INVESTORS EQUITY v. ROSENKRANTZ LYON & ROSS
Citation | 822 F. Supp. 436 |
Decision Date | 18 May 1993 |
Docket Number | No. 5:90-CV-43.,5:90-CV-43. |
Parties | INVESTORS EQUITY GROUP, a Michigan corporation, Plaintiff, v. ROSENKRANTZ LYON & ROSS, INC., a foreign corporation, Kamal Hughes, Universal Symetrics Corporation, a foreign corporation, Juris Mednis and Leslie Wicks, jointly and severally, Defendants. |
Court | U.S. District Court — Western District of Michigan |
Michael H. Perry, Iris K. Socolofsky, Fraser, Trebilcock, Davis & Foster, PC, Lansing, MI, for plaintiff.
Phillip J. Neuman, Jacob & Weingarten, PC, Troy, MI, Scott K. Nigro, Feinberg, Felzen & Nigro, New York City, Jerome F. Rock, Grosse Pointe, MI, for defendants.
Plaintiff Investors Equity Group, Inc. (IEG) filed this action seeking rescission of the sale of certain securities plaintiff purchased from the defendant Rosenkrantz, Lyon & Ross. This Court conducted a bench trial on February 9 and 10, 1993. On April 22, 1993, this Court issued an Opinion denying the plaintiff's claim for recovery. IEG filed a timely motion under Fed.R.Civ.P. 52(b) requesting this Court to Amend the Court's Findings/Make Additional Findings and Amend the Judgment.
In its April 22, 1993, Opinion, this Court found that the defendants had not established the elements of their in pari delicto defense. However, the Court also found that the defendants' violation of the Michigan Uniform Securities Act was de minimis. The finding that the defendants' violations were de minimis was a legal conclusion.
In its motion to amend/make additional findings, IEG requests the Court to make these findings:
As to proposed finding one set forth above, plaintiff contends that this Court is "duty bound" to strictly enforce the provisions of § 410 of the Uniform Securities Act. M.C.L. § 451.810(a); M.S.A. § 19.776(410)(a). Section 410 creates liability for persons who offer or sell securities in violation of section 301 of the Act.1 In its Opinion of April 22, 1993, 822 F.Supp. 429, this Court found that at the time plaintiff purchased the securities they were exempt from registration pursuant to M.C.L. § 451.802(b)(9); M.S.A. § 19.776(402)(b)(9). The plaintiff argues that even though a securities transaction is an exempt transaction when made, the transaction loses its exempt status retroactively if the broker (or issuer) does not timely file a confidential report of offering with the Michigan Department of Commerce.
First of all, that is not what the statute says. The statute explains how a transaction becomes exempt; it does not state how the exemption is lost. This Court's analysis, as contained in its April 22, 1993 Opinion, supports Judge Hillman's common sense approach. Judge Hillman's prior opinion constitutes the "law of the case."
In addition, Judge DeMascio, in an oral opinion, held that the failure to file the confidential report of offering did not permit a buyer of the securities to rescind the sale. Kelly v. Oklahoma Land and Exploration 1980 Drilling Program, Ltd., No. 83-cv-2890-DR (E.D.Mich. July 6, 1984). Judge DeMascio's decision, as pointed out by the plaintiff, certainly is not binding upon this Court. However, as I stated in the April 22 Opinion, Kelly is instructive.2 It is another common sense interpretation of the statute.
Plaintiff's proposed amendment number two asks the Court to find that defendant admitted IEG is entitled to rescind the Universal Symetrics' investment. In support of its position, plaintiff cites Defendants' Proposed Findings of Fact which state:
If Plaintiff had demanded rescission when he first learned that the Confidential Report of Offering was not filed, Plaintiff would have been entitled to the return of his consideration, $250,000 plus six percent (6%) interest.
Defendants' Proposed Findings of Fact and Conclusions of Law, ¶ 32, p. 5.
The facts as established during trial clearly reveal that plaintiff did not demand rescission when it first learned that the report of offering had not been filed. Indeed, plaintiff had its lawyers draft a letter requesting rescission but waited to send the letter until Universal defaulted on the loan. Despite the plaintiff's questionable conduct, this Court did not accept the defendant's in pari delicto defense. The Court rejected the "timing" argument. In essence, plaintiff "won" under that particular theory. It lost, however, under the de minimis theory which has nothing to do with the issue of when the plaintiff made its demand...
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Investors Equity Group, Inc. v. Universal Symetrics Corp.
...of in pari delicto, were not liable for a de minimis violation of the Act. 822 F.Supp. 429, 434, 436 (W.D.Mich.), modified, 822 F.Supp. 436 (W.D.Mich.1993). Plaintiff seeks relief from two securities transactions with defendants because the defendants neither registered the securities nor c......