# Appendix — Transamerica Mortgage Advisors, Inc. v. Lewis > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1031%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1979 - **Citation:** 444 U.S. 11 ## Text TRANSAMERICA MORTGAGE ADVISORS, INC. (TAMA); KENT L COLWELL; J. WENDE COOMBS; JOHN R. JENSEN; RALPH D. WENGER; JOHN HAVENS; TRANSAMERICA CORPORA TION; TRANSAMERICA LAND CAPITAL, INC.; AND MORTGAGE TRUST OF AMERICA, Petitioners, i INDEX Page Chronological List of Relevant Docket Entries... 1 Complaint, Filed April 5, 1973 3 Notice of Motion am Motion Dinmin, Fed March a on 22 Order, Filed October 7, 1974 . 4 Order, Filed November 21, 1974 0 ” Opinion of Court of Appeal, Ninth Ciresit, Fie Po 3 (R. 1-2). 2%). March 29, 1974—Motion to dismiss, with accompanying af- davite and memoranda of law, filed by defendants Trans- america Mortgage Advisors, Ine. (TAMA), J. Wendell Coombs, Ralph D. Wenger, Kent L. Colwell, and John RK. Jensen (R. 237-273). scommary judgment and a more definite statement filed by defendant Mortgage Trust of America (RB. 274-275). May 14, 1974—Motion to dismiss, or in the alternative, for a more definite statement filed by defendant Transamerica Land Capital, Ine. (R. 276-278). July 24, 1974—Motion to dismiss filed by defendant John F. Havens (R. 282-254). September 16, 1974— Memorandum in opposition to defend- ante’ motions to dismiss, or for summary judgment, or for other relief fled by plaintiff (B. 285-321). 2, 1974—Hearing on defendants’ motions to dismiss, or in the alternative, for summary judgment and for a more definite statement, held before the Hon. Robert HL. Schnacke, United States Distriet Court Judge (R. 380). 2 Appendiz October 7, 1974--Order entered granting defendants’ motion to dismiss with leave to amend (BR. 390.382). November 21, 1974—Order entered dismissing the case with prejudice (KR. 383.384). December 2), 1974—Notice of appeal filed (R. 385-386). April 19, 1978—Opinion of the Court of Appeals for the Ninth Cireuit filed, reversing and remanding order of emit Appendix 3 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK HARRY LEWIS, Plaintiff, - against - TRANSAMERICA CORPORATION, TRANSAMERICA MORTGAGE ADVISORS, INC., TRANSAMERICA LAND CAPITAL, INC., J. WENDELL COOMBS, RALPH D. WENGER, 73 CIV. 1448 KENT L. COLWELL, JOHN R. JENSEN, JOHN F. HAVENS, ALBERT H. SCHAAF, WALTER M. ®& BUCK, WARREN G. HAIGHT, MICHAEL J. CASEY and MORTGAGE TRUST OF AMERICA, Defendants. COMPLAINT A CLASS ACTION IS BROUGHT IN THE FOURTH THROUGH SIXTH CAUSES OF ACTION PLAINTIFF DEMANDS A TRIAL BY JURY Filed U.S. District Court Southern District of New York April 5, 1973 Transferred to U.S. District Court Northern District of California November 21, 1973 No. C-73-2180 RHS Plaintiff, by his attorneys, Wolf Popper Ross Wolf & Jones, allege upon information and belief, except as to Paragraphs “1”, “2” and “3” which are alleged upon knowl- edge: + Appendix FIRST CAUSE OF ACTION 1. Plaintiff is the beneficial owner of shares of Mortgage Trust of America (“MTA”) and was a shareholder of MTA at the time of the transactions complained of herein and has been a shareholder continuously to date. 2. Plaintiff brings this action derivatively in the right and for the benefit of MTA. 3. This action is not a collusive one to confer on this Court jurisdiction it would otherwise not have. 4. The acts complained of herein constitute violations of Sections 203, 205, 206 and 215 of the Investment Advisers Act of 1940 as amended (15 U.S.C. §§ 80b-3, 80b-5, 80b-6 and 80b-15) (the “Advisers Act”), Rule 206(4)-1(a)(5) promul- gated thereunder, and the common law. This Court has jurisdiction pursuant to Section 214 of the Advisers Act (15 U.S.C. § 80b-14), and the principle of pendent jurisdiec- tion. 5. MTA was organized, under the sponsorship of Trans- america Corporation (“Transamerica”), as a California business trust, pursuant to a Declaration of Trust dated May 23, 1969. It was established to invest in a diversified portfolio of real estate mortgages, including construction and development mortgages, permanent first and junior mortgages, other similar loans and certain equity interests in real estate. The mortgages and loans invested in and hought and sold by MTA are securities within the meaning of Seetion 202(a)(18) of the Advisers Act (15 U.S.C. § 80b- 2(a)(18)). In or ahout November, 1969, MTA issued to the public approximately 3,168,500 units of its shares of bene- ficial interest and 3,168,500 warrants to purchase an addi- tional share of beneficial interest. It commenced investing operations in or about June, 1969. MTA qualified as a real estate investment trust under Sections 856 through 858 Appendix 5 of the Internal Revenue Code of 1954, as amended, for the calendar years 1970, 1971 and 1972 and it intends to con- tinue so to qualify in future years. MTA transacts business throughout the United States, including the Southern Dis- trict of New York. Certain of the acts and transactions here complained of occurred in said District. 6. As of May 31, 1972, MTA had total assets of approxi- mately $146,398,000 and it held real estate mo:tgages and loans of approximately $136,000,000. As of February 28, 1972, it had undisbursed commitments on closed loans of approximately $63,000,000. 7. There are at present issued and outstanding approxi- mately 3,382,000 shares of MTA’s beneficial interest. 8. Transamerica, a Delaware corporation incorporated in 1928, is a diversified service industry oriented holding company, engaged through its operating subsidiaries, in the insurance, real estate, finance, transportation, motion picture and related industries. Transamerica Mortgage Advisors, Ine. (“Mortgage Advisors”), a Delaware corpora- tion organized in 1969, is a wholly-owned subsidiary of Transamerica, formed to serve as investment adviser to MTA and its shareholders. Transamerica Land Capital, Inc. (“TALC”), a Delaware corporation organized in 1964, is also a wholly-owned subsidiary of Transamerica, was en- gaged in the business of making real estate construction and development loans; but is presently a dormant corporation. Transamerica and its wholly-owned operating subsidiaries do or transact business throughout the United States and maintain offices in, inter alia, New York, New York. Trans- america, through Mortgage Advisors, has acted as invest- ment adviser to MTA since the latter’s establishment, pur- suant to an agreement dated June 24, 1969 (“the Advisory Contract”) between MTA and Mortgage Advisors. However, " Appendix neither Transamerica nor Mortgage Advisors has ever registered as an investment adviser under the Advisers Act. 9. The individual defendants, J. Wendell Coombs (“Coombs”), Ralph D. Wenger (“Wenger”), Kent L. Col- well (“Colwell”), John R. Jensen (“Jensen”), John F. Havens (“Havens”), Albert H. Schaaf (“Schaaf”), Walter M.S. Buck (“Buck”), Warren G. Haight (“Haight”) and Michael J. Casey (“Casey”) were the original trustees of MTA, and continue to be, or were at various times material to the matters complained of, members of the board of trustees of MTA. Defendants Coombs, Wenger, Colwell and Jensen each served simultaneously as a trustee of MTA and an officer or director or both of Transamerica, Mortgage Advisors, or one or more of the other wholly-owned and controlled subsidiar.es of Transamerica. Defendants Coombs, Wenger, Colwell and Jensen are hereinafter col- lectively referred to as the “Interlocked Trustees.” The principal oceupation of each of the Interlocked Trustees is his position as an officer or director of Transamerica, Mortgage Advisors, or another Transamerica subsidiary. All of the officers of MTA are officers of other Transamerica- controlled companies and all of the operating officers of MTA, who effectively make its business decisions, are subor- dinates of those Interlocked Trustees who are the principal executives of MTA. None of the trustees devote a substantial portion of their time to MTA’s business. 10. By virtue of the Interlocked Trustees’ positions with and dependence upon Transamerica and Mortgage Advisors, the latter can and do control the acts, decisions, judgments and recommendations of the Interlocked Trustees as they affect MTA, Mortgage Advisors, Transamerica and the relationships between them. Appendix 1 11. The individual defendants other than the Interlocked Trustees are men of affairs actively engaged in the conduct of their own substantial business interests. None of them are or have been officers of MTA, nor are they substantial holders of MTA securities, or representatives of any signi- ficant interest in MTA independent of Transamerica and Mortgage Advisors. With respect to the affairs of MTA, they have relied on, deferred to and accepted the decisions, judgments and recommendations of MTA and the Inter- locked Trustees, and have not exercised their own informed and independent judgment. 12. By virtue of the foregoing, and particularly the matter set forth in paragraphs 9 through 11 hereof, Trans- America, Mortgage Advisors and the Interlocked Trustees have the power to control and dominate the board of trustees of MTA: Transamerica and Mortgage Advisors have exercised this power ever since the formation of MTA. 13. Transamerica’s control and domination has perme- ated the affairs of MTA since prior to its formal establish- ment. As the sponsor of MTA, Transamerica was instru- mental in the formulating and deciding the terms of its Declaration of Trust, the Advisory Contract, and the fur- ther agreements pursuant to which MTA agreed to, and did, acquire all of its initial investments from TALC. Transamerica selected all of the original members of the board of trustees and all of the officers of MTA (all of whom were employees of Transamerica subsidiaries when selected). 14. By virtue of their offices in MTA, each of the trus- tees, as trustees, owe to MTA the absolute duty of loyalty, the duty to avoid all dealings involving self-dealing or conflict of interest and such other fiduciary duties as are imposed by law upon any trustee. Because of their power 8 Appendix of domination and control, and particularly because of their power to dictate the composition of both the board of trustees and the operating management of MTA, Trans- america and Mortgage Advisors are charged with the same fiduciary duties as are the individual trustees. 15. Transamerica, Mortgage Advisors, the Interlocked Trustees and the other individual defendants caused MTA to enter into the Advisory Contract with Mortgage Advi- sors, whereby Mortgage Advisors would act as the invest- ment adviser to MTA for an initial period of approximately two vears. The Advisory Contract provides that Mortgage Advisors will use its best efforts to present a suitable investment program and appropriate investment oppor- tunities to MTA; will act generally as its investment adviser; and will perform such clerical and ministerial functions in connection with MTA’s portfolio as may be agreed upon. The Contract provides that MTA will pay compensation to and expenses of Mortgage Advisors as follows: (a) an annual fee equal to 1% of all assets invested in real estate loans and equities plus the undisbursed commitments on closed loans and other closed invest- ments up to $100,000,000; plus a fee equal to .9% of all such assets in excess of $100,000,000 but less than $200,000,000; plus a fee equal to .8% of all such assets in excess of $200,000,000; (for the purpose of comput- ing said monthly fee, all assets are carried at hook value without reduction for any liabilities or indebted- ness in respect thereof); plus (bh) incentive compensation equal to 10% of the amount hy which the “net profit” of MTA for each fiseal vear exeeeds 8%, hut does not exceed 12%, of the “average net worth” of MTA during such vear; plus Appendiz 9 (c) further incentive compensation equal to 20% of the amount by which such “net profit” exceeds 12% of such “average net worth” during such year; plus (d) such fees as are agreed upon by Mortgage Advisors and MTA in connection with the performance by Mortgage Advisory [sic] of certain other manage- rial and advisory functions as provided for in the Ad- visory Contract and of other services not provided for in the Advisory Contract; plus (e) expenses of Mortgage Advisors paid to trustees, appraisers, independent advisers, contractors, mort- gage and property servicers, consultants, managers, officers, employees and others employed by or on behalf of MTA, and expenses of servicing mortgage loans. The amount paid by MTA to Mortgage Advisors for each year can be as much as the greater of (a) 144% of MTA’s average net assets, but without reduction for the major expenses of MTA, including such items as the cost of borrowed money; or (b) 25% of MTA’s net income, but without reduction for expenses such as interest, deprecia- tion, depletion and amortization, maintenance of assets, taxes, legal fees, proxy expenses and other costs of holding meetings of the holders of securities of MTA. 16. The Advisory Contract was unlawful when entered into and the receipt of benefits by both Transamerica and Mortgage Advisors under that agreement and in connection with such services as it, or they, have performed for MTA is and has been unlawful pursuant to Sections 203(a) and 215(b) of the Advisers Act, 15 U.S.C. §§ 80b-3(a) and 80b-15(b), because neither Transamerica nor Mortgage Advisors has ever been registered as an investment adviser under the Advisers Act. * 0 Appeades 17. The Advisory Contract and the performance thereof are and have always been grossly unfair, unjust and in- equitable to MTA and its sharchoklers. It represents the purchase by MTA of services to be performed by Trans consideration and constitutes a gift and waste of the funds and assets of MTA and its shareholders. The consideration provided for and paid by MTA is so grossly excessive as to the Advisory Contract was not due to honest errors of judgment bu’ ather to had faith or to a reckless indifference to the rights of MTA and its sharcholders, Defendants Transamerica, Mortgage Advisors and the Interlocked Trus. sees ave the heneficlaries of Chie grossly unfair, unjust and have aided and abetted the making end performance ef the agreement. The making and performance of the Advisory Contract constitute fraud, breach of trust and such mal. administration of the affairs of MTA, and such a conscious abuse of discretion by the defendants as to work a manifest gross wrong, harm and injury to MTA and its shareholders. 18 Tt is evident from the following that the making aml ite sharchoklers and perpetrates a fraud upon MTA (a) The total fers paid by MTA to Mortgage Ad- these fees can be as much as 114% per year of the performed by an internal staff could be obtained at a cost of lees than 14 of 1% of the total assets of MTA. Approdus - (b) The basic fee to be paid by MTA to Mortgage Advisors as well as the overall limit on cot : is measured against a base which ay sagen bureed commitments on closed loans and other closed investments. However, such undisbursed commitmen such a fee, and in many cases they carn no return at all determination ofthe basi fe and the overall limit on te are carried at book value without his once Sitecentip saul ae a Ste. not earning a return for MTA and its sharehold : pay a 10% bonus to Mortgage Advisors, as afore- for a farther 20% bonus on net incor ee: eae a 12% of such average net worth. However, it dors not provide for any corresponding decreases where net income falls below the set percentage. Such ge Mortgage Advisors to make high risk investments which may create losses for MTA and its stockholders = a | putea of exe year cath, AN on Ghetase anh thatines Aid stent to re extend ae ek teetneadaseesanhtntaa pan 12 Appandus for the remainder of the duration of the life of MTA, on terms which will continue to be favorable to Mortgage Advisors and unfair to MTA and its shareholders, ». By virtue of the foregoing, defendants, by participat- ing in, approving, or acquirecing in the Advisory Contract, have breached and threaten to continue to breach their fxluciary duties to MTA and its shareholders, or have aided and abetted in the breach of said fiduciary duties to MTA 21. By reason of the foregoing, the defendants other than MTA have violated and will continue to violate Section 26(1) amd (2) of the Advisers Act in that they have, direetly and indirectly, by the use of the mails and other Imeans of instrumentalities of interstate commerce emploved deviews, schemes and artifiees to defraud MTA and its shareholders and they have engaged in transactions, prac. tiers and a course of business which were intended to and did operate as a fraud upon MTA and its shareholders. 22. By reason of the foregoing, the defendants other than MTA have violated and will continue to violate Section (4) of the Advisers Act and Rule 904(4)-1(a)(5) there. umder in that they have, direetly and indireetly, uy the use of the mails and means and instrumentalities of inte a rommrrre (a) engaged in acts, practices or « course of Mesinees which is fraudulent, deceptive or nani pa (B) mn Ry seins 48 io, Geseaiinan Mi ancl On has hoklers have suffered damages in the millions of dollars, sums Sillenen einen men te Appendas ad enjoins the defendants from renewing or extending the tions will continue throughout the duration of the life of MTA. %. Plaintiff has made no demand upon the board of trustees of MTA to bring and prosecute this action. Such a demand would have been futile because the board of more, the trustees are themselves defendants in this action. complained of would, in effect, constitute a demand that futile. 2%. Demand upon the shareholders of MTA to bring A. Under the Declaration of Trust of MTA, the management of its affairs, including the bringing of sult, is entrusted to the trustees and not the share- holders ; the shareholders cannot by resolution or other: wise require MTA or its trustees to bring an action. B. A shareholder resolution demanding the bring- ing of suit would be futile since control of the action would be in the hands of the very persons alleged to be wrongdoers and cannot properly be prosecuted by them. cates dete Ga tate tne, Hee ent shareholders to take action would cast an unconscion. able financial burden on the plaintiff in that the plain. tiff would have to solicit proxies from all the share. “ Appenduz holders residing throughout the country. It would in- volve the conduct of a proxy fight which would entail prohibitive expenses and would cause undue loss of time and would also create a danger that some claims might eventually be barred by the Statute of Limita- tions. 26. Plaintiff has no adequate remedy at law. SECOND CAUSE OF ACTION gation contained in paragraphs | through 14 with the same force and effect as if set forth at length herein. 2%. In or about December, 199, and pursuant to the Traneamerica, TALL, Mortgage Advisors, the Entecioched to parchase from TALC nosregreteniggar yer. ite sapvientdly enptall of ‘ts entten talthed t restment portfolio, Itmetiately thereafter TALC, having thus dieposed of ite entire portfolio, | pe Rutenticlly ol of tts capleyess became employers of a wo i hn in connection therewith is and was un- lawful in that, inter alia, the transaction was ted with self-dealing and conflict of interest: and the trustees of MTA, Transamerien and M a their duties of wndivid : ote + olrwemtet em ppendent judgment «olely for the hest interest of MTA Appendus ss in making said purchases and otherwise in acquiring MT A's initial portfolio. 30. The aforesaid purchases and agreements to purchase by MTA from TALC were grossly unfair, unjust and inequitable to MT'A and its shareholders. Defendants Trans- and inequitable transactions, The other individual defend. ants participated in or aided and abetted in the making and ing and performance of those agreements constitutes a fraud, a breach of trust and such maladministration of the affairs of MTA, and such a conscious abuse of discretion by the defendants as to work a manifest gross wrong, harm and injury to MTA and its shareholders. It is evident from the following that the aforesaid agreement and purchases were grossly unfair, unjest and inequitable to MTA and its shareholders, who have been and are being substantially damaged as a result thereof : (a) As a result of the aforesaid transactions Trans- america and TALC received large profits and other conatal n whch eats to se ty om pes ade ets tr li Ne renal (b) The mortgages and other interests purchased by Investors from TALC were selected solely by Trans holdings of Transamerica and TALC nor did they order to obtain the best possible portfolio for MTA: 16 Appandas selected by Transamerica and TALC. (c) The mortgage and other investments purchased by MTA were of lower quality and have not performed as well as a portfolio which MTA could have pur- the same price, nor have they performed as well as a Transamerica and TALC if Transamerica and TALC best of such investments held by them. 31. Insofar as Transamerica and its affiliates received a result of the aforesail purchases and agreements to pur- chace, it or they received more compensation from MTA and harehodlers [sic] than was permissible under the exist- ing agreement described in paragraph 15 of thie complaint and therefore, the receipt of such benefits was unlawful. The reevipt of such benefits was also unlawful pursuant to Sections 200(a) and 215(b) of the Advisers Act, 15 TSC. $$ 50b3(a) and S0b-15(b), because neither Transamerica nor Mortgage Advisors has ever been registered as an gation contained in paragraphs 3) through 36 with the same foree and effect as if set forth at length herein. THIRD CAUSE OF ACTION SS. Plaintiff repeats and realleges each and every alle- gation contained in paragraphs | through 18 with the same force and effect as if set forth at length herein. Appendiz 17 % Pursuant to the Advisory Contract, Transamerica eed Mortgage Advisors have the duty to MTA and its shareholders to serve them as their investment and financial advieer and consultant in connection with policy decisions; to provide research and economic and statistical data in connection therewith and also with respect to investments; and to consult with MTA and to furnish it with advice and recommendations with respect to making, acquiring, hold- ine and disposing of real estate loans and other invest- ments. ™. Transamerica and Mortgage Advisors have failed te provide MTA with the full benefit of their knowledge with respect to advice, consultation and recommendations comeerning suitable real estate loans and other investments. Tnetead of advising MTA as to all the suitable investments whieh it might have made, Transamerica and Mortgage Teveetors [sic] have presented only some of the possibili- ties of which thev had knowledge. Thev have not advised MTA as to the best investments which would have heen vailable to MTA, but instead have acquired or retained theee investments for other Transamerica affiliates. ™* The individual defendants as trustees of MTA have failed to require Transamerica and Mortgage Advisors to advise MTA as to the best, or all the suitable investments whieh it might have made. Instead they have allowed Trans- america to acquire or retain for the portfolios of other Niates the best investments which should have been taken for MTA. 37. Asa result of the foregoing the investment portfolio of MTA and its shareholders has been of lower quality and has not performed as well as it would have if MTA had heen able to acquire the best investments known to Trans- america and Mortgage Advisors. 18 Appendix 38. The withholding of the best investment opportunities by Transamerica and Mortgage Advisors (and the acquisi- tion or retention thereby), the failure of the trustees to require them to advise MTA with respect to the best invest- ments available and the receipt of benefits by Transamerica and its affiliates as a result thereof is and has been grossly unfair, unjust and inequitable to MTA and its shareholders. Defendants Transamerica, Mortgage Advisors and the Interlocked Trustees are the beneficiaries of this grossly unfair, unjust and inequitable course of conduct. Trans- america, Mortgage Advisors and the other individual de- fendants have participated in and aided and abetted said course of conduct. It constitutes a fraud, a breach of trust and such maladministration of the affairs of MTA, and such a conscious abuse of discretion by the defendants as to work a manifest gross wrong, harm and injury to MTA and its shareholders. 39. The aforesaid course of conduct constitutes a breach of the Advisory Contract by Transamerica and Mortgage Advisors. 40. Plaintiff repeats and realleges each and every alle- gation contained in paragraphs 20 through 26 with the same force and effect as if set forth at length herein. FOURTH CAUSE OF ACTION—CLASS ACTION 41. Plaintiff repeats and realleges each and every alle- gation contained in paragraphs 1, 4 through 23 and 26 with the same force and effect as if set forth at length herein. 42. Plaintiff brings this action representatively on be- half of himself and all the shareholders of Investors simi- larly situated. Appendiz 19 CLASS ACTION ALLEGATIONS 43. Plaintiff brings this action as a class suit pursuant to Section 23(b)(1)(a), 23(b)(2) and 23(b)(3) of the Fed- eral Rules of Civil Procedure. 44. There are approximately 32,000 shareholders of MTA located in various parts of the country who are mem- bers of the class. Plaintiff and his counsel, who are experi- enced in the litigation of class actions and litigation under the federal securities laws, will fairly and adequately protect the interests of the other shareholders of MTA similarly situated. There are numerous common questions of law and fact, including whether the agreement between MTA and Mortgage A.ivisors is unfair and inequitable to the share- holders of MTA and whether the acts and conduct of the defendants are in violation of Section 203, 206 and 215(h) and Rule 206(4)-1(a)(5) of the Advisers Act, and the com- mon law. Common questions of law and fact predominate over questions affecting all the individual members of the class. The class action is superior to other methods for efficient adjudication of the claims herein since it would not be economical or feasible for the shareholders of MTA to institute individual actions against the defendants and it would be virtually impossible for all said shareholders to intervene as parties to this action. FIFTH CAUSE OF ACTION—CLASS ACTION 45. Plaintiff repeats and realleges each and every allega- tion contained in paragraphs 1, 4 through 14, 26, 28 through 31 and 42 through 44, with the same force and effect as if set forth at length herein. 20 Appendix SIXTH CAUSE OF ACTION—CLASS ACTION 46. Plaintiff repeats and realleges each and every allega- tion contained in paragraphs 1, 4 through 18, 26, 34 through 40 and 42 through 44 with the same force and effect as if set forth at length herein. Wuenrerorr, plaintiff prays for the following relief: (a) That the defendants be enjoined during the pendency of this action and permanently from taking any action to renew, extend, or carry out the Advisory Contract between MTA and Mortgage Advisors and Transamerica; (b) That the Court direct and conduct a trial before the renewal or extension of said Advisory Contract and upon the conclusion of said trial, that a restraining order be issued enjoining the defendants from taking any action to renew, extend or carry out said Advisory Contract; (c) That the Advisory Contract be set aside and, if the Advisory Contract is renewed or extended before the trial, that all such renewals or extension be set aside and that all fees and expenses and other con- sideration paid to Mortgage Advisors or Transamerica pursuant to said Advisory Contract and any renewals or extensions thereof be returned to MTA. (d) That the defendants other than MTA be required to account for and pay over all damages sustained by MTA or by the plaintiff and other shareholders of MTA similarly situated, and all profits made by any of said defendants by reason of the acts complained of herein. (e) That plaintiff be allowed the costs and expenses of this action including reasonable attorneys’ fees and accountants’ fees. Appendix 21 (f) That plaintiff have such other, further and different relief as to this Court may seem just and equitable in the premises. Wo tr Popper Ross Wotr & Jones By /s/ Donatp N. Rusy A Member of the Firm Attorneys for Plaintiff 845 Third Avenue New York, New York 10022 PL 9—4600 Stare or New York County or New YorK—ss. : Harry Lewis, being duly sworn, deposes and says that he is the plaintiff in the within action and has read the fore- going complaint and knows the contents thereof to be true and that the same is true to the deponent’s knowledge except as to those matters therein stated to be alleged upon infor- mation and belief and as to those matters deponent believes them to be true. /s/ Harry Lewis Harry Lewis (Jurat omitted in printing.) , 22 Appendix JOHN M. ANDERSON WILLIAM A, FALIK LANDELS, RIPLEY & DIAMOND 450 Pacific Avenue San Francisco, California 94133 Telephone: (415) 788-5000 Attorneys for Defendants Transamerica Mortgage Advisors, Inc. (TAMA) J. Wendell Coombs, Ralph D. Wenger, Kent L. Colwell, and John R. Jensen. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA HARRY LEWIS, Plaintiff, v. No. C-73-2180 RHS TRANSAMERICA CORPORA- TION, et al., Defendants. NOTICE OF MOTION AND MOTION TO DISMISS Fed. R. Civ. P. 12 Filed U.S. District Court Northern District of California March 29, 1974 To the Parties and To Their Counsel of Record: Appendix 23 PLEASE TAKE NOTICE that on Friday, June 21, 1974, at 9:30 a.m., or as soon thereafter as counsel can be heard, and before The Hon. Robert H. Schnacke, Judge of the District Court, Courtroom No. 5, 17th Floor, United States District Court, 450 Golden Gate Avenue, San Francisco, California, defendants Transamerica Mortgage Advisors, Ine. (TAMA), J. Wendell Coombs, Ralph D. Wenger, Kent L. Colwell and John R. Jensen, will move for an order of this Court dismissing the complaint. The above-described motion will be made and jased on the accompanying Memorandum in Support of Motion to Dismiss and Affidavit of Robert W. Cramer in Support of Motion to Dismiss; and on all of the pleadings and other papers on file in this case. Dated: March 28, 1974. Joun M. ANDERSON Wii A. Favik LanpELs, Rieptey & DiaMonp Attorneys for Defendants, Transamerica Mortgage Advisors, Inc., (TAMA), J. Wendell Coombs, Ralph D. Wenger, Kent L. Colwell, and John R. Jensen. By /s/ Wii A, FaLix William A. Falik 450 Pacific Avenue San Francisco, California 94133 Telephone: (415) 788-5000 HARRY LEWIS, = ¥. No. C-73-2180 RHS U.S. District Court October 7, 1974 The motion of defendants, Transamerica Mortgage Ad- visors, Inc. et al. to dismiss; and the motions of defendants Transamerica Corporation, Transamerica Land Capital, Ine., and Mortgage Trust of America, to dismiss or, in the alternative, for summary judgment and for a more defini- ee eee . September The plaintiff, Harry Lewis, was represented by Francis J. MeTernan, Req. and Messrs. Garry, Dreyfus, MeTernan, Broteky, Herndon & Pesonen of San Francisco. The defend Coombs, Ralph D. Wenger, Kent L. Colwell and John R. Jensen, were represented by John M. Anderson, Esq. and seo Contiel: Ren, Gave siesumnted bey deaeghs Wantin, 2 Eeq., and Messrs, Pettit, Evers and Martin of San Fran- resented by Jon F. Hartung, Feq. and Messrs, Farella, Rraun & Martel of San Francisco. Defendant, John F. Havens was represented by Neil L. Shapira, Peq. of Messrs, Cooper, White & Cooper of San Francisco. The Court having received and considered written memo- randa from the parties in support of and in opposition to am! having considered the affidavits, pleadings and other papers on file in this case, makes the following 1. The Court having determined that since Section 3 of the Tawestment Advisers Act of 1940 (15 T_S.C. | S04) affords no private right of action, and that consequently the Court has no jurisdiction of the plaintiff's claims, the defendants’ motion to dismiss ie eranted. © The alternate motions of defendants Transamerica Corporation, Transamerica Land Capital, Ine. and Mort- gage Trust of America for eommary jodgment or for a 3. Plaintiff may have 45 dave from September 27, 1974, within which to file an amended complaint. If the plaintiff does not fle an amended complaint within the foregoing period, then this case shall he dismissed parenant to Rule 41(b) of the Federal Hales of Civil Procectore. Dated: Oct 7 1974 * RORTRT H. SCHNACKE Terre Stare Deerarct Jrner MB Appeadus Wrensas, the motion of defendants, Transamerica Mort- erg Adviser, Ene, of at, to Gamiens and the motions of Capital, Ine, and Mortgage Trust of America, to diamian or, in the alternative, for summary judgment and for a more definite statement, came on for hearing on Friday, September 27, 1974; and Wreness, and pursuant to an order dated and filed October 7, 1974, thie Court granted the motion of defend. but allowing the plaintiff 45 days from September 27, 1974, within which to amend: and Appendus a Waeneas, the plaintiff, Harris Lewis, has failed to amend ORDER: Pursuant to Fed. R. Civ, P. 41(b), this case is dismissed with prejudice as against each and all of the defendants, and each and all of the defendants are awarded their re- spective costa, Dated: Now 21 1974 je) ROBERT H. SCHNACKE Usrren Starnes Deernct J enon No. 75-1285 TRANSAMERICA CORP., et al. STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA Filed U.S. Court of Appeals For the Ninth Circuit April 19, 1978 and EAST,° Senior District Judge EAST, Senior District Judge : “Section 206 of the Investment Advisers Act of 1940 (15 °Henerable William G. Rast, Senior United States Dietrict Judge for the District of Oregon sitting by designation. Appendis PJ Use. ( Sb.6) [Advieers Act) affords no private right of of the plaintiff's claims . |? We vesste the ender and Lewis’ Complaint : Lewis is a shareholder of the defendant-appelle : gage Trust of America (Test), and hie complalat preeeats three shareholder derivative and three class actions for violation of the Advisers Act and spss duties. He alleges in substance : A is qualified as a real estate investment trust under the cial idneateiie talaaaaeannameaedion and development first mortgage loans. None of its invest. exchange or offered for trading in any over-the-counter market. The exiginnl cease and Gaplayess of Ge Sout Transamerica Land Capital, tne (TALC), a “first tier” (Transamerica). The Trost purchased from TALC its sidiary of Senate ie retained as the Trust's mortgage adviser. Tt advises the Trust on various real estate investments and administers its day-to-day opera- tienes. The Trust ie and alwave hae been Mortgage Ad. visces’ cally dient. Teansamerten fs Che parent of Mortgage pm satlgenle ss somerset —dryetamaaaa » Appenduz Lewis’ lewue on Review: Does the Advisers Act give rise to an implied private right of action for injunctive relief and damages on behalf of persons injured by violations of its provisions? Defendants. Appellees’ leewes om Review: In view of the naked holding of a lack of jurisdiction, (2) Whether the class action claims are proper. (3) Whether Lewis has standing to maintain a deriva- tive action without having made a demand upon the trustees to act. to now do so. Singleton v. Wulf, 428 US. 106, 120, 96 S.Ct. 2368, 49 L.Ed2d 826 (1976); Hector +. Wiens, S33 F.2d At the time of the District Court's consideration of its ultimate order of dismissal of the action for lack of juris- diction, the cireuit case law on the issue was nil. At that able for consideration: Bolger v. Laventhol, Krekatein, Horwarth 4 Horwarth, Bi F Supp. 9, M3 (SDNY. 1974) (recognizing an implied private right of action). Greenspan v. del Toro, No. 73-638 CIV JE (SD. Fla. May 17, 1974), appeal dismissed for want of prosecution, No. 74-2043 (Sth Cir, Sept. 5, 1974); and Gemmage v. Roberts, Scott & Co., (1974-1975 Transfer Binder) Fed. See, L. Rep. (CCH) ¢ 4,761 (S.D. Cal. 1974) (no private right of action). Appendix 31 We now have the benefit of the decisions of the Courts ef Appeals for the Fifth and Second Circuits finding an implied private right of action under the Advisers Act. Wileon v. First Houston Investment Corp., 566 F.2d 1235 (Sth Cir. 1978) ; Abrahamson v. Fleschner, 568 F.2d 862 (2d Cir, 1977).* Without reiterating their able discussions, we adopt the rationale of the majorities in Abrahamson and Wilson. Accordingly, we hold that the implication of a private right of action for injunctive relief and damages under the Ad- wleers Act in favor of appropriate plaintiffs is necessary to achieve the goals of Congress in enacting the legislation. The District Court holds subject matter jurisdiction to en- 1. See the following for support of the majorities’ rationale in Abrahamson and Wilson; J. I. Case Co, v. Borak, 377 U.S. 426, #4 BCt. 1555, 12 L.Ed.2d 423 (1964) ; Cort v. Ash, 422 U.S. 66, Ts & S.Ct. 2080, 45 L.Ed.2d 26 (1975); and Bolger’s clarity- ime discussion of the goal of Congress in enacting the Advisers Act, 1 PF Supp. at 263. The following District Courts have, since the entry of the order of diwmissal in this case, held that an implied right of private action exiete under the Advisers Act: Jones v. Equitable Life Assurance — 409 F. Supp. 370 (S.D.N.Y. 1975), accord, Angelakis v. ‘bh Management Corp., [1975-1976 Transfer Binder] Fed. See. L. Rep. (CCH) § 95,285 (N.D. Cal. 1975) ; and Sullivan v. Chase Investment Services of Boston, Inc., 434 F.Supp. 171 (N.D. 1. 1977). The Securities Exchange Commission has submitted to Congress posed amendment to the Advisers Act which provides ex- Setly for a private right of action under the Advisers Act. See whieh have found no implied right of action. “The commentators whe have reviewed these decisions agree that a private right of ection should be implied under the Advisers Act. Note, Private Cowes of Action Under Section 206 of the Investment Advisers Act, 14 Mich. L. Rev. 308 (1975); Lybecker, Advisers Act Develop- ments 8 Review of Securities Regulations 927, 934 (April 23, 1975), Note, Bolger v. Laventhol, Krekstein, Horwarth & Hor- werth: Private Rights of Action Under the Investment Advisers -~ 48 Temple L.Q. 433 (1975).” Abrahamson, 568 F.2d at 872, ® if. 32 Appendiz tertain such actions and pendens state claims pursuant to 28 U.S.C. § 1331. The District Court’s order of dismissal is vacated and the cause remanded to the District Court for further pro- ceedings consistent herewith. ORDER OF DISMISSAL VACATED AND CAUSE REMANDED. WALLACE, Circuit Judge, Dissenting : This case presents an issue of first impression in our circuit on which reasonable minds may differ. I recognize the strength of the opinions and the articles cited by the majority. I am persuaded, however, by the analysis of Judge Gurfein in Abrahamson v. Fleschner, 568 F.2d 862, 879 (2d Cir. 1977) (concurring and dissenting), and there- fore respectfully dissent. 2. “The trial court stated that it was dismissing for lack of subject matter jurisdiction. According to the district court’s anal- ysis, the complaint more properly should have been dismissed for failure to state a claim upon which relief can be granted. See Mobil Oil Corp. v. Kelley, 493 F.2d 784, 786 (CA5), cert. denied, 419 U.S. 1022, 95 S. Ct. 498, 42 L.Ed.2d 296 (1974). As pertains to the asserted cause of action under the IAA, general federal question jurisdiction is conferred by 28 U.S.C. § 1331 (1970). See Abraham- son v. Fleschner, 568 F.2d 862, at 867 n. 5 (CA2 1977), (the dissent and majority agree on this point).” Wilson, 566 F.2d at 1237 n. 2. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1031%3A02. Public record. Not legal advice.