source: Caselaw Access Project

author: WEINER, District Judge.

license: Public Domain

text:
    Frank P. ANTINORE, et al. v. ALEXANDER & ALEXANDER SERVICES, INC., Alexander & Alexander, Inc. and Evanston Insurance Company.
    Master Docket No. 4-82-874. Civil Action 4-84-14.
    United States District Court, D. Minnesota, Fourth Division.
    Aug. 24, 1984.
    See also, D.C., 597 F.Supp. 1361.

      Lowell E. Sachnoff, Charles R. Watkins, Chicago, 111., for plaintiffs.
    John Labovitz, Washington, D.C., Jeanne Forneris, Minneapolis, Minn., for defendant Alexander & Alexander.
    Theodore A. Boundas, Keith Hanson, Chicago, 111.,. for defendant Evanston' Ins. Co.
   MEMORANDUM OPINION AND ORDER

WEINER, District Judge.

This action arises from the Flight Transportation Corporation (“FTC”) Securities Litigation pending before this court under Master Docket No. 4-82-874. Plaintiffs, purporting to be representatives of a class of all persons who purchased FTC securities during the period from November 30, 1979 to June 18, 1982, bring this action against the defendants, Alexander & Alexander Services, Inc. and Alexander & Alexander, Inc. (collectively referred to as “A & A”), insurance brokerage corporations organized and existing under the laws of the State of Maryland. Plaintiffs allege that Ezell Jones (“Jones”) was a corporate officer and key employee of A & A. They also allege that Jones was a member of FTC’s board of directors between the fall of 1980 and June 1982. Plaintiffs assert that by June 1982, A & A was responsible for virtually all of FTC’s insurance needs.

The complaint against A & A incorporates by reference the complaint brought against various defendants in Antinore, et al. v. Flight Transportation Corporation, et al., 593 F.Supp. 612 (“Consolidated Complaint”). Plaintiffs allege that there were material misrepresentations, material omissions, and materially false and misleading information regarding the revenues, businesses, operations and financial condition of FTC in the 1979, 1981 and 1982 Prospectuses. They assert that the procurement and maintenance of FTC’s insurance policies were essential to the allegedly fraudulent scheme to inflate the value of FTC securities described in the Consolidated Complaint. Plaintiffs allege that A & A knew or should have known of or was a member of or participant in this scheme or aided and abetted such activities. The particular facts are set forth in the complaint.

The eleven counts of the Consolidated Complaint are incorporated into the complaint against A & A as follows: Counts I — III allege claims pursuant to Section 11 of the Securities Act in connection with the November 30, 1979, March 2, 1981, and June 3 and 4,1982 Registration Statements and Prospectuses; Count IV asserts an action pursuant to Section 10(b) of the Exchange Act for false and misleading disseminations; Counts V-VII allege violations of Section 12(2) of the Securities Act. Count VIII seeks to impose liability on the defendants as control persons pursuant to Sections 15 of the Securities Act and Section 20 of the Exchange Act; Count IX asserts common law fraud and reckless misrepresentations; Count X is brought pursuant to two sections of the Minnesota securities laws; and Count XI asserts liability under the Racketeer Influenced and Corrupt Organizations Act of 1970, 18 U.S.C. §§ 1961-1968.

Presently before the court is the defendants’ motion to dismiss the entire complaint. It contends that Counts I — III and Counts V-VII are barred by the statute of limitations. It contends that Counts I-VII should be dismissed for failure to state a claim of secondary liability. A & A further contends that Counts IV-VII and Count XI must be dismissed for failure to state with particularity the circumstances constituting A & A’s purported fraud. Finally, the defendants assert that Count IX and X must be dismissed for lack of jurisdiction.

The standard governing a motion to dismiss has been stated by the Supreme Court as follows: “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). For the purposes of motion, the well-pleaded material allegations of the complaint are taken as admitted. 2A Moore’s Federal Practice ¶ 12.08 (1983).

STATUTE OF LIMITATIONS

Section 13 sets forth the limitation period for Section 11 and Section 12(2) as follows:

No action shall be maintained to enforce any liability created under section 11 or 12(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence____ In no event shall any such action be brought to enforce a liability created under section 11 ... of this title more than three years after the security was bona fide offered to the public, or under Section 12(2) of this title more than three years after the sale.

15 U.S.C. § 77m. The three year period provided in Section 13 is an absolute limitation. Engl v. Berg, 511 F.Supp. 1146, 1150 (E.D.Pa.1981); Turner v. First Wisconsin Mortg. Trust, 454 F.Supp. 899, 911 (E.D.Wis.1978). Thus, claims brought more than three years after the date of an offer (for the purposes of Section 11 claims) or the date of a sale (for the purposes of Section 12(2) claims) are time barred. In the case sub judice, only the claims brought pursuant to the November 30, 1979 offering are beyond the three year limitation period. The plaintiffs argue, however, that the complaint against A & A is, in effect, an amendment to the Consolidated Complaint. Thus, they contend that the complaint against A & A relates back to the October 1982 filing of the Consolidated Complaint and therefore renders claims brought pursuant to the November 1979 offer timely. We disagree.

The circumstances under which an amended pleading may relate back to the date of the original pleading are set forth in Rule 15(c) of the Federal Rules of Civil Procedure. Rule 15(c) provides, in pertinent part:

Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading. An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied and, within the period provided by law for commencing the action against him-, the party to be brought in by amendment (1) has received such notice of the institution of the action that he will not be prejudiced in maintaining his defense on the merits, and (2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against him.

A & A does not contend that the complaint against it does not arise out of the conduct set forth in the Consolidated Complaint or that it would be prejudiced in being required to maintain a defense on the merits.. Rather, A & A contends that the plaintiffs were not operating under a mistake concerning the identity of the proper party. Plaintiffs, on the other hand, argue that relation back is proper because A & A knew or should have known from the inception of the FTC litigation that it could be joined as a party.

The Eighth Circuit has not taken an expansive approach to Rule 15(c). Gridley v. Cunningham, 550 F.2d 551 (8th Cir.1977). In Gridley, the court declined to permit a fraud action against a corporate officer to relate back to a contract action against the corporation with which he was employed because, “There was no mistake in the identity of the proper party in the contract action.” 550 F.2d at 553. Similarly, in Russ v. Ratliff, 578 F.2d at 221 (8th Cir.1978), the court refused to permit a civil rights complaint against Star City, Arkansas to relate back to a similar action against a police officer and the mayor and council of Star City because the plaintiffs were “represented by knowledgeable civil rights attorneys” who “chose as defendants persons whom they thought were proper parties and who were proper parties.” 578 F.2d at 224.

In the case sub judice, the plaintiffs do not contend that they brought the Consolidated Complaint against the wrong parties. Accordingly, we decline to permit the complaint against A & A to relate back to the date when the Consolidated Complaint was filed. Therefore, the plaintiffs’ Section 11 claims in connection with the November 1979 offering must be dismissed. However, the plaintiffs’ Section 12(2) claims in connection with this offering cannot be dismissed. Unlike the three year limitation period for Section 11 which runs from the date of offering, the three year period for Section 12(2) runs from the date of sale. Since this court has no evidence before it as to when the plaintiffs purchased the securities issued pursuant to the 1979 offering, we cannot dismiss the Section 12(2) claims as time barred.

With respect to each of the plaintiffs’ Section 11 and 12(2) claims, however, A & A argues that they have been brought beyond the one year limitations period of Section 13 which requires actions to be brought “within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence.” 15 U.S.C. § 77m. A & A argues that, “By October 1982, [the date the Consolidated Complaint was filed] plaintiffs were obviously aware of Jones’ alleged violations and of Jones’ relationship to A & A. Thus, as early as October 1982, plaintiffs were on ‘inquiry notice’ of a potential claim against A & A.” [Memorandum in Support of A & A’s Motion to Dismiss at p. 8]. Since the complaint was not filed until January 10, 1984, A & A asserts that it was brought more than one year beyond the plaintiffs’ inquiry notice. Plaintiffs, on the other hand, assert that they did not learn of A & A’s role in the allegedly fraudulent scheme until the summer of 1983, thereby rendering the filing of this complaint timely. [Memorandum of Plaintiffs in Opposition to A & A’s Motion to Dismiss at p. 2].

Resolution of this issue on the pleadings is inappropriate. Whether the plaintiffs have exercised reasonable diligence “is a fact question for decision by the trial court.” Gridley v. Cunningham, supra, 550 F.2d at 553. Accordingly, the court must await evidence regarding this matter.

The defendants next contend that the Section 11 and 12(2) claims must be dismissed for failure to plead compliance with the limitations requirements of Section 13. In Hagert v. Glickman, Lurie, Eiger & Co., 520 F.Supp. 1028 (D.Minn.1981), this court held that a bare allegation of compliance with the limitation period is insufficient. Rather, “a plaintiff must affirmatively plead facts indicating that the action has been timely brought.” 520 F.Supp. at 1033 (citation omitted).

In a matter also arising out of the FTC Securities Litigation, we recently rejected the argument of the law firm to FTC that the Section 11 claims brought against it should be dismissed for failure to plead the limitations requirements. Antinore v. Opperman & Paquin, Civ.No. 4-83-581, related to Master Docket No. 4-82-874, slip op. at 6-7 (D.Minn. August 1, 1984). This decision was based upon the plaintiffs’ allegation that a temporary restraining order was entered against FTC on June 18, 1982 and their assertion that this was the earliest date on which they could have discovered the alleged fraud. Id. In the case sub judice, however, neither the complaint against A & A nor the Consolidated Complaint recite any facts upon which the date of discovery of a claim against A & A could be based. Moreover, unlike the complaint against the law firm, none of the Section 11 (or Section. 12(2)) counts contain even a bare allegation of compliance. However, in view of the liberal pleading requirements of the Federal Rules of Civil Procedure, dismissal of the complaint is not warranted. See, In re Caesar’s Palace Securities Litigation, 360 F.Supp. 366, 378 (S.D.N.Y.1973). Accordingly, the plaintiffs are given leave to amend the complaint to plead compliance with the limitations requirements of Section 13 in connection with their claims for relief under Sections 11 and 12(2).

A & A next contends that the plaintiffs have failed to allege a proper basis of liability against it under Sections 11 and 12(2) of the Securities Act of 1933 and Section 10(b) of the 1934 Exchange Act. The plaintiffs do not assert primary liability against A & A under these sections. Rather, they contend that A & A is liable as: (1) an aider and abettor to the alleged primary violations of the defendants named in the Consolidated Complaint; (2) a control person pursuant to Section 15 of the Securities Act and Section 20 of the Exchange Act; and (3) a principal for the alleged wrongful, acts of its agent, Ezell Jones.

SECONDARY LIABILITY UNDER SECTIONS 11, 12(2) AND 10(b)

Section 11 of the Securities Act of 1933 sets out the following persons who may be liable where a registration statement contains an untrue statement of material fact or omits to state a material fact:

(1) every person who signed the registration statement;
(2) every person who was a director of (or person performing similar functions) or partner in the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted;
(3) every person who, with his consent, is named in the registration statement as being or about to become a director, person performing similar functions, or partner;
(4) every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, report, or valuation, which purports to have been prepared or certified by him;
(5) every underwriter with respect to . such security. 15 U.S.C. § 77k(a).

Section 12(2) imposes liability on any person who “offers or sells a security” by means of a false or misleading prospectus or oral communication. 15 U.S.C. § 77(l)(2). A & A contends that aiding and abetting liability may not be asserted under Sections 11 and 12(2). We agree.

In the related matter of Antinore v. Reavis & McGrath, 593 F.Supp. 612, 616 (D.Minn.1984), after a review of developments in the case law, this court dismissed the plaintiffs’ Section 11 claims based on an aiding and abetting theory of liability. We adopt the reasoning of that opinion in ruling on the plaintiffs’ Section 11 claims in the case sub judice. Like Section 11, Section 12(2) is an express liability provision and we conclude that under the law of the Eighth Circuit, a Section 12(2) claim may not be brought on an aiding and abetting theory of liability. See Hagert v. Glickman, Lurie, Eiger & Co., supra, 520 F.Supp. at 1034. The plaintiffs’ claim of control person liability under these Sections 11 and 12(2) is discussed infra.

A & A also contends that the plaintiffs have failed to state a claim for secondary liability under Section 10(b) and Rule 10b-5 promulgated thereunder. Section 10(b) provides:

It shall be unlawful for any. person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or continuance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b).

Rule 10b-5 provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange,
(1) to employ any device, scheme, or artifice to defraud,
(2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or
(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5.

A three part test must be met before aiding and abetting liability may be imposed under Section 10(b). A plaintiff must prove:

(1) the existence of a securities law violation by the primary party (as opposed to the aiding and abetting party);
(2) “knowledge” of the violation on the part of the aider and abettor; and
(3) “substantial assistance” by the aider and abettor in the achievement of the primary violation. Stokes v. Lokken, 644 F.2d 779, 782-783 (8th Cir.1981); See also IIT, An International Investment Trust v. Cornfield, 619 F.2d 909, 922 (2d Cir.1980); Monsen v. Consolidated Dressed Beef Co., 579 F.2d 793, 799 (3d Cir.), cert. denied, 439 U.S. 930 [99 S.Ct. 318, 58 L.Ed.2d 323] (1978).

A & A contends that the plaintiffs have failed to allege the element of substantial assistance. The plaintiffs allege that:

Specifically, but not limited thereto, A & A and Jones knew or should have known of, or aided and abetted, or were involved in, engineered, participated in or were responsible for, a scheme pursuant to which William Rubin, Janet Karki and FTC insured aircraft for artificially high values and then used such insured values to obtain inflated credit or loans based on such values. These acts contributed substantially to the artificial inflation of FTC’s securities prices and to the perpetration of the overall fraudulent scheme as detailed in Exhibit A [the Consolidated Complaint] and resulted in FTC obtaining the use of funds which it otherwise would have been unable to obtain. Complaint ¶ 21.

This assertion is sufficient to constitute an allegation of substantial assistance. While proof of this allegation will ultimately be required, dismissal of the plaintiffs’ Section 10(b) claims at this stage is not warranted.

CONTROL PERSON LIABILITY

A & A next contends that the plaintiffs have failed to allege the requisite elements of control person liability under Section 15 of the 1933 Act and Section 20(a) of the 1934 Act. In Hagert v. Glickman, Lurie, Eiger & Co., supra, the court set forth the requisites for asserting a claim of control person liability as follows:

While we agree that plaintiffs need not plead specific affirmative acts showing actual control of a particular defendant over an alleged principal violator, it is necessary that, at the least, defendants be informed whether they are alleged to be primary or secondary violators, as to which primary violator they are allegedly controlling persons and whether they are controlling persons as a result of status or affirmative acts, (citations omitted).

520 F.Supp. at 1035. The plaintiffs’ complaint against A & A meets these requirements. The complaint names A & A as a secondary violator, Complaint ¶ 24; it identifies the primary violator it allegedly controlled, Id.) and the relationship upon which control liability is based. Complaint ¶¶ 13-16.

A & A asserts, however, that an allegation of “culpable participation” by the controlling entity in the wrongdoing of the primary violator is also required to state a claim of control person liability. A & A has cited no Eighth Circuit authority dispositive of this issue. Assuming, arguendo, that an allegation of culpable participation is required, the complaint contains such an allegation. Complaint ¶ 21. Thus, while the plaintiffs’ Section 11 and 12(2) claims have been dismissed to the extent that they allege secondary liability, the claims brought under these sections may remain viable on a control person theory of liability.

PLEADING WITH PARTICULARITY

A & A seeks dismissal of Counts IV-VII and Count XI for failure to allege fraud with sufficient particularity. To satisfy Rule 9(b) of the Federal Rules of Civil Procedure, which requires that in averments of fraud, the circumstances be stated with particularity, “conclusory allegations that defendant’s conduct was fraudulent and deceptive are not enough.” Decker v. Massey-Ferguson, Inc., 681 F.2d 111, 114 (2d Cir.1982) (citing Segal v. Gordon, 467 F.2d 602, 607 (2d Cir.1972)). All that is required is that plaintiffs set forth the “time, place and circumstances of the alleged fraudulent activities.” Hagert v. Glickman, Lurie, Eiger & Co., 520 F.Supp. at 1036 (citing Helfant v. Louisiana & Southern Life Ins. Co., 82 F.R.D. 53, 57 (E.D.N.Y.1979)).

The complaint against A & A satisfies the requirements of rule 9(b). A & A has been given sufficient notice of the claim made against it insofar as the complaint alleges that it participated in a scheme to insure aircraft at artificially high values which contributed to the artificial inflation of FTC’s securities prices. Complaint ¶ 21. The complaint states the relevant time period in which this activity occurred, Complaint ¶¶ 13-14, and the circumstances of the alleged fraud. Complaint ¶¶ 13-18, 20-21. Dismissal is not warranted on the basis of Rule 9(b).

LACK OF JURISDICTION

A & A contends that Counts IX and X of the Consolidated Complaint, alleging pendent state securities law and common law fraud claims should be dismissed for lack of jurisdiction if the federal claims are dismissed. Since the federal claims have not been dismissed, the pendent state law claims are properly before this court.

ORDER

The motion of the defendants, Alexander & Alexander Services, Inc. arid Alexander & Alexander, Inc. to dismiss plaintiffs’ complaint is GRANTED in part.

It is . hereby ORDERED that Count I of the Consolidated Complaint is DISMISSED as to A & A.

It is FURTHER ORDERED that the plaintiffs have thirty (30) days from the date of the filing of this order to amend the complaint against A & A to plead compliance with the limitations requirements of Section 13 in connection with their claims for relief under Sections 11 and 12(2).

IT IS SO ORDERED.

      . Judge Weiner, a district court judge in the Eastern District of Pennsylvania, is sitting by designation.

      . There are five purported subclasses. Subclass I consists of persons who purchased, directly or in the aftermarket, common stock of FTC issued pursuant to a registration statement declared effective by the SEC on November 30, 1979; subclass II consists of persons who purchased, directly or in the aftermarket, common stock and/or warrants to purchase common stock of FTC offered as units of securities of FTC, each unit consisting of one share of common stock of FTC and one half of a warrant to purchase one share of common stock of FTC, issued pursuant to a registration statement declared effective by the SEC on March 2, 1981; subclass III contains persons who purchased, directly or in the aftermarket, common stock of FTC issued pursuant to a registration statement declared effective on June 3, 1982; subclass IV consists of persons who purchased, directly or in the aftermarket, debentures and/or warrants to purchase common stock of FTC offered as units of securities of FTC, each unit consisting of a $1,000 principal amount 11¼ Sinking Fund Debenture due June 1, 1995, and warrants to purchase 57 shares of FTC common stock, issued pursuant to a registration statement declared effective by the SEC on June 4, 1982; subclass V consists of persons who purchased FTC securities but who are not included in any of Subclasses I, II, III or IV. (Complaint, ¶ 27.) They all claim to have suffered a loss from their purchases.

      . Section 15 provides:
      Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections 11 or 12 of this title, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist. 15 U.S.C. § 77o.

      . Section 20(a) provides:
      Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.
      Sections 15 and 20(a) have been interpreted in the same manner. See Pharo v. Smith, 621 F.2d 656, 673 (5th Cir.1980).

      . Seep. 1359,supra.

      . Because we have determined that the complaint states a claim for secondary liability under Section 10(b) and control person liability under Sections 11, 12(2), and 10(b), we do not reach the issue of whether the plaintiffs’ assertion of liability under these sections pursuant to the principles of respondeat superior requires dismissal.


text:
    Frank P. ANTINORE, et al. v. ALEXANDER & ALEXANDER SERVICES, INC., Alexander & Alexander, Inc. and Evanston Insurance Company.
    Master Docket No. 4-82-874.
    Civ. A. No. 4-84-14.
    United States District Court, D. Minnesota, Fourth Division.
    Aug. 24, 1984.
    Lowell E. Sachnoff, Charles R. Watkins, Chicago, 111., for plaintiffs.
    John Labovitz, Washington, D.C., Jeanne Forneris, Minneapolis, Minn., for defendant Alexander & Alexander.
    Theodore A. Boundas, Keith Hanson, Chicago, 111., for defendant Evanston Ins. Co.
   MEMORANDUM OPINION AND ORDER

WEINER, District Judge.

This action arises from the Flight Transportation Corporation (“FTC”) Securities Litigation pending before this court under Master Docket No. 4-82-874. Plaintiffs, purporting to he representatives of a class of all persons who purchased FTC securities during the period from November 30, 1979 to June 18, 1982, bring this action against the defendant, Evanston Insurance Company (“Evanston”), a corporation organized and existing under the laws of the State of Illinois. Plaintiffs allege that Evanston insured FTC against liability arising from the potential misconduct of its directors and officers (“D & O Insurance”). They allege that Alexander & Alexander Services, Inc. and Alexander & Alexander, Inc. (co-defendants in the case sub judice collectively referred to as “A & A”), through interlocking directors and overlapping, officers, control Evanston and that various wholly-owned subsidiaries of A & A effectively own a majority of Evanston’s stock. They assert that Ezell Jones (“Jones”) was a corporate officer and key employee of A & A. They also allege that Jones was a member of FTC’s board of directors between the fall of 1980 and June 1982.

The complaint against Evanston incorporates by reference the complaint brought against various defendants in Antinore, et al. v. Flight Transportation Corporation, et al., Master Docket No. 4-82-874 (“Consolidated Complaint”). Plaintiffs allege that there were material misrepresentations, material omissions, and materially false and misleading information regarding the revenues, businesses, operations and financial condition of FTC in the 1979, 1981, and 1982 Prospectuses. They allege that on October 2, 1980 and October 21, 1981, Evanston, through the efforts and supervision of Jones, issued policies of D & O Insurance to FTC. Plaintiffs contend that the maintenance of D & O Insurance was an integral part of the allegedly fraudulent scheme described in the Consolidated Complaint. They allege that Evanston possessed the power to direct and control the actions of Jones with respect to FTC. The particular facts are set forth in the complaint.

The eleven counts of the Consolidated Complaint are incorporated into the complaint against A & A as follows: Counts I — III allege claims pursuant to Section 11 of the Securities Act in connection with the November 30, 1979, March 2, 1981, and June 3 and 4, 1982 Registration Statements and Prospectuses; Count IV asserts an action pursuant to Section 10(b) of the Exchange Act for false and misleading disseminations. Counts V-VII allege a violation of Section 12(2) of the Securities Act; Count IX asserts common law fraud and reckless misrepresentations. Count X is brought pursuant to two sections of the Minnesota securities laws; and Count XI asserts liability under the Racketeering Influenced and Corrupt Organizations Act of 1970, 18 U.S.C. §§ 1961-1968.

Presently before the court is the defendant’s motion to dismiss the entire complaint. It contends that Counts I — III and Count V-VII are barred by the statute of limitations. It contends that Counts I-VII should be dismissed for failure to state a claim of secondary liability. Evanston further contends that Count IV must be dismissed for failure to state with particularity the circumstances constituting Evans-ton’s purported' fraud. Evanston asserts that it cannot be held liable under any counts of the Consolidated Complaint as a control person. Finally, Evanston claims that Counts IX and X must be dismissed for lack of jurisdiction.

The standard governing a motion to dismiss has been stated by the Supreme Court as follows: “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). For the purposes of motion, the well-pleaded material allegations of the complaint are taken as admitted. 2A Moore’s Federal Practice ¶ 12.08 (1983).

STATUTE OF LIMITATIONS

Evanston argues that the plaintiffs have been an inquiry notice of the claims against it since the Consolidated Complaint was filed in October 1982, thereby rendering the Section 11 and 12(2) claims of the complaint sub judice, filed in January 1984, beyond the one year limitation period of Section 13. Defendant also contends that the plaintiffs have failed to affirmatively plead compliance with Section 13. These arguments have also been raised by co-defendant A & A in support of its motion to dismiss. We have ruled on A & A’s motion to dismiss in an opinion also filed today. Antinore, et al. v. Alexander & Alexander Services, Inc., et al., 597 F.Supp. 1353 (D.Minn.1984). We adopt the reasoning of that opinion with respect to the statute of limitations, Id. at 1356-1358, and dismiss Count I of the consolidated Complaint as to Evanston. Moreover, plaintiffs are given leave to amend the complaint to plead compliance with the limitations requirements of Section 13 in connection with their claims for relief under Sections 11 and 12(2).

SECONDARY LIABILITY UNDER SECTIONS 11, 12(2) AND 10(b)

In accordance with today’s ruling on A & A’s motion to dismiss, we hold that plant tiffs may not assert Section 11 and 12(2) claims against Evanston based on a theory of aiding and abetting liability. Id. at 1358-1359.

Defendant’s claim that the plaintiffs have failed to state a cause of action for secondary liability under Section 10(b) requires more extended discussion. In order to assert aiding and abetting liability under Section 10(b) and Rule 10b-5 promulgated thereunder, a plaintiff must prove the following:

(1) the existence of a securities law violation by the primary party (as opposed to the aiding and abetting party);
(2) “knowledge” of the violation on the part of the aider and abettor; and
(3) “substantial assistance” by the aider and abettor in the achievement of the primary violation. Stokes v. Lokken, 644 F.2d 779, 782-783 (8th Cir.1981); see also ITT, An International Investment Trust v. Cornfield, 619 F.2d 909, 922 (2d Cir.1980); Monsen v. Consolidated Dressed Beef Co., 579 F.2d 793, 799 (3d Cir.), cert. denied, 439 U.S. 930 [99 S.Ct. 318, 58 L.Ed.2d 323] (1978).

Evanston contends that the complaint fails to allege the second two elements of the three part test. Evanston also contends, with respect to the Section 10(b) claims, that the plaintiffs have failed to allege fraud with sufficient particularity in accordance with the requirements of Rule 9(b) of the Federal Rules of Civil Procedure. Because each argument, in effect, alleges a deficiency of pleading, we will treat them as one.

‘‘Conclusory allegations that defendant’s conduct was fraudulent and deceptive” are not sufficient to satisfy the particularity requirement of Rule 9(b). Decker v. Massey-Ferguson, Inc., 681 F.2d 111, 114 (2nd Cir.1982) (citing Segal v. Gordon, 467 F.2d 602, 607 (2nd Cir.1972)). What is required is that plaintiffs set forth the “time, place and circumstances of the alleged fraudulent activities.” Hagert v. Glickman, Lurie, Eiger & Co., 520 F.Supp. 1028, 1036 (D.C.Minn.1981) (citing Helfant v. Louisiana & Southern Life Ins. Co., 82 F.R.D. 53, 57 (E.D.N.Y.1979)).

As previously stated, the complaint alleges that Evanston is controlled by A & A by means of various subsidiaries wholly-owned by A & A which effectively own a majority of Evanston’s stock. Complaint ¶ 12. It is also alleged that Ezell Jones was a corporate officer and key employee of A & A and that he served on FTC’s board of directors between fall of 1980 and June 1982. The remainder of the pertinent allegations against Evanston read as follows:

With respect to the procurement, maintenance and renewals of D & 0 Insurance and otherwise, Jones was also the agent, nominee or controlled person of Evanston. Complaint ¶ 16.
On or about October 21, 1981, through Jones, FTC obtained a policy of D & O Insurance issued by Evanston. Previously, on or about October 2, 1980, Evanston had issued an earlier policy of D & O Insurance to FTC, which also was procured through the efforts of and under the supervision of Jones. Evanston received substantial fees or premiums from FTC in connection with provision of D & O Insurance to FTC. Complaint ¶ 19.
The procurement and maintenance of FTC’s insurance policies were essential to, part and parcel of, and integral in, the fraudulent plan, scheme and conspiracy alleged among the defendants in [the Consolidated Complaint]. Complaint ¶ 20.
Obtaining and maintaining D & O Insurance was also essential to and an integral part of the fraud perpetrated by William Rubin, Janet Karki, FTC and the other defendants as alleged in [the Consolidated Complaint]. Complaint ¶ 22.
At all times material hereto, A & A possessed the power to direct and control Jones’ actions' with respect to FTC. At all times material hereto, after D & O Insurance was first placed at FTC by Evanston, Evanston possessed the power to direct and control the actions of Jones with respect to FTC. Complaint ¶ 23. Evanston is liable for all acts of Jones as alleged herein because Jones was the agent or nominee or controlled person of A & A, with which Evanston was engaged in a common enterprise, concert of action and common plan or scheme, because Jones was the agent or nominee of Evanston, or because Evanston controlled Jones. Complaint ¶ 25.

While the court agrees with the plaintiffs that the alleged misrepresentations or omissions of the primary violators have been sufficiently detailed in the Consolidated Complaint, the allegations against Evanston do not describe how Evanston is supposed to have aided and abetted them. The plaintiffs “must inform the defendants whether they are charged with primary or secondary liability, and what role each defendant played in the alleged fraud.” Hagert, 520 F.Supp. at 1036 (citing Savino v. E.F. Hutton & Co., Inc., 507 F.Supp. 1225, 1231-32 (S.D.N.Y.1981); Goldberg v. Meridor, 81 F.R.D. 105, 110-11 (S.D.N.Y.1979)). While the defendant has, in fact, been charged with secondary liability, it has not been informed of what role it has played in the alleged fraud. Essentially, all that the plaintiffs have alleged is that Evanston is an aider and abettor because it issued D & O Insurance to FTC. This is a conclusory allegation insufficient to satisfy the particularity requirement of Rule 9(b). Accordingly, plaintiffs are given leave to amend the complaint to detail allegations of Evanston’s role as an aider and abettor.

CONTROL PERSON LIABILITY

Because the amended complaint may contain additional allegations that have a bearing on the plaintiffs’ assertion of control liability against Evanston, we reserve judgment with respect to the defendant’s contention that Count VIII of the Consolidated Complaint must be dismissed. Defendant may renew this argument at a later stage of the proceedings.

ORDER

The motion of defendant, Evanston Insurance Company, to dismiss plaintiffs’ complaint is GRANTED in part.

The following is hereby ORDERED:

1. Count I of the Consolidated complaint is DISMISSED as to Evanston.

2. The plaintiffs have thirty (30) days from the date of the filing of this order to amend the complaint against Evanston to plead compliance with the limitations requirements of Section 13 in connection with their claims for relief under Sections 11 and 12(2).

3. Plaintiffs have thirty (30) days from the date of the filing of this order to amend the complaint against- Evanston to plead allegations of fraud with particularity in accordance with Rule 9(b) of the Federal Rules of Civil Procedure.

IT IS SO ORDERED.

      . Judge Weiner, a district court judge in the Eastern District of Pennsylvania, is sitting by designation.

      . There are five purported subclasses. Subclass I consists of persons who purchased, directly or in the aftermarket, common stock of FTC issued pursuant to a registration statement declared effective by the SEC on November 30, 1979; subclass II consists of persons who purchased, directly or in the aftermarket, common stock and/or warrants to purchase common stock of FTC offered as units of securities of FTC, each unit consisting of one share of common stock of FTC and one half of a warrant to purchase one share of common stock of FTC, issued pursuant to a registration statement declared effective by the SEC on March 2, 1981; subclass III contains persons who purchased, directly or in the aftermarket, common stock of FTC issued pursuant to a registration statement declared effective on June 3, 1982; subclass IV consists of persons who purchased, directly or in the aftermarket, debentures and/or warrants to purchase common stock of FTC offered as units of securities of FTC, each unit consisting of a $1,000 principal amount 11 'A% Sinking Fund Debenture due June 1, 1995, and warrants to purchase 57 shares of FTC common stock, issued pursuant to a registration statement declared effective by the SEC on June 4, 1982; subclass V consists of persons who purchased FTC securities but who are not included in any of Subclasses I, II, III or IV. (Complaint, ¶ 27.) They all claim to have suffered a loss from their purchases.