rule 10b-5
claims.    (The motion sought dismissal of Alpern's claim for affirmative
misstatements, but not his claim for material omissions.)                  The parties
discussed a possible settlement during the next few months, but the
district

      4
      This evidence consisted of documents indicating knowledge
as early as February 1992. On an insurance claim form, dated
July 27, 1992, UtiliCorp noted a potential claim against its
crime policies based on kickbacks to employees. Its manager of
administration wrote on the form that knowledge of the
misappropriation "first came to me" on February 12, 1992,
although the form also states that UtiliCorp discovered the
misappropriations on May 15, 1992. Minutes from a February 4,
1992 meeting of UtiliCorp's audit committee reflected that the
director of internal audit reported that UtiliCorp was
investigating a situation at Aquila "involv[ing] a senior
employee who was dismissed for inappropriate dealings when
purchasing reserves for Aquila Energy."

                                           8
court denied their joint motion for a pre-trial conference to further these
negotiations    and   suspend   briefing.       Alpern   and   Miller   subsequently
submitted their suggestions in opposition to UtiliCorp's motion for summary
judgment on July 22.

        On August 23, 1994, UtiliCorp's counsel notified appellants that
further information relating to the misappropriation was available and that
certain depositions needed to be rescheduled.              The parties then moved
jointly to extend the end of discovery from September 30 to October 31; the
motion was granted.

        On October 31, UtiliCorp moved for summary judgment on Alpern's
remaining § 10(b) and Rule 10b-5 claim for omissions.             It argued that it
had   relied in good faith on its legal and financial advisors that
disclosure was not required prior to June 15, 1992, and that scienter
therefore did not exist prior to Alpern's last stock purchase on March 12,
1992.

        Two weeks after the revised discovery deadline, on November 14, 1994,
the district court issued two orders.         The first dealt with the motion for
dismissal or summary judgment filed in May.              The court granted summary
judgment on Miller's claim on the ground that the earliest date the
evidence could establish UtiliCorp's scienter was December 1991,5 and
Miller had purchased his stock before then, on November 13, 1991.            Summary
judgment     was   also   granted    on       Alpern's    claim   for    affirmative
misrepresentations because he had not shown any misstatements between
December 1991

        5
      A June 19, 1992 Kansas City Star newspaper article had
reported that UtiliCorp knew of "the problems at the [UtiliCorp]
subsidiary" in December 1991. The other evidence in the record
pertaining to scienter consisted of the February 4, 1992 minutes
of a UtiliCorp Audit Committee meeting; the July 27, 1992
insurance claim form stating that UtiliCorp's Manager of
Administration first learned about the misappropriation on
February 12, 1992; Marquez's discharge date of January 24, 1992;
and Stegall's discharge date of February 24, 1992.

                                          9
and his last stock purchase in March 1992.       Finally, the court granted
summary judgment on Alpern's § 11 claim.     Since Alpern's highest purchase
price was less than the stock's value on the date he added this claim
(August 6, 1992), the court concluded that he had suffered no § 11 damages.
As a result of this order, only Alpern's § 10(b) and Rule 10b-5 claim for
material omissions remained in the case.

     A companion order denied the motion for class certification because
most of the § 10(b) and Rule 10b-5 claims and the § 11 claim had been
dismissed, and Alpern's remaining claim for material omissions was said to
be atypical of claims by a class of open market purchasers.

     The next day, UtiliCorp offered Alpern $368.36 as payment for the
stock he had purchased on March 12, 1992.    Alpern refused to accept payment
because of his fiduciary duty to the proposed class.   On November 22, 1994,
UtiliCorp moved to dismiss as moot the remaining § 10(b) and Rule 10b-5
claim for omissions, arguing that its tendered offer represented the
maximum amount of relief Alpern could recover.     The district court agreed
and ordered payment delivered to the clerk of the court in satisfaction of
Alpern's claim.

     The case was closed in the district court pursuant to an order for
judgment issued on January 6, 1995.    This order incorporated the November
14, 1994 orders, granted UtiliCorp's motion to dismiss the case pursuant
to Fed.R.Civ.P.12(b)(1), and denied as moot its motion for summary judgment
as to Alpern's omissions claim.

     Meanwhile, on November 28, 1994, shortly after the November 14 orders
for summary judgment and denial of class certification, Miller and Alpern
had filed two motions for reconsideration.    Miller sought reinstatement of
his § 10(b) and Rule 10b-5 claim

                                      10
pursuant      to   Rule   60(b)(2),6    claiming   that   newly   discovered     evidence
indicated UtiliCorp had scienter prior to his November 1991 stock purchase.
Alpern sought reinstatement of his affirmative misstatements claim pursuant
to Rule 60(a)7 and Rule 60(b)(2), claiming that a typographical error in
the complaint was the basis on which partial summary judgment had been
granted and that there now was sufficient evidence to withstand that
motion.      Miller and Alpern also sought to vacate the order denying class
certification.          They maintained that their claims had been improperly
dismissed on summary judgment and that Alpern's § 10(b) and Rule 10b-5
claim was typical of the claims of open market purchasers.

        The district court denied both motions in a single order issued on
April 17, 1995.           The court rejected consideration of the appellants'
evidence that allegedly established UtiliCorp's scienter prior to stock
purchases by Miller and Alpern on the basis that it was not newly
discovered within the meaning of Rule 60(b)(2).            It also refused to permit
correction of the typographical error in the second amended complaint,
which alleged misstatements by UtiliCorp in its announcement of record
results in a statement of January 1991, instead of in January 1992.                   The
court       concluded     that   Rule   60(a)   relief    was   not   required   because
identification of the correct date of the announcement would not affect the
issue of scienter, and because UtiliCorp's tendered offer had satisfied
Alpern's damage claim.            Without discussion, the court also denied the
motion for relief from its order denying class certification.

        6
      Rule 60(b)(2) provides for relief from a final judgment
based on "newly discovered evidence which by due diligence could
not have been discovered in time to move for a new trial under
Rule 59(b)." Fed.R.Civ.P. 60(b)(2).
        7
      Rule 60(a) provides that "[c]lerical mistakes in judgments,
orders or other parts of the record and errors therein arising
from oversight or omission may be corrected by the court at any
time of its own initiative or on the motion of any party and
after such notice, if any, as the court orders." Fed.R.Civ.P.
60(a).

                                            11
     Alpern and Miller filed two appeals, which are both before the court,
one from the January 6, 1995 judgment entered against them, and another
from the April 17, 1995 denial of their motions for reconsideration.    They
claim that they should have been permitted to represent the class, that
there were issues of material fact precluding summary judgment, and that
they were entitled to relief under Rule 60.

                                    III.

     In Count II, Alpern and Miller alleged violations of § 10(b) of the
1934 Securities Act, 15 U.S.C. § 78j, and Rule 10b-5.      They claimed that
they, and the class they sought to represent, had detrimentally relied on
UtiliCorp's reckless or knowingly false statements or omissions of material
facts concerning the misappropriations, which artificially inflated the
market price of its stock throughout the class period.

     Congress enacted the 1934 Act in order to promote full disclosure and
thereby protect investors against manipulation of stock prices.    See Basic
Inc. v. Levinson, 485 U.S. 224, 230 (1988).          "There cannot be honest
markets without honest publicity.   Manipulation and dishonest practices of
the market place thrive upon mystery and secrecy."    Id. (citation omitted).
Section 10(b) specifically prohibits the use of any "manipulative or
deceptive device or contrivance" in connection with the purchase or sale
of a security.   15 U.S.C. § 78j(b); Herman & MacLean v. Huddleston, 459
U.S. 375, 382 (1983).

     Rule 10b-5, promulgated by the Securities and Exchange Commission
under its § 10(b) authority, provides that it is unlawful "for any person,
directly or indirectly,"

     (a) To employ any device, scheme, or artifice to defraud,

                                     12
       (b) To make any untrue statement of a material fact or to omit to
       state a material fact necessary in order to make the statements made,
       in the light of the circumstances under which they were made, not
       misleading, or

       (c) To engage in any act, practice, or course of business which
       operates or would operate as a fraud or deceit upon any person, in
       the connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5 (1995).

       Standing under § 10(b) and Rule 10b-5 requires a showing of (1)
misrepresentations or omissions of material fact or acts that operated as
a fraud or deceit; (2) causation, often analyzed in terms of materiality
and reliance; (3) damages; and (4) fraudulent activity occurring in
connection with the purchase and sale of a security.   17 C.F.R. § 240.10b-
5; Harris v. Union Elec. Co., 787 F.2d 355, 362 (8th Cir.), cert. den., 479
U.S. 823 (1986).    A fact is material if it is substantially likely "that
the disclosure of the omitted fact would have been viewed by the reasonable
investor as having significantly altered the 'total mix' of information
made available."   Basic Inc., 435 U.S. at 231-32 (citation omitted); see
also Harris, 787 F.2d at 366.    This determination requires assessment of
the inferences a reasonable shareholder "would draw from a given set of
facts and the significance of those inferences to him."     TSC Industries,
Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976).

       Scienter is not explicitly required by the statutory text, but it is
an acknowledged essential element of a § 10(b) or Rule 10b-5 claim.     See
Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 (1976); Harris, 787 F.2d at
362.    Scienter may be established by proof of knowing or intentional
practices to deceive, manipulate, or defraud.     Harris, 787 F.2d at 362.
Negligence is not sufficient, Hochfelder, 425 U.S. at 215, but this circuit
follows the majority rule that recklessness also satisfies the scienter
requirement.

                                     13
Van Dyke v. Coburn Enterprises, Inc., 873 F.2d 1094, 1100 (8th Cir. 1989).
If the defendants "stated untrue facts with reckless disregard for their
truth or falsity," there is scienter.             Id.

                                             A.

       The timing of UtiliCorp's disclosures and the date when scienter
might be established are key issues in this case, and related discovery is
of importance in its procedural history.

       UtiliCorp's initial set of discovery answers did not reveal when it
learned   of    Marquez's      alleged    kickback      scheme   or    began   its   internal
investigation.     In response to appellants' first request for documents on
December 29, 1993, UtiliCorp produced some eighty boxes of materials for
copying in March 1994.         Among these documents turned over in March were two
requests for greater autonomy from Marc Petersen, Aquila's president, to
CEO Green in 1990, and minutes from two UtiliCorp Audit Committee meetings
in April and May of 1991, at which Price Waterhouse reported internal
control problems at the Aquila branches.

       On May 9, 1994, UtiliCorp moved for summary judgment on all claims
except for Alpern's § 10(b) and Rule 10b-5 omissions claim.                    Throughout the
next   few     months,   the    parties    concentrated      on       extensive    settlement
negotiations.     They jointly moved on June 23 for a pretrial conference and
to postpone all briefing until after the conference.                       After the court
denied the motion, appellants filed their suggestions in opposition to
UtiliCorp's summary judgment motion on July 22.

       Appellants    finished      reviewing      the    documents      obtained     in   March
sometime in August 1994, and scheduled depositions of Richard Green and
Harry L. Winn, Jr., UtiliCorp's chief financial officer, for the second
week of September.       They also served document requests and subpoenas on
UtiliCorp's director of internal audit, David A.

                                             14
Sisel; the former chairman of UtiliCorp's audit committee, Harry Winn; and
UtiliCorp's lead investigator at Arthur Andersen, Barbara Buganier, and
Benjamin Mann at Blackwell.        On August 23, 1994, UtiliCorp informed
appellants that the September depositions would have to be rescheduled.
It also promised to disclose by the following week materials about its
internal investigation of embezzlement at Aquila and some Arthur Andersen
documents.    Based on this unexpected turn of events, at the parties' joint
request, the district court extended discovery from September 30 until
October 31.

     UtiliCorp's promised disclosures did not occur until September 9 and
October 6.     On these dates it produced thousands of documents.          These
documents disclosed for the first time that UtiliCorp had hired a private
investigation firm and contacted Blackwell attorneys in early November 1991
to investigate the kickback allegations against Marquez.        Appellants also
now discovered Blackwell's January 22, 1992 memorandum to UtiliCorp,
written by Benjamin Mann and two other attorneys, advising that Marquez be
discharged due to his illegal conduct, Arthur Andersen's January 27, 1992
letter to UtiliCorp discussing large and possibly unauthorized wire
transfers at Aquila in Houston, and Lyn Maddox's 1988 discussions with
Richard Green about Aquila's internal control problems and alleged kickback
scheme in the Omaha office.

     Appellants began the process of sorting through these documents, and
during   October   1994    they   deposed   several   members   of   UtiliCorp's
investigation team.       Depositions were taken of Benjamin Mann, the lead
investigator at Blackwell, on October 12; David Sisel, UtiliCorp's director
of internal audit, on October 18; Harry Winn, UtiliCorp's chief financial
officer, on October 27; and Barbara J. Buganier, a partner and certified
fraud examiner at Arthur Andersen, on October 28.       Miller also served his
first interrogatories to UtiliCorp on October 28.

                                       15
        None   of   the   information    disclosed   during   this   second   wave   of
discovery or in the October depositions was before the district court when
it issued its summary judgment order on November 14, 1994, two weeks after
discovery had been scheduled to end.8           The court based its understanding
of the case upon UtiliCorp's stated version of the facts.             Appellants had
failed to include in their opposition to the motion a list of disputed
material facts as required by Local Rule 13(G), and the court indicated it
would consider only those facts which had support in the record.              The only
documents pertaining to scienter in the record at that time were those
which had prompted the reinstatement of Alpern's complaint on December 6,
1993.       The summary judgment decision was therefore based entirely on
evidence produced before the scheduled discovery period began.

        Two weeks after issuance of the summary judgment order, appellants
filed a motion for reconsideration.             They attached documents obtained
through discovery which they claimed established UtiliCorp's scienter prior
to Miller's stock purchase on November 13, 1991 and Alpern's purchase in
March 1992.     The district court declined to reconsider its order granting
summary judgment on the grounds that the evidence presented in the motion
was not newly discovered within the meaning of Rule 60(b)(2).

        The court also denied Alpern relief under Rule 60(a) even though it
recognized the existence of a typographical error in the complaint, which
had referred to January 30, 1991, instead of 1992, as the date of a key
UtiliCorp financial statement.          Correction would have been irrelevant, it
reasoned, because the correction could not have made a difference in the
earliest scienter date given the nature of the record at the time summary
judgment was

        8
      This deadline had been set in August 1994, prior to the
production of thousands of documents by UtiliCorp in September
and October 1994.

                                           16
granted.   In addition, the court concluded that Alpern could not recover
damages for his March 1992 purchase because UtiliCorp had already tendered
a check to the court for that purchase upon the court's dismissal of
Alpern's omissions claim.

                                    B.

      A party is entitled to relief under Rule 60(b)(2) from an order of
summary judgment where (1) the evidence was discovered after the summary
judgment hearing; (2) the moving party exercised due diligence to discover
the evidence; (3) the evidence is material and not merely cumulative or
impeaching; and (4) a new hearing considering the evidence would probably
produce a different result.   Callanan v. Runyun, 75 F.3d 1293, 1297 (8th
Cir. 1996).   The district court determined that Alpern and Miller failed
to meet the first and second criteria (although there had been no summary
judgment hearing).   It noted that appellants had obtained the evidence
before the court issued its summary judgment order, and concluded that
UtiliCorp's allegedly untimely production of the documents did not excuse
the appellants' lack of due diligence in locating the evidence.   We review
the district court's denial of a Rule 60(b) motion for abuse of discretion.
Id.

      A party must have a justifiable excuse for timely failing to oppose
a motion for summary judgment if it had sufficient opportunity to submit
the evidence prior to a ruling on the motion.    See Love v. Commerce Bank
of St. Louis, N.A., 37 F.3d 1295, 1296 (8th Cir. 1994).   Here, appellants
concede that they possessed the new documents a few weeks prior to the
summary judgment order, but they argue that they lacked sufficient time to
analyze and submit the evidence.

      UtiliCorp did not disclose several of these documents until some four
months after it had filed for summary judgment and about two months after
appellants had filed their opposition to the

                                    17
summary judgment motion.      UtiliCorp had filed its motion for summary
judgment in May 1994, and appellants responded in July 1994.          UtiliCorp
waited until September and October 1994, however, before producing some key
documents pertaining to its investigation of the misappropriations.         These
materials, which appellants attached to their motion for reconsideration,
disclosed that UtiliCorp's investigation began in early November 1991,
instead of in January 1992, as appellants had been previously led to
believe.   Also buried among the thousands of documents produced at this
time were Blackwell's January 22, 1992 memorandum advising Marquez's
termination and Arthur Andersen's January 27, 1992 letter concerning large
and possibly unauthorized wire transfers at Aquila Houston.       Both of these
documents were also submitted with the motion for reconsideration.

     Not   only   were   appellants   sorting   through   and   analyzing   these
materials turned over at this late date, but they were also conducting
depositions throughout October based on the new discovery.         For example,
they deposed Benjamin Mann, Blackwell's lead investigator and an author of
the January 22, 1992 memo, on October 12; David A. Sisel, UtiliCorp's
director of internal audit, on October 18; and Barbara Buganier, Arthur
Andersen's head partner on the investigation team, on October 28.

     Appellants also attached to the motion for reconsideration certain
documents produced by UtiliCorp in March 1994, the relevance of which
became clearer as a result of the October disclosures.      These included two
1990 memoranda from Aquila president Marc Peterson to UtiliCorp CEO Richard
Green, asking for greater management authority.             Appellants further
included minutes from two 1991 UtiliCorp Audit Committee meetings, at which
Price Waterhouse reported that internal control problems and a record
keeping deficiency at Aquila were being addressed by additional qualified
staff.   Appellants argue that because Green knew about these problems, he
knew or should have known as of late October

                                       18
1991 that the allegations against Marquez were of a serious nature.
     Appellants were collating all of this information when UtiliCorp
filed, on October 31, 1994, a second motion for summary judgment as to
Alpern's remaining omissions claim.    Appellants were planning to present
a single submission of the evidence to the district court on the pending
motions when the order granting UtiliCorp's first motion for summary
judgment was issued, just two weeks after the close of the scheduled
discovery period.

     The   timing   of   UtiliCorp's     disclosures   about   its   internal
investigation and its results impeded appellants' ability to process and
present the information prior to the court's ruling.    It also undercut the
purpose of discovery, which is to enable parties to obtain the factual
information needed to prepare their cases for disposition.     As the district
court recognized earlier in the litigation, unearthing proof of scienter
was especially difficult in this case because direct evidence had to come
primarily from UtiliCorp.   See, e.g., Costello, Porter, Hill, Heisterkamp
& Bushnell v. Providers Fidelity Life Ins. Co., 958 F.2d 836, 838-39 (8th
Cir. 1992) (greater latitude permissible where information needed to
respond to summary judgment motion is likely to be in movant's sole
possession); Xerox Corp. v. Genmoora Corp., 888 F.2d 345, 354 (5th Cir.
1989) (discovery essential because shareholder's proof of wrongdoing must
come entirely from the defendant ex-directors); Gary Plastic Packaging
Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 756 F.2d 230, 236
(2nd Cir. 1985) (discovery rules should be applied liberally so litigant
may secure helpful evidence from adversary).

     Under the circumstances here, UtiliCorp's delayed disclosures should
not be viewed as a lack of due diligence on the part of appellants, thereby
precluding consideration of this evidence under Rule 60(b)(2).          Since
appellants have presented a justifiable excuse for not submitting the
evidence prior to the summary

                                    19
judgment ruling, they are entitled to relief if the evidence is material,
not merely cumulative or impeaching, and would probably produce a different
result.     See Love, 37 F.3d at 1296; Callanan, 75 F.3d at 1297.

     As discussed above, the evidence submitted on reconsideration
revealed for the first time when and how UtiliCorp learned about the
allegations    of   wrongdoing   by   Marquez,   the    timing   and   scope   of   its
subsequent investigation, and when and what information it discovered as
a result.    This evidence is material both for the appellants' case on the
issue of scienter and for UtiliCorp's defense of good faith reliance on its
legal and financial advisors about when public disclosure became necessary.

     The final factor is whether consideration of this evidence at a new
hearing on UtiliCorp's motion for summary judgment would probably produce
a different result.     See Callanan, 75 F.3d at 1297.           Summary judgment is
appropriate if "the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show 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).

     With respect to Miller's claim, the district court determined that
there was no genuine issue of material fact as to whether UtiliCorp had
scienter in regard to the misappropriations at Aquila Houston prior to his
sole stock purchase on November 13, 1991.                Miller asserts that the
following new evidence shows that UtiliCorp had the requisite scienter:
UtiliCorp's knowledge in 1988 that four employees had been fired for an
alleged kickback scheme at Aquila's Omaha branch; attempts by Aquila's
president to gain greater management authority in 1990; reported internal
control problems at the Aquila subsidiaries in spring of 1991; an October
31, 1991 telephone report from a former Aquila Omaha employee fired three
years previously, that he had heard of kickbacks and

                                         20
bidrigging at Aquila's Houston office; UtiliCorp's hiring of a private
group to investigate the rumor; an unverified proposition by Marquez to an
unknown bidder; and Marquez's reportedly expensive wedding trip to Hawaii.

       Thus,   the   most   specific   evidence   UtiliCorp   received   about    the
misappropriations prior to Miller's stock purchase was that a former bidder
had been told that someone else had overheard Marquez proposition another
bidder.    In order to satisfy the requirement of materiality, it must be
substantially likely that a reasonable investor would have viewed the
disclosure of the omitted fact as having significantly altered the total
mix of information made available.       Basic Inc., 485 U.S. at 231-32.         This
standard is not met with respect to the information known to UtiliCorp at
that time.     Nor is it probable that UtiliCorp then had the requisite
scienter intentionally or recklessly to deceive, manipulate, or defraud
shareholders through its financial statements.          See Harris, 787 F.2d at
362; Van Dyke, 873 F.2d at 1100.       Accordingly, even if the district court
had reconsidered its ruling in light of appellants' new evidence, it would
have   probably not produced a different result.              The district court
therefore did not abuse its discretion in denying Miller Rule 60(b)(2)
relief from its order granting summary judgment as to his § 10(b) and Rule
10b-5 claim.    See Callanan, 75 F.3d at 1297.

       The situation differs as to Alpern, however.       The district court had
granted summary judgment as to Alpern's § 10(b) and Rule 10b-5 affirmative
misstatements claim because Alpern had not alleged any misstatements after
December 1991, the date a newspaper article stated UtiliCorp knew of the
misappropriations, and before March 12, 1992, the date of Alpern's last
stock purchase.      In their motion for reconsideration, appellants explained
that they had made a typographical error in their complaint, which stated
that "[o]n or about January 30, 1991, UtiliCorp announced that it achieved
record financial results in 1991" and that net income had increased

                                         21
in 1991 by 25%, to $73.5 million.          Appellants pointed out they mistakenly
referred to UtiliCorp's statement as occurring on January 30, 1991, instead
of   1992.     They    also    asserted    that   UtiliCorp   made   other     misleading
statements on October 31, 1991, November 18, 1991, December 19, 1991,
December 23, 1991, January 3, 1992, and January 6, 1992.                    The district
court nevertheless concluded that summary judgment was still appropriate
because appellants had not set forth admissible evidence showing a genuine
issue of material fact as to whether UtiliCorp had scienter prior to
January 30, 1992.

      Consideration of the appellants' evidence would probably produce a
different result for Alpern as to whether he had shown an issue of material
fact on the date of scienter.        During January 1992, UtiliCorp launched an
extensive investigation into the allegations, utilizing personnel from its
accounting firm, outside law firm, and own company.                      By January 22,
UtiliCorp's investigation team had discovered specific acts by Marquez
which, according to UtiliCorp's attorneys, justified and even compelled his
termination.    Marquez was fired two days later, and Aquila's president was
reprimanded.    Evidence of wrongdoing included cancelled checks indicating
nearly $90,000 in kickbacks to Marquez on several projects.                  In addition,
Sheila McDonald had provided a detailed account of how Marquez accomplished
these kickbacks.       Blackwell estimated by January 29 that the extent of the
kickbacks could reach up to four to five million dollars.

      During    this    time    period    UtiliCorp   made    numerous     statements   of
continued    financial     success   and    public    offerings,     and    the   withheld
information about the losses may have been sufficiently significant to a
reasonable investor so as to render these statements materially misleading.
See Basic Inc., 485 U.S. at 240.          UtiliCorp had commenced its third public
offering on January 22, 1992, preceded by Green's proclamation that
UtiliCorp's performance in 1991 was "another milestone."                   On January 30,
1992, Green had

                                            22
announced UtiliCorp's 1991 net income had increased 25% to $73.5 million,
reflecting   Aquila's   strategic       acquisitions     and   "the      soundness   of
UtiliCorp's growth strategy . . . [of] reducing risk through expansion."

      A reasonable shareholder may have inferred from these representations
that UtiliCorp and its subsidiaries would continue to prosper in 1992.
UtiliCorp's January 30, 1992 statement and subsequent statements prior to
its June 1992 disclosure may therefore have violated its "ever-present duty
not to mislead."   Id. at 240 n.18.      Whether or not UtiliCorp's actions were
protected by good faith reliance on its legal and financial advisors is not
at issue on this appeal.

      Since the appellants' evidence would probably produce a different
result as to Alpern's claim for affirmative misstatements, the district
court abused its discretion in not reconsidering UtiliCorp's motion for
partial summary judgment in light of this evidence.              The order denying
reconsideration as to Alpern's claim is therefore reversed and remanded.

                                         C.

      Appellants also claim that they should have been permitted to correct
the   typographical   error   in    their    complaint   pursuant   to    Rule   60(a).
Although UtiliCorp conceded that this type of error was generally subject
to Rule 60(a) relief, the district court denied it.            The court noted that
it had previously dismissed Alpern's omissions claim after UtiliCorp had
paid $368.36 to the clerk of court, covering the amount Alpern paid for
stock bought in March 1992.        Alpern's affirmative misstatements claim was
also limited to this March stock purchase, according to the district court,
since he had not shown that UtiliCorp had scienter prior to his other stock
purchases.   Thus, even if the complaint were corrected to reflect that
UtiliCorp's financial statement had occurred on

                                            23
January 30, 1992, the court concluded that Alpern could not recover damages
because of UtiliCorp's tendered offer.              The court therefore refused to
grant the motion for reconsideration.

        Rule 60(a) allows relief from a judgment based on clerical mistakes
in the record.    Although the rule usually applies to errors by the court
or clerk, it may also be used to correct mistakes by the parties.                Pattiz
v. Schwartz, 386 F.2d 300, 303 (8th Cir. 1968).                  Where the parties'
intentions are clearly defined and "all the court need do is employ the
judicial eraser to obliterate a mechanical or mathematical mistake, the
modification will be allowed."         Matter of West Texas Marketing Corp., 12
F.3d 497, 504-05 (5th Cir. 1994) (typographical errors correctable by Rule
60(a)).      Denials   of   Rule    60(a)   motions    are   reviewed   for   abuse   of
discretion.      L.Z. v. Parrish, 733 F.2d 585, 588 (8th Cir. 1984).

        UtiliCorp's tendered offer of payment to Alpern was not a proper
basis to deny relief under Rule 60(a).            Alpern was not required to accept
it.   Judgment should be entered against a putative class representative on
a defendant's offer of payment only where class certification has been
properly denied and the offer satisfies the representative's entire demand
for injuries and costs of the suit.              See Rand v. Monsanto Co., 926 F.2d
596, 601 (7th Cir. 1991) (vacating judgment imposing defendant's offer on
named     representative    where    district      court   improperly   denied    class
certification); compare Zimmerman v. Bell, 800 F.2d 386, 390 (4th Cir.
1986) (affirming denial of class certification and dismissal of claim based
on defendant's tendered offer fully satisfying plaintiff's damages);
compare Kline v. Wolf, 702 F.2d 400, 404-06 (2nd Cir. 1983) (vacating
judgment imposing settlement upon putative class representative that
deprived him of relief to which he could be entitled after trial).

        This rule protects a class representative's responsibilities to the
putative class members from being terminated by a

                                            24
defendant's attempts to pay off the representative's claims.         See Roper v.
Consurve, Inc., 578 F.2d 1106, 1110 (5th Cir. 1978), aff'd sub. nom.
Deposit Guaranty Nat. Bank, Jackson, Miss. v. Roper, 445 U.S. 326 (1980).
Acceptance of a tendered offer "need not be mandated," as then Justice
Rehnquist explained, "since the defendant has not offered all that has been
requested in the complaint (i.e., relief for the class)."         Deposit Guaranty
Nat. Bank, 445 U.S. at 341 (concurring opinion).

       The district court abused its discretion in not permitting appellants
to correct the typographical error in their complaint pursuant to Rule
60(a).   As explained below, class certification should not have been denied
on the grounds asserted.         Alpern properly rejected UtiliCorp's offer of
payment because it only covered his individual claim and did not provide
any requested relief for the class.        Id.

                                         D.

       Alpern and Miller sought to represent a class alleging § 10(b) and
Rule   10b-5   violations   of    UtiliCorp   common   stock   purchasers   between
September 1, 1990 and June 15, 1992.             The court denied certification
because it had dismissed most of appellants' claims on summary judgment and
found Alpern's remaining claim atypical of the putative class.         Appellants
contend that their claims were improperly dismissed and that Alpern is
typical of the class purchasers because he was an active investor who
relied on the integrity of the market price.        Denial of class certification
is reviewed for abuse of discretion.      DeBoer v. Mellon Mortg. Co., 64 F.3d
1171, 1175 (8th Cir. 1995), cert. denied sub nom., Michael Thomas Crehan
v. Gretchen DeBoer, No. 95-1322, 1996 WL 79875 (U.S. Apr. 22, 1996).

       Rule 23(a) permits class certification where

                                         25
      (1) the class is so numerous that joinder of all members                             is
      impracticable, (2) there are questions of law or fact common to                     the
      class, (3) the claims or defenses of the representative parties                     are
      typical of the claims or defenses of the class, and (4)                             the
      representative parties will fairly and adequately protect                           the
      interests of the class.

Fed.R.Civ.P. 23(a); see also General Telephone Co. of Southwest v. Falcon,
457 U.S. 147, 156 (1982).          A class representative "must be part of the
class and 'possess the same interest and suffer the same injury' as the
class members."      Id. (citations omitted).

      The   district      court   never   discussed        in   its   initial    denial    of
certification, or on reconsideration, whether the proposed class satisfied
the elements of numerosity, commonality of legal or factual questions, and
fair and adequate representation.          In its ruling on the request it noted
that every claim except for Alpern's omissions claim had been dismissed,
and   the   denial   of   reconsideration       of   the    certification       request   was
presumably based on the dismissal of all claims.

      Dismissal of Alpern's claims must be reevaluated in light of the
evidence submitted for reconsideration.9             The district court did not cite
any authority to support its finding that Alpern's claims were not typical
of the class claims under Rule 23(a)(3).               Its only explanation in the
initial denial order for its ruling was that "Alpern did not make any
UtiliCorp stock purchases on the open market" during the relevant period.

      Typicality under Rule 23(a)(3) means that there are "other members
of the class who have the same or similar grievances as the plaintiff."
Donaldson v. Pillsbury Co., 554 F.2d 825, 830 (8th Cir.), cert. denied, 434
U.S. 856 (1977).     The burden is "fairly

      9
      Since a class representative must be part of the class,
Miller cannot represent the class because his claim was properly
dismissed.

                                           26
easily met so long as other class members have claims similar to the named
plaintiff."   DeBoer, 64 F.3d at 1174.          Factual variations in the individual
claims will not normally preclude class certification if the claim arises
from the same event or course of conduct as the class claims, and gives
rise to the same legal or remedial theory.             Donaldson, 554 F.2d at 831;
see, e.g., DeBoer, 64 F.3d at 1174-75 (typicality requirement satisfied
even though class members held different mortgage instruments but sought
same form of relief); accord Hoxworth v. Blinder, Robinson & Co., Inc., 980
F.2d 912, 923 (3rd Cir. 1992) (affirming over typicality objections a class
of securities investors who had purchased or sold any one of twenty-one
securities during a certain period);           see generally 1 Herbert B. Newberg,
Newberg on Class Actions:          A Manual for Group Litigation at Federal and
State Levels § 3.13, at 167 (2d ed. 1985) (claim typical if it challenges
the same unlawful conduct affecting named plaintiff and putative class).

     Alpern's participation in the DRIP plan does not render his claims
atypical of a class including open market purchasers.              Alpern alleges that
UtiliCorp's financial statements were misleading because it did not
disclose the misappropriation at Aquila until June 1992.               The same set of
events leading up to the June disclosure underlie the claims of the other
putative class members.         In addition, Alpern's claim invokes the same legal
theory -- that UtiliCorp violated § 10(b) and Rule 10b-5 by making
knowingly misleading statements or omissions prior to his stock purchases.

     Alpern's grievances are thus typical of the class claims because both
challenge UtiliCorp's actions and course of conduct with respect to the
Aquila misappropriation as violations of § 10(b) and Rule 10b-5.               The fact
that damage calculations might differ slightly for DRIP and open market
purchasers    is    a   minor    matter   in   comparison   with    these   fundamental
similarities.      See DeBoer, 64 F.3d at 1174; see also In re VMS Securities
Litigation,

                                           27
136 F.R.D. 466, 475-77 (N.D. Ill. 1991) (certifying global class of open
market and dividend reinvestment plan purchasers because defendants misled
all investors by painting an overly optimistic financial picture in
violation of § 10(b)); In re Lilco Securities Litigation, 111 F.R.D. 663,
673 (E.D.N.Y. 1986) (certifying class of all stock purchasers during
securities   period   which   included     a   dividend   reinvestment   plan
representative).

     UtiliCorp suggests that Alpern is atypical because a presumption of
reliance on the integrity of the market price does not apply in his case.
The case UtiliCorp cites in support, In re Bank of Boston Corp. Securities
Litigation, 762 F. Supp. 1525, 1533 (D.Mass. 1991), involved a passive
dividend reinvestment plan investor who joined out of convenience.         In
contrast, Alpern testified in deposition that he reviewed UtiliCorp's
quarterly and annual reports in order to decide whether to reinvest in
UtiliCorp's stock.    He also stated that he joined the DRIP plan partly
because he would receive a discount from the market price, which indicates
at least some reliance on the integrity of that price.    Since all investors
have a profit incentive to pay attention to issuers' disclosures, as the
Supreme Court has explained, it is "hard to imagine that there ever is a
buyer or seller who does not rely on market integrity."      Basic Inc., 485
U.S. at 246-47 (citation omitted).

     The district court abused its discretion in denying certification of
the § 10(b) and Rule 10b-5 class for the reasons on which it relied and in
denying the motion for reconsideration.        On remand, the district court
should consider the requirements of Rule 23(a) in light of the evidence in
the record, including that submitted for reconsideration.

                                     IV.

     Finally, Alpern argues that the district court erred in

                                     28
granting UtiliCorp's motion for summary judgment as to his § 11 claim, and
in   denying certification of the § 11 subclass.           Alpern alleges he
reinvested his dividend payments in UtiliCorp common stock seven times
between September 12, 1990 and March 12, 1992, based on UtiliCorp's
September 4, 1990 DRIP prospectus and subsequent financial updates.       He
contends that these UtiliCorp statements were false and misleading, in
violation of Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k,
because they did not disclose the misappropriations.       The district court
granted summary judgment in favor of UtiliCorp after determining that
Alpern could not recover any statutory damages.      Since the § 11 claims
raised on behalf of Alpern and the subclass had been dismissed, the court
also held that the appellants' motion for certification of a subclass was
moot, and later denied reconsideration of the certification order.

      As noted, Rule 56(c) provides that summary judgment is appropriate
if "the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show 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).   A grant of summary
judgment is reviewed de novo with all inferences from the evidence drawn
in favor of the nonmoving party.     See Reich v. ConAgra, Inc., 987 F.2d
1357, 1359 (8th Cir. 1993).     Summary judgment is inappropriate "[i]f
reasonable minds could differ as to the import of the evidence."    Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

      Section 11 of the 1933 Securities Act provides for recovery of
damages from certain issuers of registered securities when a purchaser
relies on false or misleading information in a registration statement.    15
U.S.C. § 77k(a); Herman & MacLean v. Huddleston, 459 U.S. 375, 381 (1983).
Misstatements in the DRIP prospectus can be actionable under § 11 because
the prospectus was

                                     29
incorporated by UtiliCorp's August 1990 Registration Statement.   See In re
AnnTaylor Stores Securities Litigation, 807 F. Supp. 990, 993 (S.D.N.Y.
1992).    A claim under § 11 does not require proof of reliance, causation,
or scienter, but only materiality and damages.   See Ross v. Warner, No. 77
CIV. 243, 1980 WL 1474, at *7 (D.C.N.Y. Dec. 11, 1980).

     Damages are measured according to one of three formulas specified in
§ 11(e).   The relevant measure of damages for Alpern's claim is contained
within the following provision:

     The suit authorized under subsection (a) of this section may be to
     recover such damages as shall represent the difference between the
     amount paid for the security (not exceeding the price at which the
     security was offered to the public) and (1) the value thereof as of
     the time such suit was brought. . . .

15 U.S.C. § 77k(e) (emphasis added).10

     Since Alpern still possesses his stock, he can recover damages under
§ 11(e)(1) only if his purchase price was higher than the security's value
"as of the time such suit was brought."    Id.   The parties disagree as to
which date should determine "the time such suit was brought."

     UtiliCorp notes that the only suit mentioned in § 11(e) is "the suit
authorized under subsection (a)" of § 11, 15 U.S.C. § 77k(a), which
provides a cause of action for a misleading registration statement.      It
therefore argues that the district court correctly chose the date of August
6, 1992, because that is when Alpern added a claim authorized by § 11(a)
to his complaint.   Since the price of UtiliCorp stock on August 6, 1992 was
$27.25 per share, and the highest price Alpern paid was $26.885 per share,

     10
      The other two measures of damages provided apply when the
security has been sold, either before or after the action is
filed. 15 U.S.C. § 77k(e).

                                     30
Alpern would not have suffered any statutory damages if the "time such suit
was brought" refers to August 6.

     Alpern responds that his § 11 claim relates back, under Fed.R.Civ.P.
15(c)(2), to the date on which his complaint was filed on June 17, 1992.
He also argues that UtiliCorp's theory would encourage a plaintiff to
"damage shop" by waiting to file an independent § 11 claim after the stock
price drops further.   The statute must therefore refer to the date when the
securities action was commenced, not when an amended complaint was filed.
The relevant date for measuring his damages is accordingly June 17, 1992,
the date he filed his initial complaint, alleging securities violations
under § 10(b) and Rule 10b-5.     Although the value of UtiliCorp stock on
June 17, 1992 is not clearly stated in the record, the price per share was
$22.88 on June 16, 1992.

     The meaning of the term "the time such suit was brought" must be
examined first in light of the statutory language.   See Landreth Timber Co.
v. Landreth, 471 U.S. 681, 685 (1985).     Section 11(e) specifically sets
forth the method of calculating damages in every action brought under § 11,
see McMahan & Co. v. Wherehouse Entertainment, Inc., 65 F.3d 1044, 1048 (2d
Cir. 1995), but it does not define "the time such suit was brought."11

     UtiliCorp has not cited any case which has held that "the time such
suit was brought" means the date an individual § 11 claim is filed, but
there are cases which touch on the triggering filing date for measuring
damages under § 11(e)(1).     See, e.g., In re Fortune Systems Securities
Litigation, 680 F. Supp. 1360, 1369

     11
      The legislative history also does not speak to what
Congress intended by "the time such suit was brought." The
current version of § 11(e) was enacted in the 1934 amendments to
the Securities Exchange Act of 1933. A 1934 House Report
provides several reasons for various amendments, but all concern
other provisions in § 11(e). See H.R. REP. NO. 1838, 73rd Cong.,
2d Sess. 41-42 (1934).

                                      31
(N.D.Cal. 1987) (measuring damages from date plaintiffs filed an earlier
securities action in state court); Grossman v. Waste Management, Inc., 589
F. Supp. 395, 415 (N.D.Ill. 1984) (measuring damages from date plaintiff
filed initial lawsuit with a § 11 claim that was consolidated with a later
§ 10(b) and Rule 10b-5 case); see also In re Worlds of Wonder Sec. Litig.,
814 F. Supp. 850, 866 (N.D. Cal. 1993), aff'd in part and rev'd in part on
other grounds, 35 F.3d 1407 (9th Cir. 1994).12

     A case which discusses the statutory commencement time is Beecher v.
Able, 435 F. Supp. 397 (S.D.N.Y. 1977).   The court there chose the date
that the first of three consolidated § 11 actions was filed as "the time
such suit was brought."     Id. at 402.    It explained that the entire
plaintiff class had been contemplated at the time the first action was
filed and that using that filing date could minimize date shopping in
future cases, thereby limiting multiple identical suits.   Id.

     Alpern argues that his § 11 damages may be calculated from the date
he filed his initial complaint based on the relation back doctrine of Rule
15(c)(2).   He reasons that because his § 11 claim arises from the same
misappropriations as his § 10(b) and Rule 10b-5 claim, and because
UtiliCorp had the same duty to disclose material facts in order to render
its financial statements not misleading, his amended complaint dates back
to the filing date of his initial complaint on June 17, 1992.    UtiliCorp
responds that the district court properly concluded that Rule 15(c)(2) has
no bearing on this issue because it would only permit relation back of

     12
      The § 11 issue in In re Worlds of Wonder related to a loss
causation defense on which the circuit court reversed. 35 F.3d
at 1421-23. In its § 11 discussion the district court had stated
in passing that the measure of damages is "the difference between
the amount paid for the security and its price at either the time
it was sold or the date the Section 11 claim was filed." 814 F.
Supp. at 866. There was no discussion about the meaning of "the
time such suit was brought."

                                   32
the § 11 claim for statute of limitations purposes.

      Fed.R.Civ.P. 15(c)(2) provides that an amended complaint relates back
to the date of the original complaint where "the claim or defense asserted
in   the   amended   pleading   arose   out    of   the    conduct,   transaction,      or
occurrence set forth or attempted to be set forth in the original
pleading."   The basic inquiry is whether the amended complaint is related
to the general fact situation alleged in the original pleading.                      In re
Bellanca Aircraft Corp., 850 F.2d 1275, 1283 (8th Cir. 1988).

      Since the purpose of Rule 15(c) is to permit cases to be decided on
their merits, see Gridley v. Cunningham, 550 F.2d 551, 553 (8th Cir. 1977),
it has been liberally construed.          Thus, relation back has been permitted
of amendments that change the legal theory of the action, see, e.g.,
Donnelly v. Yellow Freight System, Inc., 874 F.2d 402 (7th Cir. 1989),
aff'd on other grounds, 494 U.S. 280 (1990), add other claims arising out
of the same transaction or occurrence, see, e.g., Federal Deposit Ins.
Corp. v. Bennett, 898 F.2d 477 (5th Cir. 1990), or increase the amount of
damages claimed.      See, e.g., Wm. T. Burton, Inc. v. Reed Roller Bit Co.,
214 F. Supp. 84 (W.D.La. 1963).

      Although    the   relation   back    doctrine       is   typically   applied    with
reference to statutes of limitations, courts have utilized the concept for
other purposes.      See, e.g., Hamilton v. 1st Source Bank, 895 F.2d 159, 161
(4th Cir.) (to measure back pay), rev'd on other grounds, 928 F.2d 86
(1990) (en banc);13 Sunkyong Intern. v.

      13
      In Hamilton, the plaintiff filed an initial complaint
alleging discriminatory discharge because of age, and then
amended it some three months later to add a claim of pay
discrimination based on evidence disclosed during pretrial
discovery. 895 F.2d at 161. Under the federal age
discrimination statute, Hamilton's recovery of back pay for a
nonwillful violation of pay discrimination was limited to two
years prior to the filing of a complaint. Id. at 165. In the
original panel opinion, the Fourth
Circuit chose the date Hamilton filed his initial complaint for
purposes of determining the date when the back pay period would
begin to run. Both claims arose out of the same allegedly

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Anderson Land & Livestock Co., 828 F.2d 1245, 1252-53 (8th Cir. 1987) (to
cure   defect    in   service   of   process); Fifty   Associates   v.   Prudential
Insurance Co. of America, 446 F.2d 1187, 1193 (9th Cir. 1970) (to confer
retroactive jurisdiction on the district court); see also 3 J. Moore,
Moore's Federal Practice ¶ 15.15[5] (1996) (collecting cases).

       Alpern's § 11 claim, added in the amended complaint, was based on the
same   transactions, occurrences, and conduct alleged in the original
complaint.      Alpern's first complaint alleged § 10(b) and Rule 10b-5
violations based on materially misleading financial statements beginning
in January 1992.      Shortly thereafter, UtiliCorp itself filed a complaint
against Marquez and Stegall, claiming that they began embezzling company
funds from September 1, 1990.        When Alpern amended his complaint within two
months of filing his initial pleading, he enlarged the class period to
encompass the period from September 1990.         Alpern's § 11 claim was based
on the same misappropriations alleged in the original complaint, however.
Both of his claims asserted that he was unaware of the misappropriations
and that UtiliCorp artificially inflated its stock prices by disseminating
materially misleading statements and/or omitting to state material facts
necessary to make its statements not misleading.

       Other considerations also favor the relation back of the amended
complaint.    There is no indication of date shopping, the concern identified
in Beecher. 435 F. Supp. at 402.     Nothing suggests that Alpern sought to
capitalize on a further drop in stock prices by waiting for a more
favorable date to file his § 11

discriminatory employer practices, and discovery of the pay
difference was no surprise to the defendant bank because it knew
about its own pay scales. Id.

                                          34
claim.    Rather, he amended his claim less than two months after filing his
initial complaint based on additional information discovered about the same
underlying occurrences.   Since Alpern was a DRIP plan purchaser, UtiliCorp
also     should not have been surprised that Alpern sought to hold it
accountable for its statements related to the DRIP prospectus.     See In re
Bellanca Aircraft Corp., 850 F.2d at 1283.      Finally, it is unlikely that
UtiliCorp's defense on the merits will be unfairly prejudiced, and it may
also assert reasonable inquiry and good faith belief defenses against a
§ 11 claim.    See Versyss Inc. v. Coopers and Lybrand, 982 F.2d 653, 655
(1st Cir. 1992), cert. denied, 508 U.S. 974 (1993).

       Under the circumstances Alpern's amended complaint relates back to
the filing date of the original complaint under Rule 15(c)(2).    That date,
June 17, 1992, is "the time such suit was brought" for purposes of
calculating damages under § 11(e)(1).      Since Alpern does not indicate the
value of UtiliCorp stock on that date, the district court will need to
determine the value of the stock on June 17, 1992.     If that value is less
than the purchase price of $26.885 per share, Alpern may be entitled to
recover § 11 damages and should be permitted to proceed with that claim.
The district court will also need to reconsider certification of the § 11
subclass.

                                      V.

       In summary, we affirm in part and reverse in part.       The district
court's denial of reconsideration and grant of summary judgment on Miller's
§ 10(b) and Rule 10b-5 claim are affirmed.     The grant of summary judgment
on Alpern's claims, the denial of certification of the class and subclass,
and the denial of the related motions for reconsideration are reversed.
The case is remanded for further proceedings consistent with this opinion.

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                 A true copy.

                       Attest:

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

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