Full opinion text
MEMORANDUM HIGGINS, District Judge. This is an action alleging fraud and other unlawful acts incident to the sale of securities in violation of federal securities laws, state blue-sky laws, the Racketeer Influence and Corrupt Organization Act (RICO), the Tennessee Consumer Protection Act (TCPA), and various theories of common law liability discussed in more detail below. Plaintiff Donald Nichols and 112 others filed their original complaint in this Court on May 30, 1986. The complaint names fourteen persons as defendants in this action. Those defendants which have filed motions presently under review are identified in the complaint as follows: Defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) is a broker-dealer and a Delaware corporation with its principal place of business in New York, New York. Pursuant to an agreement with the Sandestin Beach Hotel, Merrill Lynch acted as the exclusive selling agent for the sale of hotel interests to all investors. Merrill Lynch substantially participated in preparing the Private Placement Memorandum (PPM) and the sales presentations made to the plaintiffs to induce them to purchase hotel interests. Defendant Sandestin Beach Hotel (San-destin) is a Florida corporation with its principal business office in Destín, Florida. Sandestin was incorporated for the express purpose of developing the resort hotel that became the focus of the litigation. It was to be responsible for setting up the hotel on a condominium basis and for all aspects of the resort’s development, construction, and financing. Defendant Dominion Federal Savings & Loan Association (Dominion) is a savings and loan association with its principal place of business in Tysons Comer, Virginia. Before any plaintiffs had bought their hotel interests, Dominion, Sandestin and Merrill Lynch agreed that Dominion would lend to people seeking money to finance the purchase of their hotel interests. Defendant Laventhol & Horwath (Laven-thol) is a partnership of certified public accountants having its principal place of business in Tampa, Florida. Before either the sale of hotel interests to the plaintiffs or the preparation of the PPM, Sandestin or its affiliates retained Laventhol to prepare financial projections and a market study to determine whether it was feasible to build the hotel and finance it through the sale of hotel interests. Laventhol played a significant role in preparing the financial projections set forth in the PPM. Defendant Morton Olshan is a resident of New York. Since at least February 1983, he has been Vice President, a director and shareholder of Sandestin. The plaintiffs allege that Mr. Olshan owns more shares of Sandestin stock than any other shareholder. He provided funds to Sandes-tin to initiate the development of the hotel, thereby making it possible for Sandestin and its affiliates to proceed with the project. In addition to these defendants who have filed motions to dismiss, plaintiffs have filed a motion to dismiss the counterclaim of certain individual defendants. These defendants/counterplaintiffs are: 1. Frank L. Flautt, Jr., a resident of Memphis, Tennessee, and since at least February 1983, he has served as President, a director and shareholder of both Sandes-tin and Sandcastle. Mr. Flautt is alleged to be the individual chiefly responsible for developing the hotel, including formulating the financing plan, offering and selling hotel interests, and managing the entire development project. 2. William Jeffries Mann, a resident of Memphis, Tennessee. Since at least February 1983, he has been Vice President, a director and a shareholder of Sandestin. 3. Wilton D. Hill, a resident of Memphis, Tennessee. Since at least February 1983, he has been the Secretary/Treasurer, a director and a shareholder of Sandestin. 4. Fred V. Alias, a resident of Destín, Florida. Since at least February 1983, he has been a shareholder, an officer and a director of Sandcastle and Sandestin Beach Resort, Inc., both of which corporations are affiliated with Sandestin. 5. William Alias, Jr., a resident of Des-tín, Florida. Since at least February 1983, he has been a shareholder, an officer and a director of Sandcastle and Sandestin Beach Resort, Inc. 6. Robert Kamm, a resident of Memphis, Tennessee. Mr. Kamm is Vice President of Sandcastle and is also the Vice President of Financial for Flautt Properties, formerly Flautt and Mann Properties, a corporation controlled by defendant Frank Flautt and operated for the purpose of developing and managing real property. Disparate as these defendants are, they all had one thing in common. All were involved in some way in the development and promotion of a Gulf Coast resort in Destín, Florida. The resort was called the Sandestin Beach Hilton Hotel (the Hotel). The Hotel was to be a sizable affair, with fifteen stories and four hundred rooms. Like many such projects in recent years, it was planned to be a condominium complex. Each buyer acquired fee simple title to his own room and received an undivided interest in the resort’s common areas. The plaintiffs allege that they bought such interests in the Hotel in December 1984. The plaintiffs allege that they were induced to buy rooms by the defendants’ attractive Private Placement Memorandum, which described the resort and its potential in somewhat rosy terms. The PPM had three parts: (1) the “legal document,” a formal disclosure document that purports to contain the disclosures required by the securities laws; (2) a collection of exhibits to the legal document; and (3) a brochure containing photographs, drawings, and narrative descriptions of various aspects of the Hotel. The alleged deficiencies generally concern (1) statements about the position, orientation, and location of the Hotel on the beach and the view from each hotel room; (2) statements concerning the profits realized by the developers from the sale of hotel interests; (3) financial projections concerning the expected profitability of the Hotel; (4) the adequacy of the Hotel’s structural facilities; and (5) miscellaneous internal inconsistencies and inadequacies in the sales presentation materials. In addition to these specific inadequacies of the PPM, plaintiffs also allege oral misrepresentations made to them concerning the same subject matter. The Honorable Thomas Wiseman, Jr., United States District Judge for the Middle District of Tennessee, recused himself in this action on August 6, 1986. The action was then transferred to this Court and on March 12, 1987, this Court referred the following motions to the Honorable Kent Sandidge III, United States Magistrate: (1) motion (filed March 6, 1987) of defendant Morton Olshan to dismiss; (2) motion (filed March 6, 1987) of defendant Dominion to dismiss or alternatively for summary judgment; (3) motion (filed March 6, 1987) of defendant Michael D. Williams to dismiss; (4) motion (filed March 6, 1987) of defendant Laventhol to dismiss; (5) motion (filed March 6, 1987) of defendant Merrill Lynch to dismiss or alternatively for summary judgment; and (6) motion (filed March 6, 1987) of defendants Sandestin Beach Hotel, Inc., Sandcastle, Frank Flautt, Jr., William Jeffries Mann, Milton D. Hill, Fred V. Alias, William Alias and Robert Kamm for summary judgment. A hearing on the motions was held before the Magistrate on March 3, 1988. On July 1, 1988, the Magistrate filed his Report and Recommendation, in which he concluded that (1) all of the plaintiffs’ complaints against all defendants should be dismissed under Rule 12(b)(6), Fed.R.Civ.P., insofar as they were based on (a) Section 17(a) of the Securities Act of 1933, (b) the Tennessee Consumer Protection Act, and/or (c) RICO; (2) the complaint against Merrill Lynch for vicarious liability based on the conduct of Michael Williams should be dismissed; (3) the claims against defendant Morton Olshan for breach of contract and breach of warranty should be dismissed; (4) the defendants’ counterclaim against the plaintiffs should be dismissed; and (5) in all other respects, the motions to dismiss should be reserved pending ninety days of discovery and the filing of an amended complaint. So the matter stands now. This Court has jurisdiction over the controversy by virtue of 28 U.S.C. § 1331, 15 U.S.C. §§ 77v and 78aa, and 18 U.S.C. § 1964. The Court will consider the objections to the Magistrate’s Report seriatim. I. PRIVATE CAUSE OF ACTION UNDER § 17(a) The complaint alleges a violation of § 17(a) of the Securities Act of 1933. 15 U.S.C. § 77q(a). That section provides: It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly— 1) to employ any device, scheme, or artifice or defraud, or 2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or 3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. In his Report, the Magistrate recommended that all claims predicated on § 17(a) be dismissed on the ground that this section did not create a private cause of action for aggrieved purchasers of securities. This question is one that has been agitated for some time in the courts. The face of the statute is silent as to the existence of a private cause of action, and the circuit courts of appeal are divided on the question. The Second, Fourth, Seventh and Ninth Circuits have found that a private cause of action under § 17(a) does exist. Stephenson v. Calpine Conifers II, Ltd., 652 F.2d 808, 815 (9th Cir.1981); Kirshner v. U.S., 603 F.2d 234, 241 (2d Cir.1978); Daniel v. International Brotherhood of Teamsters, 561 F.2d 1223, 1244-46 (7th Cir.1977); Newman v. Prior, 518 F.2d 97, 99 (4th Cir.1975). On the other hand, the Fifth and Eighth Circuits have rejected arguments for a private cause. Landry v. All-American Assurance Co., 688 F.2d 381, 391 (5th Cir.1983); Shull v. Dain, Kalman & Quail, Inc., 561 F.2d 152, 159 (8th Cir.1977). The Sixth Circuit has, in the past, issued opinions that seemed to presume the existence of a private cause. E.g., Gutter v. Merrill Lynch, Pierce, Fenner & Smith, 644 F.2d 1194, 1196 (6th Cir.1981); Nickels v. Koehler Mgmt. Corp., 541 F.2d 611, 614 (6th Cir.1976). However, in a more recent case, the Sixth Circuit refused to decide the issue squarely in view of the inter-circuit conflict. Herm v. Stafford, 663 F.2d 669, 678 (6th Cir.1981). A decision in this district held against a private cause. Akers v. Bonifasi, 629 F.Supp. 1212, 1222 (M.D.Tenn.1984). The Supreme Court is aware of the running battle between the circuits on the question, but has apparently decided to sit back and enjoy it for awhile. On several occasions, it has refused to decide the issue. E.g., Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 304, 105 S.Ct. 2622, 2625, 86 L.Ed.2d 215 (1985); Herman & Maclean v. Huddleston, 459 U.S. 375, 378, 103 S.Ct. 683, 685, 74 L.Ed.2d 548 (1983); Int’l Brotherhood of Teamsters v. Daniel, 439 U.S. 551, 557, 99 S.Ct. 790, 795, 58 L.Ed.2d 808 (1979); Blue Chip Stamps v. Manor Drugstores, 421 U.S. 723, 733, 95 S.Ct.1917, 1924, 44 L.Ed.2d 539 (1975). Plaintiffs urge this Court to recognize a private cause under § 17(a) because a majority of the circuits that have considered the issue have held that such a private cause exists. That factor alone, however, cannot be decisive. Authorities must be weighed as well as counted, and the majority of the circuits recognizing a private cause under § 17(a) have done so after little or no analysis. The issue is also affected by one other consideration: it is not as easy for plaintiffs to claim an implied private cause of action as it used to be. That is the practical result of the Supreme Court’s decision in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), which laid down a four-part test for determining whether a statute has created an implied private action. The affected court must ask: First is the plaintiff “one of the class for whose special benefit the statute was enacted,” ... — that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? ... Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? ... And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law? Cort, 422 U.S. at 78, 95 S.Ct. at 2087 (cites omitted). It is significant that of the four circuits recognizing the private cause, none did so after considering the Cort test. The principal decision analyzing the Cort factors was the Fifth Circuit case of Landry v. All-American Assurance Co., supra. The Fifth Circuit believed that post-Cort decisions of the Supreme Court had imposed even more strict limits on the implication of private causes. In applying the modified Cort analysis, the Landry court found that the face of the statute does not indicate Congressional intent to establish a private cause. Further, the legislative history of the 1933 Act indicates that Congressional discussion of civil liability centered on §§ 11 and 12. Thus, in the Landry court’s view, the proposed private cause failed the first two points of the Cort test. As to the third (consistent with the Act’s underlying purpose), the court noted that the other sections of the 1933 Act require that “strict procedural requirements” be met before a private cause of action could be supported. To allow a private cause of action under § 17(a) without these procedural hurdles would “effectively frustrate the carefully laid framework of the Act.” The Landry court was of the opinion that the cause of action was not a part of the states’ traditional domain, but since that satisfied only one of the four tests of Cort (and that one the least important), the court concluded that no private cause existed under § 17(a). Given its implications for their position, it is not surprising that the present plaintiffs have plenty to say about Landry, not much of it good. Some of their criticisms are well founded. It does seem, for example, that the Landry court misunderstood the first prong of the Cort test. The key question of that prong is whether the plaintiffs are part of a class for whose “special benefit” the statute was enacted. The plaintiffs are purchasers of securities. If they are not members of the class the authors of the Securities Act of 1933 intended to protect, it is hard to imagine who would be. But instead of drawing the obvious conclusion, the Fifth Circuit went off on a tangent, examining the face of the statute in an apparent search for language which would not make sense if Congress had not intended a private cause. Such an inquiry is not relevant, let alone essential, to a determination of the threshold question. Indeed, the first prong of the Cort test will ordinarily be the easiest hurdle for a buyer of securities. With regard to the second prong, the Landry court was on much firmer ground. The provision of express causes in other sections of the Act makes the omission of such provisions in § 17(a) all the more glaring. The normal inference would be that Congress intended the other sections for private cause, leaving it to the SEC to enforce § 17(a). The weakness of the plaintiffs’ position on this question may be seen from the fact that they are reduced to an argument from Congressional inertia. Congress, we are told, “ratified” the private cause by refusing to amend the Act to reject any private cause under § 17(a) after some courts implied one. Relying on legislative inactivity to prove legislative intent is, at best, a risky business. Very often it literally amounts to making something out of nothing. This case does not appear to be one of the few exceptions. Since Congress did nothing while the lower federal courts divided on the issue, it seems more reasonable to believe that it was waiting to see how the Supreme Court would dispose of the question — just like the rest of us. The third Cort factor is the potential relation of the private cause to the statute’s underlying purpose. In some ways this is the trickiest prong for courts to consider, since it will almost always be possible for plaintiffs to argue that a private cause would further the purpose of the statute, at least in the sense of being consistent with it. Time-honored language about the “remedial purpose” of the statute militating against its strict construction often makes its appearance here. (Not surprisingly, the present plaintiffs urge both of these arguments upon this Court.) The Supreme Court’s post-Cori decisions, however, seem to require something more. Their sense is that it is not enough that a private cause be consistent with the underlying purpose of the statute in some general way. The cases seem to point to the conclusion that a private cause should be implied only if the statutory purpose would be frustrated without it. In the present context, this would involve an implicit finding that a regulatory scheme providing for SEC enforcement of § 17(a) combined with private remedies under other sections of the Act is patently inadequate. This Court cannot, with confidence, make such a finding. Rather, the Court is persuaded by these comments on the structure of the Act by a distinguished commentator: It is one thing to imply a private right of action under § 10(b) or the other provisions of the 1934 act, because the specific liabilities created by §§ 9(e), 16(b) and 18 do not cover all the variegated activities with which that act is concerned. But it is quite another thing to add an implied remedy under § 17(a) of the 1933 act to the detailed remedies specifically created by §§ 11 and 12. The 1933 act is a much narrower statute. It deals only with disclosure and fraud in the sale of securities. It has but two important substantive provisions, §§ 5 and 17(a). Noncompliance with § 5 results in civil liability under § 12(1). Faulty compliance results in liability under § 11. And § 17(a) has its counterpart in § 12(2). It all makes a rather neat pattern. Within the area of §§ 5 and 17(a), §§ 11 and 12 (unlike §§ 9(e), 16(b) and 18 of the 1934 act) are all-embracing. This is not to say that the remedies afforded by §§ 11 and 12 are complete. But the very restrictions contained in those sections and the differences between them — for example, the fact that § 11 but not § 12 imposes liability on certain persons connected with the issuer without regard to their participation in the offering and the fact that § 12(2) does not go so far in relation to § 17(a) as § 12(1) goes in relation to § 5 — make it seem the less justifiable to permit plaintiffs to circumvent the limitations of § 12 by resort to § 17(a). Particularly is this so in view of the fact that § 11, together with the statute of limitations in § 13, was actually tightened in the 1934 amendments to the Securities Act. 3 L. Loss, Securities Regulation 1785 (2d. ed. 1961). This Court agrees with the Fifth Circuit that the cause is not one “traditionally relegated to state law,” but in view of the analysis under the other Cort factors, that conclusion is of little practical consequence. Suffice it to say that this Court agrees with and adopts the Magistrate’s conclusion that there is no private cause of action under § 17(a) of the Securities Act of 1933. II. APPROPRIATE STATUTE OF LIMITATIONS FOR PLAINTIFFS’ § 10(b) CLAIMS Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) states: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange— (b) to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities Exchange] Commission may prescribe .... S.E.C. Rule 10b-5, promulgated by authority of this statute reads: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, (1) to employ any device, scheme, or artifice to defraud. (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (3) to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security. It has long been settled that an action under SEC Rule 10b-5 is available to private plaintiffs. E.g., Herman & Maclean v. Huddleston, 459 U.S. 375, 387, 103 S.Ct. 683, 690, 74 L.Ed.2d 548 (1983); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 196, 96 S.Ct. 1375, 1382, 47 L.Ed.2d 668 (1976); Kardon v. National Gypsum Co., 69 F.Supp. 512, 513 (E.D.Pa.1946). But since this cause of action is implied rather than expressly granted by the terms of the Act, no statute of limitations is specified for it in the Act or the Rule. In such circumstances, it is the practice of the federal courts to “borrow” the statute of limitations of the statute of the forum state most analogous to the federal law under which the action proceeds. E.g., Ernst & Ernst v. Hochfelder, supra, 425 U.S. at 210, 96 S.Ct. at 1389; Carothers v. Rice, 633 F.2d 7, 12 (6th Cir.1980). Over the years, the question of which state statute is “more analogous” has spawned much litigation. Usually it has come down to a choice between the forum state’s blue-sky law and the statute of limitations for common-law actions based on fraud or deceit. Plaintiffs tend to prefer the latter, since it is usually longer. Such is the situation in the present case. Tennessee’s statute of limitations for common-law fraud actions is three years. Tennessee’s blue-sky statute, on the other hand, provides that no action may be brought under it more than one year after the discovery of the alleged fraud, and in no event more than two years after the commission of the alleged fraud. Tenn. Code Ann. § 48-2-122(h). The parties have different theories about the nature and sequence of their dealings. The initial complaint was filed on May 30, 1986. According to the defendants, the “purchase” of the security occurs when a “binding commitment to undertake the transaction” is formed, regardless of the date of actual transfer. Defendants allege that the plaintiffs had all made such commitments, at the latest, by closing — September 6, 1983. The plaintiffs, however, insist that the securities were not “sold” for purposes of the statute until the deals were consummated in December, 1984. Obviously, if the defendants’ theory of the meaning of the word “sale” is correct, then the plaintiffs’ action would be time-barred under either of the two statutes of limitations in the Tennessee blue-sky laws. On the other hand, if the “sale” occurred at the moment of actual transfer in December, 1984, such claims as allege the “discovery” of fraud after May 30,1985, would survive, regardless of which statute of limitations was applied. Finally, if the proper limitations period for borrowing is the three-year statute of limitations for fraud, all of the plaintiffs’ claims survive even if the defendants’ version of the facts is accepted. The Magistrate concluded that the date of the statute of limitations began to run on the plaintiffs’ claims is an issue of fact and cannot be properly adjudicated on a motion to dismiss. However, since one of the competing theories as to the applicable statute has the potential for obviating any consideration of such matters, it would be well to consider that issue first. The best place to start is with a look at the Tennessee blue-sky law. The Tennessee Securities Act of 1980, Tenn.Code Ann. § 48-2-101 et seq., closely resembles the blue-sky laws of a number of other states. The anti-fraud section of the Act is Tenn.Code Ann. § 48-2-122, subsection (h), which states: “No action shall be maintained under this section unless commenced before the expiration of two (2) years after the act or transaction constituting the violation or the expiration of one (1) year after the discovery of the violation, or after such discovery should have been made by the exercise of reasonable diligence, whichever first expires.” The Magistrate remarks that the question of when the statute began to run is a question of fact and thus not susceptible to being resolved on a motion to dismiss. That is true, so far as it goes. It seems to this Court, however, that the dispositive issue here is really a mixed question of fact and law. If the defendants’ theory of the meaning of “sale” is correct, and this Court determines that the statute of limitations must be borrowed from the Tennessee blue-sky laws, then the plaintiffs’ claims must be dismissed as a matter of law, since no set of facts available to them would keep their actions from being time-barred. Therefore, the matter cannot be sidestepped. Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876 (2d Cir.1972), cited by the defendants, is not really on point because it is an insider trading case. In that situation, the important time to be considered is the time that illicit use was made of the forbidden information, and that will often have little to do with the actual date the security changed hands. However, there is a good deal of other authority supporting a broad interpretation of the word “sale” to include various kinds of agreements to sell. A contract for the transfer of stock is a “sale” for SEC Rule 10b-5 purposes, even if the actual transfer never takes place, or even if it is subject to specified conditions. Yoder v. Orthomolecular Nutrition Inst., 751 F.2d 555, 559 (2d Cir.1985); International Controls Corp. v. Vesco, 593 F.2d 166, 181 (2d. Cir.), cert. denied, 442 U.S. 941, 99 S.Ct. 2884, 61 L.Ed.2d 311 (1979). A pledge of stock “is equivalent to a sale for purposes of the antifraud provisions of the federal securities laws.” Marine Bank v. Weaver, 455 U.S. 551, 554, 102 S.Ct. 1220, 1222, 71 L.Ed. 2d 409 (1982). In short, there is at least a possibility that in the present case a “sale” of securities occurred before December 1984. But the key word here is “possibility.” In spite of all this, the Magistrate’s practical conclusion was correct. This Court cannot determine from the pleadings whether such “agreements” as existed before closing were contracts to sell, and thus “sales” within the meaning of Rule 10b-5. That is an issue for trial. This Court therefore adopts the Magistrate’s conclusion and will deny the motions to dismiss on this issue. But since the matter cannot be finally resolved until the proper statute of limitations is selected, and that issue has been placed before the Court, it is expedient to decide it without further delay. The Sixth Circuit has not yet spoken to the issue of which Tennessee statute of limitations should be borrowed for SEC Rule 10b-5 purposes, but the federal district courts of the State of Tennessee are split. In Media General, Inc. v. Tanner, 625 F.Supp. 237 (W.D.Tenn.1985), it was held that the most analogous limitation was that governing actions for fraud. The Media General court was influenced by the similarity of the elements of proof between a Tennessee common-law fraud claim and a SEC Rule 10b-5 claim, and also by the policy consideration that where two or more state law remedies more or less resemble SEC Rule 10b-5, courts should borrow the longer limitations period in order to effect the remedial purpose of the federal securities laws. 625 F.Supp. at 246-47. Decisions to the contrary have been rendered in the other two federal districts of this state. A recent decision in this district criticized Media General, noting that the wording of SEC Rule 10b-5 and the corresponding section of the Tennessee blue-sky law, Tenn.Code Ann. § 48-2-121(a) is virtually the same, a circumstance which in Judge Nixon’s view outweighed the similarities in the proof between SEC Rule 10b-5 and a fraud action. He therefore held that the appropriate limitations period was that of Tenn.Code Ann. § 48-2-122(h), which allows actions within two years of the “transaction constituting the violation” or one year after the discovery of the violation, whichever comes first. Ockerman v. May Zima Co., 694 F.Supp. 414, 416 (M.D.Tenn.1988). In an unreported decision in the remaining district of Tennessee, the court reached the same conclusion. Haney v. Dean Witter Reynolds, Inc., No. CIV-1-85-531 (E.D.Tenn. August 20, 1986) [available on Westlaw, 1986 WL 21340]. A survey of federal court decisions in states with blue-sky statutes comparable to Tennessee’s reveals that the great weight of authority favors the position taken by the Ockerman court. Among the pertinent circuit courts, only the Fifth Circuit has taken Media General’s position. McNeal v. Paine, Webber, Jackson, Curtis, Inc., 598 F.2d 888 (5th Cir.1979) (Georgia law). Two district courts in Georgia have done the same — Friedlander v. Troutman, Sanders, Lockerman, & Ashmore, 595 F.Supp. 1442 (N.D.Ga.1984); In re North American Acceptance Corp., 513 F.Supp. 608 (N.D.Ga.1981) — but their decisions became dead letters when the Eleventh Circuit reversed Friedlander. 788 F.2d 1500 (11 Cir.1986). A handful of other district courts have applied the statute of limitations for common-law fraud. Upton v. Trinidad Petroleum Corp., 468 F.Supp. 330 (N.D.Ala.1979); First Federal Savings & Loan Ass’n. of Miami v. Mortgage Corp. of the South, 467 F.Supp. 943 (N.D.Ala.1979); Felts v. Nat’l. Account Systems Ass’n., Inc., 469 F.Supp. 54 (N.D.Miss. 1978). The Fifth Circuit has since modified its position, essentially limiting McNeal, supra, to its facts and ruling that, under Alabama’s statutory scheme, the limitations period should be taken from the blue-sky statute. White v. Sanders, 650 F.2d 627 (5th Cir.1981) (Alabama law). The result in other circuits has been the same. Gurley v. Documation, Inc., 674 F.2d 253 (4th Cir.1982) (Virginia law); Morris v. Stifel, Nicolaus & Co., Inc., 600 F.2d 139 (8th Cir.1979). Fifteen decisions of the district courts in the pertinent states have adhered to the doctrines of Ockerman and Haney. To list them all would take more space than is necessary to make the point. Nevertheless, the Court is not at liberty to decide the issue on a mere head-count of participating judges. Tennessee is a Sixth Circuit state, and it appears that that circuit has developed a distinctive approach to the question, one closer to Media General than to Ockerman. While the Magistrate is surely right in pronouncing uniformity within a given district an important consideration, it is at least as important that district courts adhere to the doctrines most consistent with the rules and policies of the circuit above them. Of the states listed as having “comparable” statutes, only Kentucky is in the Sixth Circuit. The Kentucky statutes have given rise to two important cases about the borrowing of statutes of limitations. Carothers v. Rice, 633 F.2d 7 (6th Cir.1980) involved alleged fraudulent misrepresentations during a tender offer. The court held that the limitations period of the Kentucky blue-sky statute rather than that for common-law fraud was applicable to a SEC Rule 10b-5 action on the claim. But it did so for an interesting reason: [T]he broad remedial purposes of the federal securities laws are best served by longer, not shorter, statute [sic] of limitations ... But the reason for using the longer statute of limitations for a federal securities claim is to give the person with a federal claim at least as long an opportunity to sue as a person with a state claim ... The Kentucky Supreme Court has held that its blue-sky law is the exclusive remedy for fraud in the sale of securities. [City of Owensboro v. First U.S. Corp., 534 S.W.2d 789, 791 (Ky.1975)] The strict requirements of misrepresentation have been relaxed and the price exacted is a shortened statute of limitations ... A plaintiff is also relieved from proving all the elements of misrepresentation with his rule 10b-5 action; thus, it is reasonable to apply the shortened statute of limitations, (cites omitted; emphasis added) Carothers, 633 F.2d at 14-15. The clear implication of this language is that had it not been for the construction given the blue-sky law by the Kentucky court, the statute of limitations governing common-law fraud would have been applied. The Carothers doctrine was again followed by the Sixth Circuit in Herm v. Stafford, 663 F.2d 669, 678 (6th Cir.1981). There is no Tennessee case holding that the Tennessee Securities Act of 1980 is the exclusive remedy for defrauded buyers of securities in the state. Therefore, under existing law the only way to guarantee that a federal plaintiff enjoys the same procedural advantage as a state plaintiff with the same cause is to apply the longer statute of limitations. Accordingly, the Court finds that in an SEC Rule 10b-5 action, federal courts in this state should borrow the three-year statute of limitations governing actions for common-law fraud. It follows that the plaintiffs’ SEC Rule 10b-5 claims are not time-barred and therefore the defendants’ motions to dismiss must be denied. III. PLAINTIFFS’ CLAIMS UNDER SECTION 12(2) OF THE 1933 ACT Defendants argue that the plaintiffs’ § 12(2) claims are time-barred by the operation of the 1933 Act’s statute of limitations, which forbids any action unless brought within one year of the facts supporting the cause or within three years of the cause occurring. The Magistrate correctly determined that the date of occurrence in the present case, and consequently the date the statute began to run, is a question of fact which cannot be determined from the pleadings. Therefore, the motion to dismiss will be denied. IV. APPLICABILITY OF THE TENNESSEE CONSUMER PROTECTION ACT The plaintiffs allege that by engaging in unfair and deceptive acts or practices in the marketing and sale of securities, the defendants violated the Tennessee Consumer Protection Act (TCPA), Tenn.Code Ann. § 47-18-101 et seq. The defendants’ position is that the Act does not apply to the sale of securities. Whether the TCPA applies to such transactions is a question of first impression in the state. In the absence of any Tennessee precedents, it falls to the Court to make an “Erie -guess” as to the possible decision of the Tennessee Supreme Court were the matter to come before it. In the present case, the Magistrate has made a thorough study of the factors affecting this decision, including the intent of the Tennessee legislature in passing the law, the impact of the federal scheme of securities regulation, and cases construing comparable statutes in Tennessee’s sister states. After painstaking consideration, the Magistrate concluded that the Tennessee Supreme Court, if it were confronted with the issue, would hold that the TCPA does not apply to the marketing and sale of securities. The Court agrees. The TCPA was enacted in 1977 to protect “consumers and legitimate business enterprises from unfair or deceptive acts or practices in the conduct of any trade or commerce in part or wholly within the state_” Tenn.Code Ann. § 47-18-102(2). The statute, by its terms, is silent about securities; nothing about them appears in the catalogue of offenses in § 47-18-104(b). That, however, does not end the inquiry, for the enumeration of specific unlawful acts was plainly not understood to be exhaustive. That can be seen by referring to § 47-18-104(b)(21), which extends the coverage of the Act to those “[e]ngaging in any other act or practice which is deceptive to the consumer....” Thus, it becomes a question of whether this “Mother Hubbard” clause suffices to bring securities transactions within the ambit of the Act. The Magistrate found the answer in another section of the Act, § 47-18-115, which states: 47-18-115. Construction. — This part, being deemed remedial legislation necessary for the protection of the consumers of the state of Tennessee and elsewhere, shall be construed to effectuate the purposes and intent thereof. It is the intent of the general assembly that this part shall be interpreted and construed consistently with the interpretations given by the federal trade commission and the federal courts pursuant to § 5(A)(1) of the Federal Trade Commission Act (15 U.S.C. § 45(a)(1)). [Acts 1977, ch. 438, § 16.] The Magistrate noted that no federal court has ever held that the pertinent section of the Federal Trade Commission Act (FTCA) applies to securities transactions, and that there is substantial authority to the contrary. The Magistrate further noted that the overwhelming weight of state court authority favors the view that state consumer protection laws do not apply to securities transactions, and found additional support for his conclusion in the fact that securities are already intensely regulated under the federal securities laws and the Tennessee blue-sky laws. The discussion of the issues and authorities in the Magistrate’s Report is superb. It would improve nothing for the Court to replicate or paraphrase his treatment in the present memorandum. The Court prefers to adopt this portion of his Report in toto, and will add separate comments only to the extent necessary to address specific objections to the Report raised by the Attorney General and adopted by the plaintiffs. The Attorney General argues that the Magistrate gave insufficient attention to the recent Tennessee case of Skinner v. Steele, 730 S.W.2d 335 (Tenn.App.1987) perm, to appl. denied, which is alleged to have rejected reasoning of the type that the Magistrate relied upon. Skinner was a suit under the TCPA alleging fraud in the sale of an annuity certificate by an insurance company. Among the defenses to the action was the assertion that such transactions were governed by the Tennessee Insurance Law, Tenn.Code Ann. §§ 56-2-203, et seq., and that they were therefore specifically excluded from the purview of the TCPA by virtue of § 47-18-111(a) which exempts from that Act any [a]cts or transactions required or specifically authorized under the laws administered by, or rules and regulations promulgated by, any regulatory bodies ... acting under the authority of this state or of the United States. The court rejected these arguments, holding firmly that the TCPA applies to insurance transactions in spite of the existence of a separate regulatory scheme for the insurance industry. The statutory exemption for “transactions specifically authorized” by the insurance code was explained thus: The purpose of the exemption is to insure that a business is not subjected to a lawsuit under the Act when it does something required by law, or does something that would otherwise be a violation of the Act, but which is allowed under other statutes or regulations. It is intended to avoid conflict between laws, not to exclude from the Act’s coverage every activity that is authorized or regulated by another statute or agency. Skinner, 730 S.W.2d at 337. The court further found that the Insurance Code, by its own terms, does not purport to provide an exclusive remedy. The State of Tennessee, by the amicus brief of the Attorney General, contends that by the same token, the existence of parallel regulatory schemes (whether state or federal) does not preclude the application of the TCPA to transactions in securities. This Court is unpersuaded. The state’s argument proceeds from the tacit premise that the insurance industry and the securities trade are alike enough to justify using very similar regulatory approaches. Where state precedent is sparse, analogy can be necessary, but the user must beware. A maladroit analogy can send the law spinning off in the wrong direction. The present case underscores this point. The Magistrate below was aware of several insurance-related cases in apparent conflict with the result he reached, but he did not discuss the analogy to insurance law at any great length. He remarked in a footnote that “securities transactions are wholly different animal[s] from insurance transaction^].” The Court believes he was right, but because the state is urging the issue strongly on appeal, it is expedient to take a closer look at these “animals” to determine the proper place of each in the legal bestiary. As always, it is useful to consider the experience of other states. The experience of one particular state is especially helpful in that the insurance-securities-consumer protection problem has been thrashed out more thoroughly there than anywhere else. The state in question is Massachusetts. The Massachusetts’ statute for the Regulation of Business Practices for Consumers’ Protection, Mass.Gen.Laws Ann. ch. 93A (1972) differs from the TCPA in certain respects, but is similar with regard to the features affecting this litigation. Like the TCPA, its definitions establish a very broad coverage of affected practices. “Trade” or “commerce” is defined to include “offering for sale ... any property, tangible or intangible ... and any other article, commodity, or thing of value_” Mass.Gen.Laws Ann. ch. 93A § 1(b). Compare this to the TCPA’s definition of “consumer,” to which the Skinner court attached great significance: “any natural person who ... acquires by purchase ... any ... property, tangible or intangible ... [or] any other article, commodity, or thing of value....” Tenn.Code Ann. § 47-18-103(1). Cf. Skinner v. Steele, supra, 730 S.W.2d at 336-37. The Massachusetts Act, like the TCPA, is to be applied according to pertinent federal constructions of the FTCA and concomitant FTC regulations. Mass.Gen.Laws Ann. ch. 93A § 2. Moreover, the Massachusetts Act has a provision (substantially the same as that of the TCPA) exempting “transactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under statutory authority of the commonwealth of the United States.” Id., 63. In 1977, the Supreme Judicial Court of Massachusetts confronted the issue of whether the state’s Deceptive Trade Practices Act applied to the insurance industry. On that occasion it held decisively that the statute did apply, despite the existence of a separate statutory scheme for the regulation of insurance. The court was of the opinion that “[t]he mere existence of one regulatory statute does not affect the applicability of a broader, nonconflicting statute, particularly when both statutes provide for concurrent coverage of their common subject matter.” Dodd v. Commercial Union Ins. Co., 373 Mass. 72, 365 N.E.2d 802, 804-05 (1977). It was later held that wrongs committed by insurance companies can result in “loss of property” as contemplated by the statute. DiMarzo v. American Mutual Ins. Co., 389 Mass. 85, 449 N.E.2d 1189, 1196 (1983). A relatively early and unnoticed federal decision held that the Massachusetts Act did not apply to transactions in securities because the FTCA did not. Palace v. Merrill Lynch, Pierce, Fenner & Smith, No. 80-1831-T, Fed.Sec.L.Rep. (CCH) ¶ 99, 629 (D.Mass.1981) [1981 WL 1411]. But in 1983 a federal court in Massachusetts was confronted with the argument that Palace had been wrongly decided, since the reasoning underlying it was inconsistent with Dodd, and certain other Massachusetts state court decisions applying Chapter 93A (the consumer protection statute) to transactions not regulated under the FTCA. Cf. Dodd, supra, and Raymer v. Bay State Nat’l. Bank, 384 Mass. 310, 424 N.E.2d 515, 521 (1981) (Ch. 93A applies to banking business). The court, however, was unconvinced and left Palace intact. It explained: Dodd and Raymer applied Chapter 93A to insurance and banking, areas in which the states have long played a primary role in regulation. Plaintiffs’ prof-erred application of Chapter 93A to securities transactions presents a very different question. At least since 1933, Federal law has largely superseded state regulation of securities transactions, [cite omitted] This distinction causes the court to conclude that, if faced with the precise question, the Supreme Judicial Court would not extend the coverage of Chapter 93A to securities transactions. Conkling v. Moseley, Hallgarten, Estabrook & Weeden, 575 F.Supp. 760, 761 (D.Mass.1983). The Conkling court also noted that the McCarran-Ferguson Act specifically left the regulation of insurance to the states. Conkling, 575 F.Supp. at 762, quoting 15 U.S.C. § 1012(b) (1976). In the ensuing years, the issue divided district courts in Massachusetts. One judge found Conkling persuasive and followed it. Sweeney v. Keystone Provident Life Ins. Co., 578 F.Supp. 31, 35 (D.Mass.1983). But others were not so sure. A line of cases arose holding that the Massachusetts General Court had intended the FTC clause in Chapter 93A to be a mere “guide,” and that it did not effectively limit the coverage of the statute. Hickey v. Howard, 598 F.Supp. 1105, 1106 (D.Mass.1984). See also Sullivan v. Dean Witter Reynolds, Inc., No. 82-3300, slip op. (D.Mass.1983); Mitchelson v. Aviation Stimulation Technology, Inc., 582 F.Supp. 1, 2 (D.Mass.1983); Kennedy v. Josephtal & Co., No. 82-913, slip op. (D.Mass.1982). During all this time, the Supreme Judicial Court of Massachusetts was not heard from. At length the question was presented to the United States courts yet again, whereupon the presiding district judge certified the question to the Supreme Judicial Court according to the prescribed state rule. The precise question certified was: “Does Chapter 93A of the Massachusetts General Laws apply to conduct alleged to violate Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder?” In effect, the Supreme Judicial Court was invited to decide between the Conkling doctrine and the Kennedy/Hickey approach. The court accepted the question and came down firmly on the side of Conkling. Cabot Corp. v. Baddour, 394 Mass. 720, 477 N.E.2d 399 (1985). Chief Justice Hennessey, writing for a unanimous panel, stated: “We do not agree that Dodd and Raymer provide precedent for extending the reach of C.93A to the securities field.” Cabot, 477 N.E.2d at 400. He went on to quote, with strong approval, Conkling’s language about the preeminence of federal law in the field of securities regulation, and the corresponding limits on the prerogatives of the states. The Cabot court found additional support for the result from an examination of the state blue-sky law, passed almost simultaneously with Chapter 93A. While these considerations are not germane to the litigation before this Court, the language of Cabot indicates that the federal predominance described above would have been sufficient, standing alone, to dictate the result. It should hardly be necessary to say that the Tennessee Supreme Court is not bound by the decisions of the courts of any sister state. It can place Tennessee in a minority of one if it wishes. The point is that neither Skinner nor any other case binding on the Tennessee courts compels such a result. As for this Court, it is of the opinion that, were the Tennessee Supreme Court to confront this issue, it is far more likely than not that Tennessee would follow the great weight of authority in finding that such statutes “are generally held not to apply to securities.” L. Loss, Fundamentals of Securities Regulation 799 (1986 Supp. to 1983 ed.) In short, there was no error in this portion of the Magistrate’s Report. V. RICO ALLEGATIONS Section 1964(c) of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964(c), provides a private right of action for plaintiffs injured in their business by reason of a violation of the Act’s substantive provisions (or “predicate acts,” as they are generally called). In order to make out a valid RICO complaint, the plaintiff must allege that the defendant engaged in (1) conduct (2) of an enterprise (3) through a pattern of (4) racketeering activity. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985). “Racketeering activity” can consist of any of the offenses enumerated in the other sections of the Act, one of which is fraud in the sale of securities. The complaint alleges that each “tainted” sale of resort interests to each of the 366 plaintiffs constituted a separate predicate act, and that taken in the aggregate, they amounted to a “pattern of racketeering activity.” In the well-known Sedima decision, the Supreme Court complained of “the failure of Congress and the courts to develop a meaningful concept of ‘pattern.’ ” Sedima, 473 U.S. at 500, 105 S.Ct. at 3287. Complaints like the one in the present case seem to embody the problem the Court had in mind. The Magistrate’s Report, after an excellent discussion of the issues and authorities involved, concluded that if a pattern consists of “continuity plus relationship” (as suggested by the Senate Judiciary Committee before RICO’s adoption), the derelictions alleged in the present case do not meet the test. The Court finds that it cannot improve on the Magistrate’s analysis. Accordingly, the Court adopts his recommendation. The RICO counts will therefore be dismissed. VI. RESPONDEAT SUPERIOR (WILLIAMS) Inasmuch as Michael Williams has been dismissed from this action, no claim for vicarious liability based on his actions can survive his departure. Both parties admitted as much at oral argument before the Magistrate, who therefore recommended that all such claims be dismissed. The Court adopts this recommendation. Accordingly, the claims concerning Michael Williams will be dismissed. VII. RESPONDEAT SUPERIOR (SANDESTIN AND SANDCASTLE) Plaintiffs have alleged that defendant Merrill Lynch is vicariously liable for alleged illegal acts of Sandestin and Sandcastle. Merrill Lynch argues that the pleadings do not allege an employer/employee relationship between it and its two supposed agents, or that they were acting within the scope of any employment. This is a puzzling objection. The comprehensive amended complaint clearly charges that [pjursuant to the doctrine of respondeat superior, Merrill Lynch is liable for the unlawful acts of its agents, representatives, and affiliates including ... [San-destin and] Sandcastle.... Plaintiffs amended complaint, ¶ 3.2(4). While this Court has some considerable nostalgia for common-law pleading, the complaint suffices to put Merrill Lynch on notice as to the nature of the claim, and under the Federal Rules that is all that is necessary. The Magistrate properly recommended that the motion to dismiss be denied. The Court agrees. VIII.LIABILITY OF MERRILL LYNCH FOR ACTUAL CONSTRUCTION OF HOTEL & TOWNHOUSES Merrill Lynch argues that all claims for liability against it based on the actual construction of the hotel and townhouses should be dismissed because it took no part in that construction. The Court agrees with the Magistrate that these claims involve issues of fact not suitable for resolution on a motion to dismiss. Therefore the motion to dismiss these claims will be denied. IX.SUFFICIENCY OF PLEADINGS AGAINST DEFENDANT MORTON OLSHAN All that has been said about the applicability of § 17(a) of the 1933 Act, the RICO Act and the TCPA applies equally to the claim against Morton Olshan under these statutes. For the reasons discussed above, they will be dismissed. The plaintiffs, on appeal, have confessed that Count V, alleging breach of contract and breach of warranty, does not state a claim against Morton Olshan. The Magistrate recommended that the count be dismissed, and the Court agrees. The complaint alleges breach of fiduciary duties stemming from the erection of the resort buildings in an unsuitable location. As the Magistrate points out, the question of whether a fiduciary relationship exists between Morton Olshan and the plaintiffs is governed by Tennessee law, and the parties have not briefed the issue with appropriate references to Tennessee authority. Therefore, the Court will reserve judgment on these motions until the parties have submitted appropriate supplemental briefs. The Magistrate rejected Morton Olshan’s argument that the complaint did not plead common-law fraud and fraud for SEC Rule 10b-5 purposes with sufficient particularity under Rule 9(b), Fed.R.Civ.P. He also held that disputed factual questions made it inappropriate to dismiss the plaintiffs’ claim that Morton Olshan was liable as a “controlling person.” Finally, he held that the plaintiffs had stated a claim for aiding and abetting, and for “seller’s liability” under § 12(2) of the 1933 Act. After reviewing the Report and the objections thereto, the Court finds that the Magistrate was correct and that nothing need be added to his discussion of these issues. X. CLAIMS AGAINST DEFENDANT LAVENTHOL TO DISMISS For the reasons discussed above, the Court adopts the Magistrate’s recommendation to dismiss so much of the plaintiffs’ complaint against Laventhol as is predicated upon § 17(a) of the 1933 Act, the RICO Act, or the TCPA. The gravamen of the SEC Rule 10b-5 claim against Laventhol is that, in preparing estimates of future rental income for the PPM, these defendants relied upon assumed inflation rates that were much higher than the actual rate of inflation turned out to be. The Magistrate noted at the outset that the complaint fails to allege scienter, a necessary element of a SEC Rule 10b-5 action. Indeed, it is by no means clear how Laventhol could have had scienter, since it was predicting a future event. The complaint makes sense only on the premise that the accountants should have known that reliance on the high inflation projections was unreasonable. Thus, the complaint in substance is one for negligence. In any case, the PPM clearly states that [t]he projected inflated average room rates could be materially different if significantly higher or lower rates of inflation are actually experienced. Since the actual rates of inflation cannot be predicted with any degree of certainty, no assurance is given that the projected average room rates will not vary materially from those shown above, (emphasis added) PPM, I-3. For anyone who can read, this seems a clear warning that the forecast of rental income was highly speculative and in some measure contingent upon uncontrollable future events. To say nothing more, it certainly “bespeaks caution” in the language of the leading case of Luce v. Edelstein, 802 F.2d 49, 56 (2d. Cir.1986), and this is enough to insulate defendant Laventhol from liability. The Court agrees with the Magistrate that the complaint, as pleaded, fails to state a SEC Rule 10b-5 claim against Laventhol, but also agrees that the ruling on the motion to dismiss should be reserved until the plaintiffs have had the benefit of additional discovery and leave to amend. The reasons for this will be discussed below. The complaint also charges Laventhol with “controlling person” liability under § 15 of the 1933 Act (15 U.S.C. § 77o), which states: Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under section 11 or 12, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person had no knowledge of or reasonable grounds to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist. The Magistrate found that the complaint alleged only that the accountants were employed to make financial projections, market studies, and feasibility reports, and that this fell far short of the “actual participation” required to state a claim for “controlling person” liability. Having reviewed the Report and objections, the Court agrees with the Magistrate. The Court also agrees with the Magistrate's conclusion that the plaintiffs have failed to state a claim for aiding and abetting against Laventhol. But a finding that several of the claims, in their' present forms, are maladroitly pleaded is not the end of the matter. It is necessary to decide whether to grant leave to amend. In considering this question, the Court must keep its eye on the well-known policy of the Federal Rules that leave to amend will be liberally granted where such would serve the ends of justice. Under Rule 9(b), dismissal without granting leave to amend is ordinarily improper “unless it appears beyond doubt that plaintiff can prove no set of facts ... that would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). As the Magistrate observed, this is not such a case. True, the Comprehensive Amendment Complaint is the plaintiffs’ fifth attempt to state their claims. It is tempting to invoke the ancient common law maxim “enough is enough” and hold that six bites at the apple would be too many. However, as the Magistrate points out, the plaintiffs were presumably unaware of the nature of the deficiency of their pleadings. Patience is therefore the order of the day. The Magistrate’s solution — reservation of a ruling on all the surviving claims pending completion of ninety days of discovery and amendment of the complaint — is reasonable, and will be adopted. The Court also agrees that until the remaining federal claims are disposed of, any action on motions relating to pendent state claims would be premature. XI. CLAIMS AS TO DEFENDANT DOMINION As with the other defendants, the Magistrate recommended that all claims against Dominion based on § 17(a) of the 1933 Act, the RICO Act, and the Tennessee Consumer Protection Act be dismissed. For the reasons discussed supra, the Court agrees. The complaint also alleges that Dominion Federal is liable as a principal under SEC Rule 10b-5, as a “controlling person,” and as an aider and abetter. The Magistrate found that the facts alleged were insufficient to state a claim against Dominion. After reviewing the Report and the objections, the Court finds that the Magistrate is correct, and that nothing need be added to his discussion of the issues. As with Laventhol, the Magistrate recommended that the plaintiffs be granted leave to amend and that a ruling on the motions to dismiss the securities claims be reserved pending additional discovery and the filing of the new complaint. It will be so ordered. As with Laventhol, the Court will not address any pendent state claims until the picture regarding the federal claims becomes clearer. XII. DEFENDANTS’ COUNTERCLAIM Several defendants filed a counterclaim charging that the plaintiffs have tortiously interfered with their prospective business advantages by filing a groundless civil action (i.e., the present one). As the Magistrate noted, it is not certain whether, or under what conditions, Tennessee recognizes this tort. However, it is not necessary to decide these issues, since the Magistrate is sure