Narrative Opinion Summary
This case involves multiple lawsuits against Crazy Eddie, Inc., a bankrupt electronics retailer, and its former officers, directors, accountants, and underwriters, alleging violations under the Securities Act of 1933, the Securities Exchange Act of 1934, RICO, and state laws. Plaintiffs claim that false and misleading statements in securities offerings led to inflated stock prices. The litigation includes a series of consolidated actions, with numerous complaints filed between 1988 and 1991. Key issues include the traceability of securities, statute of limitations, and the right to amend complaints. The court granted summary judgment on certain Securities Act claims, finding plaintiffs failed to demonstrate traceability, and ruled that Schwebel's claims were time-barred. The court also struck the Third Complaint for being filed without permission and denied requests to amend the Second Complaint due to undue delay and prejudice. Furthermore, the court upheld the self-evaluative privilege, denying plaintiffs' discovery requests. Plaintiffs are permitted to seek to include a RICO claim against Peat Marwick, contingent on meeting specific pleading requirements. The court's decision emphasizes procedural compliance and the necessity of establishing timely and substantiated claims in securities litigation.
Legal Issues Addressed
Amendment of Complaints under Federal Rulessubscribe to see similar legal issues
Application: The court denied the motion to amend the Second Complaint nunc pro tunc, citing undue delay and prejudice to opposing parties.
Reasoning: The court finds insufficient justification to allow the addition of new defendants, citing undue delay and prejudice to opposing parties as reasons to deny the amendment.
RICO Claims - Pleading Requirementssubscribe to see similar legal issues
Application: Plaintiffs may seek leave to amend their complaint to include a RICO claim, but must provide specific allegations of predicate acts and cannot base the claim on securities fraud.
Reasoning: The court allows the plaintiffs to seek leave to file a properly pleaded RICO claim against Peat Marwick, emphasizing that it must include specific allegations of predicate acts of mail or wire fraud.
Securities Act of 1933 - Sections 11 and 12 Claimssubscribe to see similar legal issues
Application: Plaintiffs must demonstrate traceability of their securities to the specific offerings challenged to support claims under these sections.
Reasoning: Plaintiffs must demonstrate ownership of 'new' stock rather than 'old' stock to support their claims, but only Schwebel has presented evidence that his securities can be traced to a disputed offering.
Self-Evaluative Privilege in Discoverysubscribe to see similar legal issues
Application: The court upheld the magistrate's decision excusing Peat Marwick from producing internal audit documents based on the self-evaluative privilege.
Reasoning: The court found that the plaintiffs did not demonstrate a sufficient need for the documents to outweigh the defendants' claims of privilege.
Statute of Limitations under Securities Lawssubscribe to see similar legal issues
Application: Claims must be filed within one year of discovering false statements or omissions, and the period is not tolled for Schwebel due to lack of standstill agreements.
Reasoning: The statute of limitations starts when a plaintiff should have discovered the fraudulent scheme, not all its specifics.