ABBEY, GARDY & SQUITIERI, LLP
STEPHEN T. RODD
JAMES J. SEIRMARCO (194307)
PETER D. BULL
212 East 39th Street
New York, NY 10016
Telephone: 212/889-3700

Co-Lead Counsel for Plaintiffs

[Additional counsel appear on signature page.]

II. STATEMENT OF FACTS

III. ARGUMENT

A. Securities Actions Are Well Suited For Class Treatment

B. The Proposed Class In This Case Satisfies The Prerequisites Of Rule 23(a)(1)-(4)

1. The Class Members Are So Numerous That Joinder Of All Of Them Is Impracticable

2. There Are Questions Of Law And Fact Common To The Members Of The Class

3. Plaintiffs' Claims Are Typical Of Those Of The Class

4. Plaintiffs Will Fairly And Adequately Protect The Interests Of The Members Of The Class

C. The Conditions of Rule 23(b)(3) Have Been Met
1. Common Questions Of Law And Fact Predominate Over Individual Questions

2. A Class Action Is Superior To Other Available Methods For Resolving This Controversy

TO: ALL PARTIES AND THEIR ATTORNEYS OF RECORD

PLEASE TAKE NOTICE that at 9:30 a.m. on November 6, 1998 in the courtroom of the Honorable Charles A. Legge, 450 Golden Gate Avenue, San Francisco, California, plaintiffs will move for an Order pursuant to Fed. R. Civ. P. 23, certifying a plaintiff class (the "Class") consisting of all persons and entities who purchased or otherwise acquired shares of Dignity Partners, Inc. ("Dignity" or the "Company") between February 14, 1996 and July 16, 1996 (the "Class Period"), at artificially inflated prices.⁽¹⁾ Plaintiffs will also move the Court to appoint Howard Hertzberg, John DeRosa, Jeffrey Feinman and Charles Steinberg as representatives of the Class.

This motion is based upon this Notice of Motion and Motion, the Memorandum of Points and Authorities in support thereof, the accompanying Declaration of Blair A. Nicholas in Support of Plaintiffs' Motion for Class Certification ("Nicholas Decl."), the pleadings and records on file in this case, and other such matters and argument as the Court may consider in the hearing of this motion.

I. INTRODUCTION AND SUMMARY OF ARGUMENT

In a long and virtually unbroken line of cases, the Ninth Circuit and the district courts in California and elsewhere have endorsed the use of class action procedures in adjudicating claims under the federal securities laws:

[C]lass actions commonly arise in securities fraud cases as the claims of separate investors are often too small to justify individual lawsuits, making class actions the only efficient deterrent against securities fraud.

II. STATEMENT OF FACTS

In advance of the IPO, Dignity was undercapitalized and entirely dependent on the personal guarantees of its founders, B. Rotter, Perper and J. Rotter, to obtain the millions of dollars it needed in lender financing. These defendants had also loaned Dignity $2.1 million via their wholly owned company, defendant New Echelon LLC, and the loan was past due by the time of the IPO. Finally, the three founders were also owed $833,000 in past due salaries which Dignity was unable to pay. Defendants knew the only way to eliminate their personal liability for millions of Dignity's debt, get back their $2.1 million, pay themselves the back salaries of $833,000 they were owed and increase the book value of their Dignity shares, was to take Dignity public.

The IPO had to be completed quickly because the value of Dignity's portfolio of policies had substantially deteriorated as the Acquired Immune Deficiency Syndrome ("AIDS") sufferers who were Dignity's viators were living beyond Dignity's estimated date of death and defendants knew they could not conceal the truth about Dignity's prospects for long. Dignity was in the business of making viatical settlements -- transactions where individuals with terminal illnesses sell their life insurance policies at a discount to the policy's death benefit. ¶1. During 1995, and by no later than December 1995, defendants knew that many of its viators were living substantially beyond their estimated death dates because of increased efficacy of new and existing treatments for AIDS. ¶¶6, 9, 12, 46-69. Defendants already knew that thousands of AIDS patients had received the new protease inhibitor drugs, which specifically targeted advanced cases of AIDS -- the very persons whose policies formed the basis of Dignity's business -- in 1995 in important clinical trials with dramatically successful results. Defendants also knew the first protease inhibitor, Invirase, had been approved by the FDA on December 7, 1995, two months in advance of the IPO, and other protease inhibitors were on the verge of approval under the FDA's accelerated approval plan for AIDS treatments. ¶72. Defendants knew these facts because of Volberding's position as a preeminent AIDS researcher.

The Prospectus falsely presented Dignity as rapidly expanding its profitable viatical settlement business and having significant expertise in accurately estimating the lifespans of AIDS victims, underscoring that Dignity had "strict underwriting standards," while assuring investors that the progression of the AIDS disease was "relatively predictable" and that its expertise meant Dignity was "well-positioned" and gave it a "competitive advantage." ¶¶9, 27-28.⁽⁴⁾

Shortly before and in order to complete the IPO, defendants deliberately changed Dignity's accounting practices from a cash method, where defendants recognized revenue only upon the death of the insured, to an accrual method, where defendants began recognizing revenue immediately upon purchasing the policy and continued recognizing revenue over the insured's estimated life span. This change dramatically increased Dignity's reported income and enabled Dignity to falsely present itself in the Prospectus as a profitable, growing company. ¶¶2, 46. Dignity accrued, over the period between the acquisition date and the Company's estimated date of collection of the proceeds, the difference between an insurance policy's face value and its carrying value. The Complaint alleges that this discount was a "contingent gain" which should not have been recognized under Generally Accepted Accounting Principles, because collection was uncertain, as it was dependent on Dignity's continued payment of policy premiums and other factors. ¶¶50-52.

Dignity's financial statements were also false and misleading because Dignity ignored its historical policy collection data in estimating an insured's life expectancy, and failed to adjust its estimates to account for the increase in longevity of AIDS patients which Dignity had already experienced during 1995. Defendants knew by December 1995 that Dignity's estimates of life expectancy were unreliable and could not form the basis of an accrual accounting method. ¶¶5-9, 12(d),(f),(i), 13, 46-69. Desperate to extricate the millions they had invested in what they knew was a dwindling business, defendants concealed these facts so the IPO could go forward.

The IPO benefitted defendants substantially. Defendant B. Rotter sold 321,144 shares at $12 per share, pocketing $3.8 million. Dignity also paid past-due compensation of $833,000 to the Rotters and Perper and repaid them the $2.1 million loan made by their wholly owned company, New Echelon LLC. Dignity also repaid millions of its own indebtedness to Wells Fargo and renegotiated the terms of those agreements, releasing the Rotters and Perper from their personal guarantees of those borrowings. ¶¶3, 10. In addition, the IPO boosted the book value of the insiders' Dignity shares from $2.44 per share to $6.70 per share -- a $6.8 million windfall for them. ¶¶3, 10, 15.

After the IPO, defendants continued to falsely represent that Dignity's accurate estimation of AIDS insured's life expectancies was a "major competitive advantage," that Dignity would "greatly broaden the size of its policy acquisitions" to include individuals with longer life expectancies and terminal illnesses other than AIDS, as Dignity was able to "as accurately predict" the life expectancy of non-AIDS patients as well as those with AIDS, that the growth in policies purchased "reflects the implementation of the Company's growth strategy" and that Dignity would achieve "an acceleration of . . . earnings growth" and "1996 and 1997 EPS of $.42 and $.80 respectively." ¶¶11, 31.

After the IPO, Dignity's stock quickly advanced to $14-1/2 and traded between $11 and $13 through June 26, 1996. On June 26, 1996, Oppenheimer & Co., Dignity's underwriter on the IPO, revealed that Dignity's quarterly results for the June 30, 1996 quarter -- Dignity's first quarter as a publicly traded company -- would be lower than previously forecast, purportedly due to fewer AIDS viatical settlements and higher expenses. On this news, Dignity's stock price collapsed to as low as $6-1/2 on June 26, 1996 from $12 on June 25, 1996. ¶¶4, 43. Just three weeks later, and only five months after obtaining $34.2 million from the unsuspecting public in its IPO, on July 16, 1996 Dignity revealed it would "suspend" all further viatical settlements with AIDS patients -- halting its main business indefinitely -- claiming that it needed to evaluate "new" information on AIDS treatments which had just become available. These announcements caused its stock to collapse to as low as $1 per share from $7-1/4 the day before. In fact much of this information was not new at all, and defendants knew by late 1995 that advances in treatment regimens were proving dramatically more effective in treating AIDS and causing Dignity's population of AIDS viators to live much longer than expected.

For the quarter ended September 30, 1996, Dignity revealed a stupendous loss of $10 million on its purchased life insurance policies, wiping out every penny of profit Dignity had ever reported -- about $1,290,365 in total -- almost eight times over. Dignity revealed it would sell its insurance policy portfolio and that it had changed its method of recognizing income on its policy portfolio back to the cash method. Dignity then abandoned the viatical settlement business, going into another line of business entirely. ¶¶4, 13, 44, 59. Dignity's stock has never recovered.

III. ARGUMENT

A. Securities Actions Are Well Suited For Class Treatment

The Supreme Court has long recognized -- and Congress recently affirmed -- that private actions are also an important enforcement mechanism to supplement governmental administrative regulation of the securities markets. "Private enforcement . . . provides a necessary supplement to [Securities and Exchange] Commission action," by both affording relief to those injured by violations of the securities laws and serving as a deterrent to future wrongdoing. J.I. Case Co. v. Borak, 377 U.S. 426, 432 (1964). See also Basic, 485 U.S. at 231 (private actions for violations of the Exchange Act "constitute[] an essential tool for enforcement of the 1934 Act's requirements").

In enacting the Private Securities Reform Act of 1995, Congress reaffirmed the importance of private enforcement of the securities laws:

Private securities litigation is an indispensable tool with which defrauded investors can recover their losses without having to rely upon government action. Such private lawsuits promote public and global confidence in our capital markets and help to deter wrongdoing and to guarantee that corporate officers, auditors, directors, lawyers and others properly perform their jobs.

A review of the requirements of Rule 23 and the relevant case law demonstrates that this lawsuit should be certified as a class action.

B. The Proposed Class In This Case Satisfies The Prerequisites Of Rule 23(a)(1)-(4)

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

1. The Class Members Are So Numerous That Joinder Of All Of Them Is Impracticable

In this case, Dignity sold 2,702,500 shares of its common stock in the IPO. Hundreds of thousands of those shares were traded on the NASDAQ National Market System during the Class Period. ¶115. A class of this size is so numerous as to make individual joinder extremely impracticable, if not logistically impossible, especially where members of the class may be located throughout the country. Clearly, the proposed Class satisfies the numerosity requirement of Rule 23(a). See Freedman, 922 F. Supp. at 398; Wehner v. Syntex Corp., 117 F.R.D. 641, 643 (N.D. Cal. 1987); In re Seagate Techs. Sec. Litig., 115 F.R.D. 264, 267 (N.D. Cal. 1987); Weinberger v. Jackson, 102 F.R.D. 839, 844 (N.D. Cal. 1984).

2. There Are Questions Of Law And Fact Common To The Members Of The Class

The overwhelming weight of authority holds that repeated misrepresentations of the sort alleged here satisfy the "common question" requirement. Confronted with a class of purchasers allegedly defrauded over a period of time by similar misrepresentations, courts have taken the common sense approach that the class is united by a common interest in determining whether a defendant's course of conduct is in its broad outlines actionable, which is not defeated by slight differences in class members' positions . . . .

Here, the nature and existence of material omissions and misrepresentations detailed in the Complaint -- the most crucial issues in a securities fraud case -- present questions of fact and law common to all members of the Class. Defendants' omissions and misrepresentations were uniformly made in a finite number of documents that were disseminated to the investing public, not the least of which was the Prospectus. As a result, class certification is appropriate because the claims against defendants "arise out of the same set of operative facts and are based on common legal theories." Schneider, ¶95,419, at 97,111.⁽¹⁰⁾

Securities fraud cases containing common questions -- such as those enumerated in ¶119 of the Complaint⁽¹¹⁾ -- repeatedly have been held to be prime candidates for class certification. See e.g., Blackie, 524 F.2d at 902-05; Freedman, 922 F. Supp. at 398-99; Schaefer, 169 F.R.D. at 128; Cirrus Logic, 155 F.R.D. at 657; Schneider, ¶95,419, at 97,111; United Energy, 122 F.R.D. at 254. As the Ninth Circuit recently emphasized in a securities fraud case, "[t]his case fits the requirements of both Rule 23(a) and Rule 23(b)(3) like a glove" because "[t]he questions of Matsushita's liability are the same for each of the 7,000 shareholders who tendered their MCA shares . . . . The claims of every tendering shareholder turn on identical facts and law -- regardless of the identity or circumstances of the particular shareholder." Epstein, 50 F.3d at 668. Plaintiffs allege that misrepresentations and omissions of material information were contained in (or omitted from) defendants' public statements, including the Prospectus and other public filings, press releases and announcements, thereby deceiving each purchaser of Dignity's common stock in the IPO and throughout the Class Period as to the Company's true business condition and prospects in the same manner. These issues present quintessential examples of "common questions" of law and fact requiring class certification.

3. Plaintiffs' Claims Are Typical Of Those Of The Class

The Plaintiffs have sufficiently demonstrated that the named class representatives' claims are typical of those of the entire "global" class because the "typicality" prerequisite of Rule 23(a)(3) is satisfied when all members of the class are victims of the same course of conduct.

The purpose of the "typicality" requirement is to assure that the named representatives' interests "align" with those of the class. Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992); Jordan v. County of Los Angeles, 669 F.2d 1311, 1321 (9th Cir.), vacated on other grounds, 459 U.S. 810 (1982). The test generally is "whether other members have the same or similar injury, whether the action is based on conduct that is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." A & J Deutscher Family Fund v. Bullard, [1986-1987 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶92,938, at 94,584 (C.D. Cal. 1986) (citing Schwartz, 108 F.R.D. at 282); see also Schaefer, 169 F.R.D. at 128-29; Cirrus Logic, 155 F.R.D. at 657.

Typicality does not require the representatives' claims to be identical to those of the class members:

"Typicality refers to the nature of the claim or defense of the class representative, and not to the specific facts from which it arose or the relief sought. Accordingly, differences in the amount of damage, the size or manner of [stock] purchase, the nature of the purchaser, and even the specific document influencing the purchase will not render a claim atypical in most securities cases."

The courts have held that Rule 23(a)(3) requires only that there be no express conflict between the representative parties and the class "over the very issue in litigation" and that the representatives' "interests are not antagonistic to those of the class." Mersay v. First Republic Corp., 43 F.R.D. 465, 468-69 (S.D.N.Y. 1968); accord Stolz v. United Brotherhood of Carpenters & Joiners, Local Union No. 971, 620 F. Supp. 396, 404 (D. Nev. 1985). Typicality does not require that the class representatives have standing for each misrepresentation. Alfus v. Pyramid Tech. Corp., 764 F. Supp. 598, 606 (N.D. Cal. 1991). See also Adam v. Silicon Valley Bancshares, [1993-1994 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶98,234, at 99,609 n.1 (N.D. Cal. 1994). There is no conflict or antagonism here between plaintiffs' interests and those of the members of the Class. Indeed, in In re Proxima Corp. Sec. Litig., [1993-1994 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶98,236, at 99,628 (S.D. Cal. 1994), the court stated: "[T]he fact that the class in this case involves both public offering purchasers and open market purchasers does not refute a finding of typicality, and the named plaintiffs can present claims typical of all class members who are alleged to have been defrauded pursuant to a common course of fraudulent conduct."

This case satisfies the typicality requirement of Rule 23(a). In the present case, the claims of all Class members derive from the same legal theories and allege the same set of operative facts. The named plaintiffs, like the other Class members, allege that they purchased Dignity's common stock registered with the SEC pursuant to the Prospectus and thereby sustained an injury. Plaintiffs and the other Class members purchased Dignity stock at prices artificially inflated by defendants' materially false and misleading statements and non-disclosures contained in the Prospectus and other public statements. All members of the Class were victims of a common course of conduct by defendants that began with the issuance of the Prospectus and continued throughout the Class Period. As a result, the claims of the named plaintiffs are typical of those of the Class.

4. Plaintiffs Will Fairly And Adequately Protect The Interests Of The Members Of The Class

What are the ingredients that enable one to be termed "an adequate representative of the class?" To be sure, an essentialSec. Litig., [1992-1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶97,272, at 95,267 (D. Or. 1992).

Both prongs of the "adequacy" test have been met here. Here, plaintiffs have retained counsel who are experienced and well-qualified to conduct the proposed litigation. Co-counsel have extensive experience in class action litigation and have successfully prosecuted class actions in this District and throughout the country.

The second requirement is also satisfied here because there is no antagonism between the representative plaintiffs and the absent Class members. Lubin v. Sybedon Corp., 688 F. Supp. 1425, 1461 (S.D. Cal. 1988); Weinberger, 102 F.R.D. at 844-45. The representative plaintiffs' interests and those of the Class are complementary and they will vigorously prosecute this action on behalf of the Class.

C. The Conditions of Rule 23(b)(3) Have Been Met

In addition to meeting the prerequisites of Rule 23(a), the present action also satisfies the requirements of Rule 23(b), which requires that the proposed class representatives establish that common questions of law or fact predominate over individual questions and that a class action is superior to other available methods of adjudication. See Hernandez, 152 F.R.D. at 193-94. As discussed above, common questions of law and fact predominate in this case and a class action is the superior (if not the only) method available to fairly and efficiently litigate this securities action. See Epstein, 50 F.3d at 668-69; Schaefer, 169 F.R.D. at 130-31.

1. Common Questions Of Law And Fact Predominate Over Individual Questions

Where a complaint alleges a "common course of conduct" of misrepresentations, omissions and other wrongdoings that affect all members of the class in the same manner, common questions predominate. Blackie, 524 F.2d at 905-08; In re Computer Memories Sec. Litig., 111 F.R.D. 675, 684 (N.D. Cal. 1986). In determining whether common questions predominate, the court's inquiry should be directed primarily toward the issue of liability. See Blackie, 524 F.2d at 902; In re Memorex Sec. Cases, 61 F.R.D. 88, 103 (N.D. Cal. 1973). As discussed above, there are a host of common questions of law and fact as to the members of the Class which plaintiffs seek to represent. These questions clearly predominate over individual questions because defendants' alleged conduct affected all Class members in the same manner -- by creating a market for Dignity stock through the false statements in the Prospectus and, after the IPO, artificially inflating the price of Dignity's common stock. It is difficult to discern liability issues in this case that are not common to all members of the Class. See e.g., Freedman, 922 F. Supp. at 399-400; Schaefer, 169 F.R.D. at 130-31; United Energy, 122 F.R.D. at 256; Unioil, 107 F.R.D. at 622 ("As plaintiffs' claim is based on a common nucleus of misrepresentations, material omissions and market manipulations, the common questions predominate over any differences between individual class members with respect to damages, causation or reliance."). The critical issues of fact and law raised in this action are common to all members of the Class and they will predominate in this case. Once these common questions are resolved, all that should remain is the purely mechanical act of computing the amount of damages suffered by each Class member.

In contrast, there are no significant (let alone predominant) individual issues even with respect to issues such as reliance. Plaintiffs' claims arising under §10(b) of the Exchange Act, require no proof of individual reliance because plaintiffs are entitled to a presumption of reliance when they have alleged that defendants artificially inflated the price of the stock in question by issuing false and misleading statements and by failing to disclose material facts which defendants had a duty to disclose. Basic, 485 U.S. at 247; see also Cameron v. E. M. Adams & Co., 547 F.2d 473, 477 (9th Cir. 1976); Blackie, 524 F.2d at 905; Schaefer, 169 F.R.D. at 128; Seagate Tech. II, 843 F.Supp. at 1356-57.

Moreover, the fact that class members may not be identically situated is not critical. As the Ninth Circuit held in Harris, the fact that different members of the class may have invested at different times and may have been exposed to different misrepresentations and/or omissions committed by defendants does not preclude a finding that common issues predominate because a continuous course of conduct has been alleged:

Rule 23(a)(3) "does not require that all the members of the class be identically situated, if there are substantial questions either of law or fact common to all." Rule 23(a)(3) is based on the assumption that the economy of time, effort, and expense which will result from a common trial of substantial common issues exceeds the additional burden which may be imposed upon the court and the parties by the necessity of also determining in the common litigation those issues which may be several.
Harris, 329 F.2d at 914-15 (citation omitted, footnote omitted). The Ninth Circuit's landmark decision in Blackie, 524 F.2d at 902, endorsed the approach previously taken in Harris.

In sum, where a complaint alleges a continuous course of conduct committed by defendants and directed against the members of the class, the issues of law and fact which flow from that wrongful activity clearly predominate over any individual issues.

2. A Class Action Is Superior To Other Available Methods For Resolving This Controversy

Rule 23(b)(3) also requires the court to determine that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Virtually all of the previously cited authorities have recognized that the class action device is superior to other available methods for the fair and efficient adjudication of controversies involving a large number of purchasers of securities injured by violations of the securities laws. Class actions are a "particularly appropriate and desirable" way of resolving securities fraud claims. Eisenberg v. Gagnon, 766 F.2d 770, 785 (3d Cir. 1985); accord Freedman, 922 F. Supp. at 400. Here, class certification is both useful and necessary and the class action device offers judicial efficiencies because it permits common claims and issues to be tried only once, with binding effect on all parties. Class representation is the only way to afford relief to those whose claims are too small to permit them to bring individual suits. To deny class certification would be to "clos[e] the door of justice to all small claimants. This is what we think the class suit practice was to prevent." Weeks v. Bareco Oil Co., 125 F.2d 84, 90 (7th Cir. 1941).

To determine the issue of "superiority," Rule 23(b)(3) enumerates the following facts for the court to consider:

(A) [T]he interest of members of the class in individually controlling the prosecution . . . of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by . . . members of the class; (C) the desirability . . . of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.
Fed. R. Civ. P. 23(b)(3). First, the number of Class members is far too numerous and the typical claim is too small for each individual Class member to maintain a separate action. The class action device is the only viable vehicle by which persons injured by defendants' wrongful conduct may obtain a remedy. Any notion that such claims could be litigated individually is wholly unrealistic and is also contrary to the philosophy of Rule 23. As the Ninth Circuit recently stated in Epstein, "it is difficult to imagine a case where class certification would be more appropriate. Without it, thousands of identical complaints by former MCA shareholders would have to be filed -- the very result the class action mechanism was designed to avoid." 50 F.3d at 668. See also Freedman, 922 F. Supp. at 400-01; Weinberger v. Thornton, 114 F.R.D. 599, 605 (S.D. Cal. 1986); Unioil, 107 F.R.D. at 622. Second, plaintiffs are not aware of any individual actions concerning this dispute that have been commenced by other Class members. Third, the presumed nationwide geographical dispersion of the Class members -- based upon the sale of the stock on a national exchange -- makes it desirable that litigation of the claims involved be concentrated in this forum.

Finally, plaintiffs can foresee no management difficulties which would preclude this action from being maintained as a class action and are confident that any potential management problems can be addressed and resolved by the parties or by this Court. Certainly, possible management problems are not, standing alone, grounds for denying this motion. In In re Sugar Indus. Antitrust Litig., 1977-1 Trade Cas. (CCH) ¶61,373 (N.D. Cal. 1976), the court stated:

[D]enial of class certification because of conjured manageability problems is disfavored among both the courts and the legal commentators because a court refusing to certify a class action on the basis of vaguely perceived manageability obstacles is acting counter to the policy behind Rule 23.
Id. at 71,340; accord Yaffe v. Powers, 454 F.2d 1362, 1365 (1st Cir. 1972).

The Supreme Court has endorsed the superiority of the class action device for resolving securities claims:

The aggregation of individual claims in the context of a classwide suit is an evolutionary response to the existence of injuries unremedied by the regulatory action of government. Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device.
Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 339 (1980). Here too, judicial economy and the best interests of the Class members favor Class certification. For the reasons enumerated above, the proposed Class satisfies the requirements of Rule 23(b)(3).

IV. CONCLUSION

For the foregoing reasons, plaintiffs request entry of an Order certifying this action as a class action pursuant to Fed. R. Civ. P. 23.
 

DATED: June 24, 1998

Respectfully submitted, MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH PATRICK J. COUGHLIN HELEN J. HODGES AMBER L. ECK ______________________________ HELEN J. HODGES 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 MILBERG WEISS BERSHAD HYNES & LERACH LLP ALISON M. TATTERSALL 222 Kearny Street, 10th Floor San Francisco, CA 94108 Telephone: 415/288-4545 ABBEY, GARDY & SQUITIERI, LLP STEPHEN T. RODD JAMES J. SEIRMARCO PETER D. BULL 212 East 39th Street New York, NY 10016 Telephone: 212/889-3700 Co-Lead Counsel for Plaintiffs FARUQI & FARUQI, LLP NADEEM FARUQI LUBNA M. FARUQI 415 Madison Avenue 21st Floor New York, NY 10017 Telephone: 212/986-1074 BARRACK, RODOS & BACINE STEPHEN R. BASSER BLAIR A. NICHOLAS 600 West Broadway, Suite 1700 San Diego, CA 92101 Telephone: 619/230-0800 Attorneys for Plaintiffs

DIGNITY\sla03060.brf


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1. Excluded from the Class are defendants herein, members of the immediate family of each of the Individual Defendants, and affiliates of the individual and corporate defendants.

2. The Individual Defendants are Bradley N. Rotter ("B. Rotter"), a founder of Dignity and the Chairman of its Board of Directors; Alan B. Perper ("Perper"), the President and a Director of the Company; John Ward Rotter ("J. Rotter"), the Company's Executive Vice President and Chief Financial Officer and a member of its Board of Directors; and Paul A. Volberding ("Volberding"), a Director of the Company. ¶22. Defendant New Echelon LLC, an entity wholly owned by defendants B. Rotter, J. Rotter and Perper, received a portion of Dignity's initial public offering ("IPO") proceeds as payment on a past due loan it had made to Dignity. ¶¶3, 22. (Paragraph references ("¶__" and "¶¶__") refer to plaintiffs' Second Amended Complaint for Violations of the Federal Securities Laws ("Complaint"), filed March 2, 1998.)

3. The Court dismissed the §§11 and 15 claims on April 24, 1998.

4. Here, as elsewhere, emphasis has been added unless otherwise noted.

5. Similar sentiments have been repeatedly expressed by the Ninth Circuit, see e.g., Epstein v. MCA, Inc., 50 F.3d 644, 668 (9th Cir. 1993), rev'd on othergrounds, 516 U.S. 367 (1996); Arthur Young & Co. v. United States, 549 F.2d 686 (9th Cir. 1977); Blackie, 524 F.2d at 902; Harris, 329 F.2d at 913; and district courts, see e.g., Schaefer v. Overland Express Family of Funds, 169 F.R.D. 124, 130 (S.D. Cal. 1996)("Courts have generally found that actions for securities fraud actions [sic] are usually best maintained as class actions."); In re Seagate Tech. II Sec. Litig., 843 F. Supp. 1341, 1350 (N.D. Cal. 1994) (finding that doubts should be resolved in favor of class certification); In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litig., 122 F.R.D. 251, 253 (C.D. Cal. 1988) ("In a securities case, the requirements of Rule 23 should be liberally construed in favor of class actions."); Schwartz v. Harp, 108 F.R.D. 279, 281 (C.D. Cal. 1985) ("Rule 23 should be liberally construed . . . based upon the belief that class actions are particularly suited to serving as private policing weapons against corporate wrongdoing.").

6. The questions raised by a class certification motion are purely procedural; the court may not examine the merits of the plaintiffs' case when considering a motion for class certification. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974); Blackie, 524 F.2d at 901 n.17; Freedman v. Louisiana-Pacific Corp., 922 F. Supp. 377, 398 (D. Or. 1996) ("In ruling on a motion to certify, the court accepts as true the allegations made in support of certification, and does not consider the merits of the case.").

7. The Ninth Circuit has stated that "`"impractibility" does not mean "impossibility," but only the difficulty or inconvenience of joining all members of the class.'" Harris, 329 F.2d at 913-14 (citation omitted); accord In re First Capital Holdings Corp. Fin. Prods. Sec. Litig., [1992-1993 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶97,403, at 96,198 (C.D. Cal. 1993).

8. Accord Sherman v. Griepentrog, 775 F. Supp. 1383, 1389 (D. Nev. 1991) ("`It is not necessary that the members of the class be so clearly identified that any member can be presently ascertained.' The court may draw a reasonable inference of the size of the class from the facts before it.") (citations omitted) (quoting Carpenter v. Davis, 424 F.2d 257, 260 (5th Cir. 1970)).

9. In Blackie, the class was composed of purchasers of Ampex Corporation stock over a two-year period. Plaintiffs alleged that they purchased at an artificially inflated price due to defendants' misrepresentations of Ampex's financial status. The Ninth Circuit reasoned that although the alleged misrepresentations were contained in 45 different documents issued over a two-year period and each purchaser relied on "a different set of accounting facts," defendants consistently misrepresented the adequacy of reserves, thereby creating a source of price inflation common to each purchaser. 524 F.2d at 904-05. The court found that plaintiffs alleged a common course of conduct by defendants that presented common questions of law and fact. Id. at 902-04.

10. Accord In re MDC Holdings Sec. Litig., 754 F. Supp. 785, 801 (S.D. Cal. 1990) ("[T]he existence, nature, and significance of material omissions and misrepresentations are issues common to all class members."); United Energy, 122 F.R.D. at 254; Schwartz, 108 F.R.D. at 282; In re Unioil Sec. Litig., 107 F.R.D. 615, 618-19 (C.D. Cal. 1985); In re Jackpot Enters. Sec. Litig., [1991 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶96,092, at 90,481 (D. Nev. 1991) ("The main issue in dispute here will be whether the defendants engaged in a pattern of activities and omissions which violated their duties under the relevant statutes to honestly disclose all material information concerning the securities in question. This issue is common to all of the named plaintiffs, and will be necessarily decided in satisfying the claims of all potential plaintiffs within the proposed class.").

11. The claims against defendants arise from the same set of operative facts and common legal theories which include, interalia:

(a) Whether defendants violated the federal securities laws;

(b) Whether Dignity's Prospectus and other public statements disseminated to the investing public misrepresented or omitted material facts about Dignity's earnings and operating condition;

(c) Whether the price of Dignity's common stock was artificially inflated due to defendants' misrepresentations and omissions;

(d) Whether defendants" false and misleading statements created a public market for Dignity's securities in the IPO; and

(e) Whether members of the Class are entitled to monetary damages and, if monetary damages have been sustained, the appropriate measure of damages. ¶119.




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DECLARATION OF SERVICE BY MAIL
PURSUANT TO NORTHERN DISTRICT LOCAL RULE 23-2(c)(2)

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 Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on June 24, 1998, declarant served the NOTICE OF MOTION AND MOTION FOR CLASS CERTIFICATION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed as plaintiffs' counsel on the attached Service List, and by UPS Overnight Service to the parties listed as defendants' counsel 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 24th day of June 1998, at San Diego, California.
 

_______________________________ M. Regan Karstrand

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Source: Milberg Weiss Bershad Hynes & Lerach LLP website