Fisher v. Samuels

• Decision Date: 14 June 1988
• Docket Number: No. 84 C 3385.,84 C 3385.
• Citation: 691 F. Supp. 63
• Parties: Barry FISHER, Kenneth Fisher, Lloyd Berhoff, Marvin Kaufmann and Richard Goldstein, Plaintiffs, v. Howard B. SAMUELS; Eriador Drilling Partners, an Illinois partnership; Caliber Properties, Ltd., an Illinois corporation; and Jubilee Energy Corporation, a Texas corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

691 F. Supp. 63

Barry FISHER, Kenneth Fisher, Lloyd Berhoff, Marvin Kaufmann and Richard Goldstein, Plaintiffs, v. Howard B. SAMUELS; Eriador Drilling Partners, an Illinois partnership; Caliber Properties, Ltd., an Illinois corporation; and Jubilee Energy Corporation, a Texas corporation, Defendants.

No. 84 C 3385.

United States District Court, N.D. Illinois, E.D.

May 2, 1988.

On Motion for Reconsideration June 14, 1988.

COPYRIGHT MATERIAL OMITTED

James S. Montana, Jr., John A. Dienner, III, Pierce, Lydon, Griffin & Montana, Chicago, Ill., for plaintiffs.

Alan S. Rutkoff, Howard L. Kastel, McDermott, Will & Emery, Norman S. Lynn, Warren E. Silver, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ANN C. WILLIAMS, District Judge.

On October 3, 1984, the plaintiffs Barry Fisher, Kenneth Fisher, Lloyd Berhoff, Richard Goldstein, and Marvin Kaufman filed a twelve count amended complaint against the defendants Howard Samuels, Eriador Drilling Partners ("Eriador"), Caliber Properties, Ltd. ("Caliber"), and Jubilee Energy Corporation ("Jubilee").¹ The amended complaint alleges causes of action under the federal securities laws, RICO and state law. The defendants have moved for summary judgment on all counts. For the following reasons, the court grants the motion in part and denies it in part.

I Rule 56 Summary Judgment

Summary judgment pursuant to Federal Rule of Civil Procedure 56(c) is appropriate when the moving party uses the

pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, to show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Fed.R.Civ.P. 56(c). A material fact is one that "must be outcome determinative under the applicable law." Big O Tire Dealers, Inc. v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir.1984); See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (substantive law determines material facts); Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.) (en banc), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983). A genuine dispute about a material fact arises when "the evidence is such that a reasonable jury could return a verdict for that party." Anderson, 477 U.S. at 251, 106 S.Ct. at 2511.

After the movant has made a properly supported summary judgment motion, "the nonmovant does have the burden of setting forth specific facts showing the existence of a genuine issue of fact for trial." Shlay v. Montgomery, 802 F.2d 918, 920 (7th Cir. 1986). The nonmovant may not rely on the allegations or denials in its pleadings to establish a genuine issue of fact. See Fed. R.Civ.P. 56(e). Furthermore, summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). Finally, "the trial judge must accept as true the nonmovant's evidence, must draw all legitimate inferences in the nonmovant's favor, and must not weigh the evidence on the credibility of witnesses." Valentine v. Joliet Township High School District, 802 F.2d 981, 986 (7th Cir.1986).

II Factual Background

The facts as alleged in the amended complaint are as follows. In late 1981, the defendant Samuels solicited the plaintiffs to invest in oil and gas production for the purpose of receiving current tax benefits as well as future income. Samuels, who was acting individually and as an agent of Caliber, made several representations that induced the plaintiffs to invest in Eriador. Specifically, Samuels represented "that the partnership funds would not be invested in a few wells but would be spread out among many." Amended Complaint at 4, ¶ 12. The defendants' prospectus further reinforced the above representation. The defendants also represented that Eriador's funds would only be invested in oil and gas wells in Texas and New Mexico. The plaintiffs relied on these representations when making their decisions to invest. Notwithstanding their representations, the defendants invested in only six wells, four of which were in Oklahoma. In addition, the defendants invested over eighty percent of Eriador's funds in only two wells. Finally, the defendants provided the plaintiffs with untrue and deceptive reports during the course of the investment. These reports failed to reflect facts that were contrary to representations that the defendants had previously made to the plaintiffs.

General Rules 12(e) and (f) of the Northern District of Illinois provide further instructions for any party making or opposing a Rule 56 motion for summary judgment. General Rule 12(e) provides that the movant must file a statement of undisputed material facts with its motion. General Rule 12(f) states that the opposing party must file "a concise `statement of genuine issues' setting forth all material facts as to which it is contended there exists a genuine issue necessary to be litigated...." Failure to provide a Rule 12(f) statement will result in the admission of all of the material facts in the movant's Rule 12(e) statement. N.D.Ill.General R. 12(f); See also ACC Chemical Co., Inc. v. Old Dutch Materials Co., 633 F.Supp. 703, 704 (N.D.Ill. 1986) (Shadur, J.). In this case, the defendants filed a Rule 12(e) statement and the plaintiffs neglected to file a Rule 12(f) statement. Consequently, the material facts set forth in the defendants' Rule 12(e) statement are deemed admitted.

The material facts as set forth in the defendants' Rule 12(e) statement are as follows:

1). Prior to making his investment, each plaintiff received an Eriador investment memorandum and a copy of the Eriador Limited Partnership Agreement.

Amended Complaint at ¶ 14 & Exhibit A; Berhoff Deposition at 153; B. Fisher Deposition at 8-9, 19-20; K. Fisher Deposition at 76-77, 81-88.

2). Each plaintiff also signed an Eriador subscription agreement prior to investing in Eriador. By signing this agreement, each plaintiff represented that he had carefully read and understood the Eriador investment memorandum and partnership agreement, that no representations or warranties had been made to him other than those in the investment memorandum, that he was an experienced investor who was capable of evaluating Eriador and the risks associated with investments in the partnership, and that he understood that investments in Eriador were speculative and involved a high degree of risk.

Defendants' Deposition Exhibits 4, 8, 15.

3). At the time of investment, each plaintiff knew that Eriador could invest in wells located anywhere in the United States. Each plaintiff also knew that the number of wells that Eriador would invest in was uncertain and would depend on, inter alia, the amount of money raised by Eriador.

Amended Complaint at Exhibit A at 17.

4). At the time of investment each plaintiff also knew that Eriador's general partners had complete discretion with respect to Eriador's business activities.

Amended Complaint at Exhibit A.

5). The defendants made no representations to the plaintiffs Lloyd Berhoff and Kenneth Fisher with respect to the number of wells that Eriador would drill. Berhoff Deposition at 158; K. Fisher Deposition at 30, 39, 75-78, 85-88.

6). The defendant Samuels dealt with the plaintiffs at "arms length" and never acted or served as an investment advisor to any plaintiff.

Berhoff Deposition at 118; B. Fisher Deposition at 18; K. Fisher Deposition at 61.

7). Each plaintiff received written status reports concerning Eriador on or around the following dates: January 12, 1982, February 8, 1982, April 13, 1982, May 24, 1982, June 10, 1982, July 19, 1982, September 10, 1982, October 29, 1982, November 2, 1982, January 6, 1983, February 22, 1983, and March 25, 1983.

Samuel's Declaration at ¶¶ 2-14 & Exhibits A-M.

8). By February, 1982, each plaintiff knew or had constructive knowledge that Eriador had invested in a total of six wells, four of which were in Oklahoma.

Samuels Declaration at Exhibit A and B.

9). In early March, 1982, each plaintiff received an audited financial statement for Eriador for the year ending December 31, 1981.

Samuels Declaration at ¶ 15 and Exhibit O.

10). By March, 1983, each plaintiff knew or had constructive knowledge of the total amount of funds raised by Eriador and that all or substantially all of these funds had been spent.

Samuels Declaration at Exhibit O.

11). The plaintiff Berhoff would not have invested in Eriador had he known that the partnership contemplated drilling activities in Oklahoma. Berhoff raised questions with respect to the status of his investment in Eriador at or shortly after the time that he obtained knowledge that the partnership had conducted drilling activities in Oklahoma. Berhoff did not receive satisfactory responses from the defendants after he raised the above questions.

Berhoff Deposition at 99, 161, 192.

12). The plaintiff Barry Fisher believed that Eriador was conducting operations in a manner that was inconsistent with the proposed activities of the partnership as described in the investment memorandum when he learned that the partnership was conducting drilling activities in Oklahoma. The drilling in Oklahoma caused Fisher to raise questions and concerns with respect to his investment in Eriador.

B. Fisher Deposition at 71-73.

13). Prior to February, 1982, the plaintiff Kenneth Fisher suspected something was amiss with respect to his Eriador investment. In addition, both Fishers confronted Samuels with what they believed to be the falsity of pre-investment representations that were made to them concerning the number of wells that the partnership would invest in.

K. Fisher Deposition at 30-31.

14). On or about October 7, 1982, each plaintiff received a status report that,

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