Full opinion text
OPINION DAY, Senior District Judge. This is a civil action in which the plaintiffs, executors of the Estate of Howard W. Holmes (the Estate), seek damages and other relief on account of alleged violations of § 10(b) of the Securities Exchange Act of 1934 (the Act) and Rule 10b-5 promulgated thereunder, as well as, the alleged commission of fraud and breach of fiduciary obligations under the laws of Rhode Island. This Court has jurisdiction over the federal claims pursuant to § 27 of the Act, 15 U.S.C. § 78aa, and pendent jurisdiction over the state claims. The plaintiffs claim that defendants C. E. Maguire, Inc. (the Corporation), Bateson and Bronson misrepresented and failed to disclose material information in connection with the Corporation’s purchase of 350 shares of its own stock from the Estate and the purchase of the Estate’s interest in Charles A. Maguire and Associates (the Partnership) by Bateson and Bronson. Combustion Engineering, Inc. (Combustion), it is alleged, aided and abetted or conspired with the aforementioned defendants to violate said § 10(b) and Rule 10b-5. The plaintiffs further contend that Bate-son and Bronson as directors and together as majority stockholders of the Corporation, and holders of a majority interest in the Partnership committed fraud upon said Estate and breached their fiduciary obligations under the common law. The evidence at trial indicated that the Partnership, an architectural and engineering consulting firm, was formed in 1942. Holmes became a partner in 1952, while Bateson and Bronson became partners eight years later. As of January 1,1969, Holmes owned a 46% interest in the Partnership and Bateson and Bronson each possessed a 27% interest therein. Effective January 1, 1969, Holmes, Bate-son and Bronson organized the Corporation and the Partnership became a liquidating entity. Holmes was selected to be President of the Corporation; Bateson became Executive Vice President. Bronson assumed responsibility for the Corporation’s finances as Executive Vice President for Finance and Administration and Treasurer. The three named themselves the sole directors of the Corporation and issued 850 shares of common stock: 350 shares to Holmes, 250 shares to Bateson and 250 shares to Bronson. The consideration for the issuance of said stock was the transfer to the Corporation of certain Partnership assets, consisting principally of the rights to perform new contracts and complete work in progress. The Partnership retained ownership of accounts receivable and related assets pertaining to services rendered prior to January 1, 1969. To obtain working capital for the Corporation, Holmes, Bate-son and Bronson made loans to the Corporation in proportion to their holdings therein from their respective shares in the Partnership income. Holmes died on April 9, 1969. At his death he owned a 46% interest in the Partnership and 41.17% of the capital stock of the Corporation. In addition, Holmes had loaned the Corporation a total of $244,-000. 00 which was not repaid as of March 31, 1969. Shortly after the death of Holmes, Bateson assumed the presidency of the Corporation and Bateson and Bronson became the sole directors. The Estate retained as its counsel, John G. Coffey, a close family friend of Holmes, and attorney for the Partnership for many years. Thereafter Coffey did not represent the Corporation or Partnership. Coffey’s relationship with Bateson and Bronson pri- or to the death of Holmes can properly be characterized as longstanding, close and marked by mutual trust. At the time of Holmes’ death, there existed a Partnership agreement, dated January 1, 1967, which set forth, inter alia, the terms upon which the interests of a withdrawing or deceased partner could be acquired and redistributed by the remaining partners. The said agreement also included the following significant provision: “Nothing contained herein, however, shall prevent the remaining partners from entering into any other mutually satisfactory arrangements or agreement with the Estate of the deceased relative to the amount or method of payment of the amount due to or from the Estate of any deceased partner.” Holmes, Bateson, Bronson and a Milton Nelson, who retired June 30, 1968, were parties to this agreement. Upon Nelson’s retirement, the remaining partners proportionately redistributed Nelson’s 26% interest in the Partnership and agreed to pay Nelson $400,000.00 therefor. That sum represented the agreed value of his interest fixed at the date of his retirement, less a 20% discount covering such items as problems in collection of accounts receivable, the expense of collecting the accounts and uncertainties in calculating the percentage of completion of jobs in progress. Said agreement also directed that the Partnership maintain its accounts on a cash basis, a practice which was followed. It appears that on March 25, 1969, at the annual meeting of the Corporation, Holmes, Bronson and Bateson discussed the terms of a new Partnership agreement, not substantially different from previous agreements with respect to the redistribution of a departing partner’s interest. The three also agreed to work out some method for the transfer of the corporate stock of a stockholder who died thereafter. No specific method for acquiring a deceased stockholder’s shares was ever reduced to writing, nor was a new Partnership agreement executed at or after this meeting prior to the death of Holmes. It is important to note that Coffey, who became the Estate’s principal negotiator with Bateson, Bronson and the Corporation, had not been deeply involved in either the Corporation’s or the Partnership’s financial affairs while Holmes was alive. He was, however, aware of the contents of a report completed in December, 1967, by Booz, Allen & Hamilton, Inc. dealing with the Partnership’s organizational problems. One specific criticism in that report was that the Partnership’s accounting, billing and financial reporting procedures were inadequate to reveal an accurate financial picture of the Partnership. The report discussed at length the proposed incorporation of the business and made several recommendations to rectify what it regarded as weaknesses in the Partnership’s financial practices. Few of these recommendations had been implemented at the time of Holmes’ death. In 1968, Coffey had introduced the partners to Edward Scheider, a consultant on subjects including mergers and public offerings. Thereafter, Coffey was informed of Scheider’s advice to follow the recommendations in the said Booz, Allen & Hamilton, Inc. report before pursuing merger possibilities since few companies would be interested in the Partnership once they discovered its internal problems. Coffey knew that the Corporation was suffering from cash flow problems and was under the impression at Holmes’ death that the Corporation was in a precarious financial condition. He was also aware that the Corporation was seriously interested in merging or being acquired in order to alleviate some of its problems and that contact had been made by Bronson with Barry Wright Corporation (Barry Wright) prior to Holmes’ death to discuss acquisition. Little progress had been made, however, toward actually accomplishing a merger or acquisition. Thus Coffey was reasonable in his belief that the then current prospects for completing such a move on • terms which would alleviate the Corporation’s financial problems were dim. Neither executor had any greater knowledge of the Corporation’s financial condition or potential for merger or acquisition than did Coffey. Between the date of Holmes’ death and January 6, 1970, Bateson and Bronson received regular monthly cash statements for the Partnership and the Corporation within three weeks of the end of each month. During this same period, monthly statements of accounts receivable were prepared by the accountant for the Partnership and the Corporation. Bronson met regularly with the said accountant, and along with Bateson, regularly consulted the Corporation’s divisional vice presidents to review backlog, work in progress and new projects. None of this information was shared with the Estate. During the period between April 9, 1969 and the first Estate meeting, July 24, 1969, Bronson met with representatives of Barry Wright on at least four occasions and Bate-son met with said representatives at least once to discuss the possible acquisition of the Corporation by Barry Wright. In addition, Bronson had periodic contact by telephone with the President and with the Director of Corporate Development of Barry Wright. Bronson supplied Barry Wright with financial date on the Partnership for a ten year period ending December 31, 1968, which Barry Wright analyzed and converted into accrual data on or before July 8, 1969. During this same period, Bateson and Bronson conferred on two occasions with a Charles Hallinan of Reynolds and Company, a brokerage firm, on matters relating to acquisition and merger. Financial statements for the Partnership for the year ending December 31,1968 became available June 8, 1969, but were not then supplied to the estate. Bateson, Bronson, Coffey, Mrs. Holmes and Evandro Radoccia, the Trust Officer assigned by the Industrial National Bank of Rhode Island (the Bank) to discharge its duties as executor, were among those who attended the July 24, 1969 Estate meeting. No financial material was given to the Estate at the meeting, nor was any information revealed about the merger negotiations between the individual defendants and Barry Wright. The representatives of the Estate regarded the meeting as amiable, perceiving their role as working together with Bateson and Bronson toward a “common end”. Prior to the second Estate meeting, which took place on September 24, 1969, Bateson and Bronson again conferred with Hallinan. Through him they met with a representative of Science Management Corporation (Science Management) to discuss that company’s possible merger with or acquisition of the Corporation. The evidence also establishes that on August 5, 1969, Bateson and Bronson had met with the President and various other officers of Barry Wright and toured the Barry Wright facilities. On August 14, 1969, Bronson prepared, on the Corporation’s stationery, a two-part report which he described as “two very brief but intended to be reasonably comprehensive confidential memoranda re the several situations which we are evaluating”. The report included a description of a possible “payment program” for a deal with Barry Wright, involving a down payment of 140,000 shares of Barry Wright stock for the acquisition of the Corporation. This volume of shares matched one figure listed in exhibit 62, a handwritten memorandum containing a proposal for acquisition of the Corporation prepared by Pietz, the President of Barry Wright. Said report, which was not supplied to the Estate, bore on its face the following comment: “There is one copy of each of these mem-oranda in my personal file — no others exist and needless to say, please keep these,data under lock and key.” Relying primarily on the testimony of McGill, the Director of Corporate Development for Barry Wright, and the aforementioned correlation in figures between Bronson’s and Pietz’s memoranda, the Court finds that Barry Wright did make at least a serious, tentative offer to acquire the Corporation for Barry Wright stock worth approximately $4,800,000.00. This finding is corroborated by a letter dated January 9, 1970, from Bronson to Pietz, which assumes by its language the existence of an offer. Before conveying said offer, McGill had informed Pietz that he felt it would be fairer to offer between $5,500,000.00 and $6,000,-000.00 for the Corporation. By September 3,1969, all divisions of the Corporation had delivered to Bronson percentage of completion information for the period ending June 30, 1969. This material was not transmitted to the Corporation’s accountant despite the fact that it was the only outstanding material necessary for completion of the June 30, 1969 accrual reports. Bronson thereafter instructed the Corporation’s accountant to cease preparation of said accrual reports. On September 11,1969, Bateson prepared a memorandum projecting earnings of $900,000.00 for the Corporation on an accrual basis for 1969, and valuing the Corporation at $5,800,000.00 on a cash basis and $7,500,000.00 on an accrual basis. The memorandum and drafts thereof contained comparative information on the selling prices of companies deemed by Bateson to be similar to the Corporation. Said memorandum further stated that, based upon projected earnings and comparative valuations, “it appears that we are worth something in excess of $6,000,000.00 ” (emphasis in the original). Bateson sent his memorandum to Bronson who never challenged Bateson’s valuation of the Corporation. The Estate did not receive a copy of this memorandum. Bateson, Bronson, Mrs. Holmes, Coffey and Radoccia, among others, were present at the Estate meeting held on September 24, 1969. At this meeting Bronson and Bateson provided the Estate with a financial statement for the Partnership for the period ending December 31,1968, as well as, with a statement of revised estimated net worth for the Partnership and Corporation dated March 31,1969. The latter statement reflected a recorded cash loss for the Corporation of $909,726.32. Said statement did not contain information calculated on an accrual basis. While Bateson was silent at this meeting, Bronson stated that the Corporation and Partnership were having cash problems and generally painted a black picture of the Corporation’s finances. No one informed the Estate representatives that there had been an offer of $4,800,000.00 from Barry Wright for the Corporation, nor that there had been discussions with Science Management concerning its possible acquisition of the Corporation. Neither Bateson nor Bronson advised the Estate representatives that they anticipated an accrual profit of $900,000.00 in 1969 for the Corporation or that they appraised the Corporation at a value in excess of $6,000,-000.00. Finally, no information on the profits or losses of the Corporation or Partnership for periods after March 30, 1969 was supplied to the Estate representatives. From October 1 through October 3, 1969, Bronson was in California in connection with a project for Combustion which involved the evaluation of real estate owned by the Great Lakes Carbon Corporation. During one dinner meeting and a subsequent taxi ride to the airport, Bronson and Kiamie, the Vice President and Controller of Combustion, discussed the possible acquisition of the Corporation by Combustion. Bronson informed Kiamie of the level of the Corporation’s annual revenues and that the Corporation was currently profitable. In briefly reviewing the history and business activities of the Corporation, Bronson mentioned that there was an Estate problem which the Corporation was in the process of resolving. Kiamie stated that if Bronson and Bateson were interested in Combustion’s acquiring the Corporation, they ought to explore the matter more fully with Combustion representatives. Bronson replied he would like to pursue the matter. Immediately after these informal discussions in California, Kiamie contacted James Thornton of The Lummus Company, a wholly owned subsidiary of Combustion, and the latter proceeded to obtain information on the Partnership and Corporation. While Bronson met again with Kiamie in late October, there was no evidence that they discussed acquisition. Bateson and Bronson devoted the entire day of October 8, 1969 to reviewing merger and acquisition possibilities with representatives of Science Management at its facility in Moorestown, New Jersey. Bronson informed said representatives of the Corporation’s volume of business and the fact that they were negotiating with another company. On October 16, Bateson attended an all day seminar in Boston which had as its subject matter mergers and acquisitions. The following day, Bronson met with representatives of Barry Wright to discuss acquisition. Bronson prepared memoranda on Corporation stationery on October 20 and 21, 1969, containing comparisons of the advantages and disadvantages of acquisition by Science Management and Barry Wright and projections of the Corporation’s earnings on an accrual basis for the years 1969 through 1972. See exhibits 30 and 31. In the memorandum of October 20, Bronson noted that “. . . the opportunities for growth appreciation with the right merger can mean much more in compensation and security [than the sales price], particularly as we become the nucleus of a very broad based acquisition program”. In his memorandum of the following day, Bronson remarked that Science Management and Barry Wright were “vitally interested” in the Corporation’s becoming the nucleus of their acquisition oriented programs. Bateson received these memoranda; the Estate did not. Bronson, Mrs. Holmes, Coffey and Radoe-cia were among those present at the Estate meeting held October 28, 1969. There was no disclosure of the aforementioned activities concerned with merger and acquisition. Nor was there any disclosure of the financial condition or profit and loss of either the Corporation or Partnership for any period after March 31, 1969, except Bronson’s ac-knowledgement that the Corporation had a cash shortage. At this meeting the principals negotiated as to the total amount to be paid for the Estate’s interest in the Corporation and Partnership and as to the terms, especially the period of years allowed for payment. On October 28, following the meeting with the Estate representatives, Bronson met with Robert F. Pickard, counsel for the Corporation, Partnership, and individual defendants during negotiations with the Estate. Bronson informed Pickard of his meetings in California with Combustion and that Combustion had expressed an interest in exploring the possibility of its acquiring the Corporation. Pickard, knowing nothing of the extensive contacts which the individual defendants had had with Science Management and Barry Wright, advised Bronson that, so long as the Estate remained a stockholder, he had an obligation to disclose completely to Estate representatives all material information relating to, as well as the fact of, acquisition negotiations. It was Pickard’s belief that Bronson’s informal contacts with Combustion, as described to him, did not constitute negotiations. Bronson, Mrs. Holmes, Coffey and Radoc-eia were among those attending a November 3, 1969 Estate meeting. Those present tentatively agreed to the payment of $815,-000.00 to the Estate for its interests in the Corporation and Partnership, this understanding being subject to the execution of written agreements. There was a discussion of the language desired for inclusion in the final agreement. In connection with this, Bronson stated that he wanted the Corporation to be able to merge, be acquired or go public in the future without intrusion from the Estate. Bronson mentioned these options only in terms of future possibilities, totally concealing the current negotiations with Barry Wright and Science Management and his contacts with Combustion. There was also no disclosure of any memoranda in which Bateson and Bronson appraised the Corporation. Another Estate meeting was held on November 26, 1969, at which Bateson, Bronson, Mrs. Holmes, Radoccia and Coffey, among others, were present. A document was signed by which the plaintiffs, the Corporation and Bateson and Bronson as partners agreed that certain exhibits to said document would be completed and executed after the end of 1969, based upon year-end financial figures. The overall agreement contemplated payments aggregating $815,-000.00. The handwritten notation: “To be determined as of Dec. 31, 1969 in accordance with the books of corporation and partnership.” appears in lieu of a dollar amount alongside entries for (1) the Corporation’s debt to the Estate, (2) 350 shares of capital stock in Corporation and (3) interest in Partnership unrealized receivables. This document did not refer to the provision in the said Partnership agreement of January 1, 1967, which dealt with the disposition of a deceased partner’s interest and made no reference to any oral understanding reached by Holmes, Bateson and Bronson. The document does acknowledge that negotiations were held between the executors, the Corporation and the Partnership with a view to determining the value of the Estate’s interests in both the Partnership and Corporation and to settling on terms for disposition of those interests. Bateson remained totally silent at this meeting. No one disclosed negotiations with Barry Wright or Science Management, Bronson’s contacts with Combustion or financial data for any period after March 31, 1969. On December 2, 1969, Bronson wrote to Radoccia setting up a meeting for January 6, 1970 to execute the final Estate settlement documents. The following day Bronson telephoned Kiamie in order to schedule a meeting for January 7, 1970 to discuss Combustion’s acquisition of the Corporation. That same day Kiamie sent a memorandum to Kelly, Vice President and Secretary of Combustion, which stated in pertinent part: “Gordon Bronson called me today and advised that they would be ready by the first week of January to begin discussions with Combustion. Apparently, they have completed their mutual arrangements with the estate of the former partner.” On December 9, 1969, Bronson projected profits of $250,000.00 on an accrual basis for the Corporation for the last quarter of 1969 based upon financial data given to him by the Corporation’s accountant. On December 15 and 18, 1969, the Corporation’s accountant delivered to Bronson financial data which revealed, among other things, that the Corporation had an accrual profit before taxes of $720,000.00 for the nine month period ending September 30, 1969. Bronson never shared this information with the Estate and, indeed, throughout negotiations with the Estate, neither Bronson nor Bateson told any Estate representative that the Corporation was profitable on an accrual basis. In contrast to Bronson’s concealment of the said accrual statement, the individual defendants did supply the Estate, at the January 6, 1970 meeting, with a document showing a projected loss on a cash basis for the year 1969 by the Corporation of $1,330,-000.00. The same document also reflects that the Estate had loaned the Corporation $315,000.00 from April 1 through September 30, 1969, and an additional $17,930.00 from October 1 through December 31, 1969. Present at this January 6, 1970 meeting were Bateson, Bronson, Pickard, Radoccia, Mrs. Holmes, Coffey and the Corporation’s accountant. Bronson, Bateson, the Corporation and the executors signed an agreement providing that the individual defendants would pay the Estate $182,406.69 without interest over a seven year period for the balance of its Partnership interest. The Corporation and the executors executed a second agreement whereby the Corporation agreed to issue to the Estate a seven year, non-interest bearing installment note in the amount of $581,603.62 reflecting evidence of the $577,150.00 loaned to the Corporation by Holmes and the Estate, as well as, the purchase of the Estate’s 350 shares of stock of the Corporation for $4,453.62. The Estate delivered the 350 shares and in exchange received a promissory note from the Corporation guaranteed by Bateson and Bronson individually. No reference is made in this agreement to the said Partnership agreement of 1967 or any oral understanding reached by Bateson, Bronson and Holmes. At this January 6 Estate meeting there was no mention of Combustion or of the meeting scheduled for the next day between Bateson and Bronson and Combustion. There were no disclosures of past or current merger or acquisition negotiations or of the valuations of the Corporation which Bateson and Bronson had made. As previously arranged, Bateson and Bronson met with Kelly and Kiamie on January 7,1970 to discuss a possible acquisition of the Corporation by Combustion. This was Bateson’s initial face to face contact with representations of Combustion. Bronson, on the other hand, had had extensive dealings with Combustion with respect to specific projects for which the Partnership and Corporation sought to be engaged or were engaged by Combustion. Bronson’s first contact with Combustion occurred in late 1966 in connection with a year long project in Windsor, Connecticut for which the Partnership provided complete architectural-engineering services. Thereafter Bronson worked with Combustion on a year long project in Cleveland, Ohio; on economic feasibility studies for a corporate facility in Stamford, Connecticut; and, on an evaluation of real estate owned by Great Lakes Carbon Corporation. As hereinbefore stated, it was during the performance of this last project, in early October, 1969, that Bronson and Kiamie expressed a mutual interest in pursuing acquisition negotiations. At the January 7 meeting, Bronson showed Kiamie the said accrual financial statements for the first three quarters of 1969, and those present discussed the finances of the Corporation and Partnership, including the financial terms of the transactions with the Estate. During the course of the meeting, Kelly stated that Combustion would offer Bateson and Bronson in the vicinity of $6,000,000.00 for the Corporation and Partnership. Bateson and Bronson rejected one preliminary offer, made in terms of Combustion stock, because an unacceptable proportion of the stock was tied up in a contingent “earn-out” plan. Subsequently, the principals reached a tentative agreement which contemplated payment by Combustion in Combustion convertible preferred stock of 85,000 shares immediately and 65,-000 shares on a contingent “earn-out” basis. The then market value of the preferred stock was $40.00 per share. This agreement was reduced to a draft letter of intent dated January 12, 1970, but was subject to investigation of the Corporation and Partnership by Combustion, and to approval by the Combustion board of directors. On January 9,1970, Bronson wrote to the President of Barry Wright explaining his and Bateson’s decision to join Combustion rather than Barry Wright. The letter also states at one point: “We could not discuss anything until after January 6, 1970, and we were not able to gauge the seriousness of indication on their [Combustion’s] part until we had a meeting with them.” On February 2,1970, Pickard delivered to Radoceia two pages to be substituted for the first two pages of the Corporate Purchase Agreement of January 6, 1970. Said substituted pages provided that the entire $581,603.62, which the Corporation contracted to pay the Estate, was consideration for the 350 shares of stock delivered by the Estate to the Corporation on January 6. The amended pages were manually substituted without being executed by the parties to the earlier agreement. There was no evidence Mrs. Holmes consented to or was then aware of the substitution. It is unclear from the record precisely why the substitution was performed, but it is certain that neither Pickard nor anyone else intended to make any substantive change in the original Estate transaction. On February 4,1970, Pickard advised the Bank that loans on the books of the Corporation owing to Bateson, Bronson and the Estate had been capitalized in the following amounts: Bronson, $412,250.00; Bateson, $412,250.00; and Holmes and his Estate, $577,150.00. Kiamie met with Bronson and Pickard on February 17, 1970. They agreed that Combustion’s offer would be in common stock rather than preferred stock because Combustion did not have sufficient unissued authorized preferred stock available. Combustion lowered its previous evaluation of the Corporation’s net assets, correspondingly reducing its offer, because the Corporation had provided for an inadequate reserve for taxes, and eliminated the Partnership from the transaction. On March 3, 1970, the tentative agreement was further amended to eliminate 5,810 shares of common stock from the consideration to offset the retention by the Corporation of its debt to the Estate and to reduce the consideration by an additional 5,250 shares of contingent stock reserved for an incentive compensation fund for certain key Corporation employees. The agreement reached but not executed on March 3 provided that Combustion would transfer to Bateson and Bronson, in exchange for their shares of Corporation stock, a total of 24,240 shares of Combustion’s common stock as the initial payment and 24,000 shares as the contingent payment. On April 29, 1970, Combustion executed an agreement with Bateson and Bronson pursuant to which it did deliver 24,240 shares of its common stock to them and placed 24,000 shares of its common stock in escrow, to be earned by them under a stipulated formula only if the Corporation had, after taxes, earnings in excess of $2,500,-000. 00 during the period January 1, 1970 to December 31,1974. On the same day, Bate-son and Bronson entered into employment agreements with Combustion for the period through December 31, 1974. Bateson and Bronson received said 24,240 shares subject to an investment representation and agreement which provided that they were entitled at their request, at any time, to a registration statement for such shares, prepared and filed with the Securities and Exchange Commission at the expense of Combustion. This registration statement would enable Bateson and Bronson to sell publicly their Combustion stock. Finally, the agreement between Combustion and Bateson and Bronson recited that the Corporation retained in its treasury those 350 shares of stock formerly belonging to the Estate. As of March 3, 1970, the date on which the principals fixed the number of Combustion shares to be given to or placed in escrow for Bateson and Bronson, the said shares were worth $2,808,562.23. The Court relies for this finding on the testimony of Pearson Hunt, Converse Professor of Finance Emeritus at the Harvard Business School. The market value per share of Combustion common stock for the week of March 3 averaged $92.44. Hunt’s discount of 3% to take into consideration the size of the block of stock was appropriate. Accordingly, the 24,240 shares to be actually delivered had a fair market value of $2,173,-523.23. The 24,000 shares of contingent stock had a value in the Spring of 1970 of $635,039.00. The fact that Bateson and Bronson did not earn any contingent stock does not diminish the significance of said stock as consideration in the transaction. As of April 29, 1970, the date on which Combustion executed the agreement with Bateson and Bronson, Combustion shares had a market value of $78.75. Applying the aforementioned 3% discount, the fair market value on that day of the 24,240 shares delivered was $1,851,633.00. Since the value of the contingent stock was the same on April 29 as it was on March 3, 1970, the value on April 29, 1970 of all the stock designated as consideration was $2,486,-672.00. In July, 1970, Bronson, on behalf of the Corporation, wrote to Coffey offering to purchase for $417,000.00 the $581,603.62 note issued to the Estate by the Corporation six months earlier. Coffey, unaware of the terms of the Combustion acquisition, and concerned about the solvency of the Corporation, recommended acceptance of this substantial discount. On August 4, 1970, the Corporation and the Estate executed an agreement providing for the purchase of said note for $417,000.00 in cash. Coffey, Mrs. Holmes and Radoccia learned of the terms of the transaction between Combustion and the individual defendants and Corporation from the plaintiffs’ trial counsel in the Fall of 1972. Prior to that time they did not know the full nature of the activities • of Bateson and Bronson and the Corporation during the period of Estate settlement negotiations. I. LIABILITY UNDER § 10(b) and RULE 10 b-5 Section 10(b) of the Act makes it unlawful “for any person, directly or indirectly”, to “employ, in connection with the purchase or sale of any security . any manipulative or deceptive device or contrivance in contravention” of any rule “the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” Among the rules prescribed by the Commission is Rule 10 b-5. Framing Rule 10b-5 in terms of a positive duty, a person, in connection with the purchase or sale of any security, is under an obligation to refrain from employing any device, scheme or artifice to defraud, or to otherwise engage in any act, practice or course of business which operates as a fraud or deceit upon any other. Such person must refrain from making untrue statements of material fact and should supply those material facts which are necessary in order to prevent statements made, in light of the circumstances, from being misleading. It is well settled that a private right to relief from violations of these obligations is implicit in § 10(b) of the Act and Rule 10 b-5. See, e. g., Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). In order to recover, the instant plaintiffs must establish the occurrence of a misrepresentation or omission made with scienter in connection with their sale of a security and the existence of a causal link between the misrepresentation or omission and their sale of said security. Before turning to the issue of whether or not the plaintiffs have established these elements, the Court first addresses the contention of each of the defendants that any right to relief the plaintiffs might have had is barred by the applicable statute of limitations. Since the Act does not expressly provide a time limitation for civil actions under § 10(b), the defendants would have this Court apply to this action, by analogy, the one year limitation found in § 13 of the Securities Act of 1933, 15 U.S.C. § 77m. It is now beyond question, however, that the law of limitations of the forum state, rather than § 13 of the Securities Act of 1933, should be applied. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 210 n. 29, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); Janigan v. Taylor, 344 F.2d 781, 783 (1st Cir.), cert. denied, 382 U.S. 879, 86 S.Ct. 163, 15 L.Ed.2d 120 (1965). Assuming that the defendants are correct in their assertion in the alternative that R.I. G.L. § 9-1-14, with its one year limitation on actions for words spoken, governs actions for oral misrepresentations, that provision is nevertheless inapplicable here." The plaintiffs alleged a pattern of misrepresentation and nondisclosure encompassing written documents and silence, as well as, oral statements. Thus, the controlling limitation is six years, as provided by R.I. G.L. § 9-1-13. See Rusch Factors, Inc. v. Levin, 284 F.Supp. 85, 88 (D.R.I.1968). Since this action was commenced in February, 1973, while all the challenged conduct of the defendants occurred after April 9, 1969, and was finally discovered in the Fall of 1972, it was timely filed. (a) SALE OF THE ESTATE’S INTEREST IN THE CORPORATION (1) CAUSATION As noted above, the plaintiffs have the burden of establishing a causal link between their sale of the Estate’s interest in the Corporation and a misrepresentation or omission by Bateson and Bronson. Each of the misrepresentations and omissions upon which the plaintiffs rely occurred between April 9, 1969, the date upon which Holmes died, and January 6, 1970, the date upon which the document evidencing said sale was executed. Among the defendants’ contentions is that the said Partnership agreement of 1967 and a certain oral understanding reached by Holmes, Bateson, and Bronson, March 25, 1969, to handle a deceased’s interest in the Corporation in a manner similar to the disposition of his interest in the Partnership, finally fixed the terms of the purchase of the Estate’s interest in the Corporation. If the defendants’ position is correct, then, naturally, nothing which occurred between April 9, 1969 and January 6, 1970 would matter and the Court’s inquiry would be at an end. See Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 890 (2d Cir. 1972); Pittsburgh Coke & Chemical Co. v. Bollo, 421 F.Supp. 908, 923 (E.D.N.Y.1976). The Court, however, cannot accept this contention. There is no reference made in the Janu-. ary 6, 1970 agreement finally settling the Estate's interest in the Corporation to any former Partnership agreement or any oral understanding between Holmes, Bateson and Bronson. This final settlement was the product of negotiations between the Estate representatives and Bateson and Bronson, as is acknowledged in the said preliminary agreement between them, entered November 26, 1969. At any rate, even under the terms of the said Partnership agreement of 1967, the Estate representatives could enter into negotiations with the Corporation and the individual defendants and fix the value of the Estate’s interest in the Corporation as of December 31, 1969, rather than as of the date of Holmes’ death. Said Partnership agreement provided the surviving partners the option of entering into any “mutually satisfactory arrangements or agreement with the Estate of the deceased” partner. The conduct of the parties, the language of the settlement agreements, and even the advice given by Pickard relative to Bate-son’s and Bronson’s duty to disclose, make it overwhelmingly evident that the Estate was under no binding commitment to sell said stock on any particular terms until January 6, 1970. Bateson’s and Bronson’s obligation to disclose continued until that date. The next issue is whether the individual defendants met this obligation to disclose fully, material information. The “material” facts in this suit are those facts about the Corporation’s business which in reasonable and objective contemplation might affect the value of its stock. See Rogen v. Ilikon Corp., 361 F.2d 260, 266 (1st Cir. 1966). Generally speaking, the test of materiality is an objective one, that is, whether a reasonable man would attach importance to the particular facts i'n controversy in determining his choice of action in the transaction in question. Id.; TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). m The Court is convinced that Bateson and Bronson either failed to disclose or disclosed only in a partial and misleading way a number of material facts. Foremost among their material omissions was their failure to inform the Estate representatives of the existence and content of the extensive negotiations they had with Barry Wright after April 9, 1969. These negotiations reached such an advanced state that Barry Wright offered to acquire the Corporation for $4,800,000.00 in stock. Even apart from the offer, the strong interest in acquisition otherwise displayed by Barry Wright would certainly have been a factor affecting a reasonable man’s decision in the Estate's position with respect to the transaction between it and the Corporation. See Rochez Brothers, Inc. v. Rhoades, 491 F.2d 402, 409 (3d Cir. 1974). The coinciding expressions of interest in acquisition by Combustion, Science Management and Barry Wright, together with the serious negotiations involving the latter two companies, indicated that a merger or acquisition on terms very favorable to the Corporation’s stockholders was imminent. This fact was certainly material. See Thomas v. Duralite Co., 524 F.2d 577, 585 (3d Cir. 1975); SEC v. Geon Industries, Inc., 531 F.2d 39, 47-48 (2d Cir. 1976). Bateson and Bronson also failed to disclose to the Estate representatives a considerable amount of financial data on the Corporation for periods between March 31, 1969 and January 6, 1970. The data received by Bateson and Bronson during that time revealed that the Corporation’s business was continuing to increase and that the Corporation was earning substantial profits on an accrual basis. Most significantly, in August and September, 1969, the individual defendants were projecting 1969 accrual earnings for the Corporation of between $650,000.00 and $900,000.00 and were evaluating the Corporation in excess of $6,000,000.00, primarily on the basis of financial reports not supplied to the Estate representatives. Bronson’s negative remarks concerning the financial health of the Corporation and the delivery to the Estate on January 6, 1970 of a statement showing the Corporation’s cash loss for 1969 as $1,330,000.00 accentuated the materiality of this pattern of nondisclosure of financial data. Unquestionably, the Corporation suffered from cash flow problems in 1969. The Estate representatives knew this. Bateson and Bronson were aware that the Estate representatives were concerned that the Corporation’s cash shortage would render it unable to adequately compensate the Estate for the sale of its interest in the Corporation. Bronson, by his negative remarks, Bateson, by his silence, and both of them by their selective disclosure of the said cash loss in 1969, encouraged that concern at the time when each possessed information that would have presented a far more balanced and promising picture of the Corporation’s finances. That being so, the individual defendants’ omissions and representations were misleading and material. See Janigan v. Taylor, supra; Myzel v. Fields, 386 F.2d 718 (8th Cir. 1967), cert. denied, 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1143 (1968); Bowman & Bourdon, Inc. v. Rohr, 296 F.Supp. 847 (D.Mass.), aff’d per curiam, 417 F.2d 780 (1st Cir. 1969). To the extent the plaintiffs base this action on an affirmative misrepresentation by Bateson and Bronson, they must show that said misrepresentation was not only material, but also a substantial factor in determining the course of conduct which resulted in the Estate’s loss. See, e. g., Herzfeld v. Laventhol, Krekstein, Horwath & Horwath, 540 F.2d 27, 33 (2d Cir. 1976). In contrast, to the extent the alleged violation of § 10(b) is premised on nondisclosure, positive proof of reliance is not a prerequisite to recovery; the existence of an obligation to disclose and the withholding of a material fact establish the requisite element of causation in fact. Affiliated Ute Citizens v. United States, 406 U.S. at 153-54, 92 S.Ct. 1456. In nondisclosure actions, a number of eases indicate that proof of materiality raises a presumption or inference of reliance or establishes causation prima facie, but that the defendants’ proof of non-reliance defeats liability. See Rochez Brothers, Inc. v. Rhoades, 491 F.2d at 410; Carras v. Burns, 516 F.2d 251, 257 (4th Cir. 1975); Chelsea Associates v. Rapanos, 527 F.2d 1266, 1272 (6th Cir. 1975); Blackie v. Barrack, 524 F.2d 891, 905-908 (9th Cir. 1975), cert. denied, 429 U.S. 816, 97 S.Ct. 57, 50 L.Ed.2d 75 (1976). This Court agrees that in a nondisclosure case the defendants may defeat recovery by demonstrating that the plaintiffs’ decision as to the transaction would have been no different had the material facts been disclosed. Since the instant case is primarily one of nondisclosure, the plaintiffs have satisfied their burden of proving causation by showing the materiality of merger and acquisition negotiations and of financial data. The Court is completely satisfied with the inference that the plaintiffs would not have sold their 41.17% interest in the Corporation for $4,453.62 had they been aware that the Corporation was worth millions and that merger or acquisition was imminent. The defendants, however, in an attempt to disprove this inference, contend that the plaintiffs were disinterested in the Corporation’s merger or acquisition prospects and in its actual worth. The Court rejects this contention as unsupported by the evidence. The failure of the Estate representatives to more vigorously investigate the Corporation’s financial condition and prospects for acquisition and merger is attributable to their belief that they had been given all the material information necessary to form a judgment, rather than to disinterest. This belief was understandable in view of the fiduciary relationship which existed between the individual defendants and the Estate and the longstanding association grounded on mutual trust existing between Coffey and the individual defendants. Indeed, based on these relationships and the testimony of Coffey and Mrs. Holmes, the Court concludes that the plaintiffs established by positive proof of reliance a causal link between the Estate’s sale of said stock and Bronson’s negative remarks and the selective disclosure of the Corporation’s cash loss for 1969. See Janigan v. Taylor, 344 F.2d at 786. Accordingly, the element of causation is established by direct proof as well as inference. 2. SCIENTER Under the holding in Ernst & Ernst v. Hochfelder, supra, a defendant must possess scienter — the intent to deceive, defraud or manipulate — in order to be held liable under Rule 10 b-5. The evidence herein demonstrates a pattern of intentional deception on the part of the individual defendants. On October 28, 1969, in reference to Bronson’s contact with Combustion, Pickard accurately advised Bronson of the general obligation to disclose merger and acquisition negotiations, in language which clearly dictated disclosure of previous negotiations with Barry Wright and Science Management. Bronson informed Bateson of Pick-ard’s advice. Said previous negotiations, however, were not disclosed to the Estate representatives or even to Pickard. Moreover, memoranda passing between Bateson and Bronson discussing the worth of the Corporation, e. g., that of August 14, 1969, were marked “confidential” or bore the legend “keep under lock and key” and were kept in personal files. The nondisclosure of such items to the Estate was purposefully deceptive. On November 3, 1969, when the parties discussed the language to be employed in the final agreement, Bronson mentioned the prospects of merger in terms of future possibilities, totally concealing current negotiations at a time when it would have been most natural for one not intending to deceive to make a full disclosure. The record is replete with similar occasions which called for full disclosure; the calls went unheeded. Bateson and Bronson had actual knowledge of the true financial condition of the corporation and of all of the efforts made toward arranging a merger or acquisition. They kept this information from the Estate representatives so as not to disturb their misapprehension of the Corporation’s financial condition, especially its future ability to pay a substantial settlement to the Estate. 3. DUE CARE The defendants contend that the Estate representatives failed to exercise due care in not actively investigating the Corporation’s progress toward merger or acquisition and in inadequately analyzing the financial records available to them. According to the defendants, the plaintiffs are themselves responsible for any misapprehensions they may have had in respect to the Corporation’s financial prospects. The courts have employed different approaches in evaluating the conduct of plaintiffs in Rule 10 b-5 cases. See R. Wheeler, Plaintiff’s Duty of Care Under Rule 10 b-5: An Implied Defense to an Implied Remedy, 70 N.W.U.L.Rev. 561 (1975). The defendants urge this Court to apply the standard of due diligence articulated in Clement A. Evans & Co. v. McAlpine, 434 F.2d 100, 104 (5th Cir. 1970), cert. denied, 402 U.S. 988, 91 S.Ct. 1660, 29 L.Ed.2d 153 (1971). Treating “due diligence” as a distinct element of the plaintiff’s case, the Fifth Circuit announced in McAlpine a test which measures the plaintiff’s conduct against that of a reasonable investor with the attributes of the plaintiff. Under that test one who acts negligently is not entitled to relief under Rule 10 b-5. The Fifth Circuit, however, has recently relaxed its “due diligence” standard in response to the Supreme Court’s holding in Ernst & Ernst v. Hochfelder, supra, which precludes the imposition of Rule 10 b-5 liability on defendants who act negligently but without scienter. In Dupuy v. Dupuy, 551 F.2d 1005, 1020 (5th Cir. 1977), the Court reaffirmed its approach of treating due diligence as a separate element, but stated the test as being whether the plaintiff “intentionally refused to investigate ‘in disregard of a risk known to him or so obvious that he must be taken to have been aware of it, and so great as to make it highly probable that harm would follow’. W. Prosser, [Handbook of the Law of Torts] § 34 at 185 (1971)”. The Court explained by analogy that just as contributory negligence is not a defense in a tort action for intentional deceit, a due diligence standard framed in negligence terms is inapplicable in Rule 10 b-5 cases. Accord, Holdsworth v. Strong, 545 F.2d 687, 693 (10th Cir. 1976), cert. denied, 430 U.S. 955, 97 S.Ct. 1600, 51 L.Ed.2d 805 (1977). This conclusion is consistent with the fundamental purpose of the securities laws, articulated in S.E.C. v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186, 84 S.Ct. 275, 280, 11 L.Ed.2d 237 (1963), “to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry”. The First Circuit took a different approach in Rogen v. Ilikon Corp., supra, reversing a summary judgment entered for a defendant. In that case, decided prior to Affiliated Ute Citizens v. United States, supra, and Ernst & Ernst v. Hochfelder, supra, the Court linked the plaintiff’s diligence to causation in examining the plaintiff’s conduct to determine whether his reliance on misrepresentations was reasonable or justified. The instant plaintiffs have satisfied both the First Circuit’s test in Rogen v. Ilikon Corp., supra, and that of the Fifth Circuit recently announced in Dupuy v. Dupuy, supra. The plaintiffs relied on Bate-son and Bronson in lieu of conducting extensive investigations of their own, because of the long-standing, close professional and fiduciary relationships existing between the Estate representatives and the individual defendants. That reliance, reasonable under the circumstances, justified the level of care which the plaintiffs exercised. See Holdsworth v. Strong, 545 F.2d at 697; Straub v. Vaisman and Co., 540 F.2d 591, 598 (3d Cir. 1976). Additionally, many of the undisclosed material facts concerned negotiations with Barry Wright and Science Management not reflected on the Corporation’s books or were stated in confidential memoranda kept in the personal files of the individual defendants. The fact that the plaintiffs lacked effective access to information about the fraud undermines the defendants’ position. See, e. g., Rochez Brothers, Inc. v. Rhoades, 491 F.2d at 409-10. It is no answer to contend that the Estate representatives simply failed to ask the right questions. See Stier v. Smith, 473 F.2d 1205, 1208 (5th Cir. 1973). 4. LIABILITY OF THE CORPORATION, BATESON and BRONSON The Corporation negotiated with the Estate for the purchase of said stock through its agents Bateson and Bronson. Throughout the negotiation period Bateson was the Corporation’s President and one of its two Directors; Bronson was the Corporation’s Executive Vice-President and Treasurer and its other Director. Bound by the actions of Bateson and Bronson while transacting its business and being the actual purchaser of the Estate’s stock, the Corporation is directly liable to the plaintiffs. See Rochez Brothers, Inc. v. Rhoades, 527 F.2d 880, 884 (3d Cir. 1975), cert. denied, 425 U.S. 993, 96 S.Ct. 2205, 48 L.Ed.2d 817 (1976); SEC v. Lum’s Inc., 365 F.Supp. 1046, 1061 (S.D.N.Y.1973). Here the Court notes that its decision does not directly affect innocent and unaware public stockholders of the Corporation, since upon completion of the Estate transaction, Bateson and Bronson held 100% of the outstanding shares of stock. The fact that title to said stock subsequently passed from the individual defendants to Combustion does not relieve the Corporation of its liability to the plaintiffs. Combustion took said stock knowing the terms of the transaction with the Estate and subject to claims arising therefrom in accordance with its agreement with Bateson and Bronson. See Myzel v. Fields, 386 F.2d at 749. Acquisition is not an avenue of escape from liability for a firm subject to a Rule 10 b-5 claim. Though not purchasers of the Estate’s stock, Bateson and Bronson are nevertheless individually liable to the plaintiffs. As officers, directors and stockholders, the individual defendants dominated the Corporation generally and engineered this deception of the Estate. Accordingly, they are “controlling persons” within the meaning of § 20(a) of the Act, 15 U.S.C. § 78t(a), see Gould v. American-Hawaiian S. S. Co., 535 F.2d 761, 779 (3d Cir. 1976); Lanza v. Drexel & Co., 479 F.2d 1277, 1299 (2d Cir. 1973), and are jointly and severally liable to the plaintiffs for any damages resulting from the aforesaid violations of § 10(b) and Rule 10 b-5. 5. COMBUSTION LIABILITY The plaintiffs claim that Combustion “wilfully participated in a conspiracy” with or “aided and abetted” the other defendants in a violation of § 10(b) and Rule 10 b-5 making its liability equal to that of the other defendants. In order to sustain a claim under the theory of aiding and abetting, one must prove that a violation of the securities law occurred, that the defendant had knowledge of the violation and that the defendant knowingly rendered substantial assistance to the primary violators. See Landy v. Federal Deposit Ins. Corp., 486 F.2d 139, 162-63 (3d Cir. 1973), cert. denied, 416 U.S. 960, 94 S.Ct. 1979, 40 L.Ed.2d 312 (1974); Rolf v. Blyth Eastman Dillon & Co., 424 F.Supp. 1021, 1043 (S.D.N.Y.1977). A plaintiff can establish these elements by direct proof or by inference from parallel or complementary acts, prior relationships, common benefits, interchange of communications or other relevant factors. 2A Bromberg, Securities Law: Fraud § 8.5 at 581 (1973); Zabriskie v. Lewis, 507 F.2d 546, 554 (10th Cir. 1974). Bateson, Bronson and the Corporation violated Rule 10 b-5, which satisfies the first element. As to the second element, the direct proof established little more than Combustion’s awareness prior to January 6, 1970 that the Corporation was negotiating with an estate of a former partner to acquire its interest in the Corporation. This falls far short of the kind of knowledge which is the key to liability for aiding and abetting — a defendant’s knowledge of the violation and awareness of its role in the improper activity. See Woodward v. Metro Bank, 522 F.2d 84, 94-97 (5th Cir. 1975). Conceding the inadequacy of direct proof, the plaintiffs urge the Court to infer from all the circumstances that Combustion knew of and substantially assisted in the said improper activities. The record does not support these inferences. The Court has intentionally characterized the meetings between the individual defendants and Combustion, prior to January 6,1970, to the extent they dealt with acquisition, as “contacts” rather than “negotiations”. These contacts may have been heartening and serious to Bateson and Bronson who viewed them in light of their current negotiations with other companies and their knowledge of the Corporation’s attractiveness. On the other hand, the contacts were not so numerous, nor so formal that the Court will assume in the face of exclusively contrary testimony, that the conferees necessarily discussed the terms of the Estate transaction and the deceptions related thereto. In this instance the fact that Bronson had a prior relationship with Combustion militates against rather than in favor of an inference of culpable knowledge. It is entirely credible that Combustion and Bronson devoted most of their attention during their meetings in October, 1969, to the Great Lakes Carbon Corporation project on which they were collaborating. Through prior dealings, Combustion already knew, e. g., the nature of the Corporation’s services, its size and its reputation within its field. Combustion’s initial interest in exploring the possible acquisition of the Corporation need not have been the product of detailed negotiations which would have exposed said improper activity. Contrary to the plaintiffs’ assertion, Bronson’s telephone call on December 3, 1969, by which he advised Kiamie that the Corporation could begin discussions with Combustion the first week of January, did not reveal anything of the wrongdoing of Bateson and Bronson. The fact that Combustion cooperated with Bateson and Bronson in postponing acquisition negotiations until after January 6, 1970 may have reflected an innocent and understandable desire on Combustion’s part to avoid entanglement with the Estate settlement. Combustion may have merely acceded without motive to the wishes of Bronson who requested the postponement. Neither explanation gives rise to an inference that Combustion knew of the Rule 10 b-5 violation. In the absence of knowledge of a violation or a separate duty, Combustion was not under an obligation to become involved in the Estate transaction in order to protect the Estate. Finally, there was nothing in any of the information on the Corporation’s financial status which may have come to Combustion’s attention prior to January 6, 1970 which would have revealed the existence of said violation. There remain the plaintiffs’ contentions regarding what transpired after January 6, 1970. First, the plaintiffs assert that Combustion’s conditional offer to Bateson and Bronson made just one day following the closing of the Estate deal, indicates that more was afoot prior to January 6, 1970 than the testimony revealed. This position merits little discussion. Even if events after January 6,1970 led this Court to believe Combustion’s earlier interest in the Corporation was more serious than the testimony revealed, the record simply does not permit the further inference that Combustion had possessed knowledge of and intentionally assisted in the said violation. The plaintiffs’ second premise, that the familiarity with the terms of the Estate transaction, which Combustion gained after January 6, 1970, created an affirmative duty on Combustion’s part to insure fair treatment for the Estate, must likewise be rejected. The actual sale of said stock by the Estate occurred on January 6, 1970. Combustion could not have knowingly substantially assisted in that violation solely by its actions after that date. This Court is unaware of any authority for the proposition that Combustion should have investigated the transaction and encouraged the Corporation to rescind its agreement with the Estate. Indeed, this would seem to place unfairly upon Combustion a greater burden of investigation than that placed upon the Estate representatives themselves. See generally, Ruder, Multiple Defendants in Securities Law Fraud: Aiding and Abetting, Conspiracy, In Pari Delicto, Indemnification and Contribution, 120 U.Pa.L.Rev. 597, 633 (1972). Similarly, the plaintiffs have failed to establish a case of conspiracy against Combustion. Central to a conspiracy is the existence of a knowing agreement among co-conspirators, the purpose of which is the consummation of an illegal act. See Rochez Brothers, Inc. v. Rhoades, 527 F.2d at 889. No evidence was produced from which the Court could infer such an agreement between Combustion and the other defendants. 6. ESTOPPEL, LACHES, WAIVER AND RATIFICATION The defendants assert by way of affirmative defenses that the plaintiffs are barred from recovery in this action under the doctrines of estoppel, laches, waiver and ratification. The Court first addresses the is