MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
    - and -
REED R. KATHREIN (139304)
DAVID R. STICKNEY (188574)
CHRISTOPHER P. SEEFER (201197)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545

BARRACK, RODOS & BACINE
EDWARD M. GERGOSIAN (105679)
MATTHEW P. MONTGOMERY (180196)
600 West Broadway, Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800

KIRBY, McINERNEY & SQUIRE, LLP
JEFFREY H. SQUIRE
PAMELA E. KULSRUD
830 Third Avenue,
10th Floor
New York, NY 10022
Telephone: 212/317-2300

Co-Lead Counsel for Plaintiffs
 
 

 
 
 
 

RICHARD A. BADER, et al., On Behalf of  Themselves and As Court Appointed Lead  Plaintiffs On Behalf of All Others Similarly  Situated,                     Plaintiffs,     vs.   ELECTRONICS FOR IMAGING, INC., et al.,                       Defendants. ______________________________________

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. C-97-4739-CAL CLASS ACTION PLAINTIFFS' NOTICE OF MOTION AND MOTION TO DISMISS DEFENDANTS'  COUNTERCLAIM FOR DECLARATORY RELIEF AND MOTION FOR VOLUNTARY DISMISSAL PURSUANT TO RULE 41(a)(2); SUPPORTING MEMORANDUM OF POINTS AND  AUTHORITIES DATE: September 24, 1999 TIME: 9:30 a.m. COURTROOM: Hon. Charles A. Legge

 
 
 
 

I. INTRODUCTION

II. PROCEDURAL HISTORY

III. VOLUNTARY DISMISSAL PURSUANT TO RULE 41(a)(2) IS APPROPRIATE

A. Defendants EFII, Avida And Saltzman Will Suffer No Prejudice If This Action, Which Is At Its Earliest Stage, Is Dismissed

B. Defendants' Counterclaim Cannot Prevent Dismissal

C. The Class Will Not Be Prejudiced By Dismissal

D. Notice To The Class Is Neither Necessary Nor Required

A. The Counterclaim Would Require This Court To Make Needless Decisions Of State Law

B. The Counterclaim Constitutes Forum Shopping

C. The Issues Raised By The Counterclaim Are Duplicative Of Those Already Decided By The State Court

D. The Declaratory Relief Defendants Seek Would Serve No Useful Purpose

American Nat'l Fire Ins. Co. v. Hungerford,
    53 F.3d 1012 (9th Cir. 1995)

Anderberg v. Masonite Corp.,
    176 F.R.D. 682 (N.D. Ga. 1997)

Austin v. Pennsylvania Dep't of Corrections,
    876 F. Supp. 1437 (E.D. Pa. 1995)

Blanchard v. Edgemark Fin. Corp.,
    175 F.R.D. 293 (N.D. Ill. 1997)

Blue Dane Simmental Corp. v. American Simmental Ass'n,
    952 F. Supp 1399 (D. Neb. 1997), aff'd, No. 98-1557,
    1999 U.S. Dist. LEXIS 11242 (8th Cir. Feb. 10, 1999)

Brillhart v. Excess Ins. Co.,
    316 U.S. 491 (1942)

Bunger v. Hartman,
    851 F. Supp. 461 (S.D. Fla. 1994)

City of Chicago v. Int'l College of Surgeons,
    522 U.S. 156 (1997)

Continental Cas. Co. v. Robsac Indus.,
    947 F.2d 1367 (9th Cir. 1991)

Culverhouse v. Biehl & Co.,
    24 F.R.D. 198 (S.D. Tex. 1959)

Diamond Multimedia Sys., Inc. v. Superior Court,
    19 Cal. 4th 1036, cert. denied, __ U.S. __,
    1999 U.S. LEXIS 4049 (1999)

Diaz v. Trust Territory of Pac. Islands,
    876 F.2d 1401 (9th Cir. 1989)

Guerra v. Sutton,
    783 F.2d 1371 (9th Cir. 1986)

H. J. Heinz Co. v. Owens,
    189 F.2d 505 (9th Cir. 1951)

Hamilton v. Firestone Tire & Rubber Co.,
    679 F.2d 143 (9th Cir. 1982)

Hays County Guardian v. Supple,
    969 F.2d 111 (5th Cir. 1992)

In re Silicon Graphics Sec. Litig.,
    Nos. 97-16204, 97-16240,
    1999 U.S. App. LEXIS 14955 (9th Cir. July 2, 1999)

Larkin Gen. Hosp. Ltd. v. American Tel. & Tel. Co.,
    93 F.R.D. 497 (E.D. Pa. 1982)

Mechmetals Corp. v. Telex Computer Prods. Inc.,
    709 F.2d 1287 (9th Cir. 1983)

Pipes v. American Sec. Ins. Co.,
    169 F.R.D. 382 (N.D. Ala. 1996)

Shell Oil Co. v. Frusetta,
    290 F.2d 689 (9th Cir. 1961)

Stevedoring Servs. of Am. v. Armilla Int'l B.V.,
    889 F.2d 919 (9th Cir. 1989)

Stevenson v. Missouri P. R. Co.,
    53 F.R.D. 184 (D. Ark. 1971)

Stormedia Inc. v. Superior Court,
    20 Cal. 4th 449 (1999)

Travelers Ins. Co. v. Davis,
    490 F.2d 536 (3d Cir. 1974)

Tyco Lab., Inc. v. Koppers Co.,
    82 F.R.D. 466 (E.D. Wis. 1979),
    aff'd, 627 F.2d 54 (7th Cir. 1980)

Veina v. Sutter Hotel Assocs.,
    No. C 98-0980 SI,
    1998 U.S. Dist. LEXIS 18044 (N.D. Cal. Nov. 6, 1998)

Watson v. Clark,
    716 F. Supp. 1354 (D. Nev. 1989),
    aff'd, 909 F.2d 1490 (9th Cir. 1990)

Welter v. E. I. Du Pont de Nemours & Co.,
    1 F.R.D. 551 (D. Minn. 1941)

Westlands Water Dist. v. United States,
    100 F.3d 94 (9th Cir. 1996)

White Cross Stores, Inc. v. Abbott Lab. Inc.,
    216 F. Supp. 470 (W.D. Pa. 1963)

Wilton v. Seven Falls Co.,
    515 U.S. 277 (1995)
 
 

28 U.S.C.
    §1367
    §2201

Federal Rules of Civil Procedure
    12(b)(1)
    23(e)
    41(a)(2)

California Code of Civil Procedure
    §1709
    §1710
    §1781

California Corporations Code
    §25400
    §25500

3 Herbert B. Newberg & Alba Conte,
Newberg on Class Actions (2d ed. 1977)
    §4910

2 Herbert B. Newberg & Alba Conte,
Newberg on Class Actions (3d ed. 1992)
    §8.18

10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure: Civil 3d (1998)
    §2759

PLEASE TAKE NOTICE that on September 24, 1999, at 9:30 a.m. or as soon thereafter as counsel may be heard, in the Courtroom of the Honorable Charles A. Legge, at the United States District Court for the Northern District of California, located at 450 Golden Gate Avenue, San Francisco, California, plaintiffs Richard Bader, Richard Hughes, Meir Kadec, Jeff Scislow and Joseph Toms, on behalf of themselves and as court-appointed lead plaintiffs on behalf of all others similarly situated, will move this Court for an order dismissing with prejudice defendants' Counterclaim for Declaratory Relief (the "Counterclaim") and voluntarily dismissing this action without prejudice, pursuant to Fed. R. Civ. P. 41(a)(2). Pursuant to 28 U.S.C. §1367, 28 U.S.C. §2201, and Fed. R. Civ. P. 12(b)(1), the Counterclaim should be dismissed for lack of jurisdiction. The Court should decline jurisdiction over the Counterclaim because it raised issues that have already been decided in Steele v. Electronics For Imaging, Inc., No. C-97-4739-CAL, before the Superior Court of the State of California County of San Mateo (the "Steele action"). Pursuant to Rule 41(a)(2), voluntary dismissal of this action is warranted because defendants will suffer no legal prejudice.

This Motion is based on this Notice of Motion and Motion, the Memorandum of Points and Authorities, the Declaration of David Stickney, together with exhibits, all pleadings and papers filed herein, and any oral argument of counsel or other matters that may be submitted.

I. INTRODUCTION

Plaintiffs move to voluntarily dismiss this action and to dismiss defendants' Counterclaim. Plaintiffs are prosecuting the parallel Steele action in San Mateo Superior Court, and two recent decisions by the California Supreme Court have made it possible to fully vindicate their rights and the rights of the Class in that proceeding. Because the Steele action is further advanced, plaintiffs therefore move to dismiss this action and will proceed in state court. Defendants will suffer no prejudice as a result of this dismissal and the Court should dismiss this action accordingly.

Plaintiffs move to dismiss defendants' Counterclaim because the issue it raises has already been decided in the Steele action. The Counterclaim seeks "a declaration that the facts as alleged in the [federal] Amended Complaint do not sufficiently plead violations of Sections 25400 and 25500 of the California Corporations Code." Counterclaim prayer at ¶3. The San Mateo County Superior Court has already ruled that substantially identical allegations in the Steele action do state a claim under these sections. Further, the Complaint in this action does not even allege violations of §§25400/25500. The Counterclaim should therefore be dismissed because it invites this Court to duplicate the efforts of the state court and create a potentially embarrassing conflict for no useful purpose.

II. PROCEDURAL HISTORY

Plaintiffs commenced the Steele action on December 15, 1997, asserting claims under §§25400 and 25500 of the California Corporations Code and §§1709 and 1710 of the California Civil Code. Ex. 1.⁽¹⁾ When plaintiffs commenced the Steele action, the jurisdictional reach of §§25400 and 25500 had not yet been defined. The California Supreme Court had granted review in Diamond Multimedia to decide whether out-of-state stock purchasers had standing under §§25400 and 25500. While this was pending, the Steele defendants demurred on numerous grounds, including plaintiffs' standing. Judge Runde overruled defendants' demurrers, deciding that §25500 affords a remedy to both in-state and out-of-state stock purchasers. Ex. 2. Judge Runde expressly ordered, however, that defendants could later challenge plaintiffs' standing if the California Supreme Court in Diamond Multimedia Sys., Inc. v. Superior Court, 19 Cal. 4th 1036, cert. denied, __ U.S. __, 1999 U.S. LEXIS 4049 (1999) restricted standing to only "in state" stock purchasers. It was not until January 5, 1999, that the California Supreme Court ruled that nationwide relief is available under California law. The issue, however, was not finally resolved because the Diamond Multimedia defendants filed a petition for writ of certiorari in the United States Supreme Court. It was not until June 15, 1999, that defendants' petition was finally denied.

The California Supreme Court's Stormedia Inc. v. Superior Court, 20 Cal. 4th 449 (1999) decision, decided after Diamond Multimedia, was also critical. In that case, the California Supreme Court held that stock sales pursuant to a company's "employee stock option purchase plan" ("ESOP") qualify as "sales" and "offers" for purposes of pleading the "selling" element of §§25400/25500 claims. In Steele, plaintiffs allege that EFII sold stock through its ESOP. As a result of Stormedia and Diamond Multimedia, plaintiffs can now obtain complete relief for the Class in state court.

While Diamond Multimedia and Stormedia were pending, the parties were actively litigating in state court. Plaintiffs have obtained substantial information through party and non-party discovery which supports plaintiffs' claims. On March 25, 1999, the Steele plaintiffs moved to certify a nationwide class. Defendants have taken document discovery and deposed the five proposed class representatives. The hearing on plaintiffs' motion is noticed for August 27, 1999.

In stark contrast to the Steele action, this federal action has remained at its earliest stage.⁽²⁾ On December 31, 1997, investors (represented by counsel that does not represent the Steele plaintiffs) filed this action. Thereafter, on March 3, 1998, a distinct group of plaintiffs - represented by counsel that also represents plaintiffs in the Steele action - moved for appointment as lead plaintiffs in this action. The Court granted this motion on April 9, 1998, and plaintiffs later filed a consolidated complaint. The parties stipulated on November 23, 1998 to defer anticipated motions to dismiss until after resolution of the Silicon Graphics appeal. After the Court lifted the stipulated order, defendants Rosenzweig and Lenches moved to dismiss. This motion, however, is now moot because, on July 16, 1999, plaintiffs filed a notice of dismissal as to defendants Rosenzweig and Lenches pursuant to Rule 41(a)(1). Defendants EFII, Avida, and Saltzman answered the Complaint. On July 2, 1999, these defendants filed an amended answer which included their Counterclaim. Now, plaintiffs move to dismiss the Counterclaim and, also, to voluntarily dismiss the action pursuant to Rule 41(a)(2).

III. VOLUNTARY DISMISSAL PURSUANT TO RULE 41(a)(2) IS APPROPRIATE
 

The very purpose of Rule 41(a)(2) is to permit plaintiffs freely, with court approval, to voluntarily dismiss actions without prejudice after responsive pleadings have been filed. Stevedoring Servs. of Am. v. Armilla Int'l B.V., 889 F.2d 919, 921 (9th Cir. 1989); Hamilton v. Firestone Tire & Rubber Co., 679 F.2d 143, 145 (9th Cir. 1982). Rule 41(a)(2) provides that:

Except as provided in paragraph (1) of this subdivision of this rule, an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to the service upon him of plaintiff's motion to dismiss, the action shall not be dismissed against defendant's objection unless the counterclaim can remain pending for independent adjudication by the court. Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice.

Dismissal should be liberally granted unless defendants can establish "plain legal prejudice." See Veina v. Sutter Hotel Assocs., No. C 98-0980 SI, 1998 U.S. Dist. LEXIS 18044 (N.D. Cal. Nov. 6, 1998). "Legal prejudice is just that - prejudice to some legal interest, some legal claims some legal argument." Westlands Water Dist. v. United States, 100 F.3d 94, 97 (9th Cir. 1996). Plain legal prejudice requires more than a showing that defendant faces the prospect of defending a second lawsuit, that defendant has incurred legal expenses in preparing for trial, or that plaintiff has gained some tactical advantage. See id. Put differently, defendants must show that actual rights are threatened or that the monetary burden of dismissal is extreme or unreasonable. See Watson v. Clark, 716 F. Supp. 1354, 1356 (D. Nev. 1989), aff'd, 909 F.2d 1490 (9th Cir. 1990). Here, such a showing cannot be made. Moreover, defendants' refusal to dismiss this action is hypocritical. These very defendants, and this same counsel, have complained ad nauseam - albeit without basis - that they are improperly being burdened by having to defend two actions simultaneously. Yet now, when offered a chance to dismiss one of the two actions (indeed, the less advanced action) and to proceed in a single forum, they refuse the opportunity.

A. Defendants EFII, Avida And Saltzman Will Suffer No Prejudice If This Action, Which Is At Its Earliest Stage, Is Dismissed

Because dismissal will cause no legal prejudice to defendants, voluntary dismissal is appropriate.

B. Defendants' Counterclaim Cannot Prevent Dismissal

C. The Class Will Not Be Prejudiced By Dismissal

(e) Dismissal or Compromise. A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.

The purpose of Rule 23(e) is not to protect the interests of defendants but, rather, to "ensure that the representative plaintiff fulfills his fiduciary duty toward the absent class members." Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408 (9th Cir. 1989). Thus, the district court "must inquire into the terms and circumstances of any dismissal or compromise to ensure that it is not collusive or prejudicial." Id.⁽³⁾ Here, plaintiffs are not obtaining payment for dismissing.

The principal function of Rule 23(e) is to prevent defendants from paying-off or bribing the named plaintiffs in return for the dismissal of the action, without consideration being paid to the class. No such danger exists here. Plaintiffs have not received any consideration, and the Steele action will vindicate the rights of the class in state court.

D. Notice To The Class Is Neither Necessary Nor Required

In Larkin, the court approved the plaintiff's voluntary dismissal and noted:

Because no funds are being paid to any member of the proposed class, absolutely no possibility of any collusive settlement exists. Because there is an identical case pending in the United States District Court for the District of Colombia in which plaintiffs seek to represent the identical class referred to in plaintiff's complain the instant case, I find that no possible prejudice to the absent class members can result from my approval of this dismissal. See Jack Faucett Assocs., Inc. v. American Tel. & Tel., Co., C.A. No. 81-1804 (D.D.C.). Finally, I find that there is little possibility that any of the absent class members have relied on plaintiff's action in the Eastern District of Pennsylvania.

Here, there is no conceivable prejudice to the class as a result of dismissal. The Steele action protects the class. In Steele, the hearing on plaintiffs' motion for class certification will be heard on August 27, and class members will properly receive notice of the pendency of the litigation pursuant to C.C.P. §1781.

IV. THE COURT SHOULD DECLINE TO EXERCISE ITS JURISDICTION OVER THE COUNTERCLAIM

This Court has the discretion to decline to exercise its jurisdiction over defendants' claims for declaratory relief and to decline to exercise supplemental jurisdiction under 28 U.S.C. §1367. The Court should decline jurisdiction over the Counterclaim because the issues it raises have already been decided in the Steele action. This Court's consideration of the Counterclaim would simply waste judicial resources and potentially create embarrassing conflicts between courts.

28 U.S.C. §1367(a) grants the federal courts supplemental jurisdiction over all "claims that are so related to claims in the action within [the court's] original jurisdiction that they form part of the same case or controversy." However, district courts may decline to exercise jurisdiction over supplemental state law claims in the interests of judicial economy, convenience, fairness, and comity. City of Chicago v. Int'l College of Surgeons, 522 U.S. 156, 173 (1997) (citations omitted). On these grounds, the Fifth Circuit declined supplemental jurisdiction over state law claims pending in state court, stating "[a]djudicating state-law claims in federal court while identical claims are pending in state court would be a pointless waste of judicial resources." Hays County Guardian v. Supple, 969 F.2d 111, 125 (5th Cir. 1992) (cited with approval in Executive Software N. Am. v. United States Dist. Court., 24 F.3d 1545, 1559 n.12 (9th Cir. 1994)); see also Blue Dane Simmental Corp. v. American Simmental Ass'n, 952 F. Supp 1399, 1413 (D. Neb. 1997), aff'd, No. 98-1557, 1999 U.S. Dist. LEXIS 11242 (8th Cir. Feb. 10, 1999); Bunger v. Hartman, 851 F. Supp. 461, 465 (S.D. Fla. 1994). This Court should follow suit and decline supplemental jurisdiction.

District courts also have broad discretion in deciding whether or not to exercise jurisdiction over claims for declaratory relief. Wilton v. Seven Falls Co., 515 U.S. 277, 287-88 (1995). In Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942), the United States Supreme Court stated:

Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in state court presenting the same issues, not governed by federal law, between the same parties. Gratuitous interference with the orderly and comprehensive disposition of a state court litigation should be avoided.

In Continental, the Ninth Circuit reviewed a district court's decision to exercise jurisdiction over claims pending in state court and reversed, citing the following factors from Brillhart:

"First, the Court wanted to avoid having federal courts needlessly determine issues of state law." Second, the Court wished to discourage litigants from filing declaratory judgment action as a means of forum shopping. Third, the Court relied upon a policy of avoiding duplicative litigation.

A. The Counterclaim Would Require This Court To Make Needless Decisions Of State Law

Similarly, in H. J. Heinz Co. v. Owens, 189 F.2d 505 (9th Cir. 1951), a plaintiff sought declaratory relief in federal court restraining the defendant from pursuing contempt proceedings in state court. The Ninth Circuit stated that plaintiff's complaint

is an effort to embarrass the state proceedings or at least to obtain a federal adjudication contrary to the state judgment and thus possibly helpful to the defense in the state contempt proceedings. ... Other courts have similarly emphasized the perversion of the purpose of declaratory judgment legislation which occurs when it is used to anticipate the result of litigation pending in another forum or to reexamine what has there been decided.

The issues raised by the Counterclaim are of particular importance to California. The Counterclaim specifically asks this Court to decide whether the federal complaint states a claim under §§25400 and 25500. Counterclaim prayer at ¶3. While discussing §§25400 and 25500, the California Supreme Court recently stated "California ... has a legitimate and compelling interest in preserving a business climate free of fraud and deceptive practices." Diamond Multimedia, 19 Cal. 4th at 1063. This Court should therefore avoid any unnecessary decisions regarding these statutes.

B. The Counterclaim Constitutes Forum Shopping

"The wholesome purposes of declaratory acts would be aborted by its use as an instrument of procedural fencing either to secure delay or to choose a forum. It was not intended by the act to enable a party to obtain a change of tribunal ...."

The Ninth Circuit has stated that a claim for declaratory relief constitutes forum shopping if it is "defensive or reactive." Continental, 947 F.2d at 1371. In that case, the court found a declaratory relief action "reactive" because it was filed in response to or in anticipation of a state proceeding and declined jurisdiction. Id. at 1372.

The Counterclaim in this case was obviously filed in reaction to the state claim. The Counterclaim not only identifies the state action (Counterclaim at ¶3), but attaches the state complaint. Defendants simply seek to relitigate the sufficiency of plaintiffs' allegations with regard to §§25400 and 25500. Defendants have already lost this issue in the Steele action and clearly hope for a more favorable ruling in this forum. As the Ninth Circuit stated in American Nat'l Fire Ins. Co. v. Hungerford, 53 F.3d 1012, 1018 (9th Cir. 1995), "by exercising jurisdiction over a suit that raised the same issues as those in a pending state court action, we would only be encouraging forum shopping in violation of the second Brillhart principle." Id. This Court should similarly discourage such forum shopping and decline jurisdiction over the Counterclaim.

C. The Issues Raised By The Counterclaim Are Duplicative Of Those Already Decided By The State Court

D. The Declaratory Relief Defendants Seek Would Serve No Useful Purpose

In this case, a declaration that the federal complaint does not state a claim under California securities laws would serve no useful purpose because the federal complaint does not assert such a claim and plaintiffs are moving to dismiss all of their claims in federal court. If plaintiffs later amend the federal complaint to include claims under California securities laws (which they have no present intention of doing), defendants can move to dismiss those claims at that time. At this point however, the declaration defendants request would therefore have no effect on this action. Because the issue has already been decided in the Steele action, the requested declaration could have no effect in that proceeding either.

The requested declaratory judgment would also not afford defendants any relief from uncertainty or controversy because the issue has already been effectively settled between the parties in the Steele action. Many courts have declined to exercise jurisdiction over claims for declaratory relief when the issue before the court has already been decided in another forum. Travelers Ins. Co. v. Davis, 490 F.2d 536, 544 (3d Cir. 1974) (court declined jurisdiction over issue that had been decided by state court); White Cross Stores, Inc. v. Abbott Lab. Inc., 216 F. Supp. 470, 472 (W.D. Pa. 1963) (court declined jurisdiction over issue already decided by Supreme Court of Pennsylvania); 10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure: Civil 3d §2759, at 550 (1998) (courts "will refuse to entertain a declaratory-judgement action if the controversy has been effectively settled by the decision of some other tribunal"). This Court should similarly decline jurisdiction over a claim for declaratory relief that would serve no useful purpose.

V. CONCLUSION

For all of the foregoing reasons, plaintiffs respectfully move this Court for an order dismissing defendants' Counterclaim with prejudice and voluntarily dismissing this action without prejudice.

DATED this 20th day of July, 1999.

Respectfully submitted,

MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058

MILBERG WEISS BERSHAD
HYNES & LERACH LLP
REED R. KATHREIN
DAVID R. STICKNEY
CHRISTOPHER P. SEEFER
 
 
 
 

__________________________
DAVID R. STICKNEY

222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545

BARRACK, RODOS & BACINE
EDWARD M. GERGOSIAN
MATTHEW P. MONTGOMERY
600 West Broadway, Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800

KIRBY, McINERNEY & SQUIRE, LLP
JEFFREY H. SQUIRE
PAMELA E. KULSRUD
830 Third Avenue, 10th Floor
New York, NY 10022
Telephone: 212/317-2300

Co-Lead Counsel for Plaintiffs
 
 

N:\CASES\EFII\sla80067.brf

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Francisco, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 222 Kearny Street, 10th Floor, San Francisco, California 94108.

2. That on July 20, 1999, declarant served the PLAINTIFFS' NOTICE OF MOTION AND MOTION TO DISMISS DEFENDANTS' COUNTERCLAIM FOR DECLARATORY RELIEF AND MOTION FOR VOLUNTARY DISMISSAL PURSUANT TO RULE 41(a)(2); SUPPORTING MEMORANDUM OF POINTS AND AUTHORITIES by depositing a true copy thereof in a United States mailbox at San Francisco, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

http://securities.milberg.com

3. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 20^th day of July, 1999, at San Francisco, California.
 

______________________________

DEBORAH R. DASH

1. All exhibits are attached to the Declaration of David Stickney in Support of Plaintiffs' Motion to Dismiss Defendants' Counterclaim for Declaratory Relief and Motion for Voluntary Dismissal Pursuant to Rule 41(a)(2).

2.  No discovery has occurred because of the operation of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and the Local Rules. On March 5, 1999, defendants moved the Court for a protective order which would have precluded the use of discovery obtained in state court to plead or prosecute a federal cause of action. The Court ruled from the bench and denied defendants' motion.

3. See also Anderberg v. Masonite Corp., 176 F.R.D. 682, 687, 688 (N.D. Ga. 1997) (purpose of Rule 23(e) is to protect interests of absent class members); Blanchard v. Edgemark Fin. Corp., 175 F.R.D. 293, 298, 299(N.D. Ill. 1997) (Rule 23(e) designed to protect interests of absent class members); Pipes v. American Sec. Ins. Co., 169 F.R.D. 382, 384 (N.D. Ala. 1996) (Rule 23(e) serves to protect absent class members); Austin v. Pennsylvania Dep't of Corrections, 876 F. Supp. 1437, 1455 (E.D. Pa. 1995) (Rule 23(e) intended to prevent detriment to absent class members); Larkin Gen. Hosp. Ltd. v. American Tel. & Tel. Co., 93 F.R.D. 497, 500 (E.D. Pa. 1982) ("'The purposes of Rule 23(e) are to discourage the use of the class action devise to secure an unjust private settlement, and to protect the absent class members against prejudice from discontinuance.'") (citing 3 Herbert B. Newberg & Alba Conte, Newberg on Class Actions §4910, at 402 (2d ed. 1977)).

4.  Some courts have questioned the continued vitality of Brillhart and its progeny. However, in Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995), the United States Supreme Court recently affirmed the Brillhart analysis.