I. INTRODUCTION

II. THE PRESS RELEASE

III. THE MARCH 21 LETTER AND THE PRESS RELEASE WERE PROXY SOLICITATIONS

A. The March 21 Letter Was A Proxy Solicitation

B. The June 9 Press Release Was Also a Proxy Solicitation

C. The Definition of "Proxy Solicitation" Is Interpreted Liberally

D. The Fact that the March 21 Letter and the Press Release Advocated in Favor of the Proposed Plan of Dissolution Instead of Neutrally Describing It Makes Clear That They Were Proxy Solicitations

IV. THIS CASE IS FAR FROM MOOT

V. THIS COURT SHOULD ENJOIN DEFENDANTS FROM COMMITTING FUTURE VIOLATIONS OF THE SECURITIES LAWS

A. Numerous Courts Have Issued Injunctions Against Further Violations of SEC Regulations in Circumstances Similar to Those of This Case

B. Plaintiffs are Entitled to Injunctive Relief

VI. SPECIFIC RELIEF REQUESTED

VII. CONCLUSION

American Carriers, Inc. v. Baytree Inv., Inc., 685 F. Supp. 800 (D. Kan. 1988)

American Ins. Mortg. Inv. v. CRI, Inc., Fed. Sec. L. Rep. ¶ 95,730, 1990 WL 192561 (S.D.N.Y. Nov. 26, 1990)

Calumet Industries, Inc. v. MacLure, 464 F. Supp. 19 (N.D. Ill. 1978)

Canadian Javelin Ltd. v. Brooks, 462 F. Supp. 190 (S.D.N.Y. 1978)

Capital Real Estate Inv. Tax Exempt Fund Ltd. Partnership v. Schwartzberg ("CRITEF I"), 917 F. Supp. 1050 (S.D.N.Y. 1996)

Capital Real Estate Inv. Tax Exempt Fund Ltd. Partnership v. Schwartzberg ("CRITEF II"), 929 F. Supp. 105 (S.D.N.Y. 1996)

ConAgra, Inc. v. Tyson Foods, Inc., 708 F. Supp. 257 (D. Neb. 1989)

Crouch v. Prior, 905 F. Supp. 248 (D.V.I. 1995)

Calumet Industries, Inc. v. MacLure, 464 F.Supp. 19 (N.D. Ill. 1978)

Data Probe Acquisition Corp. v. Datatab, Inc., 568 F. Supp. 1538 (S.D.N.Y),

Dynamics Corp. of America v. CTS Corp., Fed. Sec. L. Rep. ¶ 92,765, 1986 WL 5669 (N.D. Ill. May 6, 1986)

Energy Ventures, Inc. v. Appalachian Co., 587 F. Supp. 734 (D. Del. 1984)

Gulf & Western Indus. v. Great Atlantic & Pacific Tea Co., 476 F.2d 687 (2d Cir. 1973)

Issen v. GSC Enterprises, Inc., 508 F. Supp. 1278 (N.D. Ill. 1981)

Kass v. Arden-Mayfair, Inc., 431 F. Supp. 1037 (C.D. Cal. 1977)

Kaufman v. Cooper Cos., 719 F. Supp. 174 (S.D.N.Y. 1989)

Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970)

Pabst Brewing Co. v. Jacobs, 549 F. Supp. 1068 (D. Del. 1982)

Polaroid Corp. v. Disney, 862 F.2d 987 (3d Cir. 1988)

Regents of Univ. of Cal. v. American Broadcasting Cos., 747 F.2d 511 (9th Cir. 1984)

Riggs Nat. Bank of Washington D.C. v. Allbritton, 516 F. Supp. 164 (D.D.C. 1981)

S.E.C. v. American Real Estate Inv. Trust ("AMREIT"), 529 F. Supp. 1300 (C.D. Cal. 1982)

S.E.C. v. Commercial Inv. & Dev. Corp. of Fla. ("CIDCF"), 373 F. Supp. 1153 (S.D. Fla. 1974)

S.E.C. v. Manor Nursing Ctrs., Inc. ("Manor"), 458 F.2d 1082 (2d Cir. 1972)

S.E.C. v. Okin, 132 F.2d 784 (2d Cir. 1943)

Smallwood v. Pearl Brewing Co., 489 F.2d 579 (5th Cir. 1974)

Studebaker Corp. v. Gittlin, 360 F.2d 692 (2d Cir. 1966)

Union Pac. R. Co. v. Chicago & N.W. Ry. Co., 226 F. Supp. 400 (N.D. Ill. 1964)

15 U.S.C. § 78n(a)

17 C.F.R. Sections 240.14a-2, 14a-3, 14a-6, 14a-9

OTHER AUTHORITIES

Practising Law Institute, Disclosure Statements, Relationship to Securities Laws, and Disclosure Requirements for Prepackaged Plans of Reorganization, 647 PLI/Comm 321 (Westlaw cite), 414-16 (1993)

William W. Barker, SEC Registration of Public Offerings under the Securities Act of 1933, 52 Bus. Law. 65 (Westlaw cite), 66 (1996)

On June 9, 1997, despite the fact that plaintiffs had filed this preliminary injunction motion, defendants once again violated the Securities Exchange Act of 1934. In violation of Exchange Act Rule 14a-3(a) (17 C.F.R. § 240.14a-3(a)), the defendants issued a press release ("the Press Release") which advocated in favor of defendants' proposed Plan of Dissolution even though no proxy statement has yet been disseminated to the limited partners. Luchenitser Reply Decl., Exh. G.

Defendants' March 21 letter and their June 9 Press Release were clearly proxy solicitations, because they advocated in favor of defendants' proposed Plan of Dissolution instead of giving a neutral description of the facts. The March 21 letter and the Press Release show that defendants have embarked on an unlawful plan to predispose the limited partners to vote in favor of the proposed Plan of Dissolution by peppering them with proxy solicitations before they receive the disclosures required to be in a proxy statement. And because the Joint Proxy Statement and Prospectus which defendants filed with the SEC on June 9 is incomplete and omits many critical items of information, it may be several months before the SEC's review process is finished and defendants' proxy statement is distributed to the limited partners.

In response to illegal premature proxy solicitations such as those issued by defendants, numerous courts have issued injunctions prohibiting further proxy solicitations from being made until a proxy statement is disseminated. Plaintiffs respectfully request this court to do likewise and enjoin defendants from committing future violations of the securities laws.

II. THE PRESS RELEASE

On June 9, 1997, the defendants issued a press release ("the Press Release"). Luchenitser Reply Decl., Exh. G. The Press Release announced that the defendants had filed a registration statement with the SEC which describes their proposed Plan of Dissolution. Id. Like their March 21 letter, the Press Release advocated in favor of the proposed Plan of Dissolution. Id.

For instance, the Press Release quoted defendant Leonard Chill as stating, "With this plan, we are delivering on our promise to enhance liquidity for limited partners in our majority shareholder, while increasing the public float for common shareholders in a non-dilutive manner." Id. The Press Release further advocated in favor of the proposed Plan of Dissolution by stating,

The filing [of the registration statement] was made pursuant to a proposed plan of Synthetic Industries, L.P. to provide liquidity for holders of its limited partnership units by offering limited partners the opportunity to receive over time the shares of Synthetic Industries, Inc. common stock that underlie their partnership units.

III. THE MARCH 21 LETTER AND THE PRESS RELEASE WERE PROXY SOLICITATIONS

A. The March 21 Letter Was A Proxy Solicitation

The court in Data Probe ruled that the letter in question was a proxy solicitation because it was "part of a 'continuous plan' intended to end in solicitation and to prepare the way for its success." Id. at 1556 n.7 (quoting Studebaker Corp. v. Gittlin, 360 F.2d 692, 696 (2d Cir. 1966)). The court explained, "[t]he fact that the letter is couched as an announcement of the new merger plan and that the greater part of the letter describes the amended merger agreement confirms that its purpose and foreseeable result was to influence stockholders to vote in favor of the plan." Id.

B. The June 9 Press Release Was Also a Proxy Solicitation

Like their March 21 letter, defendants' June 9 Press Release was a proxy solicitation. ConAgra, Inc. v. Tyson Foods, Inc., 708 F. Supp. 257 (D. Neb.), order vacated by stipulation, 716 F. Supp. 428 (D. Neb. 1989), held that a press release issued under circumstances similar to those in the case at bar was a proxy solicitation. In ConAgra, at the time that the defendant corporation was preparing proxy materials to be sent to shareholders in support of a proposed merger, the corporation issued a press release which discussed the value financial advisors placed on the corporate stock involved. Id. at 268-69. The court concluded that the corporation "in all probability, issued this press release with the hope of soliciting proxy votes in favor of the . . . Merger Agreement." Id. The court explained that "[i]t is clear that proxy solicitations neither have to contain the word proxy within them nor be a direct solicitation of a proxy; indirect methods of solicitation are also covered by the statutes." Id.

C. The Definition of "Proxy Solicitation" Is Interpreted Liberally

In addition to the cases cited above and in plaintiffs' opening brief, many other cases have liberally interpreted the definition of "proxy solicitation" and the doctrine enunciated in S.E.C. v. Okin, 132 F.2d 784, 786 (2d Cir. 1943), that the definition of "proxy solicitation" extends to "writings which are part of a continuous plan ending in solicitation and which prepare the way for its success." For instance, in Kaufman v. Cooper Cos., 719 F. Supp. 174, 185 (S.D.N.Y. 1989), the court held that a press release issued by a committee of stockholders which did not "directly or indirectly request proxies" was nevertheless a proxy solicitation, as it criticized incumbent management. Similarly to the March 21 letter, the Kaufman press release stated that "proxies will be solicited when the applicable law permits." Id.

In Crouch v. Prior, 905 F. Supp. 248, 253 (D.V.I. 1995), a corporate officer met with a securities analyst. Before the meeting, the officer had engaged in activities which evidenced a desire to engage in a consent solicitation concerning the corporation's board of directors and management. Id. at 252, 259. After the meeting, the analyst published a research note which cast the corporation in an unfavorable light. Id. at 253. The court held that the research note was a proxy solicitation, because it "conditioned the market." Id. at 259. The court ruled that the securities laws had been violated, as the corporate officer knew that meetings such as the one he had with the analyst normally result in the publication of a research note. Id. at 253, 259.

In Canadian Javelin Ltd. v. Brooks, 462 F. Supp. 190, 193-94 (S.D.N.Y. 1978), the court held that two mailings by a shareholders' committee which consisted of newspaper articles critical of the corporation's principal shareholder were proxy solicitations, even though the mailings did not ask for proxies. And in Capital Real Estate Inv. Tax Exempt Fund Ltd. Partnership v. Schwartzberg ("CRITEF I"), 917 F. Supp. 1050, 1061-62 (S.D.N.Y. 1996), the court held that two press releases by an investor which were highly critical of a merger proposal and of management and which were issued before any proxy statement had been disseminated were proxy solicitations.¹

The cases cited by defendants in support of their argument that the March 21 letter was not a proxy solicitation are factually inapplicable. Issen v. GSC Enterprises, Inc., 508 F. Supp. 1278, 1294 (N.D. Ill. 1981), held that a merger notice was not a proxy solicitation because the shareholders did not have the power to vote on the merger and the merger notice was required to be given by law. In Kass v. Arden-Mayfair, Inc., 431 F. Supp. 1037, 1046 (C.D. Cal. 1977), the court made a factual finding that a letter was not part of a continuous plan to solicit proxies but did not explain in its opinion what the contents of the letter were. Calumet Industries, Inc. v. MacLure, 464 F. Supp. 19, 32 (N.D. Ill. 1978), held that organizational communications which went on between six members of a shareholders' committee and seven of their supporters were not proxy solicitations. And the communication held not to be a proxy solicitation in Smallwood v. Pearl Brewing Co., 489 F.2d 579, 600-01 (5th Cir.), cert. denied, 419 U.S. 873 (1974), did not at all mention proxies, unlike defendants' March 21 letter, which expresses defendants' intent "to distribute a proxy statement" and states that "you will be able to vote by proxy." See Wininger Decl., Exh. A at 2.

D. The Fact that the March 21 Letter and the Press Release Advocated in Favor of the Proposed Plan of Dissolution Instead of Neutrally Describing It Makes Clear That They Were Proxy Solicitations

Defendants' argument that the March 21 letter was not a proxy solicitation because it was allegedly an "informational letter" is shown to be meritless by looking at Capital Real Estate Inv. Tax Exempt Fund Ltd. Partnership v. Schwartzberg ("CRITEF II"), 929 F. Supp. 105 (S.D.N.Y. 1996). CRITEF II is a well-reasoned opinion dealing with the issue of when a press release by management becomes a proxy solicitation. Id. at 110-14. CRITEF II explained that it would not make sense to treat as proxy solicitations all press releases by management related to transactions that may be voted upon, because certain laws require corporations to promptly alert the marketplace to material corporate events. Id. at 110-11. The court went on to state, however,

On the other hand a per se exclusion of issuer press releases from the definition of "solicitation" would go too far because it cannot seriously be doubted that press releases can serve to condition the corporate electorate in favor of the issuer's point of view. Press releases create impressions in the minds of those who read or learn of their contents. A security holder persuaded by an offer of a premium over market price and a strong recommendation by the issuer's management or board may well decide -- quite rationally -- that the cost in time and energy of reading the proxy statement when it eventually arrives simply is not worthwhile given the expected informational benefit. Thus, advocacy in a press release may well result in discouraging investors from reading the proxy statement and thus impede the full measure of communication that the proxy rules were designed to promote.

The CRITEF II court held that "the appropriate line falls between a purely factual description of the proposed transaction, perhaps coupled with a statement that the issuer's position and more information will be forthcoming in a proxy statement, and a more commendatory or subjective presentation." Id. at 113. The court stated,

If the issuer makes a recommendation or makes other statements that reasonably portray the transaction in a favorable light -- in other words, if it presents the transaction in a manner objectively likely to predispose security holders toward or against it -- it must comply with the proxy rules. If it confines itself to the basic facts, it need not do so.

There is no logical reason why the standard in CRITEF II should not be applicable to both the March 21 letter and the June 9 Press Release. And there is no doubt that both the March 21 letter and the Press Release did not "confine [themselves] to the basic facts," "portray[ed] the transaction in a favorable light," and "went far beyond . . . bare bones factual description of the proposed transaction."

The March 21 letter clearly advocated in favor of the proposed Plan of Dissolution instead of neutrally describing it. In three places, the letter described the plan as "fair." In two spots, the letter described as plan as "equitable." And the letter told the limited partners, "The various terms of the Plan are intended to distribute the Partnership's assets to you in a manner that is in all of your best interests."² Similarly, the Press Release quoted defendant Chill as stating, "With this plan, we are delivering on our promise to enhance liquidity for limited partners in our majority shareholder, while increasing the public float for common shareholders in a non-dilutive manner." Luchenitser Reply Decl., Exh. G. Because the March 21 letter and the Press Release failed to "confine [themselves] to the basic facts," they were unlawful proxy solicitations. See CRITEF II, 929 F. Supp. at 114.

IV. THIS CASE IS FAR FROM MOOT

Defendants argue that this case is moot because, on June 9, 1997, they filed with the SEC a registration statement which contains a Joint Proxy Statement and Prospectus ("the Proxy Statement"). Brown Decl., Exh. E. However, plaintiffs' complaint asks the court to order defendants to take four specific actions: (1) file a proxy statement with the SEC; (2) send the proxy statement to the limited partners; (3) file the March 21 letter with the SEC; and (4) send a corrective disclosure to the limited partners. The filing of the Proxy Statement addresses only the first of these four proposed remedies.

In addition, Exchange Act Rule 14a-3(a) prohibits defendants from making proxy solicitations until a proxy statement is actually disseminated to the limited partners -- the mere filing of a proxy statement is not enough to permit proxy solicitations to be made. See 17 C.F.R. § 240.14a-3(a). By issuing the Press Release prior to disseminating their proxy statement, defendants once again violated Rule 14a-3. The fact that defendants have twice issued illegal proxy solicitations shows that there is a substantial likelihood that they will continue to make proxy solicitations before the distribution of their proxy statement.

Furthermore, defendants' Proxy Statement is an incomplete document which omits many critical items of information. As a result, many months may pass before the SEC's review process is concluded and distribution of the Proxy Statement proceeds. The Proxy Statement states that it is "Subject to Completion, dated ________, 1997." Brown Decl., Exh. E at 1. The Table of Contents of the Proxy Statement claims that the "Agreement and Plan of Withdrawal and Dissolution" is attached as "Annex A" and that a "Fairness Opinion" is attached as "Annex B," but no "Annex A" or "Annex B" exists. See Brown Decl., Exh. E at 6. The Proxy Statement also indicates that amendments to the partnership agreement will be "filed by amendment." Brown Decl., Exh. E at II-2. These omissions indicate that the crucial documents in question do not yet exist.

In addition, the Proxy Statement contains numerous blanks which show that the following information has not yet been determined: the date of the meeting at which the Plan of Dissolution would be voted upon (Brown Decl., Exh. E at 12), the names of the redemption agent and the underwriter involved in the proposed public offering (Brown Decl., Exh. E at 8, 22), and the costs of the proposed Plan of Dissolution and proxy solicitation (Brown Decl., Exh. E at 11, 25). Moreover, the Proxy Statement fails to make any disclosures about defendants' conflicts of interest, the control premium, or the fact that the proposed Plan of Dissolution would destroy the control premium. See Brown Decl., Exh. E.

The SEC's review of a registration statement can take several months. See Practising Law Institute, Disclosure Statements, Relationship to Securities Laws, and Disclosure Requirements for Prepackaged Plans of Reorganization, 647 PLI/Comm 321 (Westlaw cite), 414-16 (1993); William W. Barker, SEC Registration of Public Offerings under the Securities Act of 1933, 52 Bus. Law. 65 (Westlaw cite), 66 (1996). Due to the glaring holes in the Proxy Statement which is contained in defendants' registration statement, its length, and the complexity of the proposed Plan of Dissolution, the SEC's review of defendants' registration statement may be especially lengthy. The strong probability that significant time will pass before defendants' proxy statement can be disseminated counsels in favor of an injunction prohibiting defendants from making further proxy solicitations until dissemination of the proxy statement.³

V. THIS COURT SHOULD ENJOIN DEFENDANTS FROM COMMITTING FUTURE VIOLATIONS OF THE SECURITIES LAWS

A. Numerous Courts Have Issued Injunctions Against Further Violations of SEC Regulations in Circumstances Similar to Those of This Case

A large number of courts, in response to the unlawful making of proxy solicitations in advance of the dissemination of a proxy statement, have issued injunctions prohibiting further violations of SEC regulations. For instance, in CRITEF I, 917 F. Supp. at 1065, after finding that the defendant had made unlawful proxy solicitations through press releases, the court enjoined the defendant from making any further proxy solicitations without complying with the Exchange Act Rules. Similarly, in ConAgra, 708 F. Supp. at 270, after finding that a press release was an illegal proxy solicitation, the court issued an injunction prohibiting further proxy solicitations until the Exchange Act Rules were complied with. Likewise, in Canadian Javelin, 462 F. Supp. at 194, the court prohibited the defendants from committing future violations of the filing and informational requirements of the proxy regulations after finding that two mailings had violated these requirements.⁴

In S.E.C. v. Manor Nursing Ctrs., Inc. ("Manor"), 458 F.2d 1082, 1100 (2d Cir. 1972), the court stated, "[t]he critical question in deciding whether to issue a permanent injunction^[5] in view of past violations is whether there is a reasonable likelihood that the wrong will be repeated." The court added that "fraudulent past conduct gives rise to an inference of a reasonable expectation of continuing violations." Id. In this case, defendants' past violations of proxy regulations, combined with the significant likelihood that a substantial period of time will elapse before defendants are able to disseminate their proxy statement, give rise to a strong inference that defendants will commit violations in the future unless they are enjoined.

One of the factors that the Manor court considered in finding that a permanent injunction was appropriate was that the defendants "did not attempt to cease or undo the effects of their unlawful activity until the institution of an investigation," though they did cease their "illegal activities prior to the institution of suit." Id. at 1100-01. Here, through their Press Release, the defendants have continued their unlawful activity even though suit has been filed against them. In addition, the Manor court held that the fact that the defendants "continued to maintain that their conduct was blameless was a factor appropriately considered by the district court in assessing the need for a permanent injunction." Id. at 1101. The defendants here also contend that their past conduct was blameless.

B. Plaintiffs are Entitled to Injunctive Relief

As explained in Smallwood, 489 F.2d at 600, if defendants are allowed to continue with their apparent plan to pepper the limited partners with proxy solicitations before they disseminate a proxy statement, "seeds of argument could be planted so deeply and securely prior to the time of formal proxy solicitation as to resist effectively later uprooting." Defendants' premature advocacy "may well result in discouraging investors from reading the proxy statement and thus impede the full measure of communication that the proxy rules were designed to promote." See CRITEF II, 929 F. Supp. at 112.

It is well-established that such infringement of investors' voting rights can constitute irreparable harm that cannot be compensated by damages. See Riggs Nat. Bank of Washington D.C. v. Allbritton, 516 F. Supp. 164, 181 (D.D.C. 1981).⁶ On the other hand, defendants will suffer no significant harm from merely being ordered to comply with the law. See CRITEF I, 917 F. Supp. at 1065; ConAgra, 708 F. Supp. at 270; Studebaker, 360 F. Supp. at 698.

Since the balance of harms weighs in their favor, and since plaintiffs have demonstrated an overwhelming probability of success on the merits, plaintiffs are entitled to injunctive relief. See Regents of Univ. of Cal. v. American Broadcasting Cos., 747 F.2d 511, 515 (9th Cir. 1984). In addition, the public interest in enforcing the federal securities laws also points in favor of injunctive relief. See Gulf & Western Indus. v. Great Atlantic & Pacific Tea Co., 476 F.2d 687, 699 (2d Cir. 1973); Union Pac. R. Co. v. Chicago & N.W. Ry. Co., 226 F. Supp. 400, 413 (N.D. Ill. 1964).

VI. SPECIFIC RELIEF REQUESTED

"Upon a showing of violations of the federal securities laws, the Court has broad powers and wide discretion to fashion a remedy appropriate to protect the public interest." AMREIT, 529 F. Supp. at 1306 (citing Mills v. Electric Auto-Lite Co., 396 U.S. 375, 391 (1970)). The primary relief plaintiffs seek in this case is a preliminary injunction prohibiting defendants (1) from making any additional proxy solicitations until they disseminate a proxy statement to the limited partners and (2) from otherwise violating the securities laws in the future.

In addition, plaintiffs respectfully request that defendants be enjoined from conducting further solicitations until they send the limited partners a corrective disclosure which reveals the matters material to but not disclosed in the March 21 letter and the June 9 Press Release, as set forth on pages 13-14 of plaintiffs' opening brief. Courts often require the issuance of corrective disclosures to correct material nondisclosures in proxy solicitations and tender offer materials. See American Carriers, Inc. v. Baytree Inv., Inc., 685 F. Supp. 800, 812-13 (D. Kan. 1988).⁷

Plaintiffs also respectfully request that defendants be prohibited from conducting further proxy solicitations until they file the March 21 letter with the SEC. While it is true that plaintiff Wininger filed the March 21 letter with the SEC as an exhibit to his preliminary proxy statement, see Brown Decl., Exh. J at 13-17, defendants cannot fully remedy their non-compliance with SEC regulations until they themselves file the March 21 letter as a proxy solicitation with the SEC. See 17 C.F.R. § 240.14a-6(b).

Plaintiffs also propose that the court issue the following equitable relief in addition to the relief requested above, or as an alternative to some of that relief:

(1) An order prohibiting the defendants from sending out their proxy statement or making any other proxy solicitations for a period of 120 days, or such other period as the court may deem proper, in order to dissipate the taint inflicted upon the limited partners' voting rights by defendants' unlawful solicitations.

(2) An order requiring the defendants to disclose in their proxy statement all the material facts described on pages 13-14 of plaintiffs' opening brief.

VII. CONCLUSION

Defendants' arguments against injunctive relief amount to arguments that they should be allowed to get away with breaking the law. In order to deter defendants and others from violating the securities laws in the future, this court should issue the injunctive relief for which plaintiffs have asked.

¹ See also S.E.C. v. American Real Estate Inv. Trust ("AMREIT"), 529 F. Supp. 1300, 1306 (C.D. Cal. 1982) (mailings which, among other things, described financial condition of real estate investment trust (REIT), contained annual report about REIT, and praised records of persons subsequently nominated to serve as trustees were proxy solicitations); Nottingham Partners, Fed. Sec. L. Rep., S.E.C. No-Action Letters ¶ 77,862, 1984 WL 46009 (Dec. 17, 1984) (proposed letter by general partner to shareholders asking "whether they would be willing to consider their selling their shares for a minimum price" would be a proxy solicitation); cf. S.E.C. v. Commercial Inv. & Dev. Corp. of Fla. ("CIDCF"), 373 F. Supp. 1153, 1163, 1165 (S.D. Fla. 1974) (report sent to shareholders explaining that public offering was being delayed due to SEC's review was "offer to sell" and "prospectus" within meaning of § 2(10) of Securities Act of 1933, 15 U.S.C. § 77b(10)).

² The following quotations from the March 21 letter are clear examples of the advocacy which permeated the letter:

(a) "[T]he Plan has been designed to provide fair and equitable treatment of all our Limited Partners." (Wininger Decl., Exh. A at 3);

(b) "We have more than 1800 limited partners with a wide variety of investment goals and objectives. We believe the Plan will satisfy these diverse needs in a fair, equitable, and tax efficient manner." (Wininger Decl., Exh. A at 1);

(c) "[T]he Plan will provide that the General Partner will receive only amounts to which it is clearly entitled under the Partnership Agreement and the General Partner will not receive any fees or other compensation for carrying out the Plan." (Wininger Decl., Exh. A at 2); and

(d) "The various terms of the Plan are intended to distribute the Partnership's assets to you in a manner that is in all of your best interests. We will not conduct a stock offering at a price that, at the time, does not represent fair value for the shares." (Wininger Decl., Exh. A at 2).

³ Defendants' accusation that plaintiffs are engaging in forum shopping is meritless. The other lawsuit filed by plaintiffs was filed in Delaware state court. See Brown Decl., Exh. B. Only the federal courts have jurisdiction over violations of the Securities Exchange Act of 1934. 15 U.S.C. § 78aa; Silberkleit v. Kantrowitz, 713 F.2d 433, 434-35 (9th Cir. 1983).

⁴ See also Kaufman, 719 F. Supp. at 186 (reacting to press release which was unlawful proxy solicitation, court issued injunction against future violations of securities laws); AMREIT, 529 F. Supp. at 1307 (issuing injunction prohibiting, among other things, future violations of Exchange Act Rules 14a-3, 14a-6, and 14a-9, after past violations were found); CIDCF, 373 F. Supp. at 1165 (court issued permanent injunction against future violations of securities laws after finding that violations had been committed).

⁵ Note that plaintiffs seek only a preliminary injunction here.

⁶ See also Kaufman, 719 F. Supp. at 178, 185; Dimond v. Retirement Plan for Employees of Michael Baker Corp. & Affiliates, 582 F. Supp. 892, 899-900 (W.D. Pa. 1983); Eisenberg v. Chicago Milwaukee Corp., 537 A.2d 1051, 1062 (Del. Ch. 1987).

⁷ See also Polaroid Corp. v. Disney, 862 F.2d 987, 1006-07 (3d Cir. 1988); Energy Ventures, Inc. v. Appalachian Co., 587 F. Supp. 734, 743 (D. Del. 1984); Pabst Brewing Co. v. Jacobs, 549 F. Supp. 1068, 1079 (D. Del.), aff'd, 707 F.2d 1392, 1394 (3d Cir. 1982); American Ins. Mortg. Inv. v. CRI, Inc., Fed. Sec. L. Rep. ¶ 95,730, 1990 WL 192561 at *8, 14, 20 (S.D.N.Y. Nov. 26, 1990); Dynamics Corp. of America v. CTS Corp., Fed. Sec. L. Rep. ¶ 92,765, 1986 WL 5669 at *4 (N.D. Ill. May 6, 1986).