Kleinert's, Inc., 391 F. Supp. 720, 726 (E.D.Pa.1975); Crowell v. Pittsburgh & Lake Erie R.R. Co., 373 F. Supp. 1303, 1311 (E.D.Pa.1974); Dorfman v. First Boston Corp., 336 F. Supp. 1089 (E.D.Pa.1972). Moreover, other courts have adopted this view. See In re Gap Stores Securities Litigation, 457 F. Supp. 1135, 1142 (N.D.Calif.1978) and cases cited therein. I decline to adopt defendants' position in light of the above-cited precedent.
Defendants also make an alternative argument concerning the portion of count III attacking the 1979 transaction. Because only a purchaser or seller of a security may bring an action under section 10(b) or rule 10b-5, Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S. Ct. 1917, 44 L. Ed. 2d 539 (1975), they argue that plaintiffs do not have standing to sue because they were neither purchasers nor sellers in the 1979 transaction. Plaintiffs claim that they have standing under the "forced seller" doctrine. Initially, it is clear that Blue Chip did not refute the "forced seller" doctrine. Alley v. Miramon, 614 F.2d 1372, 1385-87 (5th Cir. 1980). To determine the applicability of the "forced seller" doctrine, a court must "(focus) on the economic reality of the transaction" and make an "economic determination as to whether in reality the transaction constitutes a "... transformation of a securityholder's investment from an interest in a going enterprise into a right solely to receive payment in exchange for such interest.' " McCloskey v. McCloskey, 450 F. Supp. 991, 995 (E.D.Pa.1978), quoting Murphey v. Hillwood Villa Assoc., 411 F. Supp. 287, 292 (S.D.N.Y.1976); Valente v. Pepsico, Inc., 454 F. Supp. 1228, 1237 n.10 (D.Del.1978). Because this issue comes before me on defendants' motion to dismiss, I must accept as true all well pleaded allegations of the complaint, and decide all inferences pertinent to material facts which flow from those allegations in favor of plaintiffs. Adickes v. Kress & Co., 398 U.S. 144, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970); United States v. Diebold, Inc., 369 U.S. 654, 82 S. Ct. 993, 8 L. Ed. 2d 176 (1962). Viewed in this light, plaintiffs' allegations picture the 1979 transaction as one in which plaintiffs' interests in PPA were transformed from interests in a going partnership with valuable, tangible assets to interests in a shell with only highly speculative and unsecured property rights, and, as a practical matter, merely illusory rights to receive mortgage proceeds in the future. Thus the 1979 transaction must be viewed at this point as creating a "forced sale" of plaintiffs' interests in PPA, pursuant to which plaintiffs have standing to attack that transaction in count III of the complaint.
In count XII of the complaint, plaintiffs sue derivatively on behalf of PPA for violations of sections 10(b) and 20 of the Securities Exchange Act of 1934 in connection with the 1979 transaction. Other derivative claims under Pennsylvania law are set forth in counts XIII through XVI of the complaint. Defendants seek dismissal of these counts on the ground that plaintiffs may not sue derivatively on behalf of the partnership. They argue, in essence, that Pennsylvania law contains an implied prohibition against such suits because the Uniform Limited Partnership Act (ULPA) has been adopted in Pennsylvania, and because the ULPA has been interpreted in other states to prohibit derivative suits by limited partners. I note initially that the cases upon which defendants rely are at best ambiguous on the issue of the propriety of derivative suits by limited partners, as the conflicting construction urged by plaintiffs and defendants reveal. Further, Pennsylvania law does not clearly prohibit such suits. Section 545 of the Pennsylvania Uniform Limited Partnership Act, 59 Pa.Cons.Stat.Ann. § 545 (Purdon Supp.1980-81),
can be interpreted either way. Indeed, other courts which have addressed this issue concluded that the framers of the ULPA did not focus on the problem of derivative claims in promulgating the above-cited provision, but rather intended the statute merely to prevent limited partners from interfering with the right of general partners to conduct the business of the partnership. See Klebanow v. New York Produce Exchange, 344 F.2d 294, 298-99 (2d Cir. 1965) (Friendly, J.) and cases cited therein. It has also been held that "the object of the derivative action is, in essence, to enforce the limited partners' rights against the Partnership, albeit by an action against the general partner, to protect their interest in the Partnership .... This interpretation is consistent with the purpose of the (ULPA), which is to insulate the limited partners from third parties dealing with the partnership. Smith v. Bader, 458 F. Supp. 1184, 1186-87 (S.D.N.Y.1978). In addition, it is established that the question of "standing in a Rule 23.1 case to assert a derivative claim based on federal law is a federal question ..." In re Pittsburgh & L.E.R. Co. Securities and Antitrust Litigation, 543 F.2d 1058, 1067 (3d Cir. 1976). Unfortunately the federal rule is unclear as well. Nevertheless, guidance can be found in Judge Friendly's opinion in Klebanow, in which he found limited partner standing because of the confluence of the above-noted factors (standing is a federal question, law of the forum is unclear and evinces no clear policy against such standing) and by analogy to the law of trusts, which permits a cestui que trust to sue to enforce a claim of the trust when the trustee has wrongfully refused to do so. 344 F.2d at 296-99. Defendants argue that Klebanow is inapposite because it is based on New York law which is contrary to Pennsylvania law. However, I do not view New York law as do defendants, and note further that the Third Circuit has cited Klebanow as the leading case on this issue. McClune v. Shamah, 593 F.2d 482, 487 (3d Cir. 1979). The equities of the situation also militate in favor of permitting a derivative suit, because "preclud(ing) the derivative claims would effectively bar the Partnership, and possibly the limited partners, from obtaining judicial relief as a result of the general partner's alleged self-dealing, conversion of assets and opportunities and breach of fiduciary duty." Smith v. Bader, 458 F. Supp. at 1168. Finally, I note that, where state law is unclear, "federal judges are entitled to resolve the doubt in a way that permits the assertion of a federal claim." Klebanow v. New York Produce Exchange, 344 F.2d at 299. For all of these reasons I decline to dismiss counts XI through XVI for lack of standing.
PPOBA argues alternatively that the derivative claims must be dismissed because the 1979 transaction did not involve the purchase or sale of a security. Plaintiffs argue that the "senior participating certificate" involved therein is a security. In considering PPOBA's contention I am guided by the Supreme Court's admonition that federal securities laws are remedial in nature, and must be construed broadly. Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S. Ct. 548, 553, 19 L. Ed. 2d 564 (1967). I must consider the economic realities of the transaction rather than the name assigned the documents involved, United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 849, 95 S. Ct. 2051, 2059, 44 L. Ed. 2d 621 (1975), bearing in mind that "the federal courts ought to interpret the 1934 Act with a presumption of coverage of any transaction which Congress did not expressly exclude." Weaver v. Marine Bank, 637 F.2d 157 at 165 (3d Cir. 1980). In determining what constitutes a security, "(t)he test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others." S.E.C. v. Howey Co., 328 U.S. 293, 301, 66 S. Ct. 1100, 1104, 90 L. Ed. 1244 (1946); United Housing Foundation, Inc. v. Forman, 421 U.S. at 852, 95 S. Ct. at 2060.
Applying this test in light of the above-noted policy considerations to the 1979 transaction, it is clear that the "senior participating certificate" constitutes a security. Moreover, "every Court to consider the status of loan participations ... has agreed that a loan participation was, or could be, a "security.' " Commercial Discount Corp. v. Lincoln First Commercial Corp., 445 F. Supp. 1263, 1267 (S.D.N.Y.1978) (emphasis in original). In addition, the Weaver court's conclusion that a certificate of deposit constitutes a security, Weaver v. Marine Bank, 637 F.2d 157 at 163-164, compels the conclusion that the "senior participating certificate" constitutes a security as well, because both are long-term debt obligations providing for the repayment of a sum certain at a fixed interest rate. See id., at 161. It is clear that under the facts alleged, a finder of fact could conclude that the 1979 transaction involved a purchase and sale of the "senior participating certificate." Thus I reject PPOBA's argument that the 1979 transaction did not involve a purchase or sale of a security as a matter of law.
PPOBA also argues that all of plaintiffs' securities law claims must be dismissed as to it due to plaintiffs' failure to plead scienter on the part of PPOBA. However, section 324 of the Pennsylvania Uniform Partnership Act states:
Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.