Friedlander v. TROUTMAN, SANDERS, LOCKERMAN, ETC.

• Citation: 595 F. Supp. 1442
• Decision Date: 15 October 1984
• Docket Number: Civ. A. No. C84-208A.
• Parties: Herman FRIEDLANDER, individually on behalf of himself and all former minority common shareholders of Nimslo Technology, Inc., Plaintiff, v. TROUTMAN, SANDERS, LOCKERMAN & ASHMORE, Defendant.
• Court: U.S. District Court — Northern District of Georgia

595 F. Supp. 1442

Herman FRIEDLANDER, individually on behalf of himself and all former minority common shareholders of Nimslo Technology, Inc., Plaintiff, v. TROUTMAN, SANDERS, LOCKERMAN & ASHMORE, Defendant.

Civ. A. No. C84-208A.

United States District Court, N.D. Georgia, Atlanta Division.

October 15, 1984.

Henry A. Brachtl, New York City, Edward L. Greenblatt, Atlanta, Ga., for plaintiff.

John T. Marshall, Thomas S. Richey, Robert L. Connelly, Atlanta, Ga., for defendant.

ORDER

SHOOB, District Judge.

This is an action for alleged fraud by defendant in connection with the forced sale of stock owned by plaintiff. Defendant served as the law firm of certain defendants in a related case, Friedlander v. Nims, 571 F.Supp. 1188 (N.D.Ga.1983); plaintiff alleges that defendant participated in the fraudulent schemes of the defendants in the Nims case.¹ Count I asserts a claim for a violation of section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5; Count II asserts a claim under the Georgia Securities Act; and Count III asserts a state common-law claim.

Plaintiff has filed a motion "to simplify issues and to determine that a four-year statute of limitations is applicable to the case at bar." Defendant has filed a motion for summary judgment on the ground that Counts I and II are time-barred and that Count III fails to state a claim. Defendant has also moved to strike the affidavit of plaintiff filed in response to defendant's summary judgment motion.

As a preliminary matter, the Court notes that, although state practice allows motions to strike affidavits, see Malloy v. Cauley, 169 Ga.App. 623, 624-5, 314 S.E.2d 464 (1984), this Court does not entertain them. As Judge O'Kelley stated:

A motion to strike is only appropriately addressed toward matters contained in the pleadings, Fed.R.Civ.P. 12(f), and affidavits submitted in support of a motion are clearly not within that category. Regardless of the practice followed in other forums, this court does not sanction the use of a rule 12(f) motion for the advancement of objections to an affidavit filed in support of a motion. It is sufficient for the party opposing the motion to register its objection to the movant's affidavits by way of the material submitted in opposition to the motion. The court will then implicitly, if not explicitly, rule upon these objections in its consideration of the motion.

Smith v. Southeastern Stages, Inc., 479 F.Supp. 593, 594-5 (N.D.Ga.1977) (citations omitted). The same rule applies with regard to affidavits in opposition to a motion. See Best v. County of DeKalb, Civil Action No. C79-476A slip op. at 1 n. 1 (N.D.Ga. March 2, 1984) (Shoob, J.). The Court will therefore deny defendant's motion to strike.

FEDERAL SECURITIES CLAIM

The Court next addresses the issues raised by plaintiff's motion to simplify issues and defendant's motion for summary judgment. The questions, simply put, are whether a two-year or four-year limitations period applies and, if a two-year period applies, whether there is sufficient evidence of tolling to bar summary judgment for defendant. Defendant urges the Court to apply the two-year limitation created by the Georgia Securities Act to plaintiff's claim. Plaintiff argues that a four-year limitation, which governs state law actions for fraud and deceit, should apply instead.

A threshold issue is whether after Diamond v. Lamotte, 709 F.2d 1419 (11th Cir.1983), there is a uniform two-year limitations period on all Rule 10b-5 claims in Georgia. Defendant suggests that there is. The Court concludes that there is not.

Recent decisions by the Eleventh Circuit and its predecessor,² taken together, are not clear as to whether Rule 10b-5 actions in any one state have a single limitations period. In McNeal v. Paine, Webber, Jackson & Curtis, 598 F.2d 888 (5th Cir.1979), the court of appeals considered the statute of limitations question in the context of the particular claim presented. The court sought a limitations period "in regard to McNeal's claim." 598 F.2d at 892. The court of appeals then chose the state cause of action most resembling "the 10b-5 cause of action relied upon here." 598 F.2d at 894. The court went on to discuss the limitations period "applicable to McNeal's section 10(b) claim," 598 F.2d at 895. In selecting the limitations period applicable to the same plaintiff's claim under section 7, the court of appeals focused upon "McNeal's claim," id., "McNeal's asserted cause of action," id., and "McNeal's implied cause of action." 598 F.2d at 896.

The court finished its study of the statutes of limitations by saying "we conclude that the four-year period of limitations applicable to actions under Georgia's general fraud statute is applicable to the implied causes of action alleged here...." Id. The court then acknowledged that the procedure it followed created "divergent results" from other cases, and explained that divergence as "compelled by the established rule of law." Id. It is clear that the court of appeals did not intend to fashion a period of limitations for all Rule 10b-5 actions: the focus was strictly upon the selection of a limitations period appropriate to plaintiff's claim, and the court never even implied a broader rule.

A later case, Wood v. Combustion Engineering, Inc., 643 F.2d 339 (5th Cir.1981), appears to have proceeded on the assumption that a single limitations period would apply to all Rule 10b-5 actions within a state. The court of appeals referred to limitations applicable to "actions under 10b-5 in Texas," 643 F.2d at 343, "10b-5 actions in Texas," id., "a 10b-5 action in Texas," 643 F.2d at 344, and "the action under 10b-5." 643 F.2d at 346. There is no suggestion that the limitations period might be different in different types of Rule 10b-5 cases.

In White v. Sanders, 650 F.2d 627 (5th Cir. Unit B 1981), the court of appeals appeared to state a rule applicable to all Rule 10b-5 actions in Alabama. The court compared the state blue sky law with section 10(b) and Rule 10b-5, without explicitly distinguishing among types of claims. See id. at 629-632. The court concluded that "an action under the Alabama blue sky, and not a common law fraud cause of action, bears the closest substantive resemblance to the implied right of action arising under § 10(b) and Rule 10b-5." 650 F.2d at 632. Nevertheless, in its discussion of McNeal and the distinction drawn between McNeal and White, the court implicitly acknowledged that particular "circumstances and considerations" might cause different results in different cases. White, 650 F.2d at 631.

Diamond v. Lamotte, now the leading case in this circuit regarding statutes of limitations in Rule 10b-5 actions, carefully limited its analysis of the statute of limitations to the particular Rule 10b-5 action before it. The court of appeals looked for a state-law analogue to the "federal claim" and "the cause of action asserted by plaintiff," 709 F.2d at 1422; it discussed "this action," id., "the Section 10(b) action relied upon here," 709 F.2d at 1424, and "the cause of action asserted here." Id. Nowhere in Diamond does the court of appeals state or even imply that its analysis applied to all Rule 10b-5 actions.

Although these four cases vary, the Court concludes that McNeal and Diamond reveal the correct analysis. Diamond's constant focus upon the plaintiff's claim and its emphasis on the method of determining limitations periods, discussed below at 1449, show that no single, inflexible rule is appropriate. Instead, the court must in every case apply the limitations period appropriate to the particular claim before it.

This conclusion is consistent with numerous decisions of the old Fifth Circuit that the plaintiff's claim in each case is the proper focus of attention in the choice of state statutes of limitations for federal actions. As the Fifth Circuit stated in the leading case generally addressing "borrowed" statutes of limitations,

We look first to federal law to determine the nature of the claim and then to state court interpretations of the state's "statutory catalogue" to see where the claim fits into the state scheme.

Beard v. Stephens, 372 F.2d 685, 688 (5th Cir.1967). This makes clear that a court must, in every case, consider state law in the context of plaintiff's particular claim.

The Court resists the temptation of drawing an analogy between federal and state statutes rather than between federal and state claims merely for the sake of convenience. One federal statute may create a number of different claims that would be treated differently under state law. This is true, for instance, of 42 U.S.C. §§ 1981 and 1983; different limitations periods apply to actions under them according to the different types of wrong alleged. See generally Annot., 45 A.L.R.Fed. 548 (1979); Annot., 29 A.L.R.Fed. 710 (1976). Even different counts within the same action are subject to different limitations. See Scarlett v. Seaboard Coast Line Railroad Co., 676 F.2d 1043, 1050-1 (5th Cir. Unit B 1982) (different limitations for claims for damages and equitable relief in the same section 1981 claim); Whatley v. Department of Education, 673 F.2d 873, 875-8 (5th Cir. Unit B 1982) (same); Beard v. Stephens, 372 F.2d 685, 690 (5th Cir. 1967) (different limitations on different section 1983 claims for damages arising out of the same set of circumstances). As the Fifth Circuit stated in Beard,

Federal policy neither requires nor allows the federal courts to define the nature of the action in one mold for purposes of determining the statutory period and another mold for determining what parties are liable and for what.

372 F.2d at 690. It does not suffice merely to find a state law generally analogous to a federal law relied upon by a plaintiff when the analogy does not apply to plaintiff's specific claim. To do that would, contrary to Beard, cast the nature of plaintiff's action in...