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BNL EQUITY CORPORATION v. PEARSON2/10/2000
This is an appeal from an order by the trial court granting class certification to the proposed class under Ark.R.Civ.P. 23. The appellants in this appeal are BNL Financial Corporation, the parent company (BNL); BNL Equity Corporation, a wholly-owned subsidiary of the parent;
Brokers National Life Assurance Company, a wholly-owned subsidiary of BNL Equity Corporation (BNLAC); Wayne Ahart, chairman of the board of BNL Financial and BNLAC, and also chairman of the board of the predecessor companies; Kenneth Tobey, president of BNL Financial and BNLAC, and president of the predecessor companies; Barry Shamas, executive vice president of BNL Financial and BNLAC, and vice president of the predecessor companies. Prior to 1994, the predecessor company for BNL was United Arkansas Corporation (UAC) and the predecessor company for BNLAC was United Arkansas Life Assurance Company (UALAC). The appellees in this appeal are the plaintiffs and class representatives in the class action — Myra Jo Pearson, Paul Pearson, and James Stilwell.
On April 30, 1996, the Pearsons filed the original complaint against the appellees for violation of the Arkansas Securities Act and specifically for violation of Ark. Code Ann. § 23-42-106(a)(1) (Supp. 1999). The defendants moved the trial court to dismiss the case for lack of subject-matter jurisdiction or to transfer the case to chancery court because the equitable defense of laches had been asserted. The motion was denied. On May 19, 1998, Stilwell joined as a party plaintiff in the third amended complaint. The cause of action centered around misrepresentations or omissions in two public offering prospectuses and a scripted sales presentation. The first public offering sought purchasers of stock in UAC between the dates of May 1, 1989, and May 1, 1991. The second public offering also sought purchasers of stock in UAC. That offering commenced on May 1, 1991, and ended on May 1, 1992.
According to their complaint, the Pearsons purchased stock under both offerings on the dates of April 24, 1991; May 9, 1991; and February 20, 1992. Their total investment in UAC stock was $10,660. Stilwell purchased stock under the first offering on August 30, 1990. His total investment was $2,000. During the first offering, UAC raised $4,110,050 from 1,251 investors. Under the second offering, it raised $2,071,300 from 590 investors.
In their complaint, the Pearsons and Stilwell alleged pervasive deception by the appellants with regard to their entire investment plan. Specifically, the Pearsons and Stilwell alleged five material misrepresentations or omissions of material facts that were made through the use of the two public offering prospectuses and the
scripted sales presentation. Those misrepresentations or omissions were: (1) that UAC's primary business objective and principal business activity would be the ownership and operation of a life insurance subsidiary which would primarily offer customary forms of life insurance products; (2) that UAC and its life insurance subsidiary (UALAC) would hire and license captive sales agents and that the captive sales force would use a one-on-one sales method with clients and use personal visits by agents to homes and businesses; (3) that there were no then-existing opportunities known to UAC or its management to purchase any existing insurance company or other business;(4) that the key management team of UAC, primarily appellants Ahart, Shamas, and Tobey, had achieved a strong record of success and built four successful insurance holding companies; and (5) that appellant Tobey had nine or ten years experience in the life insurance business. According to the complaint, contrary to these representations, the primary bus
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