Richard A. Clark v. H. R. Watchie

Before CHAMBERS and WRIGHT, Circuit Judges, and THOMPSON, District Judge.

This appeal is from a summary judgment in favor of Defendants-Appellees. The district court held that the doctrines of res judicata and collateral estoppel preclude a 10b-5 suit subsequent to a state court judgment in a partnership accounting suit. The Court also denied class status to Plaintiffs-Appellants. We reverse the first determination and affirm the second.

H. R. Watchie was President of H. R. Watchie & Associates. In 1961, Watchie formed a large' land syndicate limited partnership known as Cougar Mountain Associates. H. R. Watchie was the general partner of Cougar Mountain Associates and H. R. Watchie & Associates was its management corporation and real estate broker.

Limited partnership units were to be sold to the public. The partnership agreement provided for six hundred limited partnership units. Each limited partner was to contribute $20,000 for each unit; $5,000 down and yearly assessments of $1,750 up to the total as required. Prospective purchasers were invited to clubs and restaurants to hear a sales talk by H. R. Watchie. After Watchie’s presentation, commissioned salesmen met…