McGonigle v. Combs, Nos. 89-16584
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
| Writing for the Court | CANBY |
| Citation | 968 F.2d 810 |
| Parties | Fed. Sec. L. Rep. P 96,899, 23 Fed.R.Serv.3d 217, 18 UCC Rep.Serv.2d 647 John F. McGONIGLE, Virginia M. McGonigle, Plaintiff-Appellant, v. Leslie COMBS, II, et al, Defendant-Appellee. Robert D. STRATMORE, Plaintiff-Appellant, v. Leslie COMBS, II, et al, Defendant-Appellee. Blas R. CASARES, Plaintiff-Appellant, v. Brownell COMBS, II, Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., a Kentucky professional corporation; Frank L. Bryant; Robert J. McGuiness; Bateman Eichler, Hill Richards, Inc., a Delaware corporation; Garth Guy; Central Bank & Trust of Lexington, a Kentucky banking corporation, Defendants-Appellees, and Spendthrift Farm, Inc.; Leslie Combs, II, Defendants. George E. LAYMAN and George E. Layman, Jr., d/b/a Forest Acres Partnership, a Washington General Partnership; Barry K. Schwartz and Calvin Klein, d/b/a Barry K. Schwartz Partnership, a New York general partnership; Earl H. Shultz; Kenneth Franzheim, II, Plaintiffs-Appellants, v. Brownell COMBS, II; Bateman Eichler, Hill Richards, Incorporated, a Delaware corporation; Robert J. McGuinness; Garth Guy; Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., a Kentucky professional corporation; Frank L. Bryant, Defendants-Appellees. Blas R. CASARES, Plaintiff-Appellant, v. SPENDTHRIFT FARM, INC.; Leslie Combs, II; Brownell Combs, II; Garth Guy; Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., a Kentucky professional corporation; Frank L. Bryant; Robert J. McGuinness; Bateman Eichler, Hill Richards, Inc., a Delaware corporation, Defendants, and Central Bank & Trust of Lexington, a Kentucky banking corporation, Defendant-Appellee. James H. GRIGGS, Plaintiff-Counter-defendant-Appellant, v. Brownell COMBS, II; Garth Guy; Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., a Kentucky professional corporation; Frank L. Bryant; Robert J. McGuinness; Bateman Eichler, Hill Richards, Incorporated, a Delaware corporation, Defendants-Appellees, Central Bank a |
| Docket Number | 89-16602,89-16611,89-16619 and 89-16620,89-16605,89-16586,89-16588,89-16608,89-16615,Nos. 89-16584 |
| Decision Date | 19 June 1992 |
Page 810
18 UCC Rep.Serv.2d 647
v.
Leslie COMBS, II, et al, Defendant-Appellee.
Robert D. STRATMORE, Plaintiff-Appellant,
v.
Leslie COMBS, II, et al, Defendant-Appellee.
Blas R. CASARES, Plaintiff-Appellant,
v.
Brownell COMBS, II, Charles R. Hembree; Kincaid, Wilson,
Schaeffer & Hembree, P.S.C., a Kentucky professional
corporation; Frank L. Bryant; Robert J. McGuiness;
Bateman Eichler, Hill Richards, Inc., a Delaware
corporation; Garth Guy; Central Bank & Trust of Lexington,
a Kentucky banking corporation, Defendants-Appellees,
and
Spendthrift Farm, Inc.; Leslie Combs, II, Defendants.
George E. LAYMAN and George E. Layman, Jr., d/b/a Forest
Acres Partnership, a Washington General Partnership; Barry
K. Schwartz and Calvin Klein, d/b/a Barry K. Schwartz
Partnership, a New York general partnership; Earl H.
Shultz; Kenneth Franzheim, II, Plaintiffs-Appellants,
v.
Brownell COMBS, II; Bateman Eichler, Hill Richards,
Incorporated, a Delaware corporation; Robert J. McGuinness;
Garth Guy; Charles R. Hembree; Kincaid, Wilson, Schaeffer
& Hembree, P.S.C., a Kentucky professional corporation;
Frank L. Bryant, Defendants-Appellees.
Blas R. CASARES, Plaintiff-Appellant,
v.
SPENDTHRIFT FARM, INC.; Leslie Combs, II; Brownell Combs,
II; Garth Guy; Charles R. Hembree; Kincaid, Wilson,
Schaeffer & Hembree, P.S.C., a Kentucky professional
corporation; Frank L. Bryant; Robert J. McGuinness;
Bateman Eichler, Hill Richards, Inc., a Delaware
corporation, Defendants,
and
Central Bank & Trust of Lexington, a Kentucky banking
corporation, Defendant-Appellee.
James H. GRIGGS, Plaintiff-Counter-defendant-Appellant,
v.
Brownell COMBS, II; Garth Guy; Charles R. Hembree;
Kincaid, Wilson, Schaeffer & Hembree, P.S.C., a Kentucky
professional corporation; Frank L. Bryant; Robert J.
McGuinness; Bateman Eichler, Hill Richards, Incorporated, a
Delaware corporation, Defendants-Appellees,
Central Bank and Trust Co., a Kentucky banking corporation;
Deloitte, Haskins & Sells, Defendants,
Counter-claimants-Appellees.
Zenya YOSHIDA, d/b/a Shadai Farm, Plaintiff-Appellant,
v.
Brownell COMBS, II; Charles R. Hembree; Kincaid, Wilson,
Schaeffer & Hembree, P.S.C., a Kentucky professional
corporation; Frank L. Bryant; Robert J. McGuinness;
Bateman Eichler, Hill Richards, Inc., a Delaware
corporation; Garth Guy, Defendants-Appellees.
HAMILTON PARTNERS, a Ohio general partnership; Frank E.
Fowler; James P. Coleman; Mercer Reynolds, III; William
O. DeWitt, Jr.; Northwood Thoroughbred Investors, a New
York general partnership Northwood Ventures, a New York
Limited partnership; Peter G. Schiff; Gateway Investment
Partnership, an Ohio general partnership; Calvin Ingram,
Plaintiffs-Appellants,
v.
Brownell COMBS, II; Garth Guy, Defendants-Appellees.
Richard L. SCHULTZ, Plaintiff-Appellant,
v.
Leslie COMBS, II, et al, Defendants,
and
Brownell Combs, II; Garth Guy; Bateman Eichler Hill
Richards, Inc.; Robert J. McGuiness; Spendthrift Farm,
Inc.; Central Bank & Trust of Lexington; Charles R.
Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C.;
Frank L. Bryant, Defendants-Appellees.
Richard L. SCHULTZ, Plaintiff-Appellant,
v.
BATEMAN EICHLER HILL RICHARDS, INC.; Robert J. McGuiness;
Charles R. Hembree; Kincaid, Wilson, Schaeffer &
Hembree, P.S.C.; Frank L. Bryant,
Defendants-Appellees.
89-16608, 89-16611, 89-16615, 89-16619 and 89-16620.
Ninth Circuit.
Decided June 19, 1992.
Page 813
Richard M. Trautwein, Alagia, Day, Marshall, Mintmire & Chauvin, Louisville, Ky., for plaintiff-counter-defendant-appellee Blas R. Casares.
John I. Alioto, Michael J. Bettinger, Alioto & Alioto, San Francisco, Cal., for plaintiffs-counter-claim-defendants-appellees-appellants.
M. Laurence Popofsky, Michael L. Rugen, Heller, Ehrman, White & McAuliffe,
Page 814
San Francisco, Cal., for defendants-appellees-appellants Charles R. Hembree and Kincaid, Wilson, Schaeffer & Hembree, P.S.C.James E. Burns, Jr., Brobeck, Phleger & Harrison, San Francisco, Cal., for defendants-appellants-appellees Bateman, Eichler, Hill Richards, Inc., and Robert J. McGuinnes.
Thomas K. Bourke, Riordan & McKinzie, Los Angeles, Cal., for defendant-counterclaimant-appellant-appellee Frank L. Bryant.
Neil A. Goteiner, Ann G. Daniels, Farella, Braun & Martel, San Francisco, Cal., for defendant-appellee Central Bank & Trust Co. of Lexington, Ky.
Curt H. Mueller, Cooley, Godward, Castro, Huddleson & Tatum, San Francisco, Cal., for defendant-appellee Brownell Combs II.
Leslie G. Landau, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for defendant-appellee Deloitte Haskins & Sells.
Appeal from the United States District Court for the Northern District of California.
Before: CANBY and KOZINSKI, Circuit Judges and CARROLL *, District Judge.
CANBY, Circuit Judge:
This appeal arises out of a private placement of stock in Spendthrift Farms, Inc. ("Spendthrift") that occurred in 1983. Several investors sued the co-owners of Spendthrift, Brownell Combs II ("Combs") and his father Leslie Combs II 1, as well as consultants, attorneys, an investment bank, an accounting firm, and a commercial bank. In summary judgment and directed verdict rulings, the district court dismissed all claims against the professional defendants--the attorneys, the investment bank, the accounting firm, and the commercial bank. Some of the claims against Combs and his consultant, Garth Guy ("Guy"), were submitted to a jury, which returned a verdict for the defense. The plaintiffs appeal the district court's summary judgment and directed verdict rulings as well as the jury verdict, which they contend was based on erroneous instructions. We affirm.
In the early 1980s, Spendthrift was the largest thoroughbred horse breeding operation in the world. In 1983, Brownell and Leslie Combs, each of whom owned 50% of Spendthrift, employed Guy to assist them in selling a portion of their interests in Spendthrift. At Guy's suggestion, the Combses decided to sell $35 million worth of stock in Spendthrift in a private placement, to be followed by a public offering by Spendthrift.
In connection with the private placement, Combs and Guy utilized the services of Charles R. Hembree and Edwin L. Schaeffer, both of whom were partners in Kincaid, Wilson, Schaeffer & Hembree, P.S.C. ("Kincaid firm"), a Kentucky law firm. Guy drafted, and Hembree reviewed, the Private Placement Memorandum ("PPM") in March of 1983. Guy also contacted the Central Bank & Trust Company ("Central Bank"), which agreed to consider loan applications from investors in the private placement. The PPM contained background on Spendthrift as well as a balance sheet valuing Spendthrift's assets at over $114 million and financial statements prepared by Deloitte, Haskins & Sells ("Deloitte"). The PPM was released on April 1, 1983, and Guy began to solicit investors by June. At the same time that the private placement was proceeding, Guy and Combs engaged the services of Bateman Eichler, Hill Richards, Incorporated ("Bateman Eichler"), and in particular Robert J. McGuiness, a stockbroker at Bateman Eichler, to serve as lead underwriter for the public offering, which was scheduled to occur a few months after the private offering was completed. Guy and the Combses also
Page 815
hired Frank Bryant as a financial consultant to Spendthrift in connection with the public offering.After over 500 persons were contacted, 34 agreed to participate in the private placement for Spendthrift stock. Prior to purchasing shares, each of these investors signed a subscription agreement representing and warranting that he or she had carefully reviewed the PPM; that he or she had a net worth in excess of $5 million; that he or she possessed, either alone or with an investment advisor, sufficient knowledge and experience in financial and business matters to evaluate the risks of the investment; and that he or she understood that the investment in Spendthrift involved a substantial degree of financial risk. The private placement closing took place on August 4, 1983, with investors paying $7.50 per share (after a 4-for-3 stock split in September 1983). After the closing, work continued on the initial public offering, which closed on November 22, 1983. The public offering price was $12 per share, and the price per share remained above the level that the plaintiffs paid through 1984. 2 In 1985, the price of the Spendthrift stock declined dramatically. In February 1986, plaintiffs began filing the complaints that were consolidated in this litigation.
Nine actions were consolidated before Judge Charles A. Legge for pretrial and trial purposes. The plaintiffs, all of whom were investors in the private placement, alleged, inter alia, violations of Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b) (1988), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5 (1991), common law claims of fraudulent misrepresentation and negligent misrepresentation, and violations of Washington and Kentucky Blue sky laws.
In December 1988, the district court dismissed all plaintiffs' claims against four defendants: Central Bank, Bryant, Bateman Eichler, and McGuiness. The remaining defendants then moved for summary judgment on the alleged misrepresentations and omissions claimed by the plaintiffs. The district court ruled that dozens of the alleged misrepresentations and omissions were, as a matter of law, not actionable, and granted summary judgment on those claims. Trial proceeded on the remaining misrepresentation or omission claims against Hembree, the Kincaid firm, Combs and Guy. After plaintiffs completed their evidence on liability issues, the district court entered a directed verdict on behalf of Hembree and the Kincaid firm on all claims. The...
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Ocm Principal Opportunities Fund v. Cibc, No. B172588.
...regarding the disclaimers are inapposite. One does not address the issue of reasonable reliance (McGonigle v. Combs (9th Cir.1992) 968 F.2d 810, 822); in another, the court determined that investors who did not receive a document could not reasonably have relied on it (Anderson v. Deloitte ......
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In re Rebel Rents, Inc., No. RS02-25442 PC.
...former Cal. Comm.Code § 9306(1) was extended to encompass income generated by a lease of the collateral. See, e.g., McGonigle v. Combs, 968 F.2d 810, 828-29 (9th Cir.1992) (holding that "proceeds" included settlement funds paid to compensate for permanent decline in value of stock pledged a......
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Mirkin v. Wasserman, No. S020465
...courts call this element both "reliance" and "transaction causation," using the terms interchangeably. (McGonigle v. Combs (9th Cir.1992) 968 F.2d 810, 821, fn. 10 ["[s]ome courts refer to transaction causation as 'reliance' ... but this distinction is merely "Reliance" in the sense of "tra......
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In re Blue Flame Energy Corp., No. 05AP-1053.
...SEC promulgated Rule 506 in order to supply investors with a safe harbor from registration requirements. McGonigle v. Combs (C.A.9, 1992), 968 F.2d 810, 825, fn. 19; Secs. & Exchange Comm. v. Life Partners, Inc. (D.D.C.1996), 912 F.Supp. 4, 10. Pursuant to Rule 506, offers and sales of an i......
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Ocm Principal Opportunities Fund v. Cibc, No. B172588.
...regarding the disclaimers are inapposite. One does not address the issue of reasonable reliance (McGonigle v. Combs (9th Cir.1992) 968 F.2d 810, 822); in another, the court determined that investors who did not receive a document could not reasonably have relied on it (Anderson v. Deloitte ......
-
In re Rebel Rents, Inc., No. RS02-25442 PC.
...former Cal. Comm.Code § 9306(1) was extended to encompass income generated by a lease of the collateral. See, e.g., McGonigle v. Combs, 968 F.2d 810, 828-29 (9th Cir.1992) (holding that "proceeds" included settlement funds paid to compensate for permanent decline in value of stock pledged a......
-
Mirkin v. Wasserman, No. S020465
...courts call this element both "reliance" and "transaction causation," using the terms interchangeably. (McGonigle v. Combs (9th Cir.1992) 968 F.2d 810, 821, fn. 10 ["[s]ome courts refer to transaction causation as 'reliance' ... but this distinction is merely "Reliance" in the sense of "tra......
-
In re Blue Flame Energy Corp., No. 05AP-1053.
...SEC promulgated Rule 506 in order to supply investors with a safe harbor from registration requirements. McGonigle v. Combs (C.A.9, 1992), 968 F.2d 810, 825, fn. 19; Secs. & Exchange Comm. v. Life Partners, Inc. (D.D.C.1996), 912 F.Supp. 4, 10. Pursuant to Rule 506, offers and sales of an i......