644 F.2d 779 (8th Cir. 1981), 80-1701, Stokes v. Lokken

Docket Nº:80-1701.
Citation:644 F.2d 779
Party Name:Arthur L. STOKES, et al., Appellants, v. Lawrence LOKKEN and Henson & Tully, a partnership, Appellees.
Case Date:July 07, 1981
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 779

644 F.2d 779 (8th Cir. 1981)

Arthur L. STOKES, et al., Appellants,


Lawrence LOKKEN and Henson & Tully, a partnership, Appellees.

No. 80-1701.

United States Court of Appeals, Eighth Circuit

July 7, 1981

Submitted April 16, 1981.

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[Copyrighted Material Omitted]

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David G. Newhall, James P. McCarthy (argued), Minneapolis, Minn., for Arthur L. Stokes, et al.

James S. Simonson (argued), Susan L. Lentz, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., for Lawrence Lokken and Henson & Tully.

Before BRIGHT, HENLEY and ARNOLD, Circuit Judges.

ARNOLD, Circuit Judge.

This is an appeal from the entry of summary judgment by the District Court 1 in favor of Lawrence Lokken, a lawyer, and his former law firm, Henson & Tully (we will refer to these parties in the singular as "Lokken") on claims of negligent misrepresentation and aiding and abetting violations of federal and state securities laws. We affirm.

This action was brought against Continental Financial Corporation, Continental Coin Exchange, and Numisco Sales Company (referred to collectively as "CFC") on February 11, 1975. A class action against the same defendants had been commenced on January 25, 1975. A partial summary judgment was entered against CFC in the class action, based on a holding that CFC sold unregistered securities in violation of the Securities Act of 1933, 15 U.S.C. §§ 77a et seq. 2 Shortly thereafter, Lokken, an attorney for CFC, and Touche, Ross & Co., CFC's accountants, were added as parties to this action and the class action. The plaintiffs in this action alleged that Lokken and Touche, Ross had aided and abetted violations of federal and state securities laws through their dealings with CFC. Some discovery was had, and the deposition of Lokken was filed on May 18, 1977, before further discovery was suspended pending completion of CFC's bankruptcy proceedings. The bankruptcy proceedings were concluded on April 14, 1980, and motions for summary judgment by Lokken and Touche, Ross were filed on June 16, 1980. After a hearing on the motions in which oral arguments were heard, the District Court denied the Touche, Ross motion but granted summary judgment in favor of Lokken on July 3, 1980. So much of the order as dismissed the claim against Lokken was certified under Fed.R.Civ.P. 54(b) for immediate appeal.

Plaintiffs make two separate arguments on appeal. First, they argue that there are genuine issues of material fact, and therefore the entry of summary judgment was improper, as to the claims that Lokken aided and abetted violations of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5 (1975), and that Lokken aided and abetted violations of § 5 of the Securities

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Act of 1933, 15 U.S.C. § 77e. Second, we are told that summary judgment was improper as to certain claims under the Minnesota Securities Act and allegations based on common-law negligence and misrepresentation. For the reasons set out below, we reject both arguments.


CFC was engaged in the marketing of precious metals, including the sale of gold and silver on margin accounts. The specifics of CFC's marketing practices were examined by the District Court in Jenson v. Continental Fin. Corp., supra, and the margin transactions were held to constitute the sale of securities. This holding is not questioned by any of the parties to this appeal, and we accept it for present purposes.

Lokken's involvement with this suit arises out of CFC's request that Touche, Ross undertake an audit of CFC for the fiscal year ending August 31, 1973. In the course of conducting this audit, Touche, Ross sent a standard auditor's letter to Henson & Tully, because the firm had previously done some legal work for CFC. In response to this request Lokken sent a letter dated September 14, 1973, which noted the possibility of securities-law claims relating to the margin transactions, but gave the opinion that the margin transactions did not amount to the sale of securities. The relevant portion of the letter reads as follows:

Continental Coin Exchange Inc. sells coins in bulk in transactions which conceivably could be characterized as sales of securities and hence made in violation of federal and state securities laws. If the sales do constitute sales of a security, substantial liabilities to customers could arise. It is our opinion that the sales in question do not involve the sale of a security.

Although Lokken had previously performed some services of a limited nature for CFC, only the conduct associated...

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