Reply Brief — Churchill Forest Industries (Manitoba), Ltd. v. Securities & Exchange Commission

a]

IN THE

Supreme Court of the United States

October Term, 1976

No. 76-1281

CuurcHILL Forest INDUSTRIES (Manrtosa) Lrp., CaurRcHILL

Putp Miu Lp. TecHnoputp INCORPORATED, STEPHEN E.

MocHary, James M. Brown, Jr., Cmester CHASTEK, RIVER

SAWMILLS Company and 3LuE CONSTRUCTION CORPORATION,

egaine Petitioners,

SECURITIES AND EXCHANGE Com MISSION,

Respondent.

—_——

PETITIONERS’ REPLY MEMORANDUM

GERALD WALPIN

575 Madison Avenue

New York, New York 10022

Attorney for Petitioner

Of Counsel: Stephen E. Mochary

RosENMAN CoLIn FrEeuND

Lewis & CoHEN

Marc Row1n

and

STEPHEN E. MocHary

Barry H. GARFINKEL

919 Third Avenue

New York, New York 10022

Attorney for Petitioners

Churchill Forest Industries

(Manitoba) Ltd., Technopulp

Incorporated and Churchill

Pulp Mill Ltd.

SKADDEN, Arps, SLATE,

MEAGHER & FLom

Douctas M. Kraus

and

Pitney, Harpin & Kipp

Cryve A. Szuc#

Dickinson R. DeBevoise

744 Broad Street

Newark, New Jersey 07102

Attorney for Petitioners

Chester Chastek, James M. Brown, Jr.,

River Sawmills Company and

Blue Construction Corporation

Riker, DanziG, SCHERER & DEBEVOISE

ALvin WEIssS

i

TABLE OF CONTENTS

PAGE

A. Conflict Among the Ciremits 22.00.0000... 2

B. Conflict With Decisions of This Court ................ 10

C. Ripeness for Decision ............................... needa 12

I ce 14

TABLE OF AUTHORITIES

Cases:

Bersch v. Drexel Firestone, Inec., 519 F.2d 974 (2d

Cir.), cert. denied sub nom. Bersch v. Arthur

Andersen & Co., 423 U.S. 1018 (1975) ........ 2, 3, 4, 5, 6, 7,

8, 11, 12,13

Benz v. Compania Naviera Hidalgo, 8.A., 353 U.S. 138

Neen Osea” 10, 11

Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338

oc ee 2 eens 9

Foley Bros., Inc. v. Filardo, 336 U.S. 281 (1949) ........ )

IIT v. Vencap, Ltd., 519 F.2d 1001 (2d Cir. 1975) ........ 3

Investment Properties Int’! Ltd. v. 1.0.S., Ltd., [1970-

71] CCH Fed. Sec. L. Rep. 993,011 (S.D.N-Y.

1971), aff’d on expedited appeal without opinion

(Docket No. 71-593, 2d Cir. 1972) ....0.00000. 11

Landy v. Federal Deposit Ins. Corp., 486 F.2d 139 (3d

Cir. 1973), cert. denied, 416 U.S. 960 (1974) ........ 9

I!

McCulloch v. Sociedad Nacional de Marineros de

Honduras, 372 U.S. 10 (1963) ..0.........., nie

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) ......

Securities and Exchange Commission v. United Finan-

cial Group, Inc., 474 F.2d 354 (9th Cir. 1973) ........

Straub v. Vaisman & Co., 540 F.2d 591 (3d Cir. 1976)

United States v. Berrigan, 482 F.2d 171 (3d Cir. 1973)

Wilko v. Swan, 346 U.S. 427 (1953) won.

Miscellaneous:

5 Wright & Miller, Federal Practice and Procedure

eens

Webster’s New International Dictionary (2d Ed.

a

“1 @

10

12

—

IN THE

Supreme Court of the United States

October Term, 1976

No. 76-1281

EE ef

CHURCHILL Forest Inpustries (Mantrosa) Lrp., CouRCHILL

Pute Muu Lo., Tecunoputp Incorporated, STEPHEN E.

Mocuary, James M. Brown, Jr., Cuester Cuastex, River

Sawmitts Company and Bivur Construction CorPoRaTION,

Petitioners,

against

SECURITIES AND ExcHancE ComMMISSION,

Respondent.

OO

PETITIONERS’ REPLY MEMORANDUM

Respondent Securities and Exchange Commission

(‘‘SEC’’) does not dispute the importance of the issue pre-

sented by this petition—the extraterritorial scope of the

federal securities law—and implicitly contends that it is

an issue not yet decided by this Court (SEC Br. p. 12).*

This position taken by the SEC is, by itself, sufficient to

warrant granting certiorari.

Virtually ignoring the need for this Court to decide this

important issue, the SEC argues that certiorari should be

* The following citations are used herein: SEC’s Brief in Oppo-

sition to the Petition—“SEC Br.”; our Petition—‘“Pet.” ; Appendix

to our Petition—“A”; Appendix in the Court of Appeals—“C.A.

App.”

2

denied on the ground that (A) the Third Circuit’s decision

here is not in conflict with the decisions of other circuits or

(B) of this Court, and (C) the issue is not ripe for decision

in this case. The SEC’s assertions are erroneous.

A. Conflict Among the Circuits

The SEC significantly neglects to offer any meaningful

factual analysis to support its conclusory assertion that

‘there is no conflict between the present case and other

appellate decisions’’ cited in our Petition (SEC Br. p, 11).

Indeed, scrutiny of the one case, the facts of which were

specifically mentioned by the SEC, Bersch v. Drexel Fire-

stone, Inc., 519 F.2d 974 (2d Cir.), cert. denied sub nom.

Bersch v. Arthur Andersen & Co., 423 U.S. 1018 (1975),

demonstrates the error in the SEC’s conclusory assertion.

According to the SEC, that decision—in which the Second

Circuit held that no securities acts jurisidiction existed

over sales to foreigners abroad—is consistent with the

contrary holding by the Third Circuit here because in

Bersch ‘‘no fraudulent acts were committed within the

United States’’ (SEC Br. p. 11 n.9).* This contention is the

*It is interesting to juxtapose this assertion with the statement

only 3 pages before that Bersch stands for the proposition that the

“federal securities laws proscribe fraudulent conduct that occurs with-

in the United States, even though the victim is a foreign investor

located in another country and there is no impact on investors within

the United States.” The SEC is in error on both statements. We

show infra pp. 3-4, that the same domestic conduct, claimed to be

fraudulent here, occurred in Bersch. And page 985 of the Bersch

opinion, which the SEC cites for this alleged no-impact-needed hold-

ing, relates only to the jurisdictional power of Congress to which the

Bersch court referred immediately before it turned to the question

whether, by enacting the securities laws, Congress “mean[t] to go to

the full extent permitted” or intended to “leave the problem to foreign

countries.” 519 F.2d at 985.

3 .

linch-pin of the SEC’s position of no conflict: unless the

domestic conduct in Bersch were materially different from

the domestic conduct alleged here, the two contrary deci-

sions must be held to be in conflict. Comparison of the

facts and holding of Bersch and of the Third Circuit

decision here demonstrates the substantial identity of the

facts and, therefore, the conflict in the holding.*

Following, we set out in tabular form the United States

activities in the instant case as enumerated by the Third

Cireuit (A4), alongside of which we set out the United

States activities in Bersch a& enumerated by the Second

Circuit in its opinion: |

Alleged United States Activities

In This Case In Bersch

Various negotiations in U.S. Meetings in New York on

- numerous occasions ‘‘to ini-

tiate, organize, and struc-

ture’’ the allegedly fraudu-

lent transaction and meet-

ings with underwriter in

U.S. (519 F.2d at 985 n.24)

* While we hereinafter show in the text that Bersch and the

instant decision are in conflict, reference must be made to one material

fact overlooked by the SEC: the Second Circuit in Bersch itself

admitted that it, and its companion decision in //T v. Vencap, Ltd.,

519 F.2d 1001 (2d Cir. 1975), went “beyond prior decisions” in

extending the securities laws to transnational transactions (JIT, 519 .

F.2d at 1018; see also Bersch, 519 F.2d at 987), since prior decisions

required proof of impact on domestic investors or securities markets

in order to sustain jurisdiction (Bersch, 519 F.2d at 987 n.29).

Hence, assuming arguendo that the Third Circuit’s decision here

were consistent with Bersch, the conflict between them and prior

decisions (including those of other circuits) would warrant a deter-

mination by this Court of this important issue.

In This Case

In Bersch

Execution of one contract in

New York

Use of instrumentalities of

interstate commerce (e.g.,

telephones and mails)

Incorporation of companies

or establishment of corpo-

rate offices in U.S.

Use of N.Y. office of a Swiss

bank for proceeds

Maintenance of books and

records in U.S.

Drafting of agreements in

US.

Transmittal of proceeds to

and from U.S.

Mailing by defendants of of-

fer (prospectus containing

false representations) to

some persons in U.S. who

accepted offer by executing

subscription in, and mailing

from, U.S. (id. at 991)

Use of instrumentalities of

interstate commerce, i.e.,

telephone (id. at 985 n.24),

and mails (id. at 990)

Defendants included US.

corporations with principal

offices in U.S. and/or subsid-

iaries with U.S. offices (519

F.2d at 979 and n.9)*

‘*Accounts for the proceeds

... Were opened’’ in a N.Y.

bank (id. at 985 n.24)

N.Y. law firm and N.Y.

accountants were retained

(tbid.), with at least relevant

work papers maintained in

U.S. (see 389 F. Supp. at

456)

Drafting of parts of the rel-

evant documents was done

in U.S. (519 F.2d at 985 n.

24)

‘the proceeds were to

be deposited” in N.Y.

bank ‘‘pending remittance’’

abroad (ibid.)

__ * The individuals responsible for the alleged wrongdoing in Bersch,

t.e., the President, chief operating officers, and many of the employees

of 1.0.S., were American citizens (389 F. Supp. at 455 n.8).

5)

Despite these basically similar activities in the United

States in both cases, the decisions by the Second Circuit

and the Third Circuit were in conflict: the Second Cir-

cuit in Bersch held that no subject matter jurisdiction

existed insofar as the sales were to foreigners outside the

United States, while the Third Circuit here held that sub-

ject matter jurisdiction existed over the sales abroad to a

single foreign entity.

The reason for these conflicting results appears in each

court’s statement of its understanding of the controlling

legal principles. The Second Circuit in Bersch stated the

law was as follows: federal jurisdiction does not exist over

‘‘sales of securities to foreigners outside the United

States unless acts ... within the United States directiy

caused such losses.’’ (519 F.2d at 993; emphasis added)

The Third Circuit, on the other hand, stated the law was

as follows:

‘¢(Fjederal securities laws do grant jurisdiction in

transnational securities cases where at least some ac-

tivity designed to further a fraudulent scheme occurs

within this country.’’ (A9)

It is true that, after enumerating this ‘‘some activity’’

test, the Third Circuit used the adjectives ‘‘substantial’’

and ‘‘essential’’ to describe the conduct in the United States

(A12). Use of these words does not alter the very extreme

extent of extraterritorial jurisdiction of the securities laws

prescribed by the decision. The SEC’s attempt (SEC Br.

pp. 7, 8) to reconcile the Third Circuit’s decision here with

that of the Second Circuit in Bersch by reference to these

adjectives is meritless on several other grounds as well.

6

First, the SEC’s reliance on the various adjectives used

by the Third Circuit here to describe the alleged domestic

conduct ignores the simple fact, demonstrated above, that,

on substantially identical conduct within the United States,

the Second Circuit held that no jurisidiction existed on

sales to foreigners abroad while the Third Circuit held to

the contrary.

Secondly, the explanative language in the Third Circuit’s

decision here demonstrates its conflict with the Bersch re-

quirement that the U.S. conduct must have ‘‘directly

caused’’ the loss to the foreigners abroad. We quoted in

our Petition, as we do here on page 5 supra, the portion of

the opinion below which demonstrates the holding to be that

**some activity’’ in the United States in furtherance of the

fraud is all that is needed for jurisdiction to attach.*

The SEC now argues that the Court below did not mean

**some activity’’—the words used in the opinion—but actu-

ally meant ‘‘some substantial activity.’’ No basis exists

for the SEC thus to revise the opinion filed by the Third

Cireuit. And, in fact, other portions of the opinion below

demonstrate that use of the phrase ‘‘some activity,’’ with-

out the adjective ‘‘substantial,’’ was intentional. For ex-

*The SEC (SEC Br. p. 8) incredibly objects to our use of

the word “any” in our Petition (p. 2) as a synonym for the word

“some” used by the Third Circuit in its opinion. Webster’s New

International Dictionary (2d ed. 1959) lists the word “some” as the

single synonym for the word “any” (p. 121). The first definition of

the word “some” is “a certain; one” (p. 2396). Finally, the dic-

tionary explains the synonyms “some” and “any” in the following

manner: “some emphasizes lack of specification, any stresses indif-

ference of choice or lack of limitation” (p. 2397). Given these dic-

tionary references, our use of the word “any” as a synonym for

“some” was clearly appropriate in the context of this case.

7

ample, the Third Circuit cited and relied on its prior deci-

sion in Straub v. Vaisman & Co., 540 F.2d 591 (3d Cir.

1976) as ‘‘flatly proclaim[ing]’’ the rule that ‘‘conduct in

this country, standing alone, is enough for jurisdiction to

attach under the federal securities laws’’ (A7).*

Finally, the Second Circuit in Bersch held that substan-

tial conduct in the United States—i.e., acts ‘‘of material

importance ... [which] have significantly contributed to’’

the violation—are sufficient for jurisdiction where the de-

frauded party was an American abroad, but are insufficient

to create jurisdiction where the defrauded party was—as

here—a foreigner abroad (519 F.2d at 993).**

Likewise, the SEC’s reliance on the Third Circuit’s ref-

erence to the conduct here as ‘‘essential’’ to the fraud

(SEC Br. pp. 7-8) does not vitiate the conflict with Bersch

since, as shown above, the domestic conduct in both cases

* The Straub decision, relied on by the Third Circuit below and

by the SEC here, is clearly inapposite on the facts. Straub did not

involve a predominantly foreign transaction, since the defendant was

“an American securities broker,” registered with the SEC, charged

with fraud in the sale of “stock in an American corporation traded

on American over-the-counter exchange’”—clear proof of domestic

impact (540 F.2d at 595). Significantly, the language quoted in the

text above was used to describe the extent of jurisdictional power

which Congress is free to exercise, not to describe the jurisdiction

intended to be exercised by Congress. The Third Circuit here con-

verted the Straub description of the extent of jurisdictional power

available to Congress into a statement of the scope of jurisdiction

actually invoked by Congress.

** The SEC’s reliance on the Third Circuit’s use of the adjective

“substantial” in fact furnishes another reason for this Court to enter-

tain this Petition. The Second Circuit in Bersch used phrases

“material importance,” “significantly contribut[ing],” and “directly

caus[ing]” to describe the different tests for jurisdiction (519 F.2d

at 993). To the extent the Third Circuit’s use of the adjective “‘sub-

stantial” is given any importance, it indicates the Third Circuit’s re-

jection of all three of the Bersch phrases in favor of the “substantial”

adjective. Can it be said that such individual choice of descriptive

adjectives by different circuits furnishes any precedental value?

8

was substantially the same. Moreover, the Second Circuit

in Bersch also suggested that the domestic conduct there

was essential to the consummation of the fraud, in the ‘‘but

for’’ sense (519 F.2d at 992). In addition to its use of the

“‘but for’’ phrase, the Second Circuit explained that the

domestic conduct there ‘‘helped to make the gun whence the

bullet was fired from places abroad; alternatively proper

action in the United States would have prevented the gun’s

ever being sent abroad’’ (519 F.2d at 987)—i.e., but for

the acts in the United States the fraud would not have oc-

curred abroad. Yet such conduct was held in Bersch to be

insufficient for securities act jurisdiction over sales to for-

eigners abroad. |

The SEC seeks to ignore the remaining decisions by

other circuits on the ground that subject matter jurisdiction

was upheld in those cases, albeit ‘‘in some of these cases...

on grounds other than in this case’? (SEC Br. p. 12).

But it is no less a conflict among the circuits, warranting

this Court’s determinative clarification, that the conflicting

rules for determining subject matter jurisdiction were set

out by different circuits in decisions upholding jurisdiction

rather than in decisions denying jurisdiction.

In a final attempt to avoid the conflict that exists among

the circuits, the SEC contends that this case is distinguish-

able on the ground that the plaintiff here is the SEC, while,

with the exception of Securities and Exchange Commission

v. United Financial Group, Inc., 474 F.2d 354 (9th Cir.

1973), all of the other cases were commenced by private

plaintiffs. For this proposition, the SEC relies on the

rule that consummation or success of a fraud is not a pre-

requisite to jurisdiction in an injunctive action brought by

9

it, as opposed to an action brought by a private plaintiff.*

But the SEC thereby merely raises a straw man. Of course,

where an attempt is a crime or civilly actionable, jurisdic-

tion would exist over such attempt to commit a fraud if

jurisdiction would have existed over the intended fraud.

United States v. Berrigan, 482 F.2d 171, 190 (3d Cir. 1973)

(‘‘Simply stated, attempting to do that which is not a crime

is not attempting to commit a crime’’); and see Coleman

Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1349 (3d Cir.

1975). The determination on the question of jurisdiction

over an attempted securities fraud depends on whether the

intended fraud involved ‘‘domestic conditions’’**—the

same test as applicable to a consummated fraud; for Con-

gress clearly could not be said to have intended to assert

jurisdiction over an attempted (but unconsummated) fraud

where it did not intend to assert jurisdiction over the same

facts if successful.

Moreover, it is difficult to conceive of a rational basis for

a holding that a statute grants subject matter jurisdiction

over a set of facts if the SEC brings the action, but the same

statute fails to grant subject matter jurisdiction over the

identical set of facts, if brought by the alleged victim.

Whether any specific plaintiff may bring an action raises

questions of standing [Landy v. Federal Deposit Ins. Corp.,

486 F.2d 139, 156 (3d Cir. 1973), cert. denied, 416 U.S. 960

(1974) ], which only can arise if subject matter jurisdiction

is first found to exist.

* The SEC, in suggesting this distinction, exalts form over sub-

stance, since the SEC is, in reality, acting as the alter ego for the al-

legedly defrauded foreign governmental entity in seeking disgorge-

ment and an accounting of all monies received by specified defendants

(C.A. App. 179-80).

** Foley Bros. Inc. v. Filardo, 336 U.S. 281, 285 (1949).

10 '

B. Conflict With Decisions of This Court

Although we cited (Pet. pp. 18-22) eight decisions of

this Court on the issue of extraterritorial jurisdiction as

suggesting a conflict between the reasoning of those deci-

sions and the Third Circuit’s decision here, the SEC has

significantly attempted to distinguish only three of them.

The SEC’s attempted distinction of Scherk v. Alberto-

Culver Co., 417 U.S. 506 (1974), is merely a restatement of

what we noted in our Petition (p. 18n)—that the motion to

dismiss for lack of subject matter jurisdiction, having been

denied by the district court, was not appealable and thus

not before this Court. But that procedural technicality

does not detract from the conclusion, discussed in our Peti-

tion (pp. 18-19)—that this Court’s rejection of the rule of

Wilko v. Swan, 346 U.S. 427 (1953), against staying securi-

ties act lawsuits in favor of an arbitration, required this

Court’s implicit decision that the securities laws do not

apply to an essentially foreign transaction (albeit with

some domestic conduct), such as was involved in Scherk

and is involved here.

The SEC’s argument (SEC Br. p. 12) that this Court’s

refusal to find federal jurisdiction in Benz v. Compania

Naviera Hidalgo, S.A., 353 U.S. 138 (1957), and McCulloch

v. Sociedad Nacional de Marineros de Honduras, 372 U.S.

10 (1963), is consistent with the Third Circuit’s finding

federal jurisdiction here does not withstand analysis. This

Court denied jurisdiction in those two decisions because of

the absence of any domestic impact, inter alia, to avoid

‘‘international discord’’ and ‘‘retaliatory action from other

nations’’ (SEC Br. p. 12). The SEC, in its endeavor to

11

extend its jurisdiction, argues that such discord and re-

taliatory action are ‘‘likely . . . to result from a denial of

jurisdiction’’ here (SEC Br. p. 12). But such decision, ex-

tending the SEC’s jurisdiction to essentially foreign trans-

actions without any domestic impact, is one that must be

made by Congress, not the SEC, as this Court clearly

stated in Benz:

‘*For us to run interference in such a delicate field of

international relations there must be present the af-

firmative intention of the Congress clearly expressed.

It alone has the facilities necessary to make fairly such

an important policy decision where the possibilities of

international discord are so evident and retaliative ac-

tion so certain. We, therefore, conclude that any such

appeal should be directed to the Congress rather than

the courts.’’ 353 U.S. at 147

Indeed, the SEC’s contention for extension of federal

securities act jurisdiction, in order to avoid international

discord, furnishes another example of the conflict on this

subject requiring the grant of the Petition here. As the

quotation by the Second Circuit in Bersch, 519 F.2d at 996,

from Investment Properties Int’l Ltd. v. I.0.8., Ltd. [1970-

71] CCH Fed. Sec. L. Rep. 793,011, at p. 90,735 (S.D.N.Y.

1971) (Frankel, J.), aff’d on expedited appeal without opin-

ton (Docket No. 71-593, 2d Cir. 1972) (quoted at p. 10 of

our Petition), demonstrates, other respected federal courts

expressed the diametrically opposite view that such inter-

national discord would occur from thus extending securities

act jurisdiction.*

* An example of the international discord that could be created

by the Third Circuit’s extension of securities law jurisdiction is found

in the Bersch facts where J. H. Crang & Co., a Canadian broker, was

being sued for fraud under our securities laws in connection with a

pope “conforming to the laws of Canada and its provinces” (519

.2d at 980).

12

C. Ripeness for Decision

The SEC (SEC Br. p. 8), seeking to avoid review by

this Court, suggests that this proceeding is at a ‘‘prelimi-

nary stage’’ and that, therefore, review should await a trial

and an appreal on the merits. Such delay (i) is inconsistent

with the purpose of Rule 12(b), F.R.C.P., (ii) is unwar-

ranted here since an issue of law, not fact, is involved, and

(iii) would impose on petitioners an enormous monetary

and time burden of litigating through trial and appeal to

obtain a determination on this initial question of the court’s

jurisdiction to hear the case.

A Rule 12(b)(1) motion, as involved here, presents

‘*preliminary matters that normally should be adjudicated

early in the action.’’ 5 Wright & Miller, Federal Practice

and Procedure §1349, p. 539 (1969). The ‘‘rationale under-

lying’’ such motion is that it is ‘‘likely to produce an over-

all saving in time and avoidance of delay, thereby benefitting

both the parties and the courts.’’ Ibid. To refuse to decide

this issue because it is in a preliminary stage would thus

run counter to the purpose of the rule, i.e., to decide such

preliminary matter at this early stage. The reasons which

induced the Second Circuit to allow an immediate appeal,

pursuant to 28 U.S.C. §1292(b), on the motion to dismiss

for lack of subject matter jurisdiction in Bersch, likewise

mandate this Court’s grant of certiorari here: ‘‘the ques-

tion of subject matter jurisdiction is a controlling issue of

law’’ (519 F.2d at 994 n.44a) ; ‘‘there is substantial ground

for difference of opinion’’ on the issue (ibid.; see also id.

at 993); and an ‘‘immediate appeal . . . will. materially

advance the ultimate determination . . . and ‘would save

... the cost and delay of protracted and expensive litiga-

tion’ ’’ (id. at 994 n.44a).

13

Moreover, the legal issue presented by this Petition will

not be altered by any fact finding. The SEC concedes that

the alleged fraud was against a single foreign governmental

entity (SEC Br. p. 3), without any impact on American in-

vestors or American securities markets (SEC Br. p. 8), and

that the consummation of the alleged fraud—the purchase

of and payment for the securities—took place in Canada

(SEC Br. pp. 7, 9) with the proceeds to be used for a

forestry complex in Canada (SEC Br. p. 5). Petitioners,

for purpose of this motion, concede the domestic conduct

alleged in the complaint. The legal question thus presented

needs no fact finding: does securities law jurisdiction exist

over a fraud, consummated abroad, against a foreign gov-

ernmental entity, involving an industrial development

abroad, and without any domestic impact, merely because

some conduct, in furtherance of that fraud, occurred in the

United States ?*

If this Court’s answer to that legal question is in the

negative, petitioners are entitled to obtain that decision at

* The SEC states that review should await a trial since the com-

plaint might be dismissed for want of jurisdiction after trial if “it is

established that no fraudulent conduct occurred within this country,

or such conduct was so minimal as to be immaterial” (SEC Br. p.

8; emphasis added). This statement too demonstrates that it is

a legal issue, not a factual issue, that is involved here and thus ripe

for determination. It is difficult to reconcile this suggestion, that

conduct within the United States, as long as it is more than minimal,

is sufficient to create securities act jurisdiction, with even the Bersch

holding ; for Bersch held that “significant” conduct in this country

—clearly greater than more-than-minimal—while sufficient to cre-

ate jurisdiction over sales to Americans abroad, was insufficient to

create jurisdiction over sales to foreigners abroad—the factual context

here. Indeed, the Third Circuit’s use of this more-than-minimal lan-

guage at the end of its opinion (Al4) to summarize its holding dem-

onstrates the extreme to which that court has sought to push the

extraterritorial jurisdiction of the securities acts. The legal issue of

whether any more-than-minimal conduct in the United States is suf-

ficient for securities act jurisdiction need not, and should not, await

a trial; it can be decided at this time.

14

this stage, rather than be required (a) to endure the lengthy

pre-trial proceedings and trial which are endemic to this

type of complaint, or (b) capitulate to the infinite litigative

resources of the SEC in order to avoid the financial drain

of such discovery and trial. Either alternative is inequi-

table and unnecessary since the determination of subject

matter jurisdiction can properly and should be made by

this Court at this time.

Conclusion

For the foregoing reasons, the petition for a writ

of certiorari should be granted.

Respectfully submitted,

(See Counsel to Brief on Facing page =)

15

GERALD WALPIN

575 Madison Avenue

New York, New York 10022

Attorney for Petitioner

Stephen E. Mochary

Of Counsel:

RosENMAN COLIN FREUND

Lewis & CoHEN

Marc RowIn

and

STEPHEN E. MocHary

Barry H. GARFINKEL

919 Third Avenue

New York, New York 10022

Attorney for Petitioners

Churchill Forest Industries

(Manitoba) Ltd., Technopulp

Incorporated and Churchill

Pulp Mill Ltd.

SKADDEN, Arps, SLATE,

MEAGHER & FLom

Douctas M. Kraus

and

Pitney, Harpin & Kipp

Cryve A. SzucH

DickKI1Nson R. DEBEVOISE

744 Broad Street

Newark, New Jersey 07102

Attorney for Petitioners

Chester Chastek, James M. Brown, Jr.,

River Sawmills Company and

Blue Construction Corporation

Riker, DANziG, SCHERER & DEBEVOISE

ALvin WEISS