Axtell v. Canyon Center Ltd. Partnership

138 F.R.D. 556, 1988 U.S. Dist. LEXIS 17619, 1988 WL 236604
CourtDistrict Court, W.D. Wisconsin
DecidedMay 4, 1988
DocketNos. 87-C-808-C, 87-C-831-C and 87-C-853-C
StatusPublished
Cited by1 cases

This text of 138 F.R.D. 556 (Axtell v. Canyon Center Ltd. Partnership) is published on Counsel Stack Legal Research, covering District Court, W.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Axtell v. Canyon Center Ltd. Partnership, 138 F.R.D. 556, 1988 U.S. Dist. LEXIS 17619, 1988 WL 236604 (W.D. Wis. 1988).

Opinion

ORDER

CRABB, Chief Judge.

IT IS ORDERED that the magistrate’s Report and Recommendation is ADOPTED as the court’s own; the motions to dismiss of defendants Padley, Johnson, and Schneider are DENIED; and the motion for summary judgment of defendant Lee is GRANTED.

REPORT AND RECOMMENDATION

JAMES GROH, United States Magistrate.

In a Report and Recommendation entered on April 1, 1988, in these three related cases, the United States Magistrate recommended denial of the motions to dismiss of defendants Padley, Johnson, and Schneider, and granting of the motion for summary judgment of defendant Charlotte Lee. Plaintiffs have not objected to the recommendation to grant defendant Lee’s motion, and it will be granted. The moving defendants have objected to the recommendation to deny their motion. After consideration of their arguments and the magistrate’s report, I conclude that the magistrate’s recommendation is correct, and I will deny the motions.

The moving defendants contend that the pleadings do not adequately allege fraud against them. The magistrate concluded that they did, and I agree. Defendants argue that plaintiffs have not spelled out the specific wrongful acts allegedly committed by each defendant, but have alleged only that “all defendants” committed certain wrongful acts. However, as the magistrate pointed out, these defendants were general partners in the defendant Madsen Partners V partnership and as such have individual liability for the obligations of the partnership, including the wrongful acts of other partners. Thus, it is unnecessary for plaintiffs to break down the wrongful acts by individual defendant. To the extent that Natowitz v. Mehlman, 542 F.Supp. 674 (S.D.N.Y.1982) holds to the contrary, I find it unpersuasive.

The complaint is adequate to apprise the defendants of the essential claims against them. Defendants may obtain additional information through the normal processes of discovery.

[559]*559In these three related eases, plaintiffs allege a variety of claims under federal and Wisconsin law involving alleged misrepresentation in the same offering and sale of securities. Defendants are the same in all three cases, as are the claims for relief. The first claim arises under Section 12(2) of the Securities Act of 1933 (15 U.S.C. § 111(2)). The second claim is for relief under Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j). The remaining claims involve Wisconsin law. The third asserts violations of the Wisconsin Uniform Securities Act (Wis.Stat.Chap. 551). The fourth through sixth claims are grounded upon intentional, strict liability and negligent misrepresentation, and the seventh alleges defendants’ breach of fiduciary duty to plaintiffs. All complaints assert essentially the same facts.

Defendants Lee, Padley, Johnson and Schneider move to dismiss each of the complaints under Fed.R.Civ.P. 9(b) for failure to plead fraud with particularity. Defendant Lee also moves to dismiss the complaints for failure to state a claim under Fed.R.Civ.P. 12(b)(6). I will consider the Rule 9(b) motions first because they do not require consideration of matters beyond the face of the complaints.1

FINDINGS OF FACT

For the purpose of the Rule 9 motions only, I find the following facts from the well-pleaded allegations of the Complaints.2

The plaintiffs3 are purchasers of 77 of 100 limited partnership units offered at $24,000 each by defendant Canyon Center Limited Partnership (Canyon Center), a Wisconsin limited partnership. (Complaints, ¶¶ 4, 15) Canyon Center was organized for the purpose of developing a mixed-use real estate project (to be known as Canyon Center) in Boulder, Colorado. (Complaints, ¶ 4) The limited partnership units are securities within the meaning of 15 U.S.C. § 77b, 78c and Wis.Stat. Chap. 551. (Axtell and Bryan, 1121; Bartlett, 1119)

Canyon Center’s general partner is defendant Madsen Partners Y, a Wisconsin general partnership formed for the purpose of holding investments and real estate and acting as the general partner of various ventures and partnerships. (Complaints, 117) The moving defendants are four of Madsen Partners’ 15 general partners, all of whom have been named as defendants. (Complaints, 118)4

Defendant Madsen Corporation (Corporation) is a Wisconsin corporation engaged in the businesses of construction, real estate development and brokerage, management, and mortgage financing. The Corporation entered into contracts with Canyon Center whereby the Corporation would manage and provide interim financing to Canyon Center, manage the project, and serve as the projects’ general contractor. (Com[560]*560plaints, II5) Defendant Madsen Investment Services, Inc., a Wisconsin corporation, was Canyon Center’s broker-dealer responsible for the sale of Canyon Center limited partnership units. (Complaints, 117)5

Between October and December, 1984, defendants promoted the Canyon Center venture as an investment opportunity among investors in the Madison area, and, in connection therewith, published and circulated a confidential Offering Memorandum dated October 1, 1984, regarding the investment. (Complaints, 111110, 11) Plaintiffs themselves had no knowledge of the commercial real estate market in the Boulder area beyond the information provided by defendants. (Axtell and Bryan 1124; Bartlett, 1127) The Offering Memorandum contained matter which was material to plaintiffs’ investment decisions, and they relied upon it in making their investment decision. (Complaints 111112-13) Commencing October 15, 1984, plaintiffs committed themselves to the purchase of from one to five limited partnership units each and executed promissory notes for the unpaid balance of their investments. (Complaints U 15)

Through the Offering Memorandum and related correspondence and oral discussions, defendants made, authorized, adopted, or ratified false and misleading representations of fact, and omitted to disclose facts, which were material to plaintiffs’ decision to invest. Specifically:

(a) Defendants made statements in the Offering Memorandum based on a market study report entitled the “Goodkin Report” which was completed on or about May, 1982, and failed to supplement said report with information regarding changes in the economic condition of Boulder, Colorado (hereinafter the “Boulder area”), in 1984;
(b) Defendants rendered an incomplete description of potentially competitive retail and office space in the Boulder area by referring only to the Exeter Project and projects in the Diagonal area and by omitting to disclose the capacities of other retail and office projects that existed and/or were being developed in the Boulder area;

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Cite This Page — Counsel Stack

Bluebook (online)
138 F.R.D. 556, 1988 U.S. Dist. LEXIS 17619, 1988 WL 236604, Counsel Stack Legal Research, https://law.counselstack.com/opinion/axtell-v-canyon-center-ltd-partnership-wiwd-1988.