Rehearing and Rehearing En Banc Denied April 7, 1992.
EMILIO M. GARZA, Circuit Judge:
Onshore Exploration Ltd. ("Onshore") is a Texas limited partnership formed to engage in oil and gas drilling ventures. On December 3, 1987, plaintiffs — fifteen out of seventy-seven Onshore investors — brought this action against twenty-three defendants.
Concluding that plaintiffs have failed to set forth specific facts and establish a genuine issue worthy of trial, we affirm the district court's summary judgment in favor of defendants.
Onshore was formed in September 1984 under Texas law for the purpose of raising funds for oil and gas drilling ventures. The enterprise was presented to potential investors as a tax shelter and a sound, legitimate investment vehicle. On September 26, 1984, Onshore entered into a Joint Venture Agreement with Defendant Houston Petroleum Company ("HPC"), Onshore agreeing to use its best efforts to raise a minimum subscription of $3,600,000 in capital contributions on or before December 31, 1984.
The defendants, general partners of Onshore, decided to raise this 3.6 million dollars by selling limited partnership units. Onshore actively began to solicit investors in November 1984. According to plaintiffs, Onshore's general partners represented to prospective investors that the Onshore offering was exempt from registration under the Security and Exchange Commission's Rule 506 of Regulation D. See 17 C.F.R. § 230.506 (1989).
In their effort to obtain adequate financing, defendants printed at least two different offering memoranda, one dated September 30, 1984 and another dated November 30, 1984.
Plaintiffs filed their original complaint on December 3, 1987. On December 18, 1987, they filed their first amended complaint, alleging that, with the help of others, Onshore's general partners — EIG and W. Roderick Johnson — engaged in a scheme to defraud them in the sale of Onshore limited partnership securities.
Defendants filed motions to dismiss, and, with the exception of claims brought under section 17 of the Securities Act of 1933, the district court denied these motions. Plaintiffs were directed to amend their complaint to specifically refer to the defendants against whom allegations were being made and comply with the court's RICO standing order. Discovery commenced. In August 1988, plaintiffs filed their Second Amended Complaint, which the district court struck.
In January 1989, the court considered a joint motion to amend the scheduling order of August 1988, and extended the discovery cut-off date to April 1989. At this January hearing, the court admonished all counsel to cooperate in discovery and reserved a ruling on pending motions for sanctions. The court set July 28, 1989 for the hearing and disposition of pending motions.
Defendants filed motions for summary judgment on June 15, 1989. Although responses to these motions were due on July 10, 1989, plaintiffs did not file their responses until July 27, 1989. Plaintiffs were also late in filing their motions for summary judgment. In October 1989, the district court granted summary judgment in favor of the Ehrman defendants and against plaintiffs. In December 1989, the district court first granted summary judgment in favor of EIG, Onshore, and Rockwood on their counterclaims against certain plaintiffs. Later that same month, the district court entered its final judgment, granting summary judgment to all the remaining defendants. The district court also held a hearing on pending motions for sanctions and granted defendants' motion for sanctions against some of the plaintiffs and against their counsel, Mr. Armando Lopez.
Plaintiffs seek reversal of the district court's grant of summary judgment, and they have pinned a tail of reversible-error assertions to this summary judgment challenge.
This case is the product of consolidation.
A & B
Since this case is an appeal from a grant of summary judgment, this court reviews the record de novo. See International Shortstop, Inc. v. Rally's, 939 F.2d 1257, 1263 (5th Cir.1991). Our inquiry as to whether the district court properly granted summary judgment in defendants' favor is guided by Rule 56 of the Federal Rules of Civil Procedure and three Supreme Court cases. See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2550, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2505-14, 91 L.Ed.2d 202 (1986); Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).
Summary judgment is proper if the movant demonstrates that there is an absence of genuine issues of material fact. See Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. Such a showing entitles the movant to summary judgment as a matter of law. See Fed.R.Civ.P. 56(c). The movant accomplishes this by informing the court of the basis for its motion, and by identifying portions of the record which highlight the absence of genuine factual issues. See generally id. Once the movant produces such evidence, the nonmovant must then direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial — that is, the nonmovant must come forward with evidence establishing each of the challenged elements of its case for which the nonmovant will bear the burden of proof at trial. See Catrett, 477 U.S. at 322, 106 S.Ct. at 2552.
The nonmovant can satisfy its burden by tendering depositions, affidavits, and other competent evidence to buttress its claim. See Rally's, 939 F.2d at 1263; see also Fed.R.Civ.P. 56(e). Mere conclusory allegations are not competent summary judgment evidence, and they are therefore insufficient to defeat or support a motion for summary judgment. See Galindo v. Precision American Corp., 754 F.2d 1212, 1216 (5th Cir.1985); United States v. An Article of Drug, 725 F.2d 976, 984-85 (5th Cir.1984). Nor may non-movants rest upon mere allegations made in their pleadings without setting forth specific facts establishing a genuine issue worthy of trial. See Anderson, 477 U.S. at 248-49, 106 S.Ct. at 2510; C.F. Dahlberg & Co., Inc. v. Chevron U.S.A., Inc., 836 F.2d 915, 920 (5th Cir.1988). In reviewing a grant of summary judgment to determine whether the law was applied correctly, this court only considers papers that were before the trial court.
The district court's opinion, organized first claim-by-claim and then defendant-by-defendant, establishes the basis upon which the court dealt with each of the claims raised by plaintiffs.
Did the district court err in finding that disclaimers in offering memoranda shielded defendants from accusations of misrepresentation?
Plaintiffs have briefed a lengthy list of misrepresentations allegedly made by defendants. The gist of plaintiffs' overall argument is that: (i) they were induced to purchase interests in Onshore with promises of low risk and high profits, and that, (ii) even though plaintiffs were given a rescission opportunity when the financing deadline established in the first memorandum expired, that opportunity was not an honest one and defendants are, therefore, liable for their misrepresentations.
As noted by the district court, despite their differences, both memoranda warned plaintiffs of the Onshore risk.
Did plaintiffs know, or should plaintiffs have known, about defendants' alleged misrepresentations by May 1, 1985?
The controlling date for purposes of the running of the respective statutes of limitations is when a purchaser of securities knew — or in the exercise of reasonable diligence, should have known — of the alleged wrongdoing. See Corwin v. Marney, Orton Invs., 843 F.2d 194, 197 (5th Cir.), cert. denied, 488 U.S. 924, 109 S.Ct. 305, 102 L.Ed.2d 324 (1988), citing Breen v. Centex Corp., 695 F.2d 907, 911 (5th Cir.1983). Plaintiffs challenge the district court's finding that they knew or should have known of defendants' alleged wrongdoing by May 1, 1985. They argue that "[d]efendants intentionally and fraudulently omitted and concealed all relevant facts from Plaintiffs."
General allegations of concealment inserted in plaintiffs' complaint or pretrial order are simply not enough to either toll a statute of limitations or survive a motion for summary judgment. We find that the district court rightfully demanded more. See generally supra Part II; see also Irving Trust Co. v. United States, 221 F.2d 303,
Is there a genuine issue of material fact as to when the limitations period on plaintiffs' causes of action under sections 12(1) and 12(2) of the 1933 Securities Act began to run?
Plaintiffs argue that there is a genuine issue of material fact as to when the limitations period on their causes of action under sections 12(1) and 12(2) of the Securities Act of 1933 began.
Each plaintiff signed a subscription agreement when she purchased Onshore interests — a subscription agreement that should have put these investors on notice of the speculative nature of their investment. It certainly triggered a reason to exercise reasonable diligence.
Section 13 of the Securities Act of 1933 provides:
Codified at 15 U.S.C. § 77m (1989) (emphasis added). Plaintiffs filed this lawsuit on December 3, 1987. All of the plaintiffs, with the exceptions of Steubling, LaCelle, Mikles and MJM, purchased their Onshore units before November 30, 1984 by executing the subscription agreements. Therefore, under the discovery rule of section 77m of Title 15,
Were plaintiffs' 10(b) and 10(b)(5) claims properly time-barred?
Plaintiffs have tucked a related "catch-all" contention within the pages of their brief — namely that they have suffered financial injuries as a result of various predicate acts, including violations of section 10(b) and federal mail and wire fraud statutes. Plaintiffs elaborated upon this contention in their Supplemental Brief. See Supplemental Brief on the Impact of the Supreme Court's Recent Decision in Lampf, Pleva, Lipkind, Prupis & Petigrow vs. Gilbertson (filed Sept. 3, 1991) ["Supplemental Brief"].
In Lampf, the United States Supreme Court, in a majority opinion authored by Justice Blackmun, held that: (i) the statute of limitations applicable to actions under section 10(b) consists of the one-and-three-year provisions of the Securities Exchange Act and Securities Act for causes of action which they specifically provided for; and that (ii) equitable tolling is not applicable. See Lampf v. Gilbertson, ___ U.S. ___, 111 S.Ct. 2773, 2781-82, 115 L.Ed.2d 321 (1991). Plaintiffs, with Lampf in hand, argue that it is beyond dispute that all plaintiffs filed this lawsuit within the three-year cut-off of Section 9(e). They then go on to argue the dissenting position of Justices Kennedy and O'Connor — "that a 3-year absolute time bar is inconsistent with the practical realities of § 10(b) litigation[,]" given the difficulties in discovering whether a violation of the securities laws occurred at all. Lampf, 111 S.Ct. at 2790.
In dealing with plaintiffs' section 12 claims, the district court applied the one- and three-year limitations periods prescribed for those actions.
Were plaintiffs' RICO claims properly barred?
The district court granted defendants' motions for summary judgment on plaintiffs' RICO claims, finding that:
Our review of the record supports these findings, and plaintiffs have added nothing new in their presentation to this court.
Did the district court err by assuming defendants had no responsibility with respect to their authorization of secondary offers and the sale of restricted onshore units?
According to plaintiffs, the record shows that defendants sold securities to people whom defendants knew could not afford them — people, some of whom were on the verge of bankruptcy, who indicated that they did not have the money to purchase the securities, along with other "unsuitable and unsophisticated" investors. Plaintiffs also assert that, in their Proposed Pretrial Order, they offered the district court a list of twenty-four witnesses capable of testifying to these matters.
This is all the plaintiffs have to offer — no specific allegations, not even so much as general allegations balanced upon the tip
Should summary judgment granting defendants' counterclaims be reversed?
The Ehrman defendants moved for summary judgment on their counterclaims against several plaintiffs regarding unpaid promissory notes and cash calls used by these defendants to purchase Onshore interests. The evidence shows that the named plaintiffs signed the notes and have not paid them, and plaintiffs have made no showing to the contrary.
941 F.2d 1323, 1325 (5th Cir.1991) (citations omitted).
Plaintiffs' other summary judgment contentions
We have sifted through plaintiffs' briefs and found numerous points tucked within their pages. Our efforts have separated out a few more contentions worthy of discussion.
The issues identified in defendants' Pretrial Order
Throughout their brief and during oral argument, plaintiffs have argued that the
Defendants assert that this contention lacks merit for two reasons: (i) a pretrial order is not competent summary judgment proof and (ii) plaintiffs' list of contested issues do not create "issues of material fact" as that term is used for the purposes of summary judgment. We agree. First, plaintiffs' "list of unfiled fact issues for the proposed pretrial order does not constitute summary judgment evidence, but is merely in the nature of pleadings, which cannot be used to create an issue of fact." Geiserman v. MacDonald, 893 F.2d 787, 793 (5th Cir.1990) (citation omitted); accord Irving Trust Company v. United States, 221 F.2d 303, 305 (2d Cir.), cert. denied, 350 U.S. 828, 76 S.Ct. 59, 100 L.Ed. 740 (1955). Rule 56(e) of the Federal Rules of Civil Procedure requires a nonmovant to go beyond pleadings to establish the presence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Second, the Supreme Court has discussed "materiality" and where, as here, the summary judgment evidence establishes that one of the essential elements of the plaintiffs' cause of action does not exist as a matter of law, or that plaintiffs' cause of action is barred by a statute of limitations, all other contested issues of fact are rendered immaterial. See Celotex, 477 U.S. at 323, 106 S.Ct. at 2552 ("[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.").
The deposition testimony of defendant Joel Middlebrook
According to plaintiffs, the district court ignored important deposition testimony of defendant Joel Middlebrook,
We disagree. After eighteen months of discovery, the only "evidence" plaintiffs produced in response to defendants' motions for summary judgment was an unsigned letter and a one-page excerpt from Ms. Joel Middlebrook's deposition, the bookkeeper for the Houston Petroleum Company.
Plaintiffs also assert that the district court erred in denying their Motion to File a Second Amended Complaint, which, according to plaintiffs, detailed the history and pattern of defendants' unlawful activities and alleged that a subsequent non-registered offering — Texas Energy Ltd. — by Ehrman and others was a continuation of defendants' investment scheme. District courts generally are afforded great discretion regarding trial procedure applications (including control of the docket and parties), and their decisions are reviewed only for abuse of discretion. See Pierce v. Underwood, 487 U.S. 552, 108 S.Ct. 2541, 2546-47 & n. 1, 101 L.Ed.2d 490 (1988). Rule 15(a) of the Federal Rules of Civil Procedure provides that:
Fed.R.Civ.P. 15 (emphasis added). Applying Rule 15, this court has stated that whether to allow an amendment is a decision to be made by the district court. See Ross v. Houston Indep. Sch. Dis., 699 F.2d 218, 228 (5th Cir.1983). Precisely,
Id. at 228 (citations omitted).
This case's convoluted procedural history suggests that it is litigation with Bleak House potential. One chapter within that history is the opportunity plaintiffs were given to amend their complaint on December 18, 1987. Another is the opportunity plaintiffs were given, following the court's granting of an extension of time, to join new parties until August 9, 1988. Rather than taking advantage of these opportunities, plaintiffs waited until they had expired and then moved for another extension of time to join new parties — a motion the district court denied. Now plaintiffs appeal the district court's denial of their September 9, 1988 Motion for Leave to File a Second Amended Complaint or in the Alternative Motion for Joinder of Persons Needed for Just Adjudication. We will not oblige and, accordingly, we affirm the district court's denial of that motion.
Plaintiffs also allege that the district court dismissed IDL as a party solely as a Rule 11 sanction to punish them for filing an allegedly frivolous claim. More specifically, plaintiffs assert that the district court's dismissal of IDL is (i) a mistake of law and (ii) in contempt of this court's mandate to reinstate IDL as a defendant.
Plaintiffs contend that this court, in deciding plaintiffs' previous appeal, implicitly recognized that the case now before us is not frivolous.
Plaintiffs also assert that the district court's dismissal of IDL as a party is in contempt of this court's mandate to reinstate IDL as a defendant. We disagree. The only debatable issue is whether IDL should be reinstated as a defendant to plaintiff Topalian's claims — an issue incidental to our consideration of the merits of plaintiffs' overall action.
Another issue raised by plaintiffs is whether, should this court decide to reverse the district court's summary judgment against plaintiffs, there is sufficient evidence in the record to justify reassignment of this case to another district court judge. We find no grounds for reversal and, therefore, we do not reach this issue.
The final matter before us is whether we should grant defendant Rockwood's request for sanctions pursuant to Rule 38 of the Federal Rules of Appellate Procedure. Under Rule 38, this court may impose sanctions upon parties who pursue frivolous appeals. See Coghlan v. Starkey, 852 F.2d 806, 810-11 (5th Cir.1988). A frivolous appeal is one "that relies on legal points that are not arguable on the merits." Lyons v. Sheetz, 834 F.2d 493, 496 (5th Cir.1987) (citation omitted); see also McAfee v. Fifth Circuit Judges, 884 F.2d 221, 223 (5th Cir.1989), cert. denied, 493 U.S. 1083, 110 S.Ct. 1141, 107 L.Ed.2d 1046 (1990). We find that, although plaintiffs have not met the evidentiary burden required to survive defendants' motions for summary judgment, we cannot summarily dismiss the issues they have brought before us as "frivolous." Accordingly, we deny defendant Rockwood's request for sanctions.
For the foregoing reasons, we AFFIRM.
Claims Against All Defendants:A. Section 17(a) Claims: Evidence presented shows that plaintiffs signed documents necessary to subscribe to units, and that documents warn investors of "high degree" of risk; each investor was sent "offer of rescission"; plaintiffs' claims under section 12(2)
of the 1933 Act are time-barred; the section 12(1) claims are clearly time-barred by the one-year statute of limitations. B. 10b-5 Claims: Since the tolling period for plaintiffs' claims commenced by May 1, 1985 at the latest, and the appropriate limitations period for section 10b-5 claims in Texas was two years, plaintiffs' claims are time barred. C. "§ 55t" Claims: District court found that no such statute exists. D. RICO Claims: Since Robert B. Eckis, Jr., was not listed as a defendant in response to Question 2 of the district court's RICO standing order, the RICO claims against him were dismissed. II. Defendants' Motions: A. John Ehrman and EIG: "The summary judgment evidence shows that the efforts expended by the Defendants were all legitimate business practice... [T]he evidence already of record, presented by other Defendants, or by Ehrman with the motion, shows no evidence of illegality or factual dispute." Order at 15. B. Roderick Johnson: "Plaintiffs have admitted that they know of no wrongdoing by Johnson, Johnson did not sell them securities. In fact, Johnson had nothing to do with their decision to purchase these securities. The Court has made an exhaustive review of all the evidence. This has revealed that Plaintiffs did not read either offering memorandum in any depth and had no knowledge of Johnson's role in the partnership." Order at 17. C. Rio Bravo & Bert Gamble: "The evidence shows that Rio Bravo and Mr. Gamble had no contact with Onshore other than the two agreements.... The Court has reviewed the documents presented by Rio Bravo. There is no evidence of wrongdoing." Order at 19-21. D. HPC & Richard O'Donnell: "Defendants' evidence shows that none of the Plaintiffs believed HPC did anything with Onshore investors, let alone anything wrong. Plaintiffs' response again is only full of contentions that at trial they will prove their claims." Order at 22. E. Rockwood: (1) "Nowhere in the Complaint or the RICO response is it alleged that Rockwood made any affirmative misrepresentations or engaged in any predicate RICO acts.... Based upon the evidence presented, Rockwood contends that there is no evidence to show that Rockwood engaged in any RICO acts, made any misrepresentations to Plaintiffs[,] or was involved in any way with the sale of the units of Onshore." Order at 23. (2) "The promissory notes signed by the Plaintiffs were assigned to Rockwood... Rockwood is entitled to judgment as a matter of law on this contractual claim regardless of any ruling on Rockwood's motion for summary judgment on the claims against it, because the claims against Rockwood do not arise out of the Indemnification Agreement.... Therefore, Rockwood is entitled to judgment as a matter of law on the
separate and independent ground of recovery based on the promissory notes." Order at 24-25. F. Robert E. Eckis, Jr.: "In short, the Plaintiffs have asserted no knowledge of Mr. Eckis' involvement in any aspect of Onshore, and Mr. Lopez's response presents no factual dispute which could preclude summary judgment for this defendant." Order at 29. G. Joel A. Middlebrook: "Mr. Lopez has not responded to this motion although it has been on file for almost two months. Since the motion is unopposed, and the Court has not found any facts to show Middlebrook's liability, Middlebrook's motion shall be granted on the merits as to all claims." Order at 29.
Appellants' Brief at vi, Topalian v. Ehrman, Nos. 90-2104, 90-2105, 90-2106 (5th Cir. filed Oct. 24, 1990) ["Appellants' Brief"].
Order at 11-12; id. at 14 ("The offering memorandum clearly states that the investors might never see a penny of their investment and might never make a profit. The promissory notes clearly state that the signer is responsible for the debt. It is well settled law that an adult is responsible for reading the documents he signs.").
[t]he unlawful rescission offer was made after December 31, 1984, it was not made to all subscribers, did not require an affirmative reconfirmation and was not accompanied by a disclosure including all information necessary to update previously provided disclosures. Furthermore, Defendants did not give any disclosure materials to Plaintiffs until well after the Partnership had secured financing.
Appellants' Brief at 26-27. And appellants add, "Defendants were able to resell the units to Plaintiffs while Plaintiffs were still under the influence of Defendants' continuing fraudulent misrepresentations and high-pressure selling tactics." Id. at 26.
15 U.S.C. § 77m (1989).
In the present case, the claims brought under the 1934 Securities and Exchange Act were dismissed by the district court in 1990 — that is, prior to Lampf, ___ U.S. at ___, 111 S.Ct. at 2773, and prior to this amendment's June 19, 1991 trigger date. Accordingly, we find that the amendment does not resurrect the plaintiffs' claims.
Appellants' Brief at 48 (emphasis added).
Appellants' Brief at 24.
Order at 15.