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GRAY v. FIRST WINTHROP CORP.

November 13, 1990

JULIUS GRAY and LEROY WILLIAM RODEWALD, on behalf of themselves individually and all others similarly situated, Plaintiffs,
v.
FIRST WINTHROP CORPORATION, et al., Defendants



The opinion of the court was delivered by: VUKASIN

 J. P. VUKASIN, JR., UNITED STATES DISTRICT JUDGE

 INTRODUCTION

 Defendants' Motion to Dismiss *fn1" was scheduled to be heard on November 8, 1990. After a review of the briefs, this court considered it appropriate to submit the motion on the pleadings pursuant to Local Rule 220-1, and now DENIES the motion.

 Plaintiffs invested in a real estate limited partnership which did not perform as well as they had hoped. Plaintiffs allege that defendants, who are the offeror, financial backers, and others involved in the limited partnership, improperly induced plaintiffs to invest. The prospectus and offering materials were issued on October 31, 1984. Among other representations, these materials projected a positive cash flow from the project, based on estimates of full occupancy by October 1985 at certain rental rates. Plaintiffs invested in the partnership in December 1984 and January 1985, each by purchasing one unit in the form of a $ 100,000, interest bearing, six year term note.

 Plaintiffs received periodic status reports on the project after they invested. From February 1985 continuing through 1986, these reports indicated that the project was failing to perform as projected in the prospectus and offering materials. Plaintiffs allege that the disclosures of adverse circumstances were selective, and were coupled with reassurances that the project would eventually prove profitable. These reassurances allegedly lulled plaintiffs into a false sense of security from which they were not disabused until investigations by their counsel in August of this year. As a result of their attorneys' investigations, plaintiffs assert claims under the federal securities laws, Civil RICO, intentional and negligent misrepresentation, breach of fiduciary duty, negligence, and interference with prospective business interests.

 The GE Defendants now move to dismiss the complaint, primarily on the grounds that it is time barred. In the alternative, the GE defendants assert substantive defects in two of the common law claims as additional grounds for dismissal.

 DISCUSSION

 1. Statutes of Limitation.

 The GE defendants argue in support of their Motion to Dismiss that plaintiffs received notice in the status reports during 1985 and 1986 of facts which should have alerted them to the alleged conduct of defendants on which the claims are based. For purposes of this motion, this court assumes that under the applicable limitations periods, all of the claims would indeed be time barred if the status reports from 1985 and 1986 triggered the running of the statutes. By contrast, if plaintiffs' counsel's investigation of August 1990 is used as the trigger, the claims are clearly not time barred. The only other arguable trigger for the statute of limitations might be the bankruptcy filing of the limited partnership, which occurred in 1989, well within the period for each of the claims.

 a. Statute of limitations as grounds for dismissal.

 Plaintiffs argue that a motion to dismiss is not the proper setting for resolution of statute of limitations issues. In most cases this is correct. In general, the issue of when a reasonable investor should have discovered a claim should be left to the trier of fact. Briskin v. Ernst & Ernst, 589 F.2d 1363 (9th Cir. 1978). If the complaint is time barred on its face, however, a motion to dismiss may be appropriate. Conerly v. Westinghouse Electric Corp., 623 F.2d 117, 119 (9th Cir. 1980). Although plaintiff bears the burden of proving the suit was filed within the limitations period, Valerio v. Boise Cascade Corp., 80 F.R.D. 626, 633 (N.D.Cal. 1978), a complaint should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of their claim. Conley v. Gibson, 355 U.S. 41, 45, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); see also Jablon v. Dean Witter & Co., 61 ...


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