Poquette v. Community State Bank
| Decision Date | 08 April 1986 |
| Docket Number | No. 85-C-666-D.,85-C-666-D. |
| Citation | 631 F. Supp. 1480 |
| Parties | Thomas A. POQUETTE, Dennis K. Jevne, Ronald G. Poquette, Michael H. Peterson, and Eau Claire River City Racquetball Club, Inc., a Debtor-in-Possession Under Chapter 11 of Title 11, United States Code, Plaintiffs, v. COMMUNITY STATE BANK, a Wisconsin banking corporation (as successor in interest to) State Bank of Fall Creek, a Wisconsin banking corporation, Steve H. Wise, Gary F. Myers, Eau Claire Tradin' Post, Inc., a Wisconsin corporation, and Roger W. Biesterveld, Defendants. |
| Court | U.S. District Court — Western District of Wisconsin |
Frank Barker, Kansas City, Mo., Michael P. Erhard, Madison, Wis., for plaintiffs.
L.C. Hammond, Quarles & Brady, Madison, Wis., and G. Lane Ware, Wausau, Wis., for defendant Community State Bank.
John Wilcox, Wilcox & Wilcox, Eau Claire, Wis., for defendant Wise.
Phillip M. Steans, Menomonie, Wis., for defendants Myers and Eau Claire Tradin' Post, Inc.
Donald R. Marjala, Eau Claire, Wis., and Frank A. Dvorak, Minneapolis, Minn., for defendant Biesterveld.
This is a civil case for monetary damages based on, among other things, alleged securities fraud under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Racketeer Influenced and Corrupt Organizations Act of the United States (RICO) (18 U.S.C. §§ 1961 et seq.). Jurisdiction exists for these claims pursuant to 28 U.S.C. § 1331.
Defendant Community State Bank (the Bank) moves to dismiss those portions of Counts I, II and III which are based on the purchase of securities by plaintiffs Tom Poquette and Dennis Jevne in October and December 1980. The Bank's motion is based on § 551.59(5) (1980), Wis.Stats., a statute of limitations.
In considering a motion to dismiss, the allegations in the complaint are taken as true, and the complaint is construed in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 1848, 23 L.Ed.2d 404 (1969), reh'g denied, 396 U.S. 869, 90 S.Ct. 35, 24 L.Ed.2d 123 (1969); 5 Wright & Miller, Federal Practice and Procedure, p. 594. A summary of the allegations of this complaint, which are relevant to the motion to dismiss, follows under the heading "Facts."
Defendant Myers formed a corporation named Eau Claire River City Racquetball Club, Inc. in January 1978. No stock was issued or business conducted until October 1980.
During the summer and fall of 1980 and prior to October 20, 1980, Myers approached T. Poquette and Jevne for the purpose of soliciting and inducing them to purchase an interest in the corporation. Myers made numerous false and fraudulent representations to T. Poquette and Jevne and failed to disclose numerous material facts, all relating to the purchase of stock in the corporation.
During the latter part of 1980, and on and prior to October 20, 1980, defendants Wise and the Bank also approached T. Poquette and Jevne for the purpose of soliciting and inducing them to purchase interests in the corporation. During that period, Wise and the Bank made numerous false and fraudulent representations and failed to disclose numerous material facts to these plaintiffs relating to the purchase of stock in the corporation.
As a direct and proximate result of the defendants' fraudulent acts and representations, T. Poquette and Jevne purchased Club stock in October and December 1980.
Plaintiffs had no knowledge of the material facts which were not disclosed to them, and no knowledge that the material representations made to them were false and fraudulent. Plaintiffs could not have discovered the falsity of these representations and the fraudulence of these omissions earlier by the exercise of reasonable diligence because defendant Myers had removed and concealed all of the pertinent financial records of the Club. Because defendants fraudulently concealed their scheme and otherwise lulled plaintiffs into inaction, plaintiffs did not discover the falsity and fraudulence of the conduct of defendants until 1984.1
OPINIONThis action was commenced on July 19, 1985 by the filing of a complaint, count I of which claims a violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and of Rule 10(b)-(5) promulgated pursuant to 17 C.F.R. § 240.10(b)-5; count II of which claims a violation of § 17 of the Securities Act of 1933, 15 U.S.C. § 77q, Rule 10(b)-5; and count III of which claims a violation of portions of Wisconsin's uniform securities law, Wis.Stat. §§ 551.41 and 551.59. The limitations period embodied in § 551.59(5) applies not only to actions brought under Wis.Stat. §§ 551.41 and 551.59, but also to actions commenced in United States district courts in Wisconsin asserting claims under § 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5. Cahill v. Ernst & Ernst, 625 F.2d 151, 153 (7th Cir.1980). The parties to the present lawsuit appear to agree, and I hold, that Wis.Stat. § 551.59(5) applies as well to actions in federal district courts in Wisconsin asserting claims under § 17 of the Securities Act of 1933 and Rule 10(b)-5.
Throughout 1980 and continuously thereafter until April 27, 1984, § 551.59(5) read:
No action shall be maintained under this section unless commenced before the expiration of 3 years after the act or transaction constituting the violation or the expiration of one year after the discovery of the facts constituting the violation, whichever first expires....
Effective April 27, 1984, and continuously through July 19, 1985, and since, § 551.59(5) has read:
No action shall be maintained under this section unless commenced before the expiration of 3 years after the act or transaction constituting the violation....2
Defendant Bank contends that the stock purchase in October and December 1980, is "the act or transaction constituting the violation" that marks the beginning of the three-year limitations period, within the meaning of either the 1980 or the 1984 version of § 551.59(5); that the three-year period ended in October and December 1983; and that by July 19, 1985, when plaintiffs filed their complaint in this action in this court, their claim based on the 1980 purchase had long been barred.
Plaintiffs' contention is less easily understood. I state it in what I believe is its most persuasive form:
The 1980 version of § 551.59(5) was subject to an equitable tolling doctrine, as if it had read that when fraud is deliberately concealed from a victim, the three-year limitation period commences at the moment of the act or transaction constituting the violation but is immediately tolled until such time as the fraud is discovered by the victim. At the moment of the discovery, the limitation period ceases to be tolled. In the present case, therefore the tolling ceased in 1984, on or after April 27, and this action could have been commenced within three years thereafter and it was in fact commenced well within that three-year period. The 1984 version of § 551.59(5) is subject to the same equitable tolling doctrine and its effect is the same: that is, this action could have been commenced at any time within three years after plaintiffs' 1984 discovery of the fraud.
For the purpose of analysis, I will assume for a moment that the 1980 version of § 551.59(5) has remained in effect continuously to the present time and that no legislative change occurred in 1984. Because the fraudulence of the defendants' acts ("the facts constituting the violation") had not been discovered within three years of their occurrence (that is, by October and December 1983), the provision in the 1980 version of § 551.59(5) relating to the effect of discovery would never have come into play. This means that only the three-year limitation contained in the 1980 version could have become operative. As I have noted, plaintiffs contend that this three-year limitation in the 1980 version was subject to an equitable tolling doctrine. However, in the 1980 version, the legislature expressly addressed the effect of delayed discovery of fraud. It is true that it did not expressly address the effect of deliberate concealment of fraud, but it made it quite clear that, discovery or no discovery, three years from the act or transaction marked the absolute limit on the opportunity to sue. No equitable tolling doctrine relating to the effect of delayed discovery can fairly be read judicially into that statute.
Thus, as defendant Bank contends, under the 1980 version, the beginning of the three-year period was October and December 1980 and the ending was October and December 1983. The July 19, 1985, filing of the complaint in this court was far too late. This is the end of the inquiry and the defendant Bank clearly prevails on its motion to dismiss unless a different result arises from the legislative action, effective April 27, 1984, striking from § 551.59(5) the words: "or the expiration of one year after the discovery of the facts constituting the violation, whichever first occurs." Plaintiffs contend that the 1984 version applies to this case and that its effect is to render timely the commencement of this action.3 I will seek to determine whether the 1984 version has any application here. For that purpose, I consider another Wisconsin statute, § 990.06, which undertakes to deal generally with transitions when the legislature enacts laws affecting existing statutes of limitations.
As of October and December 1980, and continuously thereafter to the present, § 990.06 has provided:
Repeal or change of law limiting time for bringing actions. In any case when a limitation or period of time prescribed in any act which shall be repealed for the acquiring of any right, or barring of any remedy, or for any other purpose shall have begun to run before such repeal and the repealing act shall provide any limitation or period of time for such purpose, such latter limitation or period shall apply only to such rights or remedies as...
To continue reading
Request your trial
-
State v. Haines
...provide. Wis. Stat. § 990.06 (1999-2000) (emphasis added) ("repeal" in this section includes "amendment," Poquette v. Cmty. State Bank, 631 F. Supp. 1480 (W.D. Wis. 1986)). In accordance with § 990.06 (1999-2000), the legislature expressly provided that "section 939.74(2)(c) of the statutes......
-
Esser Distributing Co., Inc. v. Steidl
...absolute limitation set forth in the statute. The most recent federal case involving the Wisconsin statute is Poquette v. Community State Bank, 631 F.Supp. 1480 (W.D.Wis.1986). In Poquette, the district court concluded that the 1984 amendment did not apply because the claims had already bee......
-
Jungck v. Nanz
...statute of limitations is the current version of Wis.Stat. § 551.59(5), was expressly rejected by the court in Poquette v. Community State Bank, 631 F.Supp. 1480 (W.D.Wis. 1986). The defendants further argue that the plaintiffs confuse "accrual" of a cause of action with the doctrine of "eq......