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June 28, 1977

DAVID P. HOULIHAN, et al., Plaintiffs,
ANDERSON-STOKES, INC., et al., Defendants

The opinion of the court was delivered by: RICHEY


 This case is before the Court on plaintiffs' motion to amend the complaint in order to rectify certain pleading deficiencies in Count I which the Court specified in its Memorandum issued herein on May 11, 1977. After due consideration of plaintiffs' motion and defendants' *fn1" opposition thereto, the Court has decided to grant the motion to amend the complaint. *fn2" The Court has concluded further that plaintiffs have properly pleaded a case of fraudulent concealment of their cause of action specified in Count I, by virtue of the amendment to the complaint. Accordingly, the Court will vacate its prior orders granting defendants' motions for judgment on the pleadings as to Count I.


 Count I alleges that defendants sold to plaintiffs certain limited partnership interest in November 1972 without filing a registration statement with the Securities and Exchange Commission, in alleged violation of §§ 5, 12(1), and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77e, 77l(1), and 77o. Defendants' position at the time of sale was apparently that the securities were exempt from the registration requirements of the Act, pursuant to the exemption for "private offerings" found in § 4(2), 15 U.S.C. § 77d(2). The Supreme Court has stated, however, that the applicability of the private offering exemption is determined by "the need of the offerees for the protections afforded by registration. . . . [and whether the offerees are] shown to have access to the kind of information which registration would disclose." SEC v. Ralston Purina Co., 346 U.S. 119, 127, 97 L. Ed. 1494, 73 S. Ct. 981 (1953). See General Life of Missouri Investment Co. v. Shamburger, 546 F.2d 774 (8th Cir. 1976). Plaintiffs maintain that defendants fraudulently concealed from them "access to the kind of information which registration would disclose."

 Under section 13 of the Act, 15 U.S.C. § 77m, plaintiffs' cause of action is subject to a one-year statute of limitations. Plaintiffs admit that they knew in November 1972 that the securities in question had not been registered. Plaintiffs also admit that, even taking into account certain tolling agreements made between plaintiffs and defendants, suit was not instituted until after the one-year statute of limitations had expired. Plaintiffs seek to escape the effect of the statute, however, by alleging, as noted above, that the facts underlying their cause of action were fraudulently concealed from them by defendants; thus, the plaintiffs allege, the statute of limitations should not be considered to have run, under the federal tolling doctrine, "until [plaintiffs] [discovered], or by reasonable diligence could have discovered, the basis of the lawsuit." Fitzgerald v. Seamans, 180 U.S. App. D.C. 75, 553 F.2d 220, 228 (1977).

 On January 28, 1977, at a hearing on defendants' motions for judgment on the pleadings, this Court ruled that the allegations of fraud contained in Count I had not been alleged with the specificity required by Fed.R.Civ.P. 9(b). Appropriate written orders granting defendants' motions were entered on February 7, 1977. In denying plaintiffs' motion for reconsideration, this Court wrote in the aforementioned Memorandum of May 11 that plaintiffs' allegations of fraudulent concealment failed because:

[Nowhere] in Count I or in the paragraphs referenced therein do plaintiffs specify exactly what information, or even what type of information, had been concealed from them.

 In light of the Court's disposition of the motion for reconsideration, the Court did not consider defendants' additional contention that, in any case, the statute of limitations on Count I had expired.


 By their proposed amendment, plaintiffs would add the following sentence to para. 25 of the Third Amended Complaint, which is incorporated by reference into Count I:

The information any prudent investor would desire to have before investing -- which should have been included in a registration statement had one been filed with the Securities and Exchange Commission -- and the material representations and omissions plaintiffs were subjected to are specified in paragraphs 43-50 of this Complaint.

 This Court has previously indicated its intention to deny any further motions for amendment of plaintiffs' complaint herein: Plaintiffs have had four opportunities already. Nevertheless, the proposed amendment at issue makes it clear that the flaw identified by the Court in its Memorandum of May 11 was entirely technical: Plaintiffs simply failed to refer to and incorporate into Count I the specific allegations which form the basis of numerous other counts of the complaint.

 In light of the liberal amendment policies of Fed.R.Civ.P. 15(a), the Court is thus convinced that granting leave to amend the complaint herein would serve the ends of justice. See Freedman v. Beneficial Corp., 406 F. Supp. 917, 925 (D. Del. 1975). In this connection, the Court notes that defendants, each of whom is named in other Counts herein, will not be prejudiced by amendment: Since plaintiffs are adding no new factual allegations to the ...

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