The opinion of the court was delivered by: NEWCOMER
move for summary judgment in this securities fraud case, arguing (1) that the statute of limitations has run on plaintiff's federal securities law claims, and (2) that plaintiff fails to state a legal claim with regard to alleged misrepresentations.
The alleged facts of this case have already been recited in summary form in this Court's Memorandum and Order of March 3, 1981. Goodman v. Moyer, et al., 523 F. Supp. 33 (E.D.Pa.1981) (Order denying defendants' Motions to Dismiss and to Stay Discovery). Plaintiff alleges that he was misled in two significant ways, and that he consequently relinquished the right to prepay a note securing a purchase of certain stocks at a favorable price. See Goodman v. Moyer, 523 F. Supp. at 34.
1. The Statute of Limitations
Plaintiff filed his complaint on December 4, 1980. Defendants argue that a one-year statute of limitations applies to his federal securities law claims, and the alleged acts of misrepresentation occurred before December 4, 1979. The federal claims are therefore, defendants argue, time-barred.
Defendants correctly state that the limitations law of Pennsylvania controls here, Biggans v. Bache Halsey Stuart Shields, Inc., 638 F.2d 605, 607 (3d Cir. 1981), although selection of the proper period of limitations requires analysis guided by "a confused and inconsistent body of law." Biggans, 638 F.2d at 612 (Weis, J., dissenting). This Court must choose the most nearly "analogous" Pennsylvania law to sections 10(b) and 20 of the Securities Exchange Act of 1934
, and Rule 10b-5 of the Securities Exchange Commission
, as they are implicated by the allegations made in this case, and apply the statute of limitations appropriate for that Pennsylvania law.
Defendants argue that the limitations in the Pennsylvania Securities Act
, which is one year
, should be applied, because section 1-401 of Pennsylvania Securities Act "addresses itself to the identical conduct addressed in Rule 10b-5: fraudulent misrepresentation by a buyer to a seller of securities or by a seller to a buyer." Defendant's Memorandum of Law at 13.
Plaintiff argues, and this Court agrees, that the issue of the appropriate limitations period is different in the case of Digi-Log, Inc. as opposed to the individual Digi-Log defendants.
With respect to claims against Digi-Log, Inc. the Court must follow Biggans and rule that the Pennsylvania Securities Act period of limitations does not apply. Section 501 of that act (to which the limitation of one year is fixed) is quite clear in its applicability only to those in privity with the plaintiff. Sharp v. Coopers & Lybrand, 649 F.2d 175, 192 (3d Cir. 1981). Because Digi-Log was neither a buyer nor a seller of the shares in this case, an action under section 1-501 of the Pennsylvania Securities Act could not lie. Therefore the most clearly analogous cause of action in the state counts, under the Biggans rationale, is common law fraud, for which the period of limitations is either six or two years. Compare Biggans, 638 F.2d at 607 n.2 with Sharp, 649 F.2d at 192. Plaintiff's claims against Digi-Log, Inc. are therefore not time-barred.
More problematic is the choice of the appropriate limitations period for plaintiff's claims against the individual Digi-Log defendants. The recent cases cited by both sides, Biggans, Sharp, and Roberts v. Magnetic Metals Co., 611 F.2d 450 (3d Cir. 1979) do not dictate a result here. The rule of Biggans, that
(w)here the state Blue Sky law does not provide the plaintiff with a cause of action for the relief requested, but common law does, and where the state legislature framed its statute to supplement, rather than supplant available common law remedies, it is the common law limitations period which must be applied in federal securities actions.
As mentioned, defendants argue that section 401 of the Pennsylvania Securities Act "addresses itself to the identical conduct addressed in Rule 10b-5." Defendants' Memorandum of Law at 15. Section 401 states:
It is unlawful for any person, in connection with the offer, sale or purchase of any security in this ...