Parish v. Boetel & Co. , 60 F.R.D. 680 ( 1973 )

MEMORANDUM AND ORDER

DENNEY, District Judge.

This matter comes before the Court for a determination as to whether this action may be maintained as a class action. Fed.R.Civ.P. 23(c). In their complaint, the plaintiffs allege that they are the purchasers of interests in real property from the defendants. It is alleged that Boetel is a registered securities broker-dealer engaged in the organization and sale of limited partnership investments in real estate. It is the plaintiffs’ contention that such sales were in violation of both Nebraska and federal securities laws. Plaintiff seeks to maintain this action as a class action, and to thereby represent not only the investors in the partnerships in which they have an interest, but also all of the investors in some sixteen limited partnerships promoted by Boetel.

The procedural consequences of the maintenance of a class action are time consuming, complex, and of a serious nature. Accordingly, “[t]he burden is on the party, who seeks to utilize the class action, to establish his right to do so.” 3B Moore’s Fed. Prac. ¶| 23.02-2, p. 23-156 [2d Ed. 1969].

In an exhaustive brief, the plaintiffs have met their burden of proof in establishing that the “Prerequisites to a Class Action”, Fed.R.Civ.P. 23(a), are present in the instant case. The claims asserted by the plaintiffs concern questions of both law and fact that are common to the claims of some 900 investors in limited partnership investment units in sixteen limited partnerships. It is the Court’s conclusion that joinder is impracticable and that the representative parties will fairly and adequately protect the interests of the class composed of such 900 investors. However, the Court’s finding as to the adequacy of representation is conditional. Fed.R. Civ.P. 23(c)(1).

Having concluded that the prerequisites to the maintenance of a class action are met, the Court will now turn to the question of whether this action may be maintained under the provisions of Fed.R.Civ.P. 23(b).

Under the circumstances of this case, as alleged in the complaint, it is entirely possible that the defendants, in separate actions, could be subjected to conflicting and incompatible adjudications. For example, the defendant, Boetel & Co. could be placed in the position of offering rescission in one action, paying damages in another, and being temporarily enjoined from doing either in a third action. Under such circumstances, the rights of other members of the class who were not parties to the litigation could be substantially impaired or impeded. The Court therefore concludes that this action is maintainable under the provisions of Fed.R.Civ.P. 23(b)(1). Furthermore, the class is composed of all the investors in all of the subject limited partnerships.

Such determination is conditional, subject to being altered or amended subsequently by the Court. At this time, the Court is concerned with the adequacy of representation as to those partnerships in which the formal parties plaintiff do not have an interest; the size of the class may, therefore, be limited eventually to investors in the partnerships in which the formal plaintiffs have an interest.

It is therefore ordered that this action be maintained as a class action under the provisions of Fed.R.Civ.P. 23(b)(1).

It is further ordered that the parties submit to the Court a proposed notice to be used for the purpose of notifying the members of the class of both the pendency of this action and of the terms of the settlement agreement within thirty (30) days from the date hereof.