Opposition Brief — Trager, Glass & Co. v. Newmyer

APR i2 BH

>pPaN!OL, JR.

In The a

Supreme Court of the United States

TRAGER GLass & COmpPANy

P, fifione 7

VS 1) L- oot \ e )

JOSEPH M NE \\ MYER f HN \V\

KWIATKOWSKI, JOHN C. Ce

ind Tosin R. Cot

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Re spondents

BRIEF IN OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI TO THI

UNITED STATES SUPREME COURT

Harry S. Stark (P-20905

MicHaeL H. Wuitinc (P-22276

JosepH A. AHERN (P-357 10

Stark, Reagan & Finnerty, P.¢

Attorneys for Res} nmdent

Suite 202

1111 West Long Lake R

Troy, Michigan 45084

,153 64] G55

ROMAN PRINTING ORPORATION. 550 FORT STREFT

DETROIT MICHIGAN 4522¢ 2 i4

QUESTIONS PRESENTED

I.

WHETHER THIS COURT SHOULD REVIEW A NON-

FINAL ORDER OF AN UNITED STATES APPELLATE COURT?

I.

WHETHER THIS COURT SHOULD REVIEW ISSUES

WHICH WERE NOT PROPERLY BEFORE EITHER THE

DISTRICT COURT OR THE COURT OF APPEALS?

TABLE OF CONTENTS

QUESTIONS PRESENTED

i. WHETHER THIS COURT SHOULD REVIEW A

NON-FINAL ORDER OF AN UNITED STATES

APPELLATE COURT? ..........

Il. WHETHER THIS COURT SHOULD REVIEW

ISSUES WHICH WERE NOT PROPERLY BEFORE

EITHER THE DISTRICT COURT OR THE COURT

OF APPEALS? ......

TABLE OF AUTHORITIES

STATEMENT OF THE CASE

i & : ere

ADRS NEE 6.0 os dnc eee

I.

IT.

THE DECISION OF THE SIXTH CIRCUIT

IS A NON-FINAL ORDER AND THERE ARE

NO CIRCUMSTANCES WHICH WARRANT

THIS COURT'S REVIEW ..............

THE PETITION FOR WRIT OF CERTIORARI

SHOULD NOT BE GRANTED BECAUSE THE

PETITIONER IS REQUESTING THIS COURT

TO EXAMINE ISSUES WHICH WERE NOT

ADDRESSED BY THE SIXTH CIRCUIT COURT

OF APPEALS NOR BY THE DISTRICT COURT

FOR THE EASTERN DISTRICT OF

MICHIGAN

CONCLUSION

Page

i

INDEX OF AUTHORITIES

Cases:

Adams v. Mills. 286 U.S. 397, 52 S.Ct. 589

(1932) Sy te ae

American Construction Company v. Jacksonville,

TCKCR. Co., 148 US. 372, 13 S.Ct. 758

1893)

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co..,

Bao ue. aon, oe (191G)............6.-.

Lynch v. United States, 292 U.S. 571. 54 S.Ct.

$40 (1934). \ 8 De a ara

McCullough v. Kammerer Corp., 323 U.S. 327,

a ag SS ) Ee

io”) rn ec GAGE Ss es Se el age

New York Dock Co. v. S.S. Poznan, 274 U.S. 117,

198, 56 S.Ct. 387 (1936)

Zellerbach Paper Co. v. Helvering, 293 U.S. 172.

29 S.Ct. 127 (1934)...

United States v. Nixon. 418 U.S. 683, 94 S.Ct.

3090 (1974)

Statutes:

15 U.S.C. Section 771

15 U.S.C. Section 7Saa

15 U.S.C. Section 78j(b)

18 U.S.C. Section 1962 Piet Meek sits

Page

STATEMENT OF THE CASE

In November of 1986, the first of the Respondents’ Com-

plaints were filed alleging, inter alia, violations of the Fed-

eral Securities Laws and the Racketeer Influenced and Corrupt

Organizations Act (““RICO”’). In response to these complaints,

four of the Defendants filed Motions to Dismiss. Before any

discovery was initiated, the lower court dismissed the Plain-

tiffs’ Complaint, holding that the investments were not secu-

rities under the Securities Exchange Acts of 1933 [15 U.S.C.

Section 771] and 1934 [15 U.S.C. Section 78aa and 78j(b)|.

The lower court also held that there was not a requisite

pattern of racketeering activity pursuant to the Racketeer

Influence Corrupt Organization Act [18 U.S.C. Section 1962].

On appeal, the Sixth Circuit reversed and remanded the

case to proceed to trial in accordance with its decision.

One of the Defendants, Trager, Glass & Company, has

asked this Court to grant its Petition for Writ of Certiorari to

reverse the decision of the Sixth Circuit Court of Appeals

relative to the securities law issue only. Respondents argue

that this Court should not exercise its discretionary power in

granting Writ of Certiorari on this matter.

FACTS

Respondents. for purposes of this response, will accept

Petitioner's version of the facts

ARGUMENT

Petitioner seeks review of the lower court's interlocutory

order pursuant to a Writ of Certiorari under 28 U.S.C. Sec-

tion 1254(1). Jurisdiction to review judgments and decrees

of the Court of Appeals by certiorari is to be exercised spar-

ingly, and only in cases of gravity and general importance, or

in order to secure uniformity of decision. Hamilton-Brown

Shoe Co. v. Wolf Bros. & Co., 240 US 251, 258 (1916)

iv

I. THE DECISION OF THE SIXTH CIRCUIT IS

A NON-FINAL ORDER AND THERE ARE NO

CIRCUMSTANCES WHICH WARRANT THIS

COURT'S REVIEW

Although a writ may issue on an interlocutory order, the

Supreme Court will not exercise its jurisdiction “unless it is |

necessary to prevent extraordinary inconvenience and embar-

rassment to the conduct of the cause’. American Construc-

tion Company v. Jacksonville, T & K. R. Co., 148 U.S. 372, 13

S.Ct. 758 (1893). In other words, only under the most extraor-

dinary circumstances will the Supreme Court hear a non-

final order, See, for example, United States v. Nixon, 418

U.S. 683, 94 S.Ct. 3090 (1974). An examination of the hold-

ing of the Sixth Circuit clearly indicates the inappropriate-

ness of Supreme Court review in this matter.

In its Petition for Writ of Certiorari, Petitioner claims:

“The Sixth Circuit Panel (J. Merritt, J. Nelson,

J. Celebrezze) determined that Plaintiffs’ investment in

Defendant Philatelic Leasing’s tax shelter program con-

stituted investment in a security.’

The Sixth Circuit determined no such thing. What the Sixth

Circuit did do, however, was to afford the Plaintiffs an oppor-

tunity to have their day in Court. The Sixth Circuit, rather

than make a determination that the investment was a secu-

rity, simply stated that it would not rule out the possibility

that the investments could be a security. The Opinion is

replete with such references:

and if the Plaintiffs in the present litigation are |

able to prove their cases, the committment given by the

distribution company here..." (p. 17).

‘Having read Philatelic’s offering memorandum, how-

ever, with its glowing account of the popularity of stamp

collecting, we cannot rule out the possibility that Phil-

atelic investors hoped to realize ‘profits’ in the true

sense of the term.” (p. 20)

wy

oo 9

‘These are factual questions, again, and the Defen-

dants may ultimately prevail on them. But such ques-

tions are not to be resolved against the Plaintiffs on

Motions to Dismiss — at least not on the sort of record

that is before us here.” (p. 21).

oe 689

“We do not come to grips with the issue here, how-

ever, given the clear possibility that at a trial of these

cases, or in summary judgment proceedings, the Plain-

tiffs may be able to show that their arrangements with

Dell got them over the commonality hurdle’. (p. 23).

The decision is clearly interlocutory. If there is an issue in

this case which the Supreme Court should review, this review

should occur after a properly developed record.

Il. THE PETITION FOR WRIT OF CERTIORARI

SHOULD NOT BE GRANTED BECAUSE THE

PETITIONER IS REQUESTING THIS COURT

TO EXAMINE ISSUES WHICH WERE NOT

ADDRESSED BY THE SIXTH CIRCUIT COURT

OF APPEALS NOR BY THE DISTRICT COURT

FOR THE EASTERN DISTRICT OF

MICHIGAN

The Petitioner requests that this Court settle the issue of

Horizontal versus Vertical commonality as an element in the

determination of whether the Philatelic investment was a

security. The Petitioner points to the split in authority between

the Circuits as a compelling reason tor Supreme Court review

There may well be such a split in the circuits. However, that

issue was not addressed either at the District Court level or

by the Sixth Circuit and, therefore, may not be raised at this

time.

In both the United States District Court for the Eastern

District of Michigan, and the Sixth Circuit Court of Appeals

both the Plaintiffs and the Defendants acknowledged that

horizontal commonality was required in the Sixth Circuit

Again, it should be noted that the Court did not hold that the

Philatelic investments satisfied the commonality requirement

but rather held that it was not impossible for the Plaintiffs to

catisty this burden at trial

It is axiomatic that issues not raised below cannot be raised

for the first time before an appellate court, especially the

United States Supreme Court. Neu York Dock Co. v. S.S

Poznan. 274 U.S. 117, 71 L.Ed. 955, 47 S.Ct. 482 (1927

Adams v. Mills. 286 U.S. 397, 76 L.Ed. 1184, 52 S.Ct. 589

1932): Minnich v. Gardner, 292 U.S. 48, 73 L.Ed. 1116, 54

S.Ct. 567 (1934): Lunch v. United States, 292 U.S. 571, 73

L.Ed. 1434. 54 S.Ct. $840 (1934) Zellerbach Paper Co. \

Helvering, 293 U.S. 172, 79 L.Ed. 264, 55 S.Ct. 127, 35-1

US.TC. Para 9003. 14 AFTR 688 (1934); Prudence Co

Fidelity & Deposit Co., 297 U.S. 198, 80 L.Ed. 581, 56 S.Ct

387 (1936): McCullough v. Kammerer Corp., 323 U.S. 327

S9 L.Ed. 273.65 S.Ct. 297,64U.S PO 7 (1945). Theretore

this Court should not grant certiorari review of the com

monalityv issue

Jt

CONCLUSION

This case is not one which the United States Supreme

Court should consider hearing — at least not vet. In the

unlikely event that the Supreme Court decides that the issues

presented in the Petitions Writ of Certiorari are worthy of its

consideration, this Court should examine these issues after a

proper record has been established pursuant to normal dis-

covery and trial. Therefore. the Respondents request that

this Court deny the Writ of Petition for Certiorari

Respecttully submitted

STARK, ReaGan & Finverty. PC.

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P =~ ~~

By: —

Harry S.Atark (P-20908

Micusetl. H. Wuitinc (P-22276

JosEpH A. AHERN (P-38710

Attorneys for Plaintiffs

Suite 202

L111 West Long Lake Road

Trov, Michigan 48084

313) 641-9955

DATED: April 5, 1990