Fencorp, Co. v. OHIO KENTUCKY OIL CORP.
675 F.3d 933
6th Cir.2012Background
- Frederick E. Nonneman invested about $3.98 million with OKO through Fencorp, including 21 joint ventures and 5 limited partnerships, from 2000 to 2003.
- OKO drilled 128 wells; only 11 produced oil, resulting in no profit to investors after considering tax benefits.
- Nonneman developed dementia; Gregory Nolfi and Lois Nonneman took over management and learned of troubling facts during discovery in related suits.
- Fencorp and Nonneman filed federal and state securities claims; district court consolidated related cases and addressed multiple pre-trial and summary-judgment issues.
- OKO allegedly engaged in misrepresentation and improper conduct, including overstated costs and acts suggesting a general solicitation of investors; discovery misconduct followed, including destruction of relevant documents.
- Jury awarded Fencorp federal rescission damages totaling $3,591,605 but the district court later reduced/adjusted damages to $1,012,835.50 for state-law claims; on remand, federal verdict remained $847,858 for securities claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether discovery sanctions invalidated OKO's federal preemption defense | Fencorp | OKO | Sanctions affirmed; preemption defense void |
| Whether OKO investments are securities under Ohio law | Fencorp investments are securities | OKO | Rejected; investments deemed securities |
| Whether the five-year statute of repose applies to state-law claims and affects damages | Fencorp | OKO | Statute of repose valid; judge erred in damages; new trial on state-law damages required |
| Whether jury instructions properly addressed reliance and damages for federal claims | Fencorp | OKO | Instructions upheld; error not reversible on appeal |
| Constitutionality of Ohio securities statute of repose under right to remedy | Fencorp | OKO | Statute constitutional; affirmed |
Key Cases Cited
- Ortiz v. Jordan, ---- (U.S. 2011) (limits review of summary-judgment rulings after final judgment)
- Roskam Baking Co., Inc. v. Lanham Machinery Co., Inc., 288 F.3d 895 (6th Cir.2002) (statutes of repose are substantive; creates vested rights)
- Groch v. Gen. Motors Corp., 883 N.E.2d 377 (Ohio 2008) (limits of right-to-remedy and repose; context-specific analysis)
- Brennaman v. R.M.I. Co., 70 Ohio St.3d 460 (Ohio 1994) (repose statutes and remedy provisions; applied to real-property cases)
- Dunn v. Zimmerman, 631 N.E.2d 1040 (Ohio 1994) (general accounting not always mandatory in partnership disputes)
- Sedar v. Knowlton Const. Co., 49 Ohio St.3d 193 (Ohio 1990) (remedies; statutory rights and limitations)