Opposition Brief — Rand v. Anaconda-Ericsson, Inc.

No. 86-598

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IN THE

Supreme Court of the WUqithP Seay ks

OCTOBER TERM, 1986

—_

MICHAEL M. RAND, JOHN COSTELLO, STEVEN J. COSTELLO, GREGORY T.

FRESE, EDWARD LAVIN, PETER A. MILANO, and VINCENT F. SERVELLO,

Petitioners,

— VY —

ANACONDA-ERICSSON INC., ERICSSON, INC., L M ERICSSON TELEPHONE

COMPANY, NORDIC AMERICAN BANKING CORPORATION, CITIBANK, N.A.,

PRICE WATERHOUSE, SULLIVAN & CROMWELL, RICHARD HOWE,

RICHARD G. LYON, L. STANTON TOWNE, TELECOM EQUIPMENT CORP,

and STEPHEN R. COHEN, Respondents.

ON PETITION FOR AWRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION

ROBINSON BURRELL LACY

125 Broad Street

New York, New York 10004

(212) 558-4000

Counsel of Record for

Respondents Anaconda-Ericsson

Inc., Ericsson, Inc., L M

Ericsson Telephone Company,

Sullivan & Cromwell, Richard

Robert M. Osgood Howe, Richard G. Lyon, and

Christopher Allegaert L. Stanton Towne

SULLIVAN & CROMWELI

Of Counsel

[Counsel for Respondents Continued on Inside of Front Cover]

RICHARD GRANT LYON, ESQ.

Ericsson, Inc.

730 International Parkway

Richardson, Texas 7508]

(214) 997-0743

Pro Se and as Attorney for

Respondents Anaconda-Ericsson

Inc., Ericsson, Inc., and L M

Ericsson Telephone Company

WHITE & CASE

1155 Avenue of the Americas

New York, New York 10036

(212) 819-8200

Attorneys for Respondent Nordic

American Banking Corporation

SHEARMAN & STERLING

53 Wall Street

New York, New York 10005

(212) 837-6000

Attorneys for Respondent

Citibank, N.A.

November 6, 1986

HOWARD, DARBY & LEVIN

10 East 53rd Street

New York, New York 10022

(212) 751-8000

Attorneys for Respondent

Price Waterhouse

PAUL S. MCDONOUGH, ESQ.

Telecom Plus International Inc.

48-40 34th Street

Long Island City, New York 11101

(718) 392-7700

Attorney for Respondents

Telecom Equipment Corporation

and Stephen R. Cohen

neem

TABLE OF CONTENTS

te ee ee ee ee oe oe ae ee ie ee or oe oe a ss

eae vee ee eS ee ee ee ne ee

BREUER EPA ter See eee ee

I. THE SANCTIONS PURSUANT TO RULE 1!1..

Il. THE INJUNCTION AGAINST FURTHER

I cub at SS REEL AS oN oO eo SS ONw 64 4

lil. THE CLAIMS ASSERTED IN THE COM-

Ea Ses are ees oe

ee gE Pe

ee EN ic whack ca cnnseanensins see

ee IE I 5 a nc ckceveeaseucuness

D. The Williams Act Claim

e@e Bee Ce vVdcanaee Cage ®t

etc lee chav ab heeahctoedcnsanenens

APPENDICES

ees ee 8.0 6 6 6.6 6.2 Oe 6.8 2h 2 oO .0-4 3 © BO O'6 +6 SO

A. Opinion of District Court on Motion to Re-

argue, Dated December 2, 1985 ............

B. Designation of Corporate Relationships .....

NN AN

co C&O

TABLE OF AUTHORITIES

PAGE

Cases

Anaconda-Ericsson, Inc. v. Hessen (In re Teltronics

Services, Inc.), 29 Bankr. 139 (Bankr. E.D.N.Y. 1983) 2, 6

Associated General Contractors v. California Council of

Carpenters, 459 U.S. 519 (1983)... 0... 6-2 e ee eee eee 8

Clinton v. United States, 297 F.2d 899 (9th Cir. 1961),

cert. denied, 369 U.S. 856 (1962). ....--++2-eeeeeee 5

Davis v. United States Gypsum Co., 451 F.2d 659

‘ot | er eee ere rt ee ere 6

Gordon v. United States Department of Justice, 558 F.2d

Pi oe eg) errr ee Te ee ee 4

Hanson Trust PLC v. SCM Corp., 774 F.2d 47

eo fee, .) eer rr or Terr tere ree 8

Ingenito v. Bermec Corp., 376 F. Supp. 1154

‘ES a ee ree eee ttt ee cr 6

Landy v. F.D.I.C., 486 F.2d 139 (3d Cir. 1973),

cert. denied, 416 U.S. 960 (1974). ........-- eee eees 6

Loeb v. Eastman Kodak Co., 183 F. 704 (3d Cir. 1910) 8

Meredith v. John Deere Plow Co., 261 F.2d 121

(8th Cir. 1958), cert. denied, 359 U.S. 909 (1959).... 5

In re Potter Instrument Co., 593 F.2d 470 (2d Cir. 1979) 7

Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980)... 5

Saxon -Industries, Inc. v. NKFW Partners, 488 A.2d

RO CE, TOGO). vos coo nea cu bcsaenveesdscseeeses< 7

SEC v. American Trailer Rentals Co., 379 U.S. 594

i bs ip Vike acne ee Re REeeS ae ONAN SENET Seat ae 7

ili

PAGE

Sedima, S.PR.L. v. Imrex Co., 105 S. Ct. 3275 (1985) 7,8

Shuffman v. Hartford Textile Corp. (In re Hartford

Textile Corp.), 681 F.2d 895 (2d Cir. 1982),

cart. Gana, 4359 UB. Tae Cs 60k dors sc bik euee 4,5

Sperry Rand Corp. v. Rothlein, 288 F.2d 245

CAR Ce DI Bo ks eG es eee 5

In re Teltronics Services, Inc., No. 79 B 2725 (CHG),

slip op. (Bankr. E.D.N.Y. April 30, 1980) .......... 7

Teltronics Services, Inc. v. L M Ericsson Telecommuni-

cations, Inc., 486 F. Supp. 836 (S.D.N.Y.), on reargu-

ment, 491 F. Supp. 538 (S.D.N.Y. 1980), aff’d, 642

F.2d 31 (2d Cir.), cert. denied, 452 U.S. 960 (1981) .. 2

Teltronics Services, Inc. v. L M Ericsson Telephone Co.,

No. 79 Civ. 1233, slip op. (S.D.N.Y. May 9, 1979)... 2

Teltronics Services, Inc. and Edward M. Beagan v.

Anaconda-Ericsson, Inc., 587 F. Supp. 724 (E.D.N.Y.

1984), aff’d, 762 F.2d 185 (2d Cir. 1985) ........... 2

Ward v. Pennsylvania New York Central Transportation

GCo., 456: Fak WO Cb Ca POT oi ooikk ko cknannks 4,3

Warren v. Manufacturers National Bank, 759 F.2d 542

ee ee re erm e ean. Oey i es 7

Statutes and Rules

EES FE Ohi FRE ooh 5 6550 oo eee 6,7

Bankruptcy Code ch. 11,

SE Gas oS goo cos wea eae tiara 7

PO. Tis Sols. We B0 cake v cb oe Senda hie vane ee 3; a3

Securities and Exchange Commission Rule 10b-5,

Peek! ee FL 6

Securities and Exchange Act of 1934,

HE ele Foe & Pe ere era eer y

PAGE

Sup. Ct. R. 21. 1(k)ii) 2... ccc ce cece een cee eenes 4

Sup. Ct. R. 21.8 ..cccvcccscccvvcvccesccvesessoscce 4

Williams Act, 15 U.S.C. §§ 78k(d)-(e), -((d)-(f)........ 8

CITATIONS TO OPINIONS BELOW

The decisions of the District Court and the Court of Appeals

are reported at 623 F. Supp. 176 (E.D.N.Y.), on motion for

reargument, 623 F. Supp. 185 (E.D.N.Y. 1985), aff’d, 794 F.2d

843 (2d Cir. 1986). The opinion of the District Court on

reargument is annexed as Appendix A.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

>

No. 86-598

MICHAEL M. RAND, JOHN COSTELLO, STEVEN J. COSTELLO,

GREGORY T. FRESE, EDWARD LAVIN, PETER A. MILANO, and

VINCENT F. SERVELLO,

Petitioners,

Vv.

ANACONDA-ERICSSON INC., ERICSSON, INC., L M ERICSSON

TELEPHONE COMPANY, NORDIC AMERICAN BANKING COR-

PORATION, CITIBANK, N.A., PRICE WATERHOUSE, SULLIVAN

& CROMWELL, RICHARD HOWE, RICHARD G. LYON, L.

STANTON TOWNE, TELECOM EQUIPMENT CORP, and

STEPHEN R. COHEN,

Respondents.

ON PETITION FOR AWRIT OF CERTIORARI TO THI

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

a o

BRIEF IN OPPOSITION

STATEMENT

In its unanimous opinion affirming the District Court’s

grant of summary judgment for defendants and entry of an

injunction prohibiting plaintiffs or their counsel from further

litigation regarding Teltronics Services, Inc., the Court of

Appeals noted, “Plaintiffs and their attorneys seem to believe

that if at first you don’t prevail, sue, sue again” (Pet. 39a).

This petition is the latest confirmation of that observation. The

2

claims which petitioners are again attempting to assert have

been litigated repeatedly and repeatedly found to be devoid of

merit over the past seven years. See, in addition to the opinions

in this action, Te/tronics Services, Inc. and Edward M. Beagan

v. Anaconda-Ericsson, Inc., 587 F. Supp. 724 (E.D.N.Y. 1984),

aff'd, 762 F.2d 185 (2d Cir. 1985); Anaconda-Ericsson, Inc. v.

Hessen (In re Teltronics Services, Inc.), 29 Bankr. 139 (Bankr.

E.D.N.Y. 1983); Teltronics Services, Inc. v. L M Ericsson

Telecommunications, Inc., 486 F. Supp. 836 (S.D.N.Y.), on

reargument, 491 F. Supp. 538 (S.D.N.Y. 1980), aff'd, 642 F.2d

31 (2d Cir.), cert. denied, 452 U.S. 960 (1981); Teltronics

Services, Inc. v. L.M. Ericsson Telephone Co., No. 79 Civ.

1233, slip op. (S.D.N.Y. May 9, 1979).

Before instituting this action, but after claims based on the

same course of conduct had been dismissed in three prior

actions, petitioners’ attorneys brought an action alleging sub-

stantially identical claims on behalf of both Teltronics and

Edward M. Beagan, the founder, former president and largest

stockholder of Teltronics. The District Court, unanimously

affirmed by the Court of Appeals, entered an injunction

against Beagan anc’ petitioners’ attorneys prohibiting further

prosecution by them of claims belonging to Teltronics. See

Teltronics Services, Inc. and Edward M. Beagan v. Anaconda-

Ericsson, Inc., 587 F. Supp. 724 (E.D.N.Y. 1984), aff’d, 762

F.2d 185 (2d Cir. 1985). In this case, petitioners’ attorneys

attempted to prosecute the same claims against many of the

same defendants on behalf of other Teltronics shareholders. As

Judge Neaher noted in denying their motion io reargue,

“Plaintiffs’ attorneys have offered no reason why other share-

holders (plaintiffs herein) should be treated differently with

respect to the same claims” (infra p. -13a).

Petitioners misinform this Court about the facts and the

record below. For instance, they fail to mention or to provide

this Court with the District Court’s opinion denying plaintiffs’

and plaintiffs’ attorneys’ motion to reargue,' which completely

A copy of Judge Neaher'’s opinion on reargument, dated December

2, 1985, is annexed as Appendix A

belies their contention that they were denied their due process

rights. Petitioners assert that the District Court entered an

injunction against them sua sponte, without notice or an

opportunity to be heard (Pet. 12). In fact, the injunction was

granted pursuant to a motion filed by defendants in November

1983 (Pet. 18a, 30a). Petitioners had over 19 months to

respond to defendants’ motion—during which time they failed

to explain to the court why the injunction should not issue—

and a further opportunity to contest the injunction during a

conference before the District Court on September 24, 1985

(infra p. 13a). Judge Neaher noted, “Despite these opportuni-

ties to explain themselves, [petitioners’ attorneys] have offered

nothing to justify their conduct, which wholly disregards the

results of the prior proceedings.” Jd. The Court of Appeals, in

affirming the injunction, stated, “The record clearly justifies

such relief” (Pet. 39a).

An equally egregious distortion of the record below is

petitioners’ implication that the Court of Appeals affirmed an

award of sanctions under Rule 11 against their attorneys. See

Petition at i, Question 5. The Court of Appeals never ruled on

the sanctions issue. As the court explained (Pet. 39a):

“The imposition of costs and attorney’s fees under Rule

11, Fed. R. Civ. P., is not before us at this time, although

appellants chose to brief the issue. When appellees moved

to adjourn the briefing and argument of this appeal until

the amount of such costs and fees was finally determined

by the district court, appellants opposed on the ground

that an appeal from such a determination might not be

taken. Because we denied appellees’ motion, the Rule 11

issue is clearly not before us.”

A subsequent appeal by petitioners’ attorneys from the award

of sanctions was dismissed by the Court of Appeals for lack of

jurisdiction, due to petitioners’ failure to file a timely notice of

appeal, on September 2, 1986.

Petitioners’ failure to provide this Court with the opinion of

the District Court on reargument and their mischaracterization

4

of the record are in themselves sufficient reasons for denying

the Petition. See Sup. Ct. R. 21.1(k)(ii), 21.5.

SUMMARY OF ARGUMENT

Many of the questions that petitioners suggest for the

Court’s consideration are not presented by the decision of the

Court of Appeals with respect to which they seek certiorari.

The Court of Appeals’ opinion is in accord with the decisions

of this Court and the other courts that have addressed the same

issues and does not raise any point meriting review by this

Court.

ARGUMENT

I.

THE SANCTIONS PURSUANT, TO RULE 11

The judgment as to which petitioners seek certiorari does not

present any issue relating to Rule 11. The Court of Appeals did

not rule upon the District Court’s award of sanctions against

petitioners’ attorneys pursuant to Rule 11. As the Court of

Appeals stated, “The Rule 11 issue is clearly not before us”

(Pet. 39a).

II.

THE INJUNCTION AGAINST FURTHER LITIGATION

The Courts of Appeals have consistently recognized “[t]he

equity power of a court to give injunctive relief against vexa-

tious litigation” and repeatedly endorsed the use of injunctive

power in circumstances similar to this case. See Shuffman v.

Hartford Textile Corp. (In re Hartford Textile Corp.), 681 F.2d

895, 897 (2d Cir. 1982), cert. denied, 459 U.S. 1206 (1983);

Gordon v. United States Department of Justice, 558 F.2d 618

(Ist Cir. 1977); Ward v. Pennsylvania New York Central

5

Transportation Co., 456 F.2d 1046, 1048 (2d Cir. 1972); Clin-

ton v. United States, 297 F.2d 899, 901-02 (9th Cir. 1961), cert.

denied, 369 U.S. 856 (1962); Sperry Rand Corp. v. Rothlein,

288 F.2d 245 (2d Cir. 1961); Meredith v. John Deere Plow Co.,

261 F.2d 121, 124 (8th Cir. 1958), cert. denied, 359 U.S. 909

(1959). A federal court may enjoin further litigation in any

court in the United States when the claimant’s proclivity for

vexatious litigation has been established by his attempt to

relitigate claims that have been repeatedly shown to be merit-

less. Shuffman vy. Hartford Textile Corp. (In re Hartford

Textile Corp.), supra, 681 F.2d at 897; Ward v. Pennsylvania

New York Central Transportation Corp., supra, 456 F.2d at

1048; Sperry Rand Corp. v. Rothlein, supra, 288 F.2d at

248-49.

The assertion that the injunction violated the due process

protections required by Roadway Express, Inc. v. Piper, 447

U.S. 752 (1980), is patently without merit. As noted above,

petitioners’ attorneys received notice of defendants’ motion

seeking injunctive relief and numerous opportunities to be

heard both before the motion was granted and in connection

with petitioners’ request for reconsideration. Petitioners have

not suggested any plausible ground why the injunction barring

them from continuing to harass respondents merits this

Court’s review.

III.

THE CLAIMS ASSERTED IN THE COMPLAINT

In part II of the petition, petitioners argue that their claims

“were warranted by existing law or a good faith argument for

the extension, modification or reversal of existing law” (Pet.

16) (emphasis in the original). This quotation from Rule 11 of

the Federal Rules of Civil Procedure indicates that part II of

the petition is intended to argue that the sanctions imposed on

petitioners’ counsel were not merited. That issue is not pre-

sented by the decision of which review is sought.

6

It is conceivable that petitioners also intend to argue that the

dismissal of the complaint raises issues that should be reviewed

by this Court. Certiorari is hardly merited, however, by the

lower courts’ failure to modify or reverse existing law to

accommodate petitioners’ claims, as discussed below.

A. The Rule 10b-5 Claim

The references in the petition to individuals who sold

Teltronics stock (Pet. 2, 18) are misleading. Plaintiffs them-

selves have never sold their shares (Pet. 2, 20-21). They assert

standing under Rule 10b-5 on the ground that an alleged

misrepresentation that Teltronics had defaulted in Ericsson’s

press release issued on March 5, 1979 (Pet. 6) was the cause of

Teltronics’ bankruptcy proceedings in September 1979 (Pet.

17, 32a).

The District Court dismissed the Rule 10b-5 claim on the

ground that the press release was not a proximate cause of the

bankruptcy proceedings (Pet. 16a). The Court of Appeals

agreed (Pet. 33a), but affirmed primarily on the basis that the

commencement of bankruptcy proceedings did not constitute a

“forced sale” of petitioners’ stock (Pet. 34a). The holding that

the commencement of insolvency proceedings does not consti-

tute a forced sale of securities for purposes of Rule 10b-S is in

accord with the decisions of the other courts that have consid-

ered the question, see Landy v. F.D.I.C., 486 F.2d 139, 159 (3d

Cir. 1973), cert. denied, 416 U.S. 960 (1974); Ingenito v.

Bermec Corp., 376 F. Supp. 1154, 1177 (S.D.N.Y. 1974); see

also Davis v. United States Gypsum Co., 451 F.2d 659, 660 (3d

Cir. 1971), and petitioners do not identify any decision to the

contrary.

When bankruptcy proceedings were commenced against

Teltronics in September 1979, it invoked the protection of

Chapter XI of the Bankruptcy Act.’ Significant alterations of

2 See Anaconda-Ericsson, Inc. v. Hessen (In re Teltronics Services,

Inc.), 29 Bankr. 139, 144 (Bankr. E.D.N.Y. 1983). The proceedings

were converted to a straight bankruptcy on April 30, 1980, id., based

the rights of public investors were not permitted in proceedings

under Chapter XI. See SEC v. American Trailer Rentals Co..,

379 U.S. 594, 614-15 (1965). The management elected by

Teltronics’ stockholders, including petitioners, remained in

possession and the stockholders generally retained their right

to elect new directors, see, e.g., In re Potter Instrument Co..,

593 F.2d 470, 475 (2d Cir. 1979); cf. Saxon Industries, Inc. v.

NKFW Partners, 488 A.2d 1298, 1300-0! (Del. 1985) (under

Chapter 11 of Bankruptcy Code). There is therefore no plausi-

ble basis for asserting that the commencement of Teltronics’

bankruptcy proceeding could constitute a “forced sale” of

petitioners’ shares.

The separate determination that the alleged misrepresenta-

tion was not a proximate cause of the bankruptcy proceedings

commenced six months later does not present any issue of

general interest meriting this Court’s review.

B. The RICO Claim

The Court of Appeals dismissed petitioners’ RICO claim on

the ground that it belonged to Teltronics and could therefore

be asserted only by the corporation, and not the shareholders.

As petitioners acknowledge (Pet. 22), the Court of Appeals

followed the only other decision addressing the same question

that is identified in the petition. Warren v. Manufacturers

National Bank, 759 F.2d 542, 544 (6th Cir. 1985). The holding

that stockholders lack standing to assert claims on their own

behalf based on injuries to the corporation also is in accord

with well settled principles of corporation law.

The Court of Appeals’ decision is not in any way inconsis-

tent with Sedima, S.°R.L. v. Imrex Co., 105 S. Ct. 3275

(1985). In Sedima, the Court held that a RICO plaintiff need

not allege either a distinct “racketeering injury” or prior

convictions of the predicate felonies. The issue addressed in

on the Bankruptcy Court’s findings of misconduct by Teltronics’

management, see Jn re Teltronics Services, Inc., No. 79 B 2725 (CHG),

slip op. at 82-86 (Bankr. E.D.N.Y. April 30, 1980).

8

Sedima relating to the type of injury that must be alleged to

assert a claim under RICO is unrelated to the question of

whether stockholders may assert claims based on injuries to the

corporation. See Warren v. Manufacturers National Bank, 759

F.2d 542, 545 (6th Cir. 1985).

C. The Antitrust Claim

The Court of Appeals affirmed the dismissal of petitioners’

antitrust claim on the basis of the principles established in this

Court’s most recent opinion on standing to assert such claims,

Associated General Contractors v. California Council of Car-

penters, 459 U.S. 519 (1983). In particular, the Court of

Appeals noted this Court’s approval of Loeb v. Eastman

Kodak Co., 183 F. 704 (3d Cir. 1910), which dismissed an

antitrust claim for lack of standing based on circumstances

that are indistinguishable from this action. In Loeb, as in the

present case, the plaintiff claimed to have been injured because

the alleged violation of the antitrust laws drove a company of

which he was a stockholder into bankruptcy and thereby

reduced the value of his shares. 183 F. at 706-07. The Court of

Appeals’ dismissal of petitioners’ antitrust claim was clearly in

accordance with the decisions of this Court.

D. The Williams Act Claim

The only authority cited by petitioners to support their

contention that the Court of Appeals erred in holding that the

transaction on which petitioners rely did not constitute a |

“tender offer” subject to the Williams Act is an earlier decision

of the same court, Hanson Trust PLC v. SCM Corp., 774 F.2d

47 (2d Cir. 1985) (Pet. 25). In Hanson Trust, the Court of

Appeals held that the principal criterion for determining

whether a transaction constitutes a “tender offer” is whether it

creates “a substantial risk that solicitees will lack information

needed to make a carefully considered appraisal of the pro-

posal,” id. at 57.

9

As petitioners acknowledge, the proposal by Ericsson that

they assert was a tender offer was expressly conditioned on

approval by Teltronics’ stockholders following distribution of

proxy material that had been submitted to the Securities and

Exchange Commission (Pet. 24). Compliance with the disclo-

sure requirements applicable to proxy material under section

14 of the Securities Exchange Act, 15 U.S.C. § 78/, would have

ensured that the stockholders had ample information concern-

ing the proposed transaction and opportunity to consider it.

The assertion that such a transaction constitutes a tender offer

is fatuous.

Conclusion

For the foregoing reasons, the petition should be denied.

Respectfully submitted,

ROBINSON BURRELL LACY

125 Broad Street

New York, New York 10004

(212) 558-4000

Counsel of Record for Respondents

Anaconda-Ericsson Inc., Ae

Ericsson, Inc., L M Ericsson

Telephone Company, Sullivan &

Cromwell, Richard Howe,

Richard G. Lyon, and

L. Stanton Towne

Robert M. Osgood

Christopher Allegaert

SULLIVAN & CROMWELL

Of Counsel

Allan L. Gropper

Robert J. Morrow

Of Counsel

Philip K. Howard

Of Counsel

10

RICHARD GRANT LYON, Esq.

Ericsson, Inc.

730 International Parkway

Richardson, Texas 75081

(214) 997-0743

Pro Se and as Attorney for

Respondents Anaconda-Ericsson

Inc., Ericsson, Inc., and L M

Ericsson Telephone Company

WHITE & CASE

1155 Avenue of the Americas

New York, New York 10036

(212) 819-8200

Attorneys for Respondent

Nordic American Banking

Corporation

HOWARD, DARBY & LEVIN

10 East 53rd Street

New York, New York 10022

(212) 751-8000

Attorneys for Respondent

Price Waterhouse

William B. Pennell

James P. Tallon

Of Counsel

November 6, 1986

1]

SHEARMAN & STERLING

53 Wall Street

New York, New York 10005

(212) 837-6000

Attorneys for Respondent

Citibank, N.A.

PAUL S. MCDONOUGH, ESQ.

Telecom Plus International Inc.

48-40 34th Street

Long Island City, New York 11101

(718) 392-7700

Attorney for Respondents

Telecom Equipment Corporation

and Stephen R. Cohen

la

APPENDIX A

Opinion on Motion to Reargue

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

83 CV 4268 (ERN)

a

MICHAEL M. RAND, JOHN COSTELLO, STEVEN J. COSTELLO,

GREGORY T. FRESE, EDWARD LAVIN, PETER A. MILANO, and

VINCENT G. SERVELLO,

Plaintiffs,

—against—

ANACONDA-ERICSSON, INC., ERICSSON, INC., L.M. ERICSSON

TELEPHONE CO., NORDIC AMERICAN BANK, CITIBANK,

N.A., PRICE-WATERHOUSE & CO., SULLIVAN & CROMWELL,

RICHARD HOWE, RICHARD G. LYON, L. STANTON TOWNE,

TELECOM EQUIPMENT CORP, and STEPHEN R. COHEN,

Defendants.

as

MEMORANDUM AND ORDER

APPEARANCES:

CARL E. PERSON & WALTER C. REID, ESQS.

New York, New York

Attorneys for Plaintiffs

2a

SULLIVAN & CROMWELL

New York, New York

Attorneys for Defendants Anaconda-Ericsson, Inc.,

Ericsson, Inc., L.M. Ericsson Telephone Co.

Sullivan & Cromwell, Richard R. Howe, Richard G.

Lyon, and L. Stanton Towne

By ROBERT M. OSGOOD, ESQ.

ROBINSON B. LACY, ESQ.

MARIA FOSCARINIS, ESQ.

RICHARD G. LYON, ESQ.

Greenwich, Connecticut

Pro Se and as Attorney for Defendants

Anaconda-Ericsson, Inc., Ericsson, Inc., and

L.M. Ericsson Telephone Company

WHITE & CASE

New York, New York

Attorneys for Defendant Nordic American Bank

By ALLAN L. GROPPER, ESQ.

HOWARD, DARBY & LEVIN

New York, New York

Attorneys for Defendant Price Waterhouse

By PHILIP K. HOWARD, ESQ.

SHEARMAN & STERLING

New York, New York

Attorneys for Defendant Citibank, N.A.

By WILLIAM B. PENNELL, ESQ.

PAUL S. MCDONOUGH, ESQ.

Long Island City, New York

Attorney for Defendants Telecom Equipment Corp. and

Stephen R. Cohen

3a

NEAHER, District Judge

The case is again before the Court, this time upon plaintiffs’

motion to reargue the Court’s decision and order of August 30,

1985, which granted defendants’ motion for summary judg-

ment and awarded attorneys fees against plaintiffs’ attorneys.

Plaintiffs’ attorneys contest the Court’s dismissal of their

clients’ claims. They also challenge the assessment of fees

against them personally. Specifically, they ask for a specifica-

tion of the charges of bad faith/misconduct which support the

award of fees and for an opportunity to be heard on this

matter at an evidentiary hearing. The Court will first address

their contentions concerning asserted errors in dismissing

plaintiffs’ claims.

Typical of the manner in which plaintiffs’ attorneys have

pursued this case, in the memorandum of law in support of

this motion at 5 they state,

“Although this Court in its opinion (Op. pg. 17) ap-

parently agrees with plaintiffs’ argument that the condi-

tions necessary for a “forced sale” exist in this case, it

nonetheless argues—for the first time—not that the Erics-

son press releases were not ‘in connection with’ the forced

sale of plaintiffs’ stock (which was the Court’s holding ii

the Beagan case) but that the issuance of the press releases

and defendants’ subsequent attempts to perpetuate the

collapse of plaintiffs’ stock were not causally related to

the forced sale of that stock. The concepts of ‘proximate

causation’ and the ‘in connection with’ requirement are

distinct and this Court is unclear in its opinion as to

whether it has abandoned its earlier reliance on the ‘in

connection with’ requirement which it used to dismiss

plaintiffs’ Rule 10b-5 claim in the Beagan case.”

On the contrary, proximate causation is an integral aspect of

the “in connection with” requirement.

“The precise meaning of ‘in connection with’ is pro-

vided neither by section 10(b) [of the Securities and

4a

Exchange Act of 1934] nor rule 10b-5. The case law

reveals that in order for this element to be satisfied there

must be some causal relationship between the alleged

deception and some consequent purchase or sale. Courts

have spoken of this connection in terms of reliance and

causation.”

Liberty National Insurance Holding Co. v. Charter Co., 734

F.2d 545, 555 (11th Cir. 1984) (citations omitted); see Angelas-

tro v. Prudential-Bache Securities Inc., 764 F.2d 939, 943 (3d

Cir. 1985). In recognition of this requirement, speaking of the

plaintiffs’ claims in Bennett v. United States Trust Co., 770

F.2d 308 (2d Cir. 1985), the Court of Appeals stated,

“They fail to establish the necessary loss causation; there

is simply no direct or proximate relationship between the

loss and the misrepresentation. See Bloor v. Carro, Span-

bock, Rodman & Fass, 754 F.2d 57, 61-62 (2d Cir. 1985).”

Id. at 314.

In this case the misrepresentation is alleged to be omissions

in a press release issued in March 1979. Its relationship to

plaintiffs’ subsequent “loss”, which occurred after Teltronics

was ordered liquidated in April 1980, is remote. By analogy,

the relationship between the press release and the asserted

“forced sale” created through Teltronics’ liquidation is simi-

larly remote.

Also contrary to plaintiffs’ argument in their memorandum

of law, the Court did not conclude that the conditions for a

forced sale existed in this case. Unlike the short form merger

which occurred in Vine v. Beneficial Finance Corp., 374 F.2d

627 (2d Cir.), cert. denied, 389 U.S. 970 (1967), where the

Court found a forced sale, after the misrepresentation alleged

to have occurred here, plaintiffs had neither the right to

judicial appraisal of their stock nor the option of selling it

pursuant to a preexisting offer, nor any equivalent rights.

Furthermore, the liquidation of Teltronics did not convert

plaintiffs’ stock into a claim for cash. As the Court noted in

Vine,

Sa

“We do not have here a stockholder who refused to accept

a fraudulent offer to purchase his stock but remains a

stockholder in an existing corporation; whether to label

this hypothetical person a ‘seller’ under the Rule is a

much different question. Due to defendant’s acts, Crown

has now disappeared and plaintiff’s stock has, in effect,

been involuntarily converted into a claim for cash.”

Id. at 634. Here, by contrast, plaintiffs could only exchange

their stock for money from the Bankruptcy Court in the event

money were available from the Teltronics estate for this pur-

pose. In its prior order the Court merely refused to rule, as

defendants had requested, that the liquidation of a corporation

in bankruptcy can never result in a forced sale.' Further

exposition of the concept would be a meaningless academic

exercise, injecting dicta into a decision derived from the cir-

cumstances of this case. To summarize and reiterate: the Court

finds that plaintiffs have not met the “in connection with”

In the Beagan action, the Court observed that,

“The fraudulent scheme alleged in the complaint consists of a plot to

plunge Teltronics into bankruptcy. [Complaint] € 120. Assuming the

success of the plot as alleged in the complaint, the separation of

Beagan or any other Teltronics’ shareholder from their shares was

hardly integral to bankrupting the corporation. Moreover the asserted

misrepresentation contained in a press release, was that Teltronics had

defaulted on loans froia Nordic and Citibank. Although the default

may have been excused, or Teltronics may have had a defense to a suit

by the banks [or their successurs in interest to the debt instruments], it

nevertheless defaulted when it failed to make the interest payment on

time. Beagan also cites an omission in that the press release failed to

state that Teltronics had adequate assets to pay the loans. The avail-

ability of money would not preclude a default, and in these circum-

stances, the asserted solvency of Teltronics is irrelevant to the fraud

alleged to have precipitated its rapid demise. That fraud was defen-

dants’ alleged promise to make the interest payments if Teltronics did

not do so. Teltronics’ possible State law claim for commonlaw fraud

arising from this deceit has been settled. The attenuation between this

misrepresentation and the securities involved in any subsequent sale,

forced or otherwise, is apparent from the pleaded facts.”

587 F. Supp. at 731-32. The instant complaint alleges the same facts and

merits the same response.

6a

requirement of § 10(b) or Rule 10b-5 and plaintiffs have not

presented facts which establish a forced sale of their stock.

Having failed to persuade the Court of the viability of their

securities fraud claims, plaintiffs’ reargument concerning the’

RICO claim fails. As the Court concluded earlier, plaintiffs

present only one RICO predicate act. Moreover, as previously

noted, any injuries to plaintiffs’ shares in Teltronics resulted

from activities (alleged fraud and antitrust violations) directed

at Teltronics. But for plaintiffs’ ownership of those shares in

that corporation and that corporation’s business relationships

with Ericsson, plaintiffs would have no loss. As recently

pointed out by Judge Edelstein, RICO is not available to

shareholders to redress injuries done to their corporation.

Nordberg v. Lord, Day & Lord, ___ F. Supp. ;

39/85 Star. Dec. 12, 28-31 (S.D. N.Y. Y. 1985) (cases cited and

discussed therein).*

Concerning plaintiffs’ claim pursuant to § 14(e) of the Wil-

liams Act, the Court stands by its prior ruling that the motion

papers disclose no tender offer.

“Although the Williams Act does not define the term

‘tender offer’, the characteristics of a typical offer are

well-recognized. They are described in the House Report

of the Committee on Interstate and Foreign Commerce,

which held hearings on the proposed Act.

The offer normally consists of a bid by an individual or

group to buy shares of a company—usually at a price

2 For reasons which escape the Court (and defy logic), plaintiffs

persist in attempting to persuade the Court that Wilson v. Garcia, 105 S.Ct.

1938, undercuts the Court’s earlier analysis, 587 F. Supp. at 733, and

presumably the analysis of Durante Brothers, etc. v. Flushing Nat. Bank, 755

F.2d 239, 248-49 (2d Cir.), cert. denied, 105 S.Ct. 3530 (1985), concerning the

appropriate New York statute of limitations for a civil RICO suit. The RICO

claim in this case was dismissed upon deficiencies in the merits and not upon

any defense of the statute of limitations.

3 As Teltronics has settled all of its claims against Ericsson as part of a

bankruptcy, there is no possibility of a shareholders’ derivative RICO suit.

7a

above the current market price. Those accepting the offer

are said to tender their stock for purchase. The person

making the offer obligates himself to purchase all or a

specified portion of the tendered shares if certain condi-

tions are met.

H.R.Rep.No. 1711, 90th Congress, 2d Sess., reprinted in

[1968] U.S. Code Cong. & Admin. News, pp. 2811, 2811.

“This definition of a conventional tender offer has

received general recognition in the courts.”

Kennecott Copper Corp. v. Curtiss-Wright Corp., 584 F.2d

1195, 1206 (2d Cir. 1978). The alleged tender offers from Tsai

and Loral Corp. never actually materialized, thus the parties

never executed contingent provisions in which Ericsson would

have acted as a “White Knight” to prevent the takeover of

Teltronics. Ericsson’s own negotiations to purchase stock from

plaintiffs and Teltronics chief stockholder, Beagan, never con-

templated a public solicitation of shares.

In construing § 14(d) of the Williams Act, the disclosure

provisions, the Court of Appeals recently stated,

“The borderline between public solicitations and privately

negotiated stock purchases is not bright and it is fre-

quently difficult to determine whether transactions falling

close to the line or in a type of a ‘no man’s land’ are

‘tender offers’ or private deals. . . . [SJince the purpose

of § 14(d) is to protect the ill-informed solicitee, the

question of whether a solicitation constitutes a ‘tender

offer’ within the meaning of § 14(d) turns on whether

viewing the transaction in the light of the totality of

circumstances, there appears to be a likelihood that unless

the preacquisition filing strictures of that statute are

followed there will be a substantial risk that solicitees will

lack information needed to make a carefully considered

appraisal of the proposal put before them.”

Hanson Trust PLC v. SCM Corp., 774 F.2d 47, 56, 57 (2d Cir.

1985). Through five private sales and one open market pur-

8a

chase, Hanson had accumulated 25% of SCM’s stock. After

stating the above test, the Court advanced seven reasons or

factors which illustrated why those transfers were not consid-

ered a tender offer.

Six of those factors parallel the instant case as follows: (1)

the number of proposed sellers consisted of Edward Beagan

and the Teltronics Board of Directors, which collectively held a

substantial portion of the corporation’s stock; (2) the proposed

offerees knew or should have known about Teltronics financial

condition and the security interest which Ericsson held in the

equipment leases; (3) any pressure to sell indirectly originated

from Ericsson’s allegedly illegal activities against Teltronics in

the marketplace; (4) there was no active or widespread advance

publicity or public solicitation, which is one of the earmarks of

a conventional tender offer; (5) the proposed purchase price

was never a premium; and (6) Ericsson never proposed a

purchase of outstanding shares. See Beaumont v. American

Can Co., ___ F. Supp. F , 45/85 Star. Dec. 220,

255-58 (S.D.N.Y. Nov. 6, 1985).

In their memorandum of law at 6, plaintiffs state,

“

‘. . . [T]he Court’s ruling is contrary to the evidence in

the record which clearly indicates that Ericsson has sought

to acquire the stock of many of Teltronics’ shareholders

and had taken ‘substantial steps’, including the prepara-

tion of a letter by its attorneys, Sullivan & Cromwell,

toward that end.”

They do not identify the exhibit which contains this evidence

and the Court cannot locate any such letter in the two volumes

of documentary exhibits which accompany plaintiffs’ original

motion papers. From the context, however, the Court compre-

hends that this letter refers to an offer to buy made by Ericsson

after the price of Teltronics stock had fallen. Nevertheless,

prior to the default, the evidence discloses that Ericsson’s

proposal to acquire an equity interest in Teltronics never

contemplated a tender offer. Plaintiff’s Exh. F, Affidavit of

Edward Beagan, 44 32-34, appendix at 499-500; plaintiff’s

Exh. Y. As Beagan further explains, negotiations consisting of

9a

‘proposal and counterproposal continued, but no agreement

was reached. Beagan Affidavit at ¢ 40, appendix at 502.

Perhaps the most vexatious and ill-founded claim repeatedly

advanced by plaintiffs is that they have standing to sue Erics-

son for alleged violations of the antitrust laws. Not unsurpri-

singly, they accuse the Court of having determined the facts in

the context of summary judgment. They characterized the

Court’s fii.ding that Ericsson’s alleged activities were directed

at Teltronics as “mistaken” because they contend that as

shareholders the injury was direct and personal to themselves.

Their reliance on Blue Shield of Virginia v. McCready, 457

U.S. 465 (1982) is misplaced. As this Court noted in Beagan’s

action, 587 F. Supp. 729-30, the rules for antitrust standing are

stated in the later case of Associated General Contractors of

California v. California Council of Carpenters, 459 U.S. 897

(1983). Rather than undercutting established. antitrust law,

these rules reinforce the principle that shareholders are not the

victims of activities, allegedly violative of the antitrust laws,

which are directed at their corporation. Plaintiffs have not

identified any activity which was violative of the antitrust laws

and directed solely at them.

In a broad sweeping claim, plaintiffs also assert that Erics-

son aimed its activities at plaintiffs to collapse the price of their

stock. The facts and circumstances do not support such a

conclusion. The price of the stock collapsed only after the

default. Moreover, plaintiffs’ entire theory of a conspiracy to

depress the price of Teltronics stock ignores the undisputed

facts. Beagan, undoubtedly with consent of Teltronics board

members, several of whom are plaintiffs in this suit, gave

Ericsson a secured interest in Teltronics assets, the ability to

influence the acceleration of a substantial portion of the

corporation’s debts, and most importantly, the opportunity to

profit from an acceleration of that debt. Once Citibank and

Nordic American Bank had assigned their rights as holders of

Teltronics loans, Teltronics owed the money directly to Erics-

son. This situation gave Ericsson the significant interest it had

desired in Teltronics, whether Teltronics stock traded for $9 a

10a

share or $.09 a share. Undeniably, Ericsson had attained the

functional equivalent of an equity position in Teltronics

without ever purchasing a single share; consequently, the Court

still fails to understand how depressing the price of Teltronics

stock was necessary to the success of the alleged takeover

scheme.

Plaintiffs’ attorneys’ response to the award of fees against

them aiso misperceives the record. They accuse the Court of

applying the equivalent of res judicata to bar their clients’

claims on the basis of prior litigation. Nothing of the sort

occurred. The instant plaintiffs raised the same claims raised

by Edward Beagan and neither they nor their attorneys should

be surprised that this Court dismissed their claims, in part, in

reliance upon its prior exhaustive treatment of these matters.

These claims were as meritless when raised by shareholder

Beagan as they are when raised by any other Teltronics share-

holder.

Additionally, nothing in this Court’s decision suggests or

permits the inference that plaintiffs’ attorneys solicited

Teltronics shareholders to sue Ericsson after this Court dis-

missed Beagan’s lawsuit. The need or desirability for the

multiplicity of actions filed by plaintiffs’ attorneys has been

attributed by them to unidentified “procedural reasons”. Its

effect has been to harass Ericsson which prevailed in a tria! of

many of these same issues in the Bankruptcy Court.

“Under the law in this Circuit, to award fees under the

bad faith exception a court must find clear evidence that

the losing party’s claims were ‘entirely without color and

made for reasons of harassment or delay or for other

improper purposes.’ The test is conjunctive and neither

meritlessness alone nor improper purpose alone will suf-

fice. Under this test, a claim is ‘entirely without color’

when it lacks any legal or factual basis. While there is no

precise definition of ‘improper purpose’ it may be evi-

denced by conduct occurring either before or during

trial.”

lla

Sierra Club v. U.S. Army Corp. of Engineers, ____ F.2d ___

____ (2d Cir. October 28, 1985) (citations and footnote omit-

ted).

This standard aptly characterizes plaintiffs’ attorneys’ oppo-

sition to Ericsson’s motion for summary judgment in this

action. Rather than opposing that motion, they should have

agreed to the entry of judgment without prejudice to their

rights to an appeal; thus saving defendants the costs and fees

of preparing additional papers. The Court’s sanction is limited

and discretely applies only after the Court of Sina’ rendered

its decision published at 762 F.2d 185.

In considering the effect and sweep of the Court of Appeals’

opinion, plaintiffs’ attorneys refer to that appeal and the

preceding district court litigation as the “Beagan” action or

suit. In so doing, they conveniently ignore the remainder of the

Court of Appeals’ decision and its clear implications for the

instant suit. For the reasons stated by this Court, the Court of

Appeals affirmed this Court’s and the Bankruptcy Court’s

approval of a settlement by Teltronics’ bankruptcy trustee of

Teltronics’ claims against Ericsson. 762 F.2d at 189. Also for

‘the reasons stated by this Court, the Court of Appeals ruled

that Edward Beagan, and obviously his attorneys, had no

authority to pursue claims settled by Teltronics’ bankruptcy

trustee. 762 F.2d at 189-90. Undoubtedly, this Court could not

and would not enjoin Beagan from pursuing his own claims,

but it did enjoin him from pursuing Teltronics’ claims. Never-

theless, his attorneys, here plaintiffs’ attorneys, appealed this

Court’s dismissal of Teltronics without seeking a stay of that

injunction.* Relying on the same claims and the same allega-

tions, they opposed the instant motion for summary judgment

with nothing more than protestations that Ericsson’s activities

created liability to Teltronics’ shareholders, the plaintiffs

herein. The Court had already ruled to the contrary, and the

4 Contrary to plaintiffs’ attorneys’ assertions, this Court never en-

couraged them to take an appeal on behalf of Teltronics.

12a

subsequent motion papers and later case authorities have

reinforced the correctness of the prior rulings.°

Significantly, too, plaintiffs’ attorneys’ manner of opposing

the motion also evidences bad faith. They have not explained

how or why the problems of an entity referred to as Datasaab,

allegedly an Ericsson subsidiary, concerning illegal exports of

technology to the Soviet Union relate to Teltronics or the

plaintiffs. The documents submitted appear to be intended to

disparage Ericsson as a predatory entity allegedly associated

with another entity involved in espionage and to convince the

Court that individuals allegedly having some connection to

Ericsson were less than forthright to a Federal Judge in the

District of Columbia. Mudslinging of this genre is inappro-

priate under Fed. R. Civ. P. 56 and cannot be tolerated. Such a

tactic insults the intelligence of the Court because it suggests

that irrelevant and prejudicial matters may influence the

Court’s decisionmaking.°

Also contrary to their complaints, plaintiffs’ attorneys have

not been denied procedural due process. Ericsson has re-

peatedly reiterated its motion for sanctions against plaintiffs’

attorneys since the first motion in the Beagan action. See Wang

v. Gordon, 715 F.2d 1187, 1190-91 (7th Cir. 1983). In the

instant case, plaintiffs’ attorneys accused Ericsson and its

attorneys of bad faith conduct and called for sanctions against

5 The prior proceedings concerning Teltronics in this Court and the

Court of Appeals put plaintiffs’ attorneys on notice that this action was so

completely without hope of succeeding that pursuing the matter in this

Court, beyond placing the case in an appellate posture, was vexatious to the

defendants and indicative of bad faith. See Glick v. Koenig, 766 F.2d 265,

270 (7th Cir. 1985).

6 Plaintiffs’ attorneys submitted their opposition papers (dated July 1,

1985) on July 5, 1985. Apparently, the references to Datasaab were intended

to satisfy the RICO requirement of prior criminal convictions, as set out in

Sedima §.P-R.L. v. Imrex, Inc., 741 F.2d 482 (2d Cir. 1984). Although this

requirement was rejected by the Supreme Court in that case on July 1, 1985,

105 S.Ct. 3275, in their subsequent papers, plaintiffs’ attorneys have not

withdrawn their references to exhibits related to Datasaab. The record

discloses that Datasaab’s activities have no legal or factual impact upon

Ericsson’s relationship(s) with Teltronics or these plaintiffs.

13a

them. The Court’s finding of bad faith rests upon the undispu-

ted activities of plaintiffs’ attorneys as evidenced by the events

of record. They have had ample opportunity to address the

Court in person and on paper.

Plaintiffs’ attorneys appeared at a conference held on the

record on September 24, 1985. At that time, they offered no

explanation, other than zealous representation of their clients,

of why they had opposed Ericsson’s motion for summary

judgment in light of this Court’s prior rulings and the Court of

Appeals’ decision. Concerning the imposition of sanctions,

their memorandum of law submitted in support of the motion

to reargue is no more enlightening except to assert that the

Court has denied them due process of law in imposing sanc-

tions. Despite these opportunities to explain themselves, they

have offered nothing to justify their conduct, which wholly

disregards the results of the prior proceedings.

This Court dismissed all of the claims of shareholder Beagan

on the merits. Plaintiffs’ attorneys have offered no reason why

other shareholders (plaintiffs herein) should be treated dif-

ferently with respect to the same claims.’ See Wang v. Gordon,

supra; compare United States ex rel. United States-Namibia,

etc., v. Africa Fund, 588 F. Supp. 1350, 1352 (S.D.N.Y. 1984);

North American Foreign Trading Corp. v. Zale Corp., 83

F.R.D. 293, 298 (S.D.N.Y. 1979). They obstinately disagree

with that dismissal and the reasons the Court advanced in

support of it, insisting, in essence, that the Court does not

understand the nature of the case or the law or asserted

liabilities involved. Their remedy lies in an appeal and not in

blind pursuit of some hope that the Court will depart from its

prior rulings when confronting the same arguments previously

rejected and the same authorities previously found either

irrelevant or unpersuasive. See Jn re TCI Ltd., 769 F.2d 441,

445 (7th Cir. 1985) (“[D]Jogged pursuit of a colorable claim

becomes actionable bad faith once the attorney learns (or

should have learned) that the claim is bound to fail.”).

7 Not only are the claims the same as were raised in the Beagan action,

but many of the affidavits and documents submitted by plaintiffs’ attorneys

are the same, viz, Plaintiffs’ Exhs. D, E, F, H, and K (including Exhs. N and

O to Exh. K).

l4a

In sum, plaintiffs’ attorneys have received the notice and

opportunity to be heard required prior to the imposition of

sanctions, see Smiga v. Dean Witter Reynolds, Inc., 766 F.2d

698, 708-09 (2d Cir. 1985); Hasty v. Paccar, Inc., 583 F. Supp.

1577, 1580 (E.D. Mo. 1984); see also Eash v. Riggins Trucking,

Inc., 757 F.2d 557, 571 (3d Cir. 1985) (en banc), and they have

not shown that the sanction is unlawful, clearly erroneous

based upon the record, or an abuse of the Court’s discretion.

See Sierra Club, supra; United States v. Nesglo, Inc., 744 F.2d

887, 891 (1st Cir. 1984); see also Tedeschi v. Smith Barney, etc.,

579 F. Supp. 657 (S.D.N.Y. 1984), aff’d, 757 F.2d 465 (2d Cir.

1985) (per curiam); Nemeroff v. Abelson, 94 F.R.D. 136

(S.D.N.Y. 1982), aff’d, 704 F.2d 652 (2d Cir. 1983).

Although not raised in their memorandum of law submitted

in support of the instant motion, plaintiffs’ attorneys, at the

aforementioned conference, expressed confusion concerning

the breadth of the injunction contained in the order and

decision of August 30, 1985. The purpose of that injunction is

to prohibit them from commencing any new lawsuits concern-

ing Teltronics, (which the Court considers unlikely) and to

prohibit them from further pursuing an action entitled,

“Teltronics Services, Inc. and Edward M. Beagan against

Telecom Equipment Corp. and Stephen R. Cohen, 83 CV

3740,” which they filed in this Court. The injunction does not

extend to filing an appeal in this matter and cannot be so

misinterpreted.

On the basis of the foregoing, the motion to reconsider is in

all respects denied. Accordingly, defendants have 20 days from

the date of this order to submit their petition for fees in accord

with this Court’s order of August 30, 1985. Plaintiffs’ attor-

neys will have 10 days thereafter to submit a response, if any.

SO ORDERED.

/s/ EDWARD R. NEAHER

U.S.D.J.

Dated: Brooklyn, New York

December 2, 1985

lSa

APPENDIX B

Designation of Corporate Relationships

Pursuant to Rule 28.1 of this Court, respondents submit this

designation of corporate relationships.

1. Anaconda-Ericsson Inc. has been renamed Ericsson, Inc.

It is a wholly-owned subsidiary of Ericsson North America

Inc., which in turn is a wholly-owned subsidiary of L M

Ericsson Telephone Company, a Swedish corporation whose

shares are publicly held. L M Ericsson Telephone Company

has subsidiaries throughout the world, but none of their shares

are publicly traded in the United States.

2. Since the commencement of this action, the corporate

name of respondent Nordic American Banking Corporation

has been changed to DnC America Banking Corporation. DnC

America Banking Corporation is wholly owned by Den norske

Creditbank, a Norwegian corporation.

3. The parent company of Citibank, N.A. is Citicorp. The

following is a list of subsidiaries and affiliates which are not

wholly owned.

Agence Expression S.A.R.L.

Agence Touristique de Guyenne et Gascogne S.A.

AMBAC, Inc.

AP-Dow Jones/Quotron Co.

Arrendadora INCI, S.A. de C.V.

Auximar Voyages S.A.

Banco Centro Sud S.P.A.

Banco de Honduras S.A.

Banco Internacional de Colombia (Nassau) Ltd.

Banco Internacional de Colombia, S.A.

Bay Forest Lot 20

Boerum Court Associates

Brandts Clark Marine Ltd.

l6a

Brickell Biscayne Associates

BT Publications, Inc.

Burloak Financial Services Inc.

Cardholder Services Limited

Central Capital Market Sources, Inc.

Central Holdings Corp.

Channel Collections Ltd.

Channel Islands Transatlantic Investment Company in Health

Care Equities

Channel Islands Transatlantic Investment Funds Limited

Citi-Reserve, Societe D’Investissement A Capital Variable

Citibank (Zaire) S.A.R.L.

Citibank Budapest RT

Citibank Espana S.A.

Citibank Financial Consultants Limited

Citibank-Maghreb

Citibelsa-Assurantiemaatschappij Financia Compagnie

D’ Assurances Finan

Citico

Citicorp Construction Limited

Citicorp Data Distribution, Inc.

Citicorp Insurance Brokers (International) Limited

Citicorp Insurance Brokers Limited

Citicorp Insurance Holdings Limited

Citicorp Underwriting Agencies Limited

Citicorp Y Rio-Banco de Inversion, S.A.

Citifin Espana, S.A. de Financiacion

Citifinance Limited

Citilease Internacional, S.A.

Citilease Syndication No. | Corp.

Citytrust Banking Corporation

Citytrust Finance Corporation

Citytrust Realty Corporation

17a

Clarke Vickers (UK) Limited

Clarke Vickers Limited

Clarke Vickers Services Pty. Limited

Collateral Trust Corporation Limited

Commerce and Trade Bank Limited

Compagnie Bordelaise de Negotiations et de Gestion S.A.R.L.

Compagnie Franco-Americaine de Gestion Financiere

Compagnie Generale de Banque Citibank

Compania Exportadora Cityexport S.A.

D.C.F. Holdings S.A.

D.C.F. Services Limited

Datastruktur GMBH

Diners Assurances S.A.R.L.

Diners Club de France S.A.

Diners Club Limited, The

Diners Club Limited, The (Ireland)

Diners Selection S.A.R.L.

Diners Voyages S.A.

Diners World Travel Limited

DKM Consultants Limited

Dorchester on Rittenhouse Square Partners, The

Drury Lane Limited

Eagle II

Euclid Commercial Joint Venture

Euclid Golf Joint Venture

European Overseas Issuing Corporation S.A.

Famibank S.A.

Fil-Insure Brokers, Inc.

Financia Nederland N.V.

Financial Institutions Insurance Brokers Limited

Financial Reserve, Incorporated

Financiera Citicorp S.A.

18a

Finders Limited

First Citicorp Leasing, Inc.

First Hemphill

Fraser Vickers Research Pte. Limited

FRMC Corporation

Fuji National City Consulting, Ltd.

Garfield Restoration, The

GKB Gerwerbekreditbank AG

Global Electronic Markets Company

Goldsboro Joint Venture

Groupe D’Etudes Techniques et Commerciales S.A.R.L.

Harrison Credit Group, Inc.

HCG Services, Inc.

Inmobiliaria Jiennense, S.A.

International Bank Limited

Island Finance Corporation

Jj & E Davy

J & E Davy Holdings Limited

J.N. Travers & Co. Limited

Kemp-Gee Holdings (Jersey) Limited

Kemp-Gee Nominees Limited

Kingsbrooke Co.

KKB Bank KGAA

KKB Lebensversicherung AG

Kredit-Und-Versicherungsvermittlungsgesellschaft MBH

Lake Terrace Associates

Leonine Administration Limited

Lexington Commons, The

Lexington Village, The

Maghreb Finance S.A.

Mandata GMBH Fur Rechtsbesorgung UND Inkasso

Marine Partners

19a

Memo Services S.A.R.L.

Meridian Partnership Ltd.

Mission Park Corporation

Nigeria International Bank, Limited

Oak Forest Company

Olive Trees Venture

One Sansome Street Associates Inc.

Organization d’Information et de Securite pour

le Credit S.A.R.L.

Orient Pacific Capital Investment Corporation

P.N. Kemp-Gee Service Company

P.T. Citicorp Leasing Indonesia

PT. Diners Jaya Indonesia International

Paddle Creek Enterprises, Inc.

Park West Construction Company

Partridge Hill Company

Quotnet (France) S.A.R.L.

Quotnet (Hong Kong) Limited

Quotnet (U.K.) Limited

Quotnet A.G.

Quotnet G.M.B.H.

Quotnet Services (Singapore) Pte. Limited

Quotnet Services Limited

Revue Signature S.A.R.L.

Rob Roy Country Club Village

Saudi American Bank

Schuyler Associates

SCI Sainte Madeleine I

SCI Sainte Madeleine II

Scrimgeour Kemp-Gee Management (Jersey) Limited

Scrimgeour Vickers & Co.

Scrimgeour Vickers Financial Futures Limited

20a

Scrimgeour Vickers Financial Services Limited

Scrimgeour Vickers Insurance Brokers Limited

Scrimgeour Vickers Research Services Limited

Seccombe Marshall & Campion P.L.C.

Sita World Travel (London) Limited

SKG Management Limited

Sobelfac S.A.

Southern Syndicate, Inc.

Spar-Und Kreditbank Registrierte Genossenschaft MBH

Sperry New Holland Credit Corporation

Taiwan First Investment & Trust Co., Ltd.

Tiers of Laurel Lakes Limited Partnership, The

United Bank of Trinidad and Tobago Limited, The

Waka Vermogensverwaltungs GMBH

Woodglen Venture

200 West Holdings Corp.

808 Broadway Associates

4. Telecom Equipment Corp. has been renamed Telecom

Plus International Inc. Tel-Plus Communications, Inc. is the

only subsidiary of Telecom Plus International Inc. that is not

wholly-owned. Siemens Aktiengesellschaft is a joint stock-

holder with Telecom Plus International Inc. in Tel-Plus Com-

munications, Inc.