                         United States Court of Appeals
                               FOR THE EIGHTH CIRCUIT



                                   _____________

                                    No. 96-2751
                                   _____________

Great Rivers Cooperative of              *
Southeastern Iowa, an Iowa               *
farm cooperative; Sawyer                 *
Cooperative Equity Exchange,             *
a Kansas farm cooperative,               *
                                         *
      Plaintiffs,                        *
                                         *
Roger Tacey, a Nebraska                  *
resident, on behalf of                   *
themselves and others                    *
similarly situated,                      *
                                         *
      Plaintiff - Appellant,             *   Appeal from the United States
                                         *   District Court for the
      v.                                 *   Southern District of Iowa.
                                         *
Farmland Industries, Inc., a             *
Kansas farm cooperative; Harry           *
D. Cleberg; H. Wayne Rice;               *
Albert Shively,                          *
                                         *
      Defendants - Appellees.            *
                                   _____________

                            Submitted: February 13, 1997

                                 Filed: July 29, 1997
                                   _____________

Before HANSEN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and
MELLOY,1 District Judge.
                          _____________


HANSEN, Circuit Judge.


      Roger Tacey, a named plaintiff in this class action, appeals the district court's2
grant of summary judgment to defendants as to his claims of securities fraud against
Farmland Industries, Inc., as time barred. We affirm.

                                           I.

        In reviewing the district court's grant of summary judgment, we view the facts
in the light most favorable to Tacey, the nonmoving party. Kopp v. Samaritan Health
System, Inc., 13 F.3d 264, 269 (8th Cir. 1993). Tacey alleges the following facts.
        Farmland Industries, Inc., (Farmland) is an agricultural cooperative
headquartered in Kansas City, Missouri, and incorporated in Kansas. In August of
1990, Farmland implemented a business plan known as the Base Capital Plan (BCP).



      1
       The Honorable Michael J. Melloy, Chief Judge, United States District Court for
the Northern District of Iowa, sitting by designation.
      2
        The Honorable Harold D. Vietor, United States District Judge for the Southern
District of Iowa.

                                           2
As part of the BCP, Farmland planned to purchase the outstanding equity of its wholly
owned subsidiary, Farmland Foods (Foods), with newly created Type 12 Capital
Credits. Farmland distributed a letter discussing the BCP. Farmland also held
informational meetings ("help sessions") concerning the BCP and, in particular,
Farmland's offer to exchange Farmland equity for Foods equity. (Appellant's App. at
240.) In August of 1991, Farmland tendered its exchange offer.

       Roger Tacey, a hog farmer from Nebraska, owned equity in Foods. Tacey
received the Farmland prospectus and the letter discussing the BCP. He also attended
an informational meeting. At the meeting, Tacey inquired about what would happen
if he declined Farmland's offer to exchange Foods equity for Farmland equity. When
the Farmland representatives would or could not inform him about the value of his
Foods equity, he concluded that the only way to retain any equity value was to accept
the exchange offer. Tacey traded approximately $1100 of equity certificates in Foods
for approximately $900 of Farmland's Type 12 Capital Credits and $222.93 in cash.
In making this trade, Tacey relied on Farmland's representations that (1) within one to
two years of August 1991, the owners of the capital credits would be able to recoup
their investment, either through redemption or by sale in a secondary market to be
created by Farmland; (2) the value of the capital credits would be similar to the equity
the offerees already held in Foods; and (3) the face value of the capital credits would
be equal to the redemption value or the secondary market value.

       In July of 1992, a complaint was filed against Farmland in the United States
District Court for the District of Colorado. Consumers Gas & Oil, Inc. v. Farmland
Indus., Inc., No. 92-K-1394 (D. Colo.)[hereinafter Consumers]. This class action
involved small, liquidated cooperatives that, pursuant to Farmland's bylaws, had
exchanged common stock for capital credits and allegedly later had discovered that
Farmland would not redeem the capital credits. The plaintiffs claimed Farmland had
engaged in "freeze-out" schemes that adversely impacted its holders of capital credits.


                                           3
The plaintiffs alleged RICO violations, securities fraud, breach of fiduciary duties, and
unjust enrichment.

       Tacey read about the Consumers case in a Farmland newsletter in October of
1992. In the article, which was entitled "Co-op sues Farmland over stock issue,"
Farmland described the Consumers case as "ridiculous" and "ludicrous." (Appellant's
App. at 235-36.) The article stated Farmland's policy and priority schedule for
redeeming its outstanding equity. The article explained that Farmland had placed
capital credits quite low on its priority schedule, presently planning to redeem only five
percent annually, subject to the Board of Directors' discretion based upon "earnings,
capital needs and other factors." (Id. at 236.)

      In late 1992, Tacey contacted a class representative in the Consumers suit and
counsel for the class with regard to redemption of stock. Tacey was a member of a
Nebraska cooperative that held common stock in Farmland. Tacey inquired whether
the Nebraska cooperative would have to go through the Consumers' process to have its
Farmland stock redeemed. Tacey did not inquire or discuss any issue regarding the
Foods transaction or the possible redemption of his Type 12 Capital Credits.

       The Consumers case settled in June 1993. Tacey first learned of the details of
the case when he obtained a copy of the complaint and settlement papers in early 1994.
In mid-1994, Tacey contacted a Farmland representative to inquire about redeeming
his Type 12 Capital Credits. Tacey learned then that Farmland would redeem the
capital credits for not more than three cents on the dollar and that the promised
secondary market was a failure.




                                            4
        This class action was filed on July 29, 1994, against Farmland and three
individuals who had served as officers and directors of either Farmland or Foods.3
Tacey is one of three named plaintiffs in the action, seeking relief under various
theories of securities fraud and breach of state law fiduciary duties.4 Relevant to this
appeal are the claims alleged in Count 1 (violation of Securities Exchange Act § 10(b)
and Rule 10b-5), Count 4 (violation of Securities Exchange Act § 14(e)), and Count 5
(violation of Securities Exchange Act § 12(2)).

      Farmland moved for summary judgment against Tacey on the basis of time bar.
The district court granted this motion as to the securities fraud claims, finding as a
matter of law that Tacey had inquiry notice of Farmland's alleged misrepresentations
more than a year before he filed his claims. The court also dismissed the section 14(e)
claim in its entirety, holding it could not go forward because the only class
representative named for that claim (Tacey) no longer had a viable cause of action.
Tacey appeals.

                                          II.

      We review a grant of summary judgment de novo, using the same standards
under Federal Rule of Civil Procedure 56(c) as applied by the district court. Summary
judgment is appropriate when there is no genuine issue of material fact and the moving




      3
        The three individual defendants are Harry Cleberg, H. Wayne Rice, and Albert
Shively. Cleberg is the CEO, President, and a director of Farmland Industries. Rice
is a former director of Farmland Foods. Shively serves as a director on and the Chair
of the Farmland Industries Board of Directors.
      4
       The other two named plaintiffs are two small farm cooperatives -- Great Rivers
Cooperative of Southern Iowa, an Iowa corporation, and the Sawyer Cooperative
Equity Exchange, a Kansas corporation.

                                           5
party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp.
v. Catrett, 477 U.S. 317, 322-23 (1986).

       A. Inquiry Notice

       The applicable statute of limitations for federal securities fraud claims is the one-
year period set forth in section 13 of the 1933 Securities Act, 15 U.S.C. § 77m (1994).
Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 361 (1991).
Section 13 provides:

       No action shall be maintained to enforce any liability created under
       section 77k or 771(2) of this title unless brought within one year after the
       discovery of the untrue statement or the omission, or after such discovery
       should have been made by the exercise of reasonable diligence. . . . In no
       event shall any such action be brought to enforce a liability . . . more than
       three years after the security was bona fide offered to the public, or . . .
       more than three years after the sale.


15 U.S.C. § 77m (1994) (emphasis added). Under this provision, even if a victim does
not actually know of a misrepresentation, the one-year limitation period begins to run
when the victim should have discovered the misrepresentation through the exercise of
reasonable diligence. This objective standard is commonly referred to as the doctrine
of "inquiry notice." See Davidson v. Wilson, 973 F.2d 1391, 1402 (8th Cir. 1992). We
have held that inquiry notice exists when there are "storm warnings" that would alert
a reasonable person of the possibility of misleading information, relayed either by an
act or by omission. Id. When uncontroverted evidence irrefutably demonstrates that
a plaintiff had inquiry notice of fraudulent conduct, the issue of notice is amenable to
summary judgment. Davis v. Birr, Wilson & Co., 839 F.2d 1369, 1370 (9th Cir. 1988).




                                             6
       At the core of the parties' first argument is a dispute over how to apply the
standard of inquiry notice. Farmland argues that because inquiry notice is an objective
standard, knowledge of all the facts available to the public is automatically imputed to
the injured party. Thus, the argument goes, because the Consumers case was filed in
Colorado, Tacey was on inquiry notice of Farmland's allegedly untrue statements as a
matter of law. Tacey, on the other hand, argues that he was not on inquiry notice,
despite having read about the Consumers case, because he did not have sufficient
notice that Farmland would refuse to redeem the type of capital credits he owned. We
disagree with both of these versions of the inquiry notice standard.

        The determination of whether inquiry notice exists is an objective standard based
upon the facts known to the victim. Inquiry notice exists when the victim is aware of
facts that would lead a reasonable person to investigate and consequently acquire actual
knowledge of the defendant's misrepresentations. Davidson, 973 F.2d at 402.
Breaking this standard into its components, a court must determine: (1) the facts of
which the victim was aware; (2) whether a reasonable person with knowledge of those
facts would have investigated the situation further; and (3) upon investigation, whether
the reasonable person would have acquired actual notice of the defendant's
misrepresentations. If a reasonable person aware of the facts known to the victim
would have investigated, that is, exercised reasonable diligence, and consequently
discovered the misrepresentations, the victim had inquiry notice. Accord Whirlpool
Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 610 (7th Cir. 1995) (describing inquiry
notice as "when the victim of the alleged fraud became aware of facts that would have
led a reasonable person to investigate whether he might have a claim") (internal
quotations omitted); Jackson Nat'l Life Ins. Co. v. Merrill Lynch & Co., 32 F.3d 697,
701 (2d Cir. 1994) (describing inquiry notice as when the plaintiff acquires "notice of
the facts, which in the exercise of reasonable diligence, would have led to actual
knowledge"); Menowitz v. Brown, 991 F.2d 36, 41-42 (2d Cir. 1993) (same); Jensen
v. Snellings, 841 F.2d 600, 606-07 (5th Cir. 1988) (same).


                                           7
        Farmland argues that we should engage only in the second and third prongs of
the analysis we have set forth, because, according to Farmland, the question of what
a victim actually knows is immaterial to our objective standard for inquiry notice.
Thus, Farmland would have us automatically impute to Tacey constructive knowledge
of any information available to the public, including all articles published on, and the
public records available in, the Consumers case, regardless of Tacey's actual
awareness. We cannot adopt this analysis. As the Seventh Circuit recently stated in
rejecting this same argument, "an open door is not by itself a reason to enter a room."
Fujisawa Phar. Co. v. Kapoor, 1997 WL 324433, *3 (7th Cir. June 16, 1997). A victim
must be aware of some suspicious circumstances, some "storm warnings," to trigger the
duty to investigate. See Davidson, 973 F.2d at 1402 ("The Court must determine
whether the plaintiff possessed such knowledge as would alert a reasonable investor
to the possibility of fraud.") (internal quotations omitted).
        We pause to note that this requirement of some awareness does not mean that
an injured party will necessarily avoid the statute of limitations by turning a blind eye
to what is obviously in full view. The determination of awareness is by its terms a
factual analysis, and a fact finder may decide that a victim of fraud was indeed aware
of public information. Further, there might be circumstances where the evidence of
awareness is so overwhelming that there is no genuine dispute on the issue for purposes
of summary judgment. Cf. Whirpool Fin. Corp., 67 F.3d at 610 (imputing to Whirlpool
knowledge of dramatic discrepancies between defendants' projections and actual
performance); Eckstein v. Balcor Film Investors, 58 F.3d 1162, 1168-69 (7th Cir.
1995) (imputing knowledge to investors where the information was contained in the
registration statement filed with the SEC, was widely reported, and was noted in a
quarterly report that was filed with the SEC and sent to investors). We express no
opinion today as to when such circumstances may exist. We simply note that we will
not automatically impute public information to an injured party without a determination
of some awareness of "storm clouds" on the horizon. More specifically, we will not




                                           8
automatically impute to Tacey, a hog farmer in Nebraska, the details of a class action
litigated in Colorado.

        We therefore turn to the first prong of our analysis. In this summary judgment
context, we assume the facts of Tacey's knowledge as he alleges them. He knew
Farmland had been either unable or unwilling to answer his questions about the value
of his Foods equity if he were to refuse to exchange it for Farmland equity. He knew
he had traded approximately $1100 of equity credits in Foods for approximately $900
in Farmland's Type 12 Capital Credits and $222.93 in cash. Tacey was upset with the
deal, feeling that he had been "bribed" by the cash portion of the offer, especially given
the large salaries the executives of Farmland were being paid, and that Farmland was
"trying to scr__ [him] out of a thousand." (Appellant's App. at 242-43.) He had called
Farmland representatives "you son-of-a-b____es" at the informational meeting. (Id. at
243.) In October of 1992, through the article in the Farmland newsletter, Tacey learned
that Farmland was subject to a class action suit in Colorado based on Farmland's failure
to redeem other types of Farmland capital credits.
        Under the second prong of our analysis, we conclude Tacey had sufficient
information to trigger the duty to investigate. Given the circumstances, the article in
the Farmland newsletter would make a reasonable person in Tacey's shoes suspicious
that Farmland's representations regarding the redemption of Type 12 Capital Credits
might be false. According to the article, the plaintiffs in the Consumers case were
alleging that Farmland "deliberately ha[d] refused to redeem the capital credits of small,
defunct or liquidated cooperatives" and had diverted money due to these cooperatives
to large cooperatives in which Farmland's directors had a stake. (Appellant's App. at
235.) The article explains Farmland's priority schedule and reveals that, as a general
matter, Farmland had prioritized the redemption of capital credits quite far behind
several other types of equity interests in the schedule. The article states that the Board
had scheduled the redemption of capital credits at only about five percent annually, and
redemption of those credits was subject to the Board's discretion based upon "earnings,


                                            9
capital needs and other factors." (Id. at 236.) Nowhere in the article is there any hint
that any particular type of capital credits (such as the Type 12 Capital Credits owned
by Tacey) were to be excepted from the general policy statements and thereby
redeemable after a certain period of time. After reading this article and learning that
redemption of Farmland's capital credits was not only a low priority, but also wholly
discretionary on the part of Farmland's board of directors, a reasonable person who had
been told (as Tacey says he was) that his capital credits would definitely be redeemable
within a year or two would be suspicious that some misrepresentation had occurred.
Tacey's initial and continuing dissatisfaction with the equity exchange deal, including
Farmland's inability or unwillingness to predict the future value of Foods equity and
Farmland's unwillingness to tender full cash payment for the Foods equity, would
heighten a reasonable person's suspicion. Considering the totality of the circumstances,
particularly the contents of the Farmland article, this information triggered the duty to
exercise due diligence. See Fujisawa Pharm., 1997 WL 324433, at *2-3.
        Tacey argues that the article in the Farmland newsletter was not a sufficient
"storm warning" of Farmland's fraud. He contends the article did not put him on
inquiry notice because it described the Consumers suit as "ludicrous" and "ridiculous";
Farmland's self-serving statements about the invalidity of the suit do not, however,
negate the other pertinent information presented in the article. Tacey also claims that
the title of the article, "Co-op sues Farmland over stock issue," led him to believe that
Consumers involved the redemption of stock, not of capital credits; because he admits
reading the article, Tacey had actual notice of the article's contents, which clearly
explained that capital credits were at issue. We also reject Tacey's argument that his
duty to investigate would not be triggered in this case because he was not a
sophisticated investor and he had capital credits worth only approximately $900. Our
inquiry as to whether a duty to investigate arose is an objective standard, and we
conclude that a reasonable person would be suspicious of possible misrepresentations
upon seeing the article in the Farmland newsletter. Finally, we reject Tacey's
contention that the Consumers case did not put him on notice because that case arose


                                           10
out of a different transaction and involved a different type of capital credits; the article
Tacey read described a general policy regarding capital credits, and that information
was sufficient to trigger the duty to investigate.

       Lastly, we turn to the third prong of our inquiry. We conclude that upon the
exercise of reasonable diligence, a reasonable person would have acquired actual notice
of Farmland's alleged misrepresentations. Our hypothetical person would have
acquired information regarding the Consumers suit from the representatives and
attorneys of that case.5 The claims in the Consumers case mirror those in this class
action,6 differing only in that the plaintiff class here owns a different type of capital
credits than the plaintiff class in Consumers. Had Tacey exercised reasonable
diligence, the facts underlying his claims under Counts 1, 4, and 5, all alleging
securities fraud under federal law, would have become apparent to him.

       Thus, Tacey had inquiry notice shortly after reading the article in the Farmland
newsletter in October 1992, and the one-year statute of limitations began to run at that
time. Because Tacey was on inquiry notice more than one year before he filed this suit
in July 1994, his claims are time barred.

        B. Dismissal of the 14(e) Claims as to the Entire Class

       The district court dismissed Count 4, which alleged securities fraud in violation
of section 14(e) of the Securities Exchange Act, in its entirety, on the basis that Tacey


    5
     Although Tacey contacted a Consumers representative, he failed to exercise
reasonable diligence when he did not inquire about the redemption of capital credits.


        6
       This striking similarity is not surprising, as the plaintiffs in Consumers were
represented by the same counsel representing the class in this case.

                                            11
was the only named plaintiff for that count and his claim was moot pursuant to the
statute of limitations. Tacey argues that the district court erred in dismissing Count 4
as to the entire class. He contends that he remains a proper class representative both
because his claim is not moot and because of the nature of class actions. Farmland
argues that the class fails because Tacey's claim became moot before the class was
certified.

        Farmland correctly points out that whether the mootness of a class
representative's claim warrants dismissal of the entire class on that count is a question
of timing. Compare Sosna v. Iowa, 419 U.S. 393, 400-01 (1975) (holding that
postcertification mootness of representative's claim does not render class members'
claims moot) with Shipman v. Missouri Dep't of Family Serv., 877 F.2d 678, 682 (8th
Cir. 1989) (affirming dismissal of class action complaint without a ruling on class
certification where class representative had not filed a motion requesting class
certification prior to his own claim becoming moot), cert. denied, 493 U.S. 1045
(1990). However, Tacey's claim does not technically suffer from a mootness problem;
rather, he has a live controversy that is barred by the statute of limitations. Thus, we
find the discussions in the mootness cases and their reliance on Article III limitations
unhelpful.

       Rule 23 of the Federal Rules of Civil Procedure, which sets forth the
requirements for class certification, provides an answer to this puzzle. Inherent in Rule
23 is the requirement that the class representatives be members of the class. Fed. R.
Civ. P. 23(a) (stating that "one or more members of a class may sue or be sued as
representative parties . . . ."); Vervaecke v. Chiles, Heider & Co., 578 F.2d 713, 719-
20 (8th Cir. 1978) ("The plaintiff- or defendant- representative (in a class action suit)
must be a member of the class which he purportedly represents.") (quoting 3B Moore's
Federal Practice ¶ 23.04, at 23-254 (2d ed. 1977)); see also Fed. R. Civ. P. 17(a) (real
party in interest requirement); 7A Wright, Miller & Kane, Federal Practice and
Procedure § 1761 (2d ed. 1986) (discussing requirement that representatives must be

                                           12
members of the class). Here, Tacey is not and cannot be a class member because his
claim is time barred; consequently, he cannot represent the class. See Weinberger v.
Retail Credit Co., 498 F.2d 552, 556 (4th Cir. 1974); Mason v. Anheuser-Busch, Inc.,
579 F. Supp. 871, 873 & n.1 (E.D. Mo 1984). Because Tacey is the only named
representative in Count 4, the putative class lacks a representative on that count.
Without a class representative, the putative class cannot be certified and its claims
cannot survive. The district court's dismissal was therefore proper. Cf. Vervaecke,
578 F.2d at 719-20 (holding district court did not abuse its discretion in striking class
claims prior to class certification where class representative's claims failed).

                                          III.

      For the above reasons, we affirm the judgment of the district court.

      A true copy.



             Attest:



                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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