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IN RE NATIONAL STUDENT MKTG. LITIG.

April 26, 1976

In re NATIONAL STUDENT MARKETING LITIGATION

Parker, District Judge.


The opinion of the court was delivered by: PARKER

PARKER, District Judge.

 Before the Court for determination is the motion of defendants Louis W. Biegler and the Biegler Foundation ("Defendants") to enforce Rules 9(b) and 23.1 of the Federal Rules of Civil Procedure. Having considered the motion, the memoranda of points and authorities in support thereof and in opposition thereto, and the relevant affidavits, the Court finds that the Complaints in Civil Actions 2405-72 and 2406-72 (Garber Complaint) and 2407-72 (Natale Complaint), fully comply with Rules 9(b) and 23.1, F.R.Civ.P., and, therefore, concludes that the relief requested by the Biegler defendants should be denied for the reasons stated below.

 Factual Background

 The class action complaints *fn1" in this multidistrict litigation allege widespread fraudulent activities in connection with the sale of stock of the National Student Marketing Corporation ("NSMC"). The Biegler defendants were added as parties when amended complaints were filed in March of 1975, with leave of Court.

 Those defendants were stockholders in the Interstate National Corporation ("Interstate"), which merged with NSMC on October 31, 1969, and Interstate shares were exchanged for NSMC shares. The amended complaints allege that the Biegler defendants, along with other Interstate defendants, became aware of the fact that NSMC had overstated its profits in the financial statements distributed in connection with the merger, but nonetheless sold their NSMC stock with knowledge that the price had been artificially inflated by these false statements, thus committing fraud in violation of the federal securities laws. *fn2"

 Rule 9(b)

 The 9(b) motion asserts that the amended complaints fall short of the requirement of the Rule, which states, in pertinent part:

 
In all averments of fraud . . ., the circumstances constituting fraud . . . shall be stated with particularity.

 The defendants complain that the precise time of their sales of stock; the circumstances surrounding their knowledge of the material falsity of NSMC's financial statements; and facts supporting the allegation that they were part of an Interstate control group, are not specified with the particularity required by Rule 9(b).

 The particularity referred to in that Rule generally encompasses the time, place and contents of the false representations, the identity of the person or persons making the misrepresentations and what was obtained thereby. *fn3" In securities cases, the Rule has been interpreted to mean that conclusory allegations of fraud based on the provisions of the statutes are not sufficient. *fn4" On the other hand, it is universally recognized that Rule 9(b) must be reconciled with Rule 8 which requires a short and concise statement of claims. *fn5" Indeed, some courts have denied 9(b) motions if the complaint provides sufficient detail of the transactions constituting the alleged fraud to allow the defendant to formulate a response. *fn6"

 The amended complaints in this proceeding clearly provide adequate facts to enable the defendants to respond, as is evidenced by the extensive discussion of the facts in both the defendants' memoranda and the Biegler affidavit.

 The defendants, however, challenge the lack of details as to the sales of each individual defendant. The amended complaints state that sales were made by all of the additional defendants "on or after October 31, 1969." *fn7" The lack of detail as to individual defendants, however, is not fatal in the overall context of these complaints which set forth in great detail the specific documents in which misstatements were made, by whom they were made and the circumstances surrounding disclosure of the misrepresentations at the closing of the Interstate/NSMC merger. If the Court accepted the argument of the Biegler defendants the complaints could easily become too voluminous and unwieldy by spelling out the specifics of each sale by the numerous defendants. *fn8"

 The defendants also object that several allegations regarding their actual knowledge of the falsity of the financial statements were not stated with sufficient particularity. Each ...


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