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TAB PSHP. v. GRANTLAND FIN. CORP.

November 4, 1994

TAB PARTNERSHIP and R. MICHAEL BOWE, Plaintiffs,
v.
GRANTLAND FINANCIAL CORPORATION and LAIRD A. MOONEY, Defendants.



The opinion of the court was delivered by: ALLEN G. SCHWARTZ

 ALLEN G. SCHWARTZ, DISTRICT JUDGE:

 Pending before this Court is Defendant Laird A. Mooney's ("Defendant") motion to dismiss the plaintiffs' claims under the Securities Act of 1933 § 12(2) and the Securities Exchange Act of 1934 § 10(b). *fn1" For the reasons that follow, Defendant's motion to dismiss is granted.

 FACTS

 The facts relating to this case are set forth in the of Judge Conboy dated June 30, 1993 ("Order"), discussed infra. Familiarity with the Order is assumed.

 PROCEDURAL HISTORY OF THIS ACTION

 On October 30, 1992, Defendant filed a motion to dismiss the complaint in this action, or, in the alternative, to transfer the action to the Southern District of California. In his Order, Judge Conboy: (1) granted Defendant's motion to dismiss the plaintiffs' federal securities law claims; (2) denied Defendant's motion to dismiss plaintiffs' state law claims; (3) denied Defendant's motion to transfer venue; and (4) granted both parties leave to replead. Plaintiffs filed an amended complaint *fn2" ("Amended Complaint") on July 22, 1993, alleging that the defendants had attempted to interest other members of the general public in investing in the CD Rollover Program and that other investors had, in fact, participated in the Program by purchasing certificates of deposit ("CDs"). Amended Complaint at P 14(d), 16.

 ANALYSIS

 I. Plaintiffs' Loan Is Not a Security

 The June 30, 1993 Order held that the agreement between the plaintiffs and the defendants did not constitute a security. Order, page 4. Under the Supreme Court's definition in Marine Bank v. Weaver, 455 U.S. 551, 560, 102 S. Ct. 1220, 1225, 71 L. Ed. 2d 409, 417 (1982), an agreement is not a security if the defendants "distributed no prospectus to the [plaintiffs] or to other potential investors," the agreement they negotiated "was not designed to be traded publicly," and the agreement was negotiated one-on-one between the parties. More precisely, Judge Conboy determined that the agreement in this action was arrived at through one-on-one negotiation and that plaintiffs did not allege that the agreement would be traded publicly or that a prospectus would be distributed.

 Plaintiffs now contend that the new allegation of defendants' attempts to interest others to invest in the Program and the fact that other investors had, in fact, bought CDs indicates that the agreement at issue here is a security under the Marine Bank definition. We disagree. It remains undisputed that the agreement was arrived at through one-on-one negotiation. Federal securities laws are not properly invoked where a loan results from direct negotiations between the parties. Vorrius v. Harvey, 570 F. Supp. 537 (S.D.N.Y. 1983); see also Marine Bank, 455 U.S. at 559-60, 102 S. Ct. at 1225. Plaintiffs, moreover, have failed to allege that defendants intended to trade the agreement publicly or that they would distribute a prospectus to investors. Plaintiffs' use of the word "investor" is not a sufficient showing that the defendants intended to trade this agreement publicly. The agreement does not qualify as a security. Accordingly, Defendant's motion to dismiss the federal securities claims is granted.

 II. Even Assuming that the Agreement is a Security, the Plaintiffs' Securities Claims are Time Barred

 a. Plaintiffs' § 12(2) Securities Claim Is Time Barred

 The statute of limitations for securities fraud claims under the Securities Act of 1933 § 12(2) is the lesser of one year after the discovery of the untrue statement or omission, or three years after the sale of the security. See 15 U.S.C. § ...


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