Fed. Sec. L. Rep. P 95,103 John Franklin Foster and Gary Kemp v. Financial Technology Inc.

In this action to recover damages for violations of section 5 of the Securities Act of 1933 and section 10(b) and rule 10b — 5 of the Securities Exchange Act of 1934, plaintiffs Foster and Kemp appeal from a summary judgment for defendants. The only issue before us is whether, taking plaintiffs’ allegations as true, defendants’ violations of the securities laws entitle plaintiffs to any monetary relief.

In 1970, plaintiffs each paid $10,000 to American Information Exchange, Inc. (AIE), a wholly owned subsidiary of defendant Financial Technology, Inc. (FTI), for the privilege of becoming AIE franchisees. AIE, it is alleged, failed to perform its obligations under the franchise agreement, and plaintiffs sought return of the $10,000. In settlement of these claims FTI agreed to sell to each plaintiff 6,667 shares of common stock of Basic Resources, Inc. (BRI), another defendant, which was to be issued to FTI in exchange for some oil properties. The agreement provided that the shares be delivered to plaintiffs on or before April 30, 1971, and that upon acceptance of the shares plaintiffs were to execute releases of any claims they possessed against FTI, AIE, and their…

(concurring).

I concur, albeit reluctantly, in the opinion of Chief Judge Chambers. My reluctance stems from a belief that the District Judge was “sandbagged” by the presentation made by counsel on the motions for summary judgment.

Plaintiffs’ amended complaint presented two basic claims for relief, a claim under Section 5 of the Securities Act of 1933 alleging a sale by defendants of unregistered securities (15 U.S.C. §§ 77e and 777) and a claim under Section 10b and Rule 10b — 5 of the Securities Exchange Act of 1934 alleging fraud and misrepresentation in the sale of the securities ( 15 U.S.C. § 78 (j)). Initially, a motion by defendants to dismiss the complaint was denied.

On November 27, 1972, the parties filed a joint pretrial statement. Pertinent admissions and claims are as follows:

On May 4, 1973, plaintiffs filed a motion for summary judgment directed solely to the Section 5 claim, the sale of unregistered securities. By affidavit in support of the motion, plaintiffs reaffirmed their position: “In the present case, the Plaintiffs released claims in the aggregate amount of $20,000, in consideration for the securities, said release not being in controversy.”

On May…

517 F.2d 1068 Fed. Sec. L. Rep. P 95,103 John Franklin FOSTER and Gary Kemp, Plaintiffs-Appellants, v. FINANCIAL TECHNOLOGY INC. et al., Defendants-Appellees. No. 73-3202. United States Court of Appeals, Ninth Circuit. April 30, 1975. Paul S. Nesse, San Jose, Cal., for plaintiffs-appellants. Royal M. Galvin, Beverly Hills, Cal., for defendants-appellee. OPINION Before CHAMBERS and WRIGHT, Circuit Judges, and THOMPSON, * District Judge. CHAMBERS, Circuit Judge: 1 In this action to recover damages for violations of section 5 of the Securities Act of 1933 and section 10(b) and rule 10b-5 of the Securities Exchange Act of 1934, plaintiffs Foster and Kemp appeal from a summary judgment for defendants. The only issue before us is whether, taking plaintiffs' allegations as true, defendants' violations of the securities laws entitle plaintiffs to any monetary relief. 2 In 1970, plaintiffs each paid $10,000 to American Information Exchange, Inc. (AIE), a wholly owned subsidiary of defendant Financial Technology, Inc. (FTI), for the privilege of becoming AIE franchisees. AIE, it is alleged, failed to perform its obligations under the franchise agreement, and plaintiffs sought return of the…