MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
HELEN J. HODGES (131674)
ARTHUR C. LEAHY (149135)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
ALISON M. TATTERSALL (149607)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545

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

BERGER & MONTAGUE, P.C.
SHERRIE R. SAVETT
GARY E. CANTOR
1622 Locust Street
Philadelphia, PA 19103
Telephone: 215/875-3000

Co-Lead Counsel for Plaintiffs

Disregarding plaintiffs' statement that their allegations are based on counsel's investigation, defendants argue that plaintiffs' Complaint is pled on information and belief and, therefore, the Private Securities Litigation Reform Act's ("PSLRA") heightened pleading standard applies. This argument fails because as the court in Quarterdeck stated:

The PSLRA does raise the pleading standard for allegations made on information and belief. . . . Plaintiffs' allegations are based on the investigation of their counsel, not on information and belief. The heightened standard does not apply here.

Moreover, under the PSLRA, plaintiffs' allegations must still be taken as true, and the standards under Rule 12(b)(6) remain unchanged. Quarterdeck, Ex. A at 1-2; ValuJet, Ex. B at 5.

As to the argument that plaintiffs have inadequately alleged that defendants acted with the requisite scienter, the ValuJet decision supports plaintiffs' position:

[V]iewing the allegations in the complaint as true, the Court finds that Plaintiffs have alleged conscious behavior that allows an inference of fraudulent intent against the Defendants.

[C]ourts have found that allegations of financial fraud often provide strong circumstantial evidence of knowledge. . . . [W]hen combined with other circumstances suggesting fraudulent intent, such violation [of Generally Accepted Accounting Principles] may be used to show scienter.

The court in Weikel also upheld the complaint against defendants' motions to dismiss, holding that a strong inference of the required state of mind was adequately alleged through direct or circumstantial facts supporting defendants' "'motive and opportunity to commit fraud'" or "'strong circumstantial evidence of conscious misbehavior or recklessness.'" Ex. C at 2 (citation omitted).

As to defendants' argument that the Court should consider material outside the Complaint, the court in Quarterdeck refused to take judicial notice of information published in news articles, noting that such material may only be considered where it is referenced in the complaint and no party questions its authenticity. Ex. A at 2.
 

DATED: December 3, 1997

Respectfully submitted, MILBERG WEISS BERSHAD HYNES & LERACH LLP ALISON M. TATTERSALL ______________________________ ALISON M. TATTERSALL  222 Kearny Street, 10th Floor San Francisco, CA 94108 Telephone: 415/288-4545 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH HELEN J. HODGES ARTHUR C. LEAHY 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 BARRACK, RODOS & BACINE EDWARD M. GERGOSIAN 600 West Broadway, Suite 1700 San Diego, CA 92101 Telephone: 619/230-0800 BERGER & MONTAGUE, P.C. SHERRIE R. SAVETT GARY E. CANTOR 1622 Locust Street Philadelphia, PA 19103 Telephone: 215/875-3000 Co-Lead Counsel for Plaintiffs

FRITZ\JMI03770.MIS

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 December 3, 1997, declarant served the PLAINTIFFS' SUPPLEMENTAL SUBMISSION OF AUTHORITY PURSUANT TO LOCAL RULE 7-3(e) 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:

3. Declarant caused a true copy of the above to be served via facsimile on the parties denoted on the attached Service List.

4. 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 3rd day of December, 1997, at San Francisco, California.
 

______________________________ JANETTE M. INGRAM

 

1 Feb 1998
Source: Milberg Weiss website