815 F.2d 1265 (9th Cir. 1987), 86-3544, Durning v. First Boston Corp.

Docket Nº:86-3544.
Citation:815 F.2d 1265
Party Name:Marvin B. DURNING and Jean C. Durning, husband and wife, on behalf of themselves and all persons similarly situated, Plaintiffs-Appellants, v. The FIRST BOSTON CORPORATION; Citibank, N.A.; First Interstate Bank of Casper, N.A.; Wyoming Community Development Authority, Defendants-Appellees.
Case Date:April 27, 1987
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1265

815 F.2d 1265 (9th Cir. 1987)

Marvin B. DURNING and Jean C. Durning, husband and wife, on

behalf of themselves and all persons similarly

situated, Plaintiffs-Appellants,

v.

The FIRST BOSTON CORPORATION; Citibank, N.A.; First

Interstate Bank of Casper, N.A.; Wyoming

Community Development Authority,

Defendants-Appellees.

No. 86-3544.

United States Court of Appeals, Ninth Circuit

April 27, 1987

        Argued and Submitted Nov. 12, 1986.

Page 1266

        Dexter A. Washburn, Seattle, Wash., for plaintiffs-appellants.

        Paul L. Ahern, Jr., Seattle, Wash., for defendants-appellees.

        Appeal from the United States District Court for the Western District of Washington.

        Before TANG, SCHROEDER and NORRIS, Circuit Judges.

        TANG, Circuit Judge:

        The Durnings appeal the district court's dismissal of their securities fraud action for failure to state a claim upon which relief can be granted.

        The Durnings brought suit in United States District Court for the District of Washington pursuant to the jurisdictional provisions of the Securities Act of 1933, 15 U.S.C. Sec. 77v, and the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78aa, and under diversity jurisdiction pursuant to 28 U.S.C. Sec. 1332.

        The Durnings allege violations of federal and state securities laws, common law negligent misrepresentation, breach of contract, tortious breach of the covenant of good faith and fair dealing, breach of fiduciary duty, unjust enrichment, and violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Secs. 1961-68. The gravamen of their complaint is that the defendants, in connection with a bond issue, distributed an Official Statement, a disclosure document equivalent to a prospectus, that failed to inform investors that the bonds were redeemable prior to 1991. The Durnings attached several documents to the complaint, including a copy of the Official Statement, a description of the bonds by Moody's Investor's Service stating that the bonds were not callable before June 1, 1991, and a confirmation statement from Shearson/American Express describing the bonds as callable on June 1, 1991.

        All four defendants moved to dismiss under Fed.R.Civ.P. 12(b)(6) arguing that the Official Statement refutes the Durnings' allegations. The court ruled that "[w]hen the allegations of the complaint are refuted by an attached document, the Court need not accept the allegations as being true." Durning v. First Boston Corp., 627 F.Supp. 393, 395 (W.D.Wash.1986). The court held, as a matter of law, that the Official Statement is not ambiguous and informs the investors that the bonds were redeemable prior to June 1, 1991. Id. at 397.

        Because we find that the complaint alleges sufficient facts to state a claim which

Page 1267

are not, as a matter of law, refuted by the Official Statement, we reverse.

        FACTS

        This lawsuit arises out of a $75,000,000 issue of tax exempt single family mortgage revenue bonds by the Wyoming Community Development Authority ("Authority"). First Interstate Bank of Casper is the trustee for the bond issue. Citibank is the paying agent. First Boston Corporation is the lead underwriter for the syndicate which marketed the bonds.

        The Authority was created to provide financing for housing construction in Wyoming. The Authority used the bond proceeds to purchase mortgage loans on residential real property from financial institutions and made those loans available to home buyers at low interest rates. In December of 1981, the Authority sold the bonds to the underwriters, led by First Boston, for distribution to the public. The Durnings purchased four bonds from the first of two series issued. Each bond had a face value of $5,000 and a maturity date of June 1, 1996.

        The authority recalled $28,000,000 of bonds in June 1983 and another $4,000,000 in June 1985. One of Durnings' bonds was recalled in 1985. The Durnings allege that this resulted in the loss of $4,000 in interest payments and caused the value of their remaining three bonds to diminish in the secondary trading market.

        DISCUSSION

        We review de novo a dismissal pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Fort Vancouver Plywood Co. v. United States, 747 F.2d 547, 552 (9th Cir.1984). A complaint should not be dismissed under the rule "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); see also, Amfac Mortgage Corp. v. Arizona Mall of Tempe, Inc., 583 F.2d 426, 429-30 (9th Cir.1978). All allegations of material fact are taken as true and construed in the light...

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