The opinion of the court was delivered by: Leisure, District Judge:
This is an action for violation of § 10(b) of the Securities
Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b
promulgated thereunder, as well as pendent state law claims for
fraud, rescission, and breach of contract and fiduciary duties.
The parties have cross-moved for summary judgment. For the
reasons set forth below, the cross-motion of defendants
Comstock Gold Company, L.P., United Mining Corporation, Raynham
Hall Contracting, Inc., Timothy Collins and Maurice Castagne
(collectively "the Moving Defendants") is granted, and
plaintiffs' cross-motion is denied.*fn1
The instant action arises out of the sale to plaintiffs of
limited partnership shares in defendant Comstock Gold Company,
L.P. ("Comstock") in 1978 and 1979. Comstock was organized in
1978 by defendants United Mining Corporation ("UMC") and
Timothy Collins ("Collins") to explore for and mine gold and
silver in the Comstock Lode near Virginia City, Nevada. The
first offering occurred in December 1978, when Comstock, UMC
and Collins issued a private placement memorandum (the "1978
Memorandum") offering for sale $1,600,000 in Class I limited
partnership interests, in ten units of $160,000 each. When this
offering did not result in a sale of all ten units, a second
offering was made in March 1979 with the issuance of a
substantially identical private placement memorandum (the "1979
Memorandum"), offering sufficient units, again at $160,000 per
unit, to reach the original goal of raising $1,600,000.
Plaintiff Robert C. Haggerty was at the time of his
investment a senior partner with the New York law firm of
Dewey, Ballentine, Bushby, Palmer & Wood. Plaintiff Robert C.
Graham was the president of a real estate company and president
of the Graham Gallery, Ltd. Plaintiff Kirk Parrish was the
executive vice president of an advertising company, and had
previously been president of Life Savers, Inc., the American
Chicle Company, and Lanvin Charles of the Ritz, and a director
of the Squibb Corporation. Plaintiff Howard T. Bellin, M.D. was
a surgeon in New York, as well as president of Bellin's
Department Store, Bellin Aviation, and Speed Flying Service.
Plaintiff Robert Giller, M.D. was a doctor in New York. All of
the plaintiffs were experienced in tax shelter investments, all
were college graduates,
and all had incomes that placed them in the top tax bracket.
The 1978 Memorandum and 1979 Memorandum (collectively, "the
Offering Memoranda") included the following warnings regarding
the proposed investment in Comstock:
THE INVESTMENT DESCRIBED HEREIN INVOLVES
SUBSTANTIAL RISKS AND IS OFFERED ONLY TO
INDIVIDUALS WHO CAN AFFORD SUCH RISKS. SEE
"PRINCIPAL RISK FACTORS" HEREIN. THERE WILL BE NO
PUBLIC MARKET FOR THE UNITS, AND RESALES AND OTHER
TRANSFERS ARE LIMITED BY FEDERAL AND STATE
SECURITIES LAWS, THE INTERNAL REVENUE CODE, AND
THE LIMITED PARTNERSHIP AGREEMENT. SEE ALSO
"CONFLICTS OF INTERESTS," AND "FEDERAL INCOME TAX
CONSEQUENCES" FOR ADDITIONAL RISK CONSIDERATIONS.
Offering Memoranda at cover page.
Of course, there can be no assurance that [gold
and silver] reserves will be discovered in
commercially recoverable quantities or, if
reserves are discovered, that a sufficient
quantity of gold and silver will be extracted to
pay operating expenses and/or a return on the
investment made in the Partnership.
Estimates of profit, loss and cash flow have been
made by the General Partners through 1984.
However, there is no assurance whatsoever that the
Partnership will ever operate at a profit or that
distributions, if made, will equal those estimated
by the General Partners at the present time.
1979 Memorandum at 3.*fn2
Each prospective Class I Limited Partner must take
into account the fact that all of his notes will
be presented for payment and that the Partnership
may never be in a position to make any cash
distributions. The risk factors relating to
investment in the Partnership are set forth in
this memorandum; they should be carefully reviewed
by any prospective ...