I. INTRODUCTION

II. MANY COURTS HAVE DENIED ADMISSION PRO HAC VICE TO ATTORNEYS WHO HAVE COMMITTED ETHICAL VIOLATIONS.

III. BODE VIOLATED ETHICAL RULES BY SOLICITING CLIENTS WHO HE KNEW WERE ALREADY REPRESENTED BY COUNSEL

IV. BODE VIOLATED ETHICAL RULES BY FAILING TO CLEARLY INDICATE ON THE ENVELOPE AND COVER OF THE NOVEMBER 26 LETTER THAT IT WAS A SOLICITATION OF CLIENTS

V. BODE VIOLATED ETHICAL RULES BY MAKING FALSE AND MISLEADING STATEMENTS IN HIS NOVEMBER 26 LETTER

VI. CONCLUSION

Cases

D.H. Overmeyer Co. v. Robson,
750 F.2d 31 (6th Cir. 1984)

Fred Weber, Inc. v. Shell Oil Co.,
566 F.2d 602 (8th Cir. 1977)

Hull v. Celanese Corp.,
513 F.2d 568 (2d Cir. 1975)

In re Admission Pro Hac Vice of Chokwe Lumumba,
526 F. Supp. 163 (S.D.N.Y. 1981)

In re Rappaport,
558 F.2d 87 (2d Cir. 1977)

In re Washington Public Power Supply Sec. Litig.,
19 F.3d 1291 (9th Cir. 1994)

Panzardi-Alvarez v. United States,
879 F.2d 975 (1st Cir. 1989)

Thomas v. Cassidy,
249 F.2d 91 (4th Cir. 1957)

United States v. Collins,
920 F.2d 619 (10th Cir. 1990)

United States v. Howell,
936 F. Supp. 767 (D. Kan. 1996)

United States v. Ries,
100 F.3d 1469 (9th Cir. 1996)

United States v. Summet,
862 F.2d 784 (9th Cir. 1988)

Statutes

ABA Model Rule of Professional Conduct 7.1(a)

ABA Model Rule of Professional Conduct 7.3(c)

American Bar Association ("ABA") Model Rule of Professional Conduct 4.2

California Rule of Professional Conduct 1-400(D)

California Rule of Professional Conduct 1-400(E)

California Rule of Professional Conduct 2-100(A)

I. INTRODUCTION

Attorney William Bode claims that he represents over 300 limited partners in Synthetic Industries, L.P., including several limited partners who are seeking to intervene in this action. Motion of Pro-Plan Intervenors to Intervene, filed on or about December 22, 1997, at 1. However, Bode committed several violations of the Rules of Professional Conduct of the State Bar of California and the ABA Model Rules of Professional Conduct in soliciting the limited partners he claims to represent.

In violation of California Rule of Professional Conduct 2-100(A) and ABA Model Rule 4.2, Bode sent a solicitation letter to numerous limited partners who were already represented by counsel. In violation of Standard 5 of California Rule of Professional Conduct 1-400(E), and in violation of ABA Model Rule 7.3(c), Bode failed to clearly indicate on the first page of his solicitation letter or the envelope it came in that he was soliciting clients. And, in violation of California Rule of Professional Conduct 1-400(D) and ABA Model Rule 7.1(a), Bode made false and misleading statements in his solicitation letter about the distributions that the General Partner is entitled to receive and the attorney's fees class counsel would be entitled to receive.

For these reasons, Lead Plaintiff Dwight E. Wininger ("the Lead Plaintiff") respectfully requests that Bode's application to be admitted to practice before this Court pro hac vice be denied.

II. MANY COURTS HAVE DENIED ADMISSION PRO HAC VICE TO ATTORNEYS WHO HAVE COMMITTED ETHICAL VIOLATIONS.

Civil Local Rule 11-2 provides that the court has discretion as to whether to admit an application of an attorney to appear pro hac vice. Under Rule 11-2, and well-established case authority, this Court has the discretion to deny admission pro hac vice to an attorney who has committed ethical violations.

Rule 11-2 states:

In the discretion of the court, an attorney who is not a member of the bar of this court may appear pro hac vice in a particular action in this district under the following conditions:
. . . .
(2) The applicant agrees to abide by the Standards of Professional Conduct set forth in Civil L.R. 11-3.

(Emphasis added.) In turn, Civil Rule 11-3(a) provides:

Every member of the bar of this court and any attorney permitted to practice in this court under Civil L.R. 11-2 shall:
(1) Be familiar with and comply with the standards of professional conduct required of members of the State Bar of California;
(2) Maintain respect due to courts of justice and judicial officers;
(3) Practice with the honesty, care, and decorum required for the fair and efficient administration of justice;
(4) Discharge the obligations owed to his or her clients and to the court . . .

(Emphasis added.) It is implicit from Rules 11-2 and 11-3 that an attorney, like Bode, who has already committed serious violations of the Rules of Professional Conduct of the State Bar of California should be denied admission pro hac vice.

Interpreting similar court rules, many federal courts have denied pro hac vice admissions "because there has been evidence of ethical violations." Panzardi-Alvarez v. United States, 879 F.2d 975, 981 (1st Cir. 1989), cert. denied, 493 U.S. 1082 (1990). See United States v. Ries, 100 F.3d 1469, 1471 (9th Cir. 1996) (pro hac vice application may be denied in criminal case where attorney's past actions suggest that he may not abide by court's rules and practices), cert. denied, 118 S.Ct. 134 (1997); United States v. Collins, 920 F.2d 619, 626 (10th Cir. 1990) (court may "consider an attorney's ethical fitness before granting a motion to proceed pro hac vice"), cert. denied, 500 U.S. 920 (1991); United States v. Summet, 862 F.2d 784, 786 (9th Cir. 1988) (pro hac vice admission revoked after attorney committed contemptuous conduct toward court); D.H. Overmeyer Co. v. Robson, 750 F.2d 31 (6th Cir. 1984) (pro hac vice application denied because of evidence that conflict of interest had not been reported to court); In re Rappaport, 558 F.2d 87, 89 (2d Cir. 1977) (application denied due to ethical violations); Thomas v. Cassidy, 249 F.2d 91 (4th Cir. 1957) (application denied because of "unlawyerlike conduct"); United States v. Howell, 936 F. Supp. 767, 773-74 (D. Kan. 1996) (application denied where attorney made false and misleading statements to magistrate judge), cert. denied, 355 U.S. 958 (1958); cf. In re Admission Pro Hac Vice of Chokwe Lumumba, 526 F. Supp. 163, 165 (S.D.N.Y. 1981) (admission denied where evidence showed that attorney intended "to carry on a propaganda campaign much beyond the limits of proper representation of a client"). Thus, violation of the ethical rules of the State Bar of California is a sufficient ground to deny Bode's admission to appear pro hac vice.

III. BODE VIOLATED ETHICAL RULES BY SOLICITING CLIENTS WHO HE KNEW WERE ALREADY REPRESENTED BY COUNSEL

California Rule of Professional Conduct 2-100(A) states, "While representing a client, a member shall not communicate directly or indirectly about the subject of the representation by another lawyer in the matter, unless the member has the consent of the other lawyer." American Bar Association ("ABA") Model Rule of Professional Conduct 4.2 is virtually identical. Bode violated these rules by sending a solicitation letter to limited partners whom he knew were represented by other counsel with respect to their investment in the Partnership.

On or about November 26, 1997, Bode sent a letter ("the November 26 Letter") to the limited partners in the Partnership (collectively, "the Limited Partners"), soliciting them to sign an enclosed representation agreement and send him a retainer. Declaration of Charlene E. Sutherland in Opposition to Application of William Bode to Appear Pro Hac Vice ("Sutherland Decl."), Ex. A. The November 26 Letter stated that Bode represented certain limited partners who worked with the General Partner to formulate the flawed and unlawful Proposed Plan. Id. at 1. The letter attacked class counsel and the limited partners represented by class counsel and blindly endorsed positions taken by the General Partner which are extremely inimical to the Limited Partners' interests. Id. at 1-4.

The November 26 Letter stated that Bode intended to move to intervene in this action and the Delaware action, remove the current class counsel, and dismiss all the claims of both lawsuits. Id. at 3-4. The letter solicited the Limited Partners to pay Bode a retainer and hire Bode's firm to represent them in support of this ill-advised scheme (Id. at 4), and was accompanied by a blank attorney-client fee and representation agreement (Id. at 6).

The November 26 Letter was sent to limited partners that already had signed representation agreements with class counsel. See Luchenitser Decl. (filed herewith), Ex. A (letter from limited partner stating, "When I received your letter of November 26th I thought it made sense and sent you my check for $50.00. I also sent a note on your requested form asking how this was going to work as I am currently signed up with Mr. Mills' firm."). The letter was also sent to the limited partners who are being represented by the firm of Howard Rice et al. and are seeking to intervene in this lawsuit. Sutherland Decl., ¶ 3. Some of the limited partners the letter was sent to, such as one of the proposed intervenors being represented by Howard Rice, reside in California. See Sutherland Decl., Ex. B.

Bode sent out the November 26 Letter with full knowledge that he was sending the letter out to limited partners already represented by counsel. In a letter to class counsel dated December 1, 1997, Bode stated, "Your letters to the limited partners state that you represent approximately 22% of the limited partners in the litigation in Delaware and California." Luchenitser Decl. (filed herewith), Ex. B at 1.

Bode may claim that he did not know the names of the limited partners represented by class counsel, since class counsel had not publicly disclosed their names, with the exception of the name of the Lead Plaintiff and the name of a second representative plaintiff in the Delaware action. However, Bode could have easily asked class counsel for the names of the limited partners represented by class counsel, yet did not do so. Luchenitser Decl. (filed herewith), ¶ 3. Instead, Bode asked class counsel for the names of these limited partners only more than a month after sending out the November 26 letter. Luchenitser Decl. (filed herewith), Ex. C at 1.

Moreover, Bode sent out the November 26 Letter to all but two of the Limited Partners,¹ even though he knew that class counsel had represented that it had entered into representation agreements with more than a fifth of the Limited Partners. Thus, Bode knew that the letter would be received by some limited partners who were already represented by counsel, even if he did not know who these limited partners were. In addition, Bode sent the November 26 Letter to the limited partners being represented by Howard Rice, whose names appeared on the first page of pleadings which they had filed in this action on October 15, 1997. See Sutherland Decl., ¶ 2. Therefore, Bode willfully and knowingly violated California Rule of Professional Conduct 2-100(A) and ABA Model Rule of Professional Conduct 4.2.

IV. BODE VIOLATED ETHICAL RULES BY FAILING TO CLEARLY INDICATE ON THE ENVELOPE AND COVER OF THE NOVEMBER 26 LETTER THAT IT WAS A SOLICITATION OF CLIENTS

California Rule of Professional Conduct 1-400(D) states that a "communication or solicitation[²] shall not . . . [f]ail to indicate clearly, expressly, or by context, that it is a communication or solicitation, as the case may be." Rule of Professional Conduct 1-400(E) states, "The Board of Governors of the State Bar shall formulate and adopt standards as to communications which will be presumed to violate this rule 1-400." Pursuant to Rule 1-400(E), the Board of Governors has adopted Standard 5, which states that a violation of Rule 1-400 is presumed in the case of

A "communication," except professional announcements, seeking professional employment for pecuniary gain, which is transmitted by mail or equivalent means which does not bear the word "Advertisement," "Newsletter" or words of similar import in 12 point print on the first page. If such communication, including firm brochures, newsletters, recent legal development advisories, and similar materials, is transmitted in an envelope, the envelope shall bear the word "Advertisement," "Newsletter" or words of similar import on the outside thereof.

(Emphasis added.) ABA Model Rule of Professional Conduct 7.3(c) has a similar requirement.

It is clear from the face of Bode's November 26 Letter that it did not contain the words "Advertisement," "Newsletter," or other words of similar import on its first page. Sutherland Decl., Ex. A. Moreover, the outside of the envelope in which the November 26 Letter was mailed did not display the words "Advertisement," "Newsletter," or any other similar words. Sutherland Decl., ¶ 3, Ex. B. Therefore, Bode improperly solicited clients in violation of California Rule of Professional Conduct 1-400 and ABA Model Rule of Professional Conduct 7.3(c).

V. BODE VIOLATED ETHICAL RULES BY MAKING FALSE AND MISLEADING STATEMENTS IN HIS NOVEMBER 26 LETTER

California Rule of Professional Conduct Rule 1-400(D) states:

A communication or a solicitation (as defined herein) shall not:
(1) Contain any untrue statement; or
(2) Contain any matter, or present or arrange any matter in a manner or format which is false, deceptive, or which tends to confuse, deceive, or mislead the public; or
(3) Omit to state any fact necessary to make the statements made, in the light of circumstances under which they are made, not misleading to the public.

ABA Model Rule of Professional Conduct 7.1(a) similarly prohibits false or misleading statements in attorney-client solicitations. Bode's November 26 Letter violated Rules 1-400(D) and 7.1(a) through at least two major misrepresentations.

One of the central reasons the Lead Plaintiff opposes the Proposed Plan is that the Proposed Plan fails to realize a control premium for the Partnership. Bode's letter falsely represented that, if a control premium were to be obtained, most or all of the control premium would be received by the General Partner, not the Limited Partners. This false representation was based on a false statement contained in defendants' proxy materials, which is one of the key misrepresentations challenged in the pending complaint in this case. First Amended and Supplemental Complaint, ¶ 85.

The Partnership Agreement provides that the Limited Partners receive 99 percent of all distributions, and the General Partner receives 1 percent, until a priority return is reached. See Second Supplemental Declaration of Alex J. Luchenitser in Support of Temporary Restraining Order and Preliminary Injunction, filed Oct. 17, 1997, ¶ 6(f), pp. 138-39. Under the Partnership Agreement, the priority return is reached once the Limited Partners receive distributions sufficient to provide them with a 6 percent annual compounded return on their investment. Id. at § 6(d), p. 136. After the priority return is reached -- the General Partner is entitled to 30 percent of all subsequent distributions and the Limited Partners are entitled to 70 percent. Id. at § 6(f), pp. 138-39.

Bode's letter, however, falsely represented that, once the priority return is reached, the General Partner would be entitled to 100 percent of all subsequent distributions until the General Partner received over $58 million worth of distributions, after which the General Partner would be entitled to 30 percent. Sutherland Decl., Ex. A at 2, 5. Bode's letter further represented that the priority return would be reached if the Company's stock is sold for $25 per share, which is approximately its current price. Id. Thus, according to Bode, if a control premium were to be obtained, the General Partner would receive all of it unless it exceeded $58 million. Id.

This misrepresentation blindly echoed a misrepresentation made by the defendants in their proxy materials. Defendants' Proxy Statement represented that, once the priority return is reached, the General Partner will be entitled to 100 percent of all distributions until the ratio of the General Partner's and Limited Partners' capital accounts reached 30:70, after which the General Partner would be entitled to only 30 percent of distributions. See Declaration of Alex J. Luchenitser in Support of TRO and Preliminary Injunction, filed Oct. 1, 1997, Ex. G at 29. Moreover, even if the false representation in the Proxy Statement was accurate, the General Partner would be entitled to 100 percent of all distributions until the General Partner received approximately $30 million, not $58 million as claimed by Bode. Luchenitser Decl. (filed herewith), ¶ 6.

There is no doubt that the representation in the Proxy Statement is materially false. The official offering memorandum and accompanying materials prepared by the General Partner and distributed to the Limited Partners and to brokers when the General Partner initially sold units in the Partnership clearly interpret the Partnership Agreement as providing that the General Partner is entitled to only 30 percent of all distributions once the priority return is reached. Luchenitser Decl. (filed herewith), Ex. D, E. For instance, the Offering Memorandum given to the Limited Partners, as part of an "Illustration of the Economic and Tax Consequences of a Hypothetical Sale of the Company," states, "Subsequent to the Priority Return, the balance of the cash is allocated 70% to the Limited Partners and 30% to the general partner." Luchenitser Decl. (filed herewith), Ex. D at 220.

Therefore, Bode's (and defendants') representation that the General Partner would be entitled to 100 percent of all distributions until the General Partner received tens of millions of dollars is false. Like the General Partner, Bode either knew the representation was false or made it in reckless disregard of the truth, since the offering materials, which were received by the limited partners who initially retained Bode, clearly contradict the representation. It is incredible that an attorney who claims to represent limited partners would go on record in support of a position that is so adverse to the interests of the Limited Partners -- if Bode's position were accepted, it could cost the Limited Partners $58 million.

This misrepresentation concerning the General Partner's entitlement to distributions was critical to Bode's ability to solicit clients in support of dismissing all claims in this lawsuit and the Delaware action, since one of the main claims made by the Lead Plaintiff is that the Limited Partners will make significantly more money than they would under the Proposed Plan if a control premium were to be obtained. The misrepresentation was one of the principal arguments in Bode's letter -- the letter spends several paragraphs discussing the misrepresentation and contains a detailed chart based on it. Sutherland Decl., Ex. A at 2-3, 5.

The misrepresentation concerning the General Partner's entitlement to distributions was compounded by a second, wholly unfounded misrepresentation in the November 26 letter. Without any basis, Bode represented that, if a class is certified, counsel for Lead Plaintiff would receive attorney's fees of at least approximately $8 million. Sutherland Decl., Ex. A at 3, 5. This misrepresentation was based on the unsupported representation that the court would calculate class counsel's fees by giving class counsel four to six percent of the total proceeds of the liquidation of the partnership. Id. at 3. Incorporating this misrepresentation, Bode claimed that, if a control premium of approximately $83 million were to be obtained, the first $58 million would go to the General Partner, the next $8 million would go to counsel for Lead Plaintiff, and the remaining $17 million would go to transaction costs, leaving the Limited Partners with nothing. Id. at 5.

Bode's statements about class counsel's fees were unsupported by the law. In the Ninth Circuit, courts award attorney's fees to class counsel using one of two methods. Under the percentage method, which is preferred in this district, class counsel receives a percentage of the common fund created for the class by counsel's efforts. Under the lodestar method, class counsel receives the reasonable hours expended multiplied by a reasonable hourly rate, which is sometimes enhanced or reduced by a multiplier that is determined by, among other factors, the benefit conferred upon the class. See, e.g., In re Washington Public Power Supply System Sec. Litig., 19 F.3d 1291, 1294 n.2 (9th Cir. 1994).

There is no authority for basing class counsel's attorney's fees in a case such as this one on the total sale proceeds received by the class, since the total sale proceeds would exceed the common fund. Under the hypothetical scenario set forth in Bode's letter, in which $75 million of an $83 million control premium go to the General Partner or transaction costs, it is highly unlikely that any court would award $8 million in fees to class counsel, assuming arguendo that Bode's misrepresentation about the General Partner's entitlement to distributions and his estimate of transaction costs were true.

Bode's misrepresentation about the attorney's fees counsel for the Lead Plaintiff may receive was the second centerpiece of Bode's reckless scheme to intervene in this and the Delaware action in support of the anti-limited-partner positions taken by the General Partner and the General Partner's unlawful Proposed Plan. This misrepresentation, and the misrepresentation that the General Partner will be entitled to receive 100 percent of distributions after the priority return is reached, violated California Rule of Professional Conduct Rule 1-400(D) and ABA Model Rule of Professional Conduct 7.1(a).

VI. CONCLUSION

Bode violated at least three separate ethical rules in his efforts to solicit clients in furtherance of his plan to intervene in this action and oust class counsel. First, Bode violated ethical rules prohibiting attorneys from communicating directly with parties represented by counsel. Second, Bode violated ethical rules regulating solicitations of clients by attorneys, as he failed to clearly identify that his November 26 Letter was a solicitation on the first page of the letter and on the envelope in which the letter came in.

Third, parroting a central false representation in defendants' proxy materials, Bode represented that if a transaction which realized a control premium -- or any other future transaction -- resulted in a higher return for the Partnership than the Proposed Plan would, the Partnership Agreement would entitle the General Partner to receive the entirety of this higher return unless it exceeded $58 million. This statement was plainly false, since the Partnership Agreement, as explained in the General Partner's offering materials, entitles the General Partner to 30 percent of distributions, and no more, once the priority return is reached. It is incredible that an attorney who purports to represent limited partners would go on record in support of such a position. By endorsing this false position, and by making misrepresentations concerning the fees class counsel could receive, Bode violated ethical rules prohibiting the making of false and misleading statements in solicitations of clients by attorneys.

Bode should not be permitted to continue to profit from his violations. For the foregoing reasons, Lead Plaintiff Wininger respectfully requests that Bode's application to appear pro hac vice in this action be denied.

¹ Apparently Bode did not send the November 26 Letter to the Lead Plaintiff or to the second representative plaintiff in the Delaware action.

² As used in the Rules of Professional Conduct, the term "communication" covers "any message made by or on behalf of a member concerning the availability for professional employment of a member or a law firm directed to any former present or prospective client," while the term "solicitation" covers certain types of "communications." California Rule of Professional Conduct 1-400(A), (B).