Nolfi v. Ohio Kentucky Oil Corp.
2012 U.S. App. LEXIS 6745
| 6th Cir. | 2012Background
- Nonneman invested over $14.9 million in OKO oil/gas ventures (1986–2003) personally and via Fencorp; most wells drilled were dry or marginal; Nolfi and Lois Nonneman took over management in 2003 amid concerns about dementia and mismanagement; discovery in a state fraud case revealed aggressive, potentially fraudulent solicitation by Griffith and Campbell; federal securities claims were initially §10(b) and later §12(a)(1) and settled with the district court ruling on statute of limitations and dismissals; the jury found in favor of Nonneman on federal claims and awarded rescissory damages but the verdict form showed a different amount; the district court denied post-trial motions and this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the securities claims were pled with sufficient particularity and supported by evidence | Nonnemanargues adequacy under PSLRA/Rule 9(b) | OKO contends insufficiency of pleading/evidence | No reversible error; pleading/evidence deemed adequate under controlling standards. |
| Whether the district court properly denied summary judgment on §10(b) claims | Nonneman contends triable issues of fact remained | OKO argues lack of material facts; dismissal appropriate | Ortiz v. Jordan precludes appellate review of most summary-judgment issues after trial; remaining legal issue resolved in plaintiffs' favor. |
| Whether the investment interests were securities under §2(a)(1) and Howey test applicability | Nonneman interests are fractional undivided interests in oil/gas wells and securities | Investments are not traditional securities; Howey applies | Interests are securities as fractional undivided interests; Howey not controlling. |
| Whether rescissory damages were proper and the measure of damages | Rescission is appropriate; full amount should be awarded | Dura/Burden on proving loss causation; rescission inappropriate for some damages | Rescission damages proper; full amount guided by PSLRA/precedent; tax benefits not deducted. |
| Whether §12(a)(1) claims are barred by statute of limitations and tolling | Equitable tolling should apply due to concealment/discovery in state case | One-year statute applies; no tolling for §12(a)(1) | Equitable tolling not available for §12(a)(1); claims barred. |
Key Cases Cited
- Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (U.S. 2005) (inflated stock price not actionable where causation not shown; distinguishable facts)
- Ortiz v. Jordan, 131 S. Ct. 884 (U.S. 2011) (summary-judgment appealability after trial limited; evidence at trial controls)
- Merck & Co. v. Reynolds, 131 S. Ct. 1303 (U.S. 2010) (discovery rule for scienter necessary before statute runs)
- Randall v. Loftsgaarden, 478 U.S. 647 (U.S. 1986) (tax benefits not deducted from rescissory damages)
- Stone v. Kirk, 8 F.3d 1079 (6th Cir. 1993) (recognizes rescission as possible §10(b) damages measure)