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March 16, 1984

ELIZABETH MAIDEN, Trustee of the Pound Ridge Trust, et al., Plaintiffs,
CARL BIEHL, et al., Defendants.

The opinion of the court was delivered by: STEWART


STEWART, District Judge:

 Plaintiffs filed this action on October 24, 1974 to recover damages allegedly incurred in connection with their purchase of Ivanhoe Associates securities in October 1968.Ivanhoe Associates, a now defunct agribusiness, was later named Multiponics, Inc. Plaintiff International Investment Trust ("IIT") sues on its own behalf and on behalf of its fundholders, and the seven class plaintiffs sue in their individual capacities as well as on behalf of all other owners and holders of Multiponics securities. The complaint names four categories of defendants: 1) the organizers and promoters of Multiponics, consisting of Messrs. Biehl, Burkley, Carpenter, Casey, Moran, Orbe, Swinney and Zuccaro; 2) the "Staatscorp" defendants, consisting of entities and individuals who were all connected with the securities brokerage firm of Glove Forgan, William R. Staat, Inc.; 3) Deloitte, Haskins and Sells, the independent auditor for Multiponics; and 4) the officers of IIT, who were in control of the Fund at the time IIT made the Multiponics investment.

 The background of the transactions underlying these claims is fully set forth in our previous decision. See Maiden v. Biehl, [1981-1982 Transfer Binders] Fed. Sec. L. Rep. (CCH) P98, 226 at 91,522 (S.D.N.Y. May 19, 1981); P98,347 at 92,150 (S.D.N.Y. Nov. 6, 1981). Before us now are motions by most of the promoter defendants seeking partial summary judgment dismissing: 1) all claims by plaintiff IIT; 2) all claims by plaintiffs in their representative capacity; and 3) all claims in their individual capacities by any plaintiffs who are not residents of New York. One defendant, Deloitte, Haskins and Sells seeks summary judgment with respect to all claims. Lastly, plaintiffs seek class certification. We will address each of these motions in turn.

 Background Factual Discussion

 The chronology of certain undisputed events after the sale of the Multiponics securities is relevant to the motions under consideration. The closing of the purchase of the securities took place on October 25, 1968. The first sign of trouble was on October 15, 1970, when First National City Bank ("Citibank"), serving as Indenture Trustee for the Multiponics debenture holders, mailed notice to the holders stating that Multiponics failed to make an interest payment and was unable to continue operations. On October 23, 1970, Citibank notified the holders that Multiponics intended to liquidate. The debenture holders formed a committee on October 28, 1970 to represent them in the Multiponics liquidation proceedings.

 In February of 1971, Multiponics filed the petition for reorganization in Louisiana. Sherman & Sterling acted as counsel for Citibank, and Mr. Dineen of the firm kept the debenture holders apprised of the bankruptcy proceedings. The Reorganization Trustee's Report, sent to debenture holders on December 23, 1971, made specific disclosure of two of the facts which plaintiffa assert were misstated or omitted from the offering circular: Multiponics assumption of debt as part of the acquisition price of farming properties and the operating status of the properties. Mr. Dineen wrote to the Reorganization Trustee in February of 1972, specifically comparing discrepancies between the offering circular and the registration statement.

 Background Legal Discussion

 The instant motions for summary judgment are all based on the timeliness of the plaintiffs' claims. While each claim presents different issues, the basic legal framework for the defendants' statutes of limitations defense is the same. The federal securities laws under which most of these claims are brought do not provide for a limitations period. *fn1" To determine the timeliness of the action, we must refer to the statute of limitations of the forum state, which includes reference to New York's borrowing statute, N.Y.Civ.Prac.Law § 202. *fn2" Arneil v. Ramsey, 550 F.2d 774, 779 (2d Cir. 1977). Under the borrowing statute, if the plaintiff is a non-resident of New York and the cause of action accrued outside of the state, New York courts will apply either the limitations period of the state where the action accrued, or the New York statute, whichever is shorter.

 Under New York law, plaintiffs' claims would be timely insofar as they were brought within 6 years, the applicable statute of limitations for fraud actions and 10b-5 lawsuits. Maiden v. Biehl, supra, P98,226 at 91,528. For non-New York residents, the critical question for borrowing statute purposes is where the cause of action accrued. Plaintiffs argue that all of the claims accrued in New York, making the borrowing statute inapplicable. Our previous decision noted that New York and federal courts were grappling with two different approaches to the question of how to decide where a cause of action accrued for the purposes of the borrowning statute. At that time, the Second Circuit had held that the test for fraud was, "where the economic impact is felt, normally the plaintiff's residence." Sack v. Low, 478 F.2d 360, 366 (2d Cir. 1973). At the same time, courts were shifting toward another possible analysis, which would be to apply modern choice of law tests. State Teachers Retirement Board v. Fluor Corp., 500 F. Supp. 278 (S.D.N.Y. 1980), modified, 654 F.2d 843 (2d Cir. 1981). That approach to determining where a cause of action accrued would take into account a variety of factors, such as where the stock transactions took place, the state of incorporation and principal place of business of defendants, and where the fraud occurred. State Teachers, supra, 500 F. Supp. at 287. Issues of fact relevant to either analysis precluded summary judgment at that time.

 Since our last decision, the Second Circuit has made it clear that choice of law principles based on grouping of contacts do not apply to borrowing statute analysis. Industrial Consultants Inc. v. H.S. Equities, 646 F.2d 746 (2d Cir.), cert denied, 454 U.S. 838, 70 L. Ed. 2d 120, 102 S. Ct. 145 (1981); Stafford v. International Harvester Co., 668 F.2d 142 (2d Cir. 1981). See also Freschi v. Grand Coal Venture, 551 F. Supp. 1220 (S.D.N.Y. 1982). To determine where a cause of action accrued in a fraud case, the test is not where the misrepresentations were made, or other factors relevant to the fraudulent activity itself, but where "the loss resulting from the misrepresentation was sustained." Industrial Consultants, supra, 646 F.2d at 747. While economic impact is usually felt at the place of residence, there is no indication that this is a mechanical test. Where a cause of action accrues still depends on the facts of each case, but the question is always where the plaintiff felt the economic impact of the fraud. Sack v. Low, 478 F.2d 360, 368 (2d Cir. 1973); Arneil v. Ramsey, 550 F.2d 774, 780 (2d Cir. 1977).

 Plaintiffs general argument that all of the claims are timely because of the New York events connected with the fraud must therefore fail. Each claim of the non-New York residents must be assessed independently, in terms of the place of accrual and the applicable statute of limitations. We turn to a consideration of each plaintiff's claim in an individual capacity.

 Plaintiffs in Their Individual Capacities

 Shareholders Associates and Shareholders Capital Corporation *fn3"

 On October 28, 1968, Roger Bensen, a Connecticut resident, signed a Purchase Agreement for 8,500 units of Ivanhoe as attorney in fact for "Shareholders Associates, a California partnership." On that date, "it was contemplated that the purchaser would be an investment partnership to be formed under the name of Shareholders Associates," Aff. of Roger Bensen, P4, but no such partnership in fact existed. On October 30, 1968, a corporation, Shareholders Associates, Inc. ("Shareholders Associates"), was incorporated in Delaware. Bensen was elected to its three-member Board of Directors. The principal place of business of Shareholders Associates from November 1, 1968 through at least June 29, 1969 was in New York City.

 On November 1, 1968, the Board of Shareholders Associates passed a resolution providing:

 the corporation ratif[ied] and adopt[ed] as its own the Purchase Agreement dated October 25, 1968 for the acquisition of $850,000.00 principal amount of 7 1/2% subordinated debentures due October 1, 1983, 59,500 shares of common stock and stock purchase ...

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