Gilmur R. Murray, Esq. (#111856)
Derek G. Howard, Esq. (#118082)
Alex J. Luchenitser, Esq. (#177367)
THE MILLS LAW FIRM
300 Drakešs Landing, Suite 155
Greenbrae, California 94904
Telephone: (415) 464-4770

Attorneys for Plaintiff Dwight E. Wininger
On Behalf of Himself and All Others Similarly Situated

Plaintiff Dwight E. Wininger hereby moves for an order requiring defendants SI Management L.P., et al. to: (1) answer Plaintiff's First Set of Rule 33 Interrogatories, dated October 8, 1997; (2) produce the documents sought by Plaintiff's First Set of Rule 34 Requests for Production of Documents, dated October 8, 1997; (3) produce a deponent for the Deposition of SI Management L.P., which has been noticed for March 17, 1998; (4) comply with all other outstanding discovery requests; and (5) cooperate with plaintiff's discovery requests in the future. Plaintiff files this motion to compel as an expedited motion in accordance with Civil L.R. 37-1(d) and 7-10. Counsel for plaintiff hereby certifies that he gave defendants notice of this motion on February 20, 1998 and complied with the other requirements of Civil L.R. 7-10(b). This motion is based on the Memorandum of Points and Authorities herein and the accompanying Declaration of Alex J. Luchenitser.

I. WHAT THIS CASE IS ABOUT

This case is a class action filed on behalf of the limited partners ("the Limited Partners") of Synthetic Industries, L.P. ("the Partnership"). Ex. K.¹ The defendants are the Partnership's general partner ("the General Partner") and the individuals and entities who control it. Ex. K at 3-4. The Partnership's sole asset is two-thirds of the stock of Synthetic Industries, Inc. ("the Company"). Ex. L at 5.

The defendants have proposed to liquidate the Partnership through a "Plan of Withdrawal and Dissolution" ("the Proposed Plan" or "the Plan"). Ex. L. As alleged in plaintiff's First Amended and Supplemental Complaint ("the Complaint"), the Proposed Plan violates the Limited Partnership Rollup Reform Act of 1993 ("the Rollup Reform Act"). Ex. K at 29-31. Defendants solicited proxies for approval of the Proposed Plan from September 19, 1997 through November 1997, and claim to have received approval of the Plan at a special meeting of the Partnership on November 7, 1997. Ex. M. As alleged in the Complaint, however, defendants secured this purported "approval" by failing to disclose many material facts and making numerous false and misleading statements in their proxy solicitations, thereby violating the federal securities laws. Ex. K at 14-28.

The Honorable Claudia Wilken issued a temporary restraining order against the implementation of the Proposed Plan on November 6, 1997, and has taken under submission a motion for a preliminary injunction. Ex. N at 6-7. The plaintiff has also filed a lawsuit against the defendants in Delaware Chancery Court, alleging state law claims. Ex. O. On October 23, 1997, the Delaware Court of Chancery issued a preliminary injunction against the implementation of the Plan. Ex. P. Defendants' appeal of this decision is pending before the Delaware Supreme Court. Ex. Q, R.

II. DEFENDANTS HAVE FLATLY REFUSED TO COMPLY WITH PLAINTIFF'S DISCOVERY REQUESTS

On October 8, 1997, plaintiff sent defendants Plaintiff's First Set of Rule 33 Interrogatories and Plaintiff's First Set of Rule 34 Requests for Production of Documents. Ex. A, B. On the same date, plaintiff noticed the depositions of two of the defendants. Ex. Y, Z. Defendants refused to respond to these discovery requests, inaccurately claiming that discovery was stayed. Dec. ¶ 2, Ex. S at 7, Ex. U.

At a January 9, 1998 hearing, Judge Wilken made clear that discovery was not stayed and may proceed. Ex. C at 67. Judge Wilken suggested that plaintiff identify specific items of discovery in exchange for prompt receipt of which he would be willing to defer taking other discovery until later. Ex. C at 68-69. In letters dated January 29, 1998 and February 5, 1998, plaintiff offered to defer other discovery requests if defendants promptly (1) produced documents encompassed by Request for Production of Documents No. 4, (2) answered Interrogatory No. 6, (3) produced defendant SI Management L.P. for a Rule 30(b)(6) deposition on a limited, focused topic, and (4) allowed inspection of the proxies on which votes for or against the Proposed Plan were cast. Ex. D, E. Defendants did not respond to this offer.

Instead, on February 5, 1998, defendants served a "Response" to the outstanding interrogatories and document requests, in which they refused to provide discovery, stating that they "object to the commencement of discovery at this time." Ex. G at 3. Despite Judge Wilken's explicit direction that discovery may proceed, defendants have taken the position that they will not provide any discovery until the Delaware Supreme Court rules on the pending appeal and Judge Wilken decides the pending preliminary injunction motion. Ex. F, Ex. G at 3. On February 20 and 24, 1998, defendants reaffirmed their flat refusal to provide any discovery. Ex. I; Dec. ¶ 9.

III. THERE IS NO LEGITIMATE EXCUSE FOR DEFENDANTS' REFUSAL TO PROVIDE DISCOVERY

Defendants argue that this case may eventually become moot as a result of the Delaware action (Ex. I at 2), but this is not a legitimate basis for not providing discovery. Judge Wilken has already ruled that discovery may proceed. Ex. C at 67. Defendants, who have not sought reconsideration or moved for a stay, cannot simply refuse to provide discovery because they disagree.

Moreover, the case is hardly moot. Judge Wilken has indicated that she will rule on plaintiff's pending motion for a preliminary injunction very quickly if the Delaware Supreme Court reverses. Ex. V at 8. Judge Wilken has already ruled that, if defendants did in fact violate the federal securities laws, the Limited Partners will suffer irreparable harm if the Proposed Plan is implemented. Ex. N at 5. Under these circumstances, plaintiff needs prompt discovery now, so that all important evidence may be presented to Judge Wilken before she has to issue a ruling on the pending preliminary injunction motion. Otherwise, if the Delaware Supreme Court reverses, plaintiff may be gravely and irreparably prejudiced.

Furthermore, Judge Wilken will still have to decide the pending preliminary injunction motion if the Delaware Chancery Court allows the Proposed Plan to go forward upon final adjudication. And, even if the Proposed Plan is stopped permanently by the Delaware courts, defendants will probably propose a new liquidation plan or a modified version of the Proposed Plan. Thus, plaintiff intends to move to enjoin defendants from sending out any proxy solicitations unless they are previously approved by the Court, so that the requirements of federal law -- which defendants have repeatedly violated -- are followed.

In addition, Judge Wilken has ordered the parties to engage in supervised settlement discussions. Ex. C at 69; Ex. DD. A settlement conference has been scheduled with Judge Zimmerman for June 9, 1998. Ex. EE. One of the main issues relevant to this lawsuit and especially to the settlement conference is whether the Partnership can realize a control premium for the Partnership's controlling interest in the Company by engaging in a transaction involving a sale or other block transfer of the controlling interest to a third party. Ex. K at 24-26. Plaintiff alleges that defendants have not adequately explored such transactions, while defendants deny that any control premium exists. Ex. C at 56, Ex. CC at 13. The focused discovery plaintiff sought in his January 29 letter is relevant mainly to this issue.

Defendants also have argued that plaintiff has already had an opportunity to conduct discovery in the Delaware action. Ex. F at 2. However, this action concerns federal law issues, while the Delaware action concerns totally different state law claims. Ex. K; Ex. O. Moreover, the Delaware discovery was conducted on a highly expedited basis and was limited to certain issues. Ex. W, Ex. X, Ex. FF. The interrogatories and requests for production at issue here are far more comprehensive. Ex. A, Ex. B. And the topics of the Rule 30(b)(6) deposition of the General Partner plaintiff has noticed here are different from the topic of the Rule 30(b)(6) deposition plaintiff took in Delaware. Ex. X, Ex. AA.

In response to plaintiff's request to inspect the proxies, defendants have argued that the request has no relevance to this lawsuit. Ex. F at 2-3. This argument is without merit. The order by Judge Wilken which issued a TRO against the Proposed Plan stated that plaintiff has raised serious questions as to whether defendants properly disclosed what the limited partners had to do in order to require the Proposed Plan to be approved by two thirds in interest of the limited partners. Ex. N at 4. Defendants have claimed that this issue is moot because the Plan was purportedly approved by 70 percent in interest of the limited partners, which is slightly more than two thirds. Ex. M at 2. The proxies are obviously relevant to the issue of whether the Plan was in fact properly approved by two thirds in interest of the limited partners.

IV. RELIEF REQUESTED

As there is no excuse for defendants' refusal to provide discovery, plaintiff respectfully requests an order requiring defendants to: (1) answer Plaintiff's First Set of Rule 33 Interrogatories (Ex. A) within one week of the date of the order; (2) produce all relevant documents sought by Plaintiff's First Set of Rule 34 Requests for Production of Documents (Ex. B) within two weeks of the date of the order; (3) produce a deponent for the Rule 30(b)(6) deposition of SI Management L.P. (Ex. AA) for the noticed date of March 17, 1998; (4) answer Plaintiff's Second Set of Rule 33 Interrogatories (Ex. BB) by March 16, 1998; (5) produce all relevant documents sought by Plaintiff's Second Set of Rule 34 Requests for Production of Documents (Ex. GG) by March 13, 1998; and (6) cooperate with any discovery requests plaintiff may make in the future.

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¹ All exhibit cites herein are to the accompanying Declaration of Alex J. Luchenitser ("Dec.").