Townsend v. Columbia Operations

• Decision Date: 08 February 1982
• Docket Number: No. 79-4638,79-4638
• Citation: 667 F.2d 844
• Parties: Fed. Sec. L. Rep. P 98,446 Charles E. TOWNSEND, Jr. and Henry L. Pohndorf, Plaintiffs-Appellants, v. COLUMBIA OPERATIONS, Columbia Petroleum, Inc., Anton G. Nosek, III, Mindevco, Inc., Chaparral Petroleum, and Ben M. Fitzgerald, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 844

667 F.2d 844

Fed. Sec. L. Rep. P 98,446

Charles E. TOWNSEND, Jr. and Henry L. Pohndorf, Plaintiffs-Appellants, v. COLUMBIA OPERATIONS, Columbia Petroleum, Inc., Anton G.

Nosek, III, Mindevco, Inc., Chaparral Petroleum,

and Ben M. Fitzgerald, Defendants-Appellees.

No. 79-4638.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 13, 1981.

Decided Feb. 8, 1982.

Kenneth M. Christison, San Francisco, Cal., for plaintiffs-appellants.

Allan I. Shatkin, Gordon, Holstein & Ropers, Inc., San Francisco, Cal., Rauer L. Meyer, Bushkin, Kopelson, Gaims, Gaines & Wolf, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before GOODWIN and POOLE, Circuit Judges, and WYATT ^*, District Judge.

WYATT, District Judge:

This is an appeal by plaintiffs from a summary judgment for defendants entered on August 24, 1979. We affirm.

1.

The action was commenced on May 24, 1978.

After various maneuvers and a hearing of motions, a first amended complaint was filed on May 9, 1979. This is the only pleading for plaintiffs now effective, and, for convenience, it will hereafter be referred to simply as "the complaint."

The complaint is not "a short and plain statement of the claim" as required by a basic general rule. (Fed.R.Civ.P. 8(a)). It is a complicated, confusing 22 page document, with a good deal of evidence averred. The nature of the claims can, however, be made out. The plaintiffs are two individuals. The defendants are corporations, partnerships, and individuals, who offered to investors interests in partnerships to exploit oil and gas leasehold interests. Plaintiffs purchased from defendants at different times between August 1973 and May 1978 interests in "Columbia Drilling Venture-Series 3," a limited partnership (hereafter usually referred to simply as "the Partnership"). Plaintiffs aver that they were induced to make these purchases by fraud of the defendants in that defendants made "untrue statements of material facts and omitted to state material facts" (for example para 27; "para" references are to paragraphs of the complaint). Compensatory damages are sought "in an amount to be determined at trial"; punitive damages of one million dollars are also sought.

Federal jurisdiction is based on Section 22(a) of the Securities Act of 1933 (15 U.S.C. § 77v(a)), and on Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. § 78aa). There are two claims based on federal law and three pendent claims based on California law. The federal claims are for alleged violations of Section 17(a) of the 1933 Act (15 U.S.C. § 77q(a)), and of Section 10(b) of the 1934 Act (15 U.S.C. § 78j(b)), and of Rule 10b-5 of the Securities and Exchange Commission (17 C.F.R. § 240.10b-5).

Significant to this appeal is that, while there is mention at a few places in the complaint of "oral" misrepresentations (paras 11, 21, 28, 44), it is clear that the frauds asserted by plaintiffs are misrepresentations in or omissions from four specific documents which are extensively referred to in the complaint and which are said to have induced plaintiffs to purchase their interests in the Partnership. The four documents are: a "1973 Memorandum," a "1974 Confidential Memorandum," a "1976 Confidential Memorandum," and a January 1974 letter. These four documents are hereafter referred to sometimes as "the four documents." It is specifically alleged (para 37) that one of the plaintiffs relied upon the misrepresentations in and omissions from "all of the memorandums (sic) and the January, 1974 letter," that the other plaintiff relied upon the misrepresentations in and omissions from "the 1974 Memorandum," and that they were thereby induced to purchase their interests in the Partnership. The four documents, however, are not annexed to the complaint.

Motions were made by all defendants, including motions to dismiss the complaint for failure to state a claim upon which relief can be granted (Fed.R.Civ.P. 12(b)(6)). No "matters outside the pleading" were presented to the court in the moving papers. Various grounds were there urged, but it seems evident that the principal ground, at least as to the federal claims, was the bar of the statute of limitations.

Argument on the motions was set for August 3, 1979.

We are told in the briefs, and it is not in dispute, that before the argument, and on July 30 or 31, at the telephone request of a law clerk to Judge Schwarzer, counsel to plaintiffs and counsel to some of the defendants delivered copies of the four documents to Judge Schwarzer at his chambers. They were not at that time filed in the Clerk's office. There is no suggestion here that the copies were inaccurate.

The argument took place on August 3, 1979.

At the beginning of the August 3 hearing, the district judge made a statement critical of both the complaint and of the motions. As to the motions, the criticism was that the four documents had not been made part of the moving papers. The court said that, on the basis of a "summarization" by counsel of the four documents, he could not be expected to rule on the statute of limitations point (movants were arguing that the documents themselves made full disclosure or at least, particularly the January 1974 letter, put plaintiffs on inquiry notice). The judge declared, however, that he had "gone through this now," by which evidently he meant that he had received the four documents and had studied them.

During the argument, the judge referred to "the documents that are at issue here," and emphasized: "I have the documents; I have the complaint." The four documents and their alleged misrepresentations and disclosures were extensively discussed at the argument. The court said that disclosures in the January 1974 letter meant that "they (plaintiffs) don't have any claim on that" and "if they ever had one, the statute has run on that." Counsel to plaintiffs pointed to alleged false statements in the four documents on which he relied. The court then referred to the January 1974 letter which he said had "an unqualified disclosure" and said to counsel for plaintiffs: "So, clearly, the statute of limitations on that claim began to run at that time, did it not?" The reply for plaintiffs was in effect affirmative. The court then declared: "I don't think that raises a factual issue as to whether there is an adequate disclosure. I think it clearly is. It is certainly sufficient to put them on notice to ask questions. And I think to that extent it is clear. Let's go on."

At all times during the August 3 hearing, the four documents were in the hands of court and counsel and were the focus of the entire argument. There was no objection by plaintiffs nor by anybody else to their being used in support of the motions, and it was clear from the beginning that the court was in fact so using them. There was no indication by plaintiffs that they wished to submit anything in respect of the four documents.

Counsel for plaintiffs and for all defendants were given every opportunity to address the court. When no one had anything more to say, Judge Schwarzer announced his decision to grant summary judgment for all defendants. He then dictated an opinion for the record. The oral opinion occupies five pages of the stenographic transcript and contains the reasoning of the court. Its first statement is that the motions to dismiss must be treated as motions for summary judgment because "without examination of those documents (the four documents), one cannot pass on the merits of those defenses." This was a reference to the fact that the motions, as the court had just explained, were "based primarily on the statute of limitations" and to the provision in Fed.R.Civ.P. 12(b) that if, on a motion to dismiss for failure of the complaint to state a claim upon which relief can be granted, "matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment ...."

It was not until nearly three weeks later, on August 23, 1979, that a written order granting summary judgment was filed. Exactly three weeks later-on August 24-a summary judgment for defendants was entered. During the three-week period, there was no offer by plaintiffs of any further "matters outside the pleading" in opposition to summary judgment.

This appeal then followed.

When appellants filed their opening brief, they argued, among other things, that the four documents were not part of the record before the district court (and presumably not part of the record on appeal). Apparently taking note of this problem, Judge Schwarzer, on May 20, 1980, filed an order under Fed.R.App.P. 10(e) directing that the four documents "be certified and transmitted" to this court "as part of the record on appeal." This was said in the order to have been done "so that the record on appeal will truly disclose what occurred in the District Court," a slight paraphrase of language in Fed.R.App.P. 10(e).

2.

Appellants make three principal arguments in asking that the summary judgment for defendants be reversed:

(1) that the district court committed error in considering the four documents because they had not been authenticated by affidavit, had not been filed with the Clerk, and were not part of the district court record;

(2) that the district court committed error in treating the motions as ones for summary judgment (a) without giving plaintiffs reasonable notice of that purpose, and (b) without giving plaintiffs a reasonable opportunity to present opposing material; and

(3) that the district court committed error in ruling that there was no genuine issue as to any material fact.

3.

The arguments to this Court by both sides have assumed that the four documents are "matters outside the pleading" within the meaning of these words in Fed.R.Civ.P. 12(b). This was also apparently the assumption of Judge Schwarzer, who felt it...