Ackerberg v. Johnson
| Decision Date | 28 December 1989 |
| Docket Number | 88-5539 and 89-5093,Nos. 88-5538,s. 88-5538 |
| Citation | 892 F.2d 1328 |
| Parties | , Fed. Sec. L. Rep. P 94,850 Norman J. ACKERBERG, Appellee, v. Clark E. JOHNSON, Jr., Roger G. Lindquist, Gary M. Petrucci, R. Hunt Greene, Piper, Jaffray & Hopwood, Inc., Appellants. Norman J. ACKERBERG, Appellee, v. Clark E. JOHNSON, Jr., Appellant. Roger G. Lindquist, Gary M. Petrucci, R. Hunt Greene, Piper, Jaffray & Hopwood, Inc. Norman J. ACKERBERG, Appellant, v. Clark E. JOHNSON, Jr.; Roger G. Lindquist; Gary M. Petrucci; R. Hunt Greene; and Piper, Jaffray & Hopwood, Inc., Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
W. Michael Drake, Minneapolis, Minn., for Lindquist.
Curtis D. Forslund, Minneapolis, Minn., for Johnson.
Floyd E. Siefferman, Jr., Minneapolis, Minn., for Ackerberg.
Before FAGG and BEAM, Circuit Judges, and HENLEY, Senior Circuit Judge.
This appeal arises out of the sale of 16,500 unregistered shares of Vertimag Systems Corporation stock for $99,000. Norman J. Ackerberg brought suit against Piper, Jaffray & Hopwood and several of its employees (the PJH defendants), as well as against Clark E. Johnson, Jr., the chairman of the board of Vertimag, from whom Ackerberg bought most of his shares. The complaint set forth nine counts, alleging violations of the Securities Act of 1933, 15 U.S.C. §§ 77a-77aa (1988), the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a-78kk (1988), the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (1982) and various state securities laws. While many of these claims were ordered to arbitration and others dismissed, the district court refused to compel arbitration of the 1933 Act claims, and entered summary judgment in part of them in Ackerberg's favor. All defendants appeal from the order of summary judgment, and Ackerberg cross-appeals from the district court's calculation of damages. We reverse.
Ackerberg bought the Vertimag shares in March of 1984. Ackerberg bought 12,500 shares from Johnson, who, in addition to being the chairman of the board, was one of the founders of Vertimag and its largest individual stockholder. Ackerberg bought the remaining 4,000 shares from Roger Lindquist, a vice president at Piper, Jaffray & Hopwood, and the owner of at least 50,000 shares of Vertimag. Lindquist's shares were held by the Roger Lindquist Partnership, an entity organized to invest in Vertimag and in other securities. Lindquist's partners were Gary Petrucci, a senior vice president at PJH who handled Ackerberg's account, and James Vieberg, another registered representative at PJH. Ackerberg paid $6.00 per share for 16,500 shares, and paid PJH a commission of $2,062.
The Vertimag transaction began in October of 1983, when Vertimag proposed a private placement of $10,000,000 in securities, to be sold at $6.00 to $6.50 per share. In December of 1983, Ackerberg said that if he could invest around $100,000, he would be interested. Petrucci then gave Ackerberg a ninety-nine page private placement memorandum which contained detailed information about Vertimag.
On March 17, 1984, Ackerberg signed a subscription agreement, prepared by counsel for Vertimag. Ackerberg testified by deposition that he read and understood this document. Vertimag's counsel stressed to Ackerberg that no sale could be made without the subscription agreement, which agreement informed Ackerberg that the Vertimag securities were unregistered and not readily transferable. Specifically, the agreement provided, in part, that:
2. The undersigned acknowledges and represents as follows:
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(e) That the undersigned has been given access to full and complete information regarding Vertimag....
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(g) That ... the Shares have not been registered under the Securities Act of 1933 and, therefore, cannot be sold unless they are subsequently registered under said Act or an exemption from such registration is available, (iii) there is presently no public market for the Securities and the undersigned may not be able to liquidate the investment ... and (iv) the transferability of the Securities is restricted....
3. The undersigned has been advised that the Securities are not being registered under the Securities Act of 1933 or the relevant state Securities laws and are being sold pursuant to exemptions from such Act and laws; and that your reliance upon such exemptions is predicted [sic] in part on the undersigned's representations to you as contained herein.
Ackerberg also represented in the subscription agreement that his yearly income was in excess of $200,000, that his net worth was over $1,000,000, and that his liquid assets exceeded $500,000. Indeed, Ackerberg's account at PJH alone totaled around $500,000.
Ackerberg began this litigation in March of 1985. As indicated, Ackerberg's complaint contained nine counts against Johnson, PJH, and its employees Lindquist, Petrucci, and R. Hunt Greene, who was also involved in the sale of Vertimag to Ackerberg. Count one was based on § 12(1), count two on § 12(2), and count three on § 17(a) of the 1933 Act. Count four was based on § 10(b) of the Act of 1934. Counts five through eight were based on common law fraud, breach of contract, and violation of the Minnesota Blue Sky laws. Count nine alleged RICO violations. The third count was dismissed by the district court on June 11, 1985, and the sixth count dismissed as to Johnson on March 14, 1986. In the order of March 14, 1986, the district court also refused to dismiss the 1933 Act claims against Johnson, finding that Johnson had not proven entitlement to an exemption from registration under the Act. Counts four through nine against the PJH defendants were ordered to arbitration, leaving only the 1933 Act claims as to them.
On August 23, 1988, the district court entered summary judgment in favor of Ackerberg on the § 12(1) claim and refused to compel arbitration of either remaining 1933 Act claim. Johnson's motion for summary judgment on all claims remaining against him was denied. The district court denied the motions of defendants for reconsideration on November 4, 1988.
The district court's order of November 4, 1988, entered pursuant to Ackerberg's motion under Rule 54(b) of the Federal Rules of Civil Procedure, was a final judgment as to Count I of the amended complaint. Rule 54(b) allows the entry of a final judgment "as to one or more but fewer than all of the claims or parties" in a case involving multiple claims and multiple parties. The court's entry of judgment on Ackerberg's § 12(1) claim leaves pending the § 12(2) claim against Johnson and the PJH defendants, as well as claims four, five, seven, eight and nine against Johnson. The district court could enter a final judgment pursuant to Rule 54(b) only by determining that "there is no just reason for delay" within the meaning of the Rule. The court stated in its order of November 4, 1988, that a final judgment under Rule 54(b) was appropriate because "plaintiff's counsel has represented that by the entry of such judgment, this matter may be effectively terminated, and because there is no just reason for delay in the entry of an order for judgment." Order, Civ. No. 4-87-159, Nov. 4, 1988, at 7.
On January 10, 1989, the district court calculated damages on the § 12(1) claim by using a rescissionary formula which awarded Ackerberg the difference between the $6.00 per share he paid and $2.75 per share, the amount contemplated in a private placement proposed for May of 1984. Ackerberg was thus awarded damages of $14,932.70 against the PJH defendants, and $46,716.07 against Johnson. The district court denied Ackerberg's motion to amend the judgment.
The PJH defendants and Johnson appeal from the order of November 4, 1988, which order denied reconsideration of the final judgment entered, and from the court's order refusing to compel arbitration of the 1933 Securities Act claims. On cross-appeal, Ackerberg appeals from the order denying his motion to recalculate damages.
We begin with the order holding that Ackerberg's 1933 Act claims were not arbitrable under Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953). The PJH defendants argued to the district court that Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct 2332, 96 L.Ed.2d 185 (1987), which held that claims arising under the Act of 1934 are arbitrable, should also apply to claims arising under the 1933 Act. Defendants argued that McMahon effectively overruled Wilko, since the Court's rationale could be applied to 1933 Act claims as well as to 1934 Act claims. Indeed, after McMahon, many courts did find that 1933 Act claims were arbitrable for that reason. See Rodriguez De Quijas v. Shearson/American Express, Inc., --- U.S. ----, 109 S.Ct. 1917, 1923 n. 1, 104 L.Ed.2d 526 (1989) (Stevens, J., dissenting). See also McMahon, 482 U.S. at 243, 107 S.Ct. at 2346 (Blackmun, J., dissenting) (). The district court in this case, however, agreed with the Second Circuit that "the [Supreme] Court ... did not overrule [Wilko ] and it continues to govern us." Order, Civ. No. 4-87-159, Aug. 23, 1988, at 7 (quoting Chang v. Lin, 824 F.2d 219, 222 (2d Cir.1987)). Thus, the district court refused to compel arbitration of the 1933 Act claims.
While, at the time, the district court was correct in declining to find that Wilko had been tacitly overruled, it is now clear that Wilko is no longer the law. In Rodriguez De Quijas, the Court noted that Wilko was based largely on a distrust of arbitration, and...
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