Appendix — Murphey Favre, Inc. v. Lynn

>) O5- 995 Sg eaangpe wre

No. + Sonia

IN THE

; l CLERK

SUPREME COURT OF THE UNIT -

OCTOBER TERM, 1995

MURPHEY FAVRE, INC.,

WASHINGTON MUTUAL SAVINGS BANK,

GREGORY ONDRAK, JAMES ROYAN and

DOUGLAS SPRINGER,

Petitioners,

PAUL M. LYNN, on behalf ot himself and

all similarly situated persons, and THE DISTRICT

COURT OF THE FOURTH JUDICIAL DISTRICT OF

THE STATE OF MONTANA, IN AND FOR THE

COUNTY OF MISSOULA, THE HONORABLE

JOHN S. HENSON, PRESIDING JUDGE,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF THE ST ATE OF MONTANA

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI

Of Counsel: CAMDEN M. HALL

Joun D. LOWERY (Counsel of Record)

RIDDELL WILLIAMS Tm™ J. FILER

BULLITT & FOSTER PEPPER &

WALKINSHAW SHEFELMAN

1001 Fourth Avenue il11 Third Avenue

Suite 4400 Suite 3400

Seattle, Washington 98154 Seattle, Washington 98101

(206) 624-3600 (206) 447-4400

Attorneys for Murphey Favre, Inc.,

Washington Mutual Savings Bank,

Gregory Ondrak, James Royan and Douglas Springer

Washington, 0.C. « THIEL PRESS «+ (202) 328-3286

(t)

TABLE OF CONTENTS

APPENDIX TO PETITION FOR WRIT OF CERTIORARI

TO THE SUPREME COURT OF THE STATE OF MONTANA

Page

APPENDIX A — Order Dismissing Petition For Writ Of

Supervisory Control (Montana Supreme Court,

September 26, 19S) «oc cece cc ccc cssiccesecens la

APPENDIX B — Opinion And Order Denying Defendant’s

Motion To Vacate Order Allowing Communications

With Montana Investors And Certifying A Class (Mon-

tana District Court (“Montana Court”), July 27,

ea tar ere Sr eee ee ee eee ee 3a

APPENDIX C — Final Judgment And Order Of Dismissal

With Prejudice (King County, Washington Superior

Court (“‘Washington Court’), December 15, 1994) ...... lla

APPENDIX D — Order Denying Montana Plaintiffs’

Motion To Dismiss For Lack Of Jurisdiction

Over Montana Investors (Washington Court,

SR Es TE ok bk aad betwee eRe ees snes 19a

APPENDIX E — Relators’ Application For Writ Of Super-

visory Control Or Any Other Appropriate Writ Of

Relief And Request For Stay (Montana Writ Pro-

I, NEE BF OE sa ee web ae Se wee saan 28a

APPENDIX F — Murphey Favre’s Reply Memorandum

In Support Of Motion To Vacate Order Allowing

Communication With Montana Investors (Mon-

a ee eee eee eee ee 43a

APPENDIX G — Murphey Favre’s And Individual

Defendants’ Memorandum In Opposition To

Plaintiff Lynn’s Motion For Class Certification

(Montana Action, January 5,1995) ...............4. 92a

APPENDIX H — Plaintiff’s Opening Brief In Support

Of Motion For Class Certification (Excerpt) (Mon-

tana Action, December 15, 1994)............. were

(11)

APPENDIX I — Opinion And Order Allowing Com-

munications With Montana Investors (Montana

Court, Decensber 5, 1G. sci n eae ee as hw 2 kes 135a

APPENDIX J — Transcript Of Proceedings Before

Judge Scott On Montana Plaintiff’s Motion

To Dismiss For Lack Of Jurisdiction Over

Montana Investors (Excerpt) (Washington

Action, December 3, BUGS. -0:5: ses dade we waaceiex 138a

APPENDIX K — Stipulation Of Settlement (Excerpt)

(Washington Action, August 11, 1994) .............. 147a

APPENDIX L — Second Amended Complaint For

Violation Of Securities Laws, Violation Of

Consumer Protection Act, And Breach Of Fidu-

ciary Duty/Common Law Unsuitability (Excerpt)

(Washington Action, January 3, 1994).............. 157a

APPENDIX M — Amended Complaint For Violation Of

Securities Laws, Violation Of Consumer Protection

Act And Breach Of Fiduciary Duty/Common Law

Unsuitability (Excerpt) (Washington Action, Sep-

tember 56, 1908) .....500cesckwaaepeeteseaene ee 163a

APPENDIX N — Complaint For Violation Of Securities

Laws, Violation Of Consumer Protection Act And

Breach Of Fiduciary Duty (Excerpt) (Washington

Action, March 15, 919003. 5 64 u08 bee beled nes ce 168a

APPENDIX O — Chronology of Selected Proceed-

Sr ee 173a

APPENDIX P — Declaration of Camden M. Hall Regard-

ing Amounts Paid In Settlement of Washington

Action to Members of Class Certified by

Montana Coust . . . « ss.4s455 eee aaa eas 178a

APPENDIX Q — Proof of Claim and Release (Washington

ACCOR) oo 0 06 6 6.5 ee en 182a

Pelli Gres

la

APPENDIX A

[Filed SEP 26 1995]

IN THE

SUPREME COURT OF THE STATE OF MONTANA

No. 95-381

THE STATE OF MONTANA ON THE

RELATION OF MURPHEY FAVRE, INC., et al.,

Relators,

THE DISTRICT COURT OF THE FOURTH

JUDICIAL DISTRICT OF THE STATE OF MONTANA,

IN AND FOR THE COUNTY OF MISSOULA,

THE HONORABLE JOHN S. HENSON, Presiding

Judge, and PAUL M. LYNN, on behalf of himself

and all similarly situated persons, et al.,

Respondents.

ORDER

Relators, Murphey Favre, Inc., et al, have applied to

this Court for a writ of supervisory control or other

appropriate relief, pursuant to Rule 17, M.R. App. ?.

Relators ask that we vacate an order of the District

Court of the Fourth Judicial District which directed

that Montana investors affected by the class action

be notified of their option to join the suit. Relators

further ask that we direct “he District Court to enter

an order decertifying the Montana class action and

dismissing, with prejudice, all claims of Montana pur-

chasers who did not affirmatively opt out of the related

Washington class action.

2a

Under Rule 17, M.R. Civ. P., this Court is empowered

to exercise the power of supervisory control when con-

ditions make due consideration in the trial court and

appeal to this Court an inadequate remedy, or when this

Court deems supervision of a trial court other than by

appeal necessary or proper.

Having considered this matter, the Court concludes

that relators have not shown that their remedy by appeal

is inadequate and that the circumstances justify the issu-

ance of the extraordinary writ of supervisory control in

this case.

Therefore,

IT IS ORDERED that the application for writ of sup-

ervisory control is DENIED.

The Clerk is directed to mail a true copy of this order

to relators personally and to all other parties of record.

DATED this 26th day of September, 1995.

/s/ J.A. Turnage

Chief Justice

/s/ Terry Trieweiler

/s/ Karla M. Gray

/s/ William E. Hunt, Sr.

/s/ James C. Nelson

/s/ W. William Leaphart

DE PUR Pr

3a

APPENDIX B

[Filed JUL 27 1995]

John S. Henson, District Judge

Department No. 2

Fourth Judicial District

Missoula County Courthouse

Missoula, Montana 59802

Telephone: (406) 523-4772

MONTANA FOURTH JUDICIAL DISTRICT COURT,

MISSOULA COUNTY

Cause No. 77454/134

PAUL M. LYNN, on behalf of

all similarly situated persons,

Class Plaintiff,

-VS-

MURPHEY FAVRE, INC. a corporation;

WASHINGTON MUTUAL SAVINGS BANK,

a corporation; DOUGLAS D. SPRINGER, an

individual; GREGORY J. ONDRAK, an

individual; JAMES W. ROYAN,

an individual; and DOES 1-100,

Defendants.

OPINION AND ORDER

The matters before the Court are Plaintiffs’ motion for

class certification, and Murphey Favre’s motion to vacate

the Court’s Order allowing communication with Mon-

tana Bond Purchasers. In addition, it has been brought to

4a

the Court’s attention that Defendant Washington Mutual’s

motion to dismiss for lack of personal jurisdiction is

still pending.

Motion to Dismiss of Lack of Personal Jurisdiction

a. Water of Lack of Personal Jurisdiction.

Plaintiffs maintain that Washington Mutual has waived

its right to assert lack of personal jurisdiction, and should

not be allowed to amend its motion to dismiss. Washing-

ton Mutual counters that the holding in Heinle v. Fourth

Judicial District Court, (1993) 260 Mont. 489, 861 P.2d

171, applies. Heinle stated that waiver is immaterial

where the controlling consideration is whether a Montana

court has a constitutional basis to exercise personal juris-

diction. It would appear that the Heinle exception has, in

most respects, swallowed the rule, that being Rule 12

(b)2, Mont.R.Civ.P. The Court concurs with Defendant

that the analysis set forth in Edsall Construction Co. v.

Robinson, (1991) 246 Mont. 378, 804 P.2d 1039, is the

key consideration before the Court.

b. Washington Mutual’s Contacts with Montana.

Washington Mutual contends that this Court’s exercise

of jurisdiction would be violative of Montana’s long arm

statute and due process as it is not found within the state.

Specifically, Defendant contends that Washington Mutual

has no officers or employees in Montana and has not

engaged in transactions in Montana or solicited business

here, save for indirect activities. Defendant states that

ownership of Murphey Favre is insufficient to subject

Washington Mutual to Montana jurisdiction; they are two

separate and distinct corporate entities, and such a

parent/subsidiary relationship is not a basis for juris-

diction.

OEE RN i Me ak

5a

Defendant cites several Montana cases which hold that

for a business to be “found” in Montana, it is necessary

that the Defendants’ activities are substantial or system-

atic and continuous. The question presented the Court

then is whether Washington Mutual has engaged in sub-

stantial or systematic and continuous activities within

Montana. In addition, the question also arises whether a

parent corporation is subject to jurisdiction by the activi-

ties of its subsidiary.

There is ample evidence that Murphey Favre promoted

and sold investments that were backed and managed by

Washington Mutual, and was a conduit for such business.

All facts to be considered, the facts presented by Plain-

tiffs in this matter, in the form of affidavits and exhibits,

must be accepted as true for purposes of this motion.

Jackson v. Kroll, Pomerantz and Cameron, (1986) 223

Mont. 161, 724 P.2d 717. Plaintiffs maintain that Mur-

phey Favre promotes itself as being a member of the

“Washington Mutual Financial Group” and as being

backed by Washington Mutual by virtue of its financial

prominence. Further, WM solicits the sale of and sells

its own certificates of deposit and debentures to Montana

residents through Murphey Favre. These contentions are

sufficient to evoke general jurisdiction.

Plaintiffs also make persuasive arguments for applica-

tion of specific jurisdiction over a parent corporation. In

the Jones Enterprises, Inc. v. Atlas Service Corporation,

442 F.2d 1136 (9th Cir. 1971), the court held that

where a defendant purposefully sets his product or design

(in that case, defective architectural renderings) into the

stream of commerce, knowing or having reason to know

that they will reach the forum state and that they create

a potential risk of injury, that is sufficient to bring the

nonresident into the forum state’s jurisdiction. In this

6a

instance, Washington Mutual prepared a financial report

analyzing the Homestead investment, which was dis-

tributed to Murphey Favre representatives in Missoula,

Montana. Marketing of the investment was then done

based on the analysis and promotion. This is sufficient

minimum contact for exercise of personal jurisdiction.

Washington Mutual benefitted by this relationship, and

it would be disingenuous to assert otherwise.

Defendants’ Motion to Vacate Order Allowing

Communication

The Court determined in its Order of December 5,

1994, that Plaintiffs could contact Montana Homestead

bond purchasers regarding the instant action. Defendants

request the Court to reconsider and vacate the Order,

pursuant to Rule 59(g), Mont.R.Civ.P. Alternatively,

Defendants seek a modification allowing for an agreed

upon form for contact, or a form approved by the Court

in the event agreement cannot be reached.

After careful review of the briefs, and review of the

remainder of the voluminous record in this matter, the

Court hereby declines to vacate its previous Order.

The Washington Court determined that the class

notice in that action was sufficient, and did not require

comparisons of class member rights under different state

laws. While the Court agrees with this precept, it con-

tinues to find it problematic that many Montana pur-

chasers apparently were never made aware at all of a

parallel Montana action. In Phillips Petroleum Co. v.

Shutts, (1985) 472 U.S. 797, 811-12, the USS. Supreme

Court determined that due process requires several condi-

tions to be satisfied before a distant state forum may

subject non-resident class members to judgment entered

in a class action. A key provision is that the class mem-

7a

bers must be notified of their rights. This Court has

attempted to ensure that the Montana purchasers be

apprised of the Montana action, thereby allowing them a

choice. They have not been so notified, through no fault

of Plaintiffs’ counsel, and this in itself may be sufficient

to invalidate the Washington court’s exercise of jurisdic-

tion over the Montana bond purchasers. Further, the

Court has been witness to the deluge of documents,

which have tended to obfuscate and delay rather than

enlighten and expedite these proceedings. For these

reasons, the Court feels notification is still a relevant

and proper procedure. However, the Court finds merit in

presenting the Montana purchasers with an agreed upon

form. Counsel may proceed to draft such a form, and

shall notify the Court if agreement cannot be reached.

Plaintiffs’ Motion for Class Certification

Plaintiffs seek to certify the entire class of Montana

bond purchasers, including those who have expressly

“opted in” the Washington State class action. Plaintiffs

conceive of a procedure wherein those who wish to

remain in the Washington action may do so, those who

wish to “opt out” may do so in favor of this action, and

those failing to respond would be included in the Mon-

tana action.

Defendants strongly contest that class certification is

appropriate in this action. The Court find it curious that

class action has been sustained in the Washington suit for

bond purchasers, yet Defendants maintain Montana

bond purchasers cannot meet the standards imposed by

Rule 23(b)(3). Defendants do not address this discrep-

ancy. The Defendants consented to certification in Wash-

ington under the same rule, but balk in this instance,

when, presumably, it does not meet their objectives.

8a

Defendants can, through advanced scrutiny, point out

various differences between class members as to questions

of fact or law. Were such detailed scrutiny to by utilized

by courts in determining the efficacy of class certifica-

tion, it is unlikely class certification would ever occur.

The Court has reviewed the cases cited by the parties,

and finds that McDonald v, Washington, (1993) 261

Mont. 392, 862 P.2d 1150, is controlling, and validates

Plaintiffs’ assertions that class action is appropriate in this

matter.

The six necessary elements for class certification under

Rule 23(a) and (b)(3), Mont.R.Civ.P., are:

1. The class must be so numerous that joinder of

all members is impractical.

2. There must be questions of fact or law common

to the class.

3. The claims or defenses of the representative

parties must be typical of the claims or defenses

of the proposed class.

4. The representative parties will fairly and ade-

quately protect the interest of the proposed

class.

5. The questions of law or fact common to the

members of the class predominate over questions

of the individual members.

6. The class action is superior to other methods of

adjudicating the controversy.

The first two elements are not contested by Defend-

ants. When the facts of this case are compared with those

in McDonald, the remaining elements also are adequately

established.

Mr. Lynn’s claims are typical of the class, as there is

“a nexus between the injury suffered by [Lynaj and the

9a

injury suffered by the class.’”” McDonald, 261 Mont. at

402. Further, the Court noted that “a named Plaintiff’s

claim is typical if it stems from the same event, practice,

or course of conduct that forms the basis of the class

claims and is based upon the same legal or remedial

theory.” (Emphasis supplied.) The claims are quite

apparently typical in this matter. While there may be

individual reliance issues in this action, they may be

resolved separately, and to no great detriment of judicial

economy.

As for fair and adequate protection of the interests of

the proposed class, the Court is convinced that these

parties through this action will be adequate if not better

representatives than those in the Washington action.!

Counsel, in particular Mr. Youtz, have established them-

selves as well versed in this type of proceeding, and the

Court has no doubts as to their abilities and the resolve

of Plaintiff Lynn.

Regarding whether questions of law or fact common

to the members of the class predominate over questions

of the individual members, the Court understands that

issues of reliance and subsequent damages will differ

between members, but that a common course of conduct

does predominate in this matter, and that individual

determinations about damage does not preclude class a

determination. 7

Finally, whether class action is superior to other

methods of adjudicating the controversy, the Court finds

that where these damage cases involve basically the same

1This is in reference to the portion of Montana bond pur-

chasers who neither affirmatively opted in or opted out of the

Washington action, and appear to be in a remunerative limbo.

10a

proof, where a portion of the bond holders will not

receive a monetary award in the Washington action, and

where it is unlikely that some investors will individually

‘pursue a course of action, class action is here, as was

determined of similarly situated investors in the Washing-

ton Case, a superior method of adjudication.

DATED this 27th day of July, 1995.

/s/John S. Henson

JOHN S. HENSON

District Judge

cc: Bruce A. McKenzie

Donald Snavely

Camden M. Hall

John D. Lowery

R. Keith Strong

4 tne alien bbe Mil eae, 5-03

ee ee a

lla

APPENDIX C

CIVIL TRACK I

JUDGE STEVEN SCOTT

SUPERIOR COURT OF WASHINGTON

FOR KING COUNTY

NO. 93-2-06519-1

MARGARET WRIGHT, an individual, et al.,

Plaintiffs,

v.

MURPHEY FAVRE, INC.,

a Washington corporation, et al.,

Defendants.

FINAL JUDGMENT AND ORDER OF

DISMISSAL WITH PREJUDICE

This matter came before the Court to determine

whether there is any reason why this Court should not

approve the proposed settlement (the “Settlement’’) set

forth in the Stipulation of Settlement dated August 11,

1994, and filed with this Court, relating to the above-

captioned action (the “‘Stipulation”).!

The Court entered the Order Certifying Class and Pre-

liminarily Approving Settlement and Approving the Form

and Manner of Notice (the “Certification Order”) on

1 Unless otherwise defined in this Final Judgment and Order

of Dismissal With Prejudice (“Final Judgment’’), capitalized terms

used in this Final Judgment shall have the meanings given to them

in the Stipulation.

12a

August 11, 1994. The Certification Order directed that

notice of the pendency of the action and proposed

Settlement of the action be mailed to the Class and

scheduled a hearing to be held to determine whether the

proposed settlement should be approved as fair, reason-

able and adequate. In accordance with the Stipulation

and Certification Order, Plaintiffs caused to be mailed

to the Class a Notice of Pendency and Settlement of

Class Action (the “Notice’’) dated August 19, 1994, and

caused to be published one time in the national edition

of The Wall Street Journal, and twice in a daily edition

of The Missoulian, The Oregonian, The Seattle Post-

Intelligencer, The Seattle Times, and The Spokane

Spokesman Review a summary notice (the “Summary

Notice”) of the pendency of the proposed Settlement of

the Litigation and of the opportunity to object to the

Settlement. Affidavits and/or declarations concerning

mailing of the Notice and publication of the Summary

Notice were filed with the Court on November 23, 1994.

Plaintiffs and Defendants have applied to the Court for

final approval of the terms of the Stipulation and for

entry of this Judgment. Pursuant to the Notice and Sum-

mary Notice, and upon notice to all parties, a hearing

was held before this Court on December 15, 1994, to

consider whether the Settlement set forth in the Stipu-

lation should be approved by this Court as fair, reason-

able and adequate. At that hearing, all interested Persons

were given an opportunity to be heard.

The Court has now considered the pleadings filed and

proceedings and hearings had in this matter. Being fully

informed, the Court finds and concludes that:

1. The Notice and the Summary Notice constitute the

best notice practicable under the circumstances and pro-

vided individual notice to all Class Members who could

hide ANA DR DIE Sal mer Alar Rous 0 8

l3a

be identified by reasonable effort. The Notice properly

informed persons in the Class of their rights under the

Settlement, including, without limitation, the right to

opt out and pursue individual actions, and the conse-

quences of failing to opt out. The affidavits or declara-

tions filed with this Court on November 23, 1994,

demonstrate that this Court’s orders with respect to the

Notice and Summary Notice have been complied with

and further, that the best notice practicable under the

circumstances was in fact given and constituted valid,

due, and sufficient notice to members of the Class,

complying fully with due process and Rule 23 of the

Superior Court Civil Rules.

2. The proposed Settlement set forth in the Stipula-

tion is fair, reasonable and adequate. In reaching this

determination, the Court has considered, among other

things, a comparison of the potentially applicable pro-

visions of Montana law and Washington law. In light

of the benefits and detriments to persons in the Class

arising under each state’s law, the Court finds that the

Settlement is fair, reasonable and adequate to all mem-

bers of the Class, including, without limitation, Montana

Homestead Bond purchasers.

3. Approval of the Stipulation will result in sub-

stantial savings in time and money to the litigants and

will further the interests of justice.

4. The Stipulation and the Settlement are the product

of extensive arm’s length negotiations by the parties on

whose behalf they were signed. Both in the litigation

and the settlement negotiations, the Class Representatives

adqequately represented all persons in the Class, includ-

ing, without limitation, Montana Homestead Bond pur-

chasers.

l4a

Now therefore, it is ORDERED that:

1. The Court has jurisdiction over the subject matter

of this litigation and has personal jurisdiction over all

parties to this litigation, including all Class Members.

2. The Court approves the Settlement set forth in the

Stipulation and concludes that the Settlement is, in all

respects, fair, reasonable and adequate to the Class and

Class Members and within the authority of the parties.

3. Neither this Final Judgment, the Stipulation nor

the Settlement is an admission or an indication by the

Defendants, or any of them, of the validity of any claims

in this litigation or of any liability or wrongdoing or of

any violation of law by them or any of them. The terms

and provisions of paragraphs VI and VIII(L)(1) of the

Stipulation are incorporated by reference as though fully

set forth herein. The Final Judgment, the Stipulation

and the Settlement are not concessions, and none of

them shall in any way be used as an admission or indica-

tion with respect to any Released Claims of any wrong-

doing, fault or omission by any Defendant or any other

Released Party. Neither this Final Judgment, nor the

Stipulation, the Settlement, nor any related document,

proceeding or action, nor any reports or accounts thereof,

shall be offered or received in evidence in any civil,

criminal, or administrative action or proceeding, other

than such proceedings as may be necessary (a) to con-

summate or enforce the Stipulation and Settlement and

all releases given thereunder, or (b) to determine whether

the Defendants, individually or collectively, or any

insurer or reinsurer, are entitled to be reimbursed or

indemnified by others for any payment made or to be

made to the Homestead Bond Settlement Fund, the

Homestead Bond Notice and Administration Fund, or

portions thereof, or to be reimbursed or indemnified by

sew 3 a melas Cait Valea ot Aw

th 205 nt AO A Pte Se,

15a

others for attorney fees, costs and expenses associated

with this litigation, or (c) to establish the affirmative

defenses of res judicata or collateral estoppel.

4. This action is DISMISSED on the merits and with

prejudice against all Class Members in favor of each and

all of the Defendants and without costs to any of the

parties as against any other party.

5. All Class Members are forever barred and perma-

nently enjoined from prosecuting, commencing or

continuing any Released Claims, either directly, repre-

sentatively, or in any other capacity, based upon the

facts, transactions, events, occurrences, acts, misrepresen-

tations or omissions alleged in, arising out of, or in any

way related to the allegations in the Second Amended

Complaint, or based on, related to, or arising out of the

subject matter of the Second Amended Complaint,

against any of the Released Parties. All Class Members

shall be conclusively deemed to have released and dis-

charged any and all of the Released Parties of and from

any and all Released Claims, whether or not they have

filed a Proof of Claim and Release.

6. Persons within the Class who have validly and

timely requested exclusion from the Class, and who are

identified in the accompanying Attachment 1, are not

Class Members and may pursue only their own individual

claims and remedies, if any. Such persons may not pursue

such claims or remedies against Defendants as members

or representatives of a class action.

7. The Court hereby approves the proposed Plan of

Allocation set forth in paragraph VIII(E)(3) of the Stipu-

lation.

8. The Notice of Pendency of Class Action, Proposed

Settlement of Class Action and Hearing, etc. (‘‘Settle-

l6a

ment Notice”), given to the Class which sets forth the

principal terms of the Stipulation and other matters was

the best notice practicable under the circumstances,

including individual notice to all Persons in the Class

who could be identified through reasonable efforts. The

Settlement Notice and the Summary Notice of Hearing

on Proposed Settlement provided due and adequate

notice of these proceedings and of the matters set forth,

including the Settlement, to all persons entitled to such

notice, and said notices fully satisfied the requirements of

Rule 23 of the Superior Court Civil Rules and the require-

ments of constitutional due process.

9. Class Counsel are awarded fees of $3,600,000.00

and reimbursement of expenses and disbursements from

prosecuting this action of $47,369.29 and Notice and

Administration Costs of $43,464.76, tobe paid from the

Homestead Bond Settlement Fund after the Effective

Date of this Final Judgment.

10. Without affecting the finality of this Final Judg-

ment in any way, the Court retains continuing jurisdic-

tion over (a) implementation of this Settlement and any

distributions to Authorized Claimants, Defendants and

Insurers pursuant to the Stipulation or further orders of

this Court; (b) disposition of the Homestead Bond Settle-

ment Fund and the Homestead Bond Notice and Admin-

istration Fund; (c) hearing and determination of applica-

tions for attorney fees and expenses, if any ; (d) all parties

to this action and all Class Members for the purpose of

enforcing and administering the Settlement; and (e) any

other matters related or ancillary to the foregoing.

11. In the event that the Stipulation of Settlement is

terminated or canceled, or if the Effective Date does not

occur for any reason, then this Final Judgment, the

Stipulation and the Settlement shall be rendered null and

sit AA INARA hi Ses eneiAd eN'D I NE gil te re RaW De BI

17a

void and shall be vacated, and in such event, all orders

entered in connection therewith, except those portions

of said orders involving return of the Homestead Bond

Settlement Fund, the Homestead Bond Notice and

Administration Fund, and any interest thereon to De-

fendants and Insurer, shall be vacated and rendered null

and void.

DATED this 15th day of December, 1994.

/s/ Steven Scott

HON. STEVEN SCOTT

Superior Court Judge

Presented by:

SHORT CRESSMAN & FOSTER PEPPER &

BURGESS SHEFELMAN

/s/ James A. Oliver /s/ Camden M. Hall

James A. Oliver Camden M. Hall

WSBA No. 217 WSBA No. 146

Attorneys for Plaintiffs Attorneys for Murphey

Favre, Inc., and All

Individual Defendants except Hobbs

BOGLE & GATES RIDDELL, WILLIAMS,

BULLITT & WALKINSHAW

/s/ Evan L. Schwab (per /s/ John D. Lowery

telephone authority for) John D. Lowery

Evan L. Schwab WSBA No. 6633

WSBA No. 2174 Attorneys for Defendants

Attorneys for Defendants Washington Savings Bank, Inc.,

Hobbs and WM Financial, Inc.

18a

ATTACHMENT I

LIST OF PERSONS WHO TIMELY AND VALIDLY

REQUESTED EXCLUSION FROM THE CLASS

Kirk D. Comiskey & Margaret E. Mandell

Ernest W. Amundsen

Joann Kregosky

Louise M. Caras

George D. Caras

Robert G. DeMarois and Billie L. DeMarois

DeMarois Olds-GMC

Scott D. Erler, D.D.S., P.C. Profit Sharing Plan, Scott D.

Erler, Trustee

Duane A. Felstet

Paul M. Lynn

James F. McCallum

Sirco Manufacturing, Inc. Employee Profit Sharing Plan

(f.k.a. Bascorp Employee Profit Sharing Plan)

Allergy & Asthma Clinic for Western Montana, P.C.

Employee Pension & Profit Sharing Plan

Thomas Dell, Trustee, Bell Educational Trust

William R. Blair & Mary O. Blair

Myrtle J. Buls, Trustee

19a

APPENDIX D

The Honorable Steven Scott

SUPERIOR COURT OF WASHINGTON

FOR KING COUNTY

No. 93-2-06519-1

MARGARET WRIGHT, an individual;

RODERICK KIRKWOOD and JANE DOE KIRKWOOD,

husband and wife; GENE V. CUSHWAY, an individual;

JACK LEACH and THELMA L. LEACH, husband

and wife; ON THEIR OWN BEHALF AND ON BEHALF

OF AND AS CLASS REPRESENTATIVES OF

ALL OTHER PERSONS SIMILARLY SITUATED,

Plaintiffs,

Vv.

MURPHEY FAVRE, INC., a Washington corporation;

WASHINGTON MUTUAL SAVINGS BANK, INC.,

a Washington corporation; WM FINANCIAL, INC.,

a Washington corporation; LEE J. SAHLIN and

JANE DOE SAHLIN, husband and wife; BEN L.

BROOKS and JANE DOE BROOKS, husband and wife;

KIENTZENE M. FELICE and JANE DOE FELICE,

husband and wife; DAVID C. LYNCH and JANE DOE

LYNCH, husband and wife; LOUIS H. PEPPER and

JANE DOE PEPPER, husband and wife; KERRY K.

KILLINGER and JANE DOE KILLINGER, husband

and wife; MICHAEL D. TOWERS and JANE DOE

TOWERS, husband and wife; WILLIAM G. PAPESH

and JANE DOE PAPESH, husband and wife; GENE

G. BRANSON and JANE DOE BRANSON, husband

20a

and wife; CRAIG S. HOBBS and JANE DOE HOBBS,

husband and wife; CRAIG E. TALL AND JANE DOE

TALL, husband and wife; DAVID J. DIRECTOR

and JANE DOE DIRECTOR, husband and wife,

Defendants.

ORDER DENYING MONTANA PLAINTIFFS’

MOTION TO DISMISS FOR LACK OF

JURISDICTION OVER MONTANA INVESTORS

This matter came before the Court on the Motion to

Dismiss for Lack of Jurisdiction Over Montana Investors

(the “Jurisdiction Motion’’) filed by Sirianni & Youtz

and Mr. Donald Snavely (cellectively—“Mentana-Coun-

se+} as counsel for Mr. Paul Lynn, who were purporting

to act on behalf of all Montana purchasers of Homestead

Bonds. In connection with the Jurisdiction Motion, the

Court also considered Plaintiffs’ and Defendants’ Joint

Motion for Order Directing Claims Administrator to

Disregard Improper Request for Exclusion from Settle-

ment Class (the “Joint Motion”).

The Court considered the Joint Motion, the Jurisdic-

tion Motion and the additional following papers sub-

mitted by the parties to this action, through their counsel

of record, and by Montana Counsel:

1. Declaration of Tim J. Filer in Support of Plain-

tiffs’ and Defendants’ Joint Motion for Order

Directing Claims Administrator to Disregard

Improper Request for Exclusion from Setile-

ment Class (dated November 14, 1994);

2. Declaration of Donald V. Snavely (dated Octo-

ber 3, 1994);

3. Opinion and Order from the Hon. John S. Hen-

son, in the case of Lynn et al. ». Murphey

mBEST AVAL

2la

Les ive Fe ss

Favre, Inc., et al., Montana Fourth Judicial

District Court, Missoula County, Montana,

Cause No. 77454 (the “Montana Action’’)

(dated February 16, 1994);

: 4. Declaration of Jack Demarois (dated Novem-

ber 28, 1994);

5. Declaration of Robert E. Hibbs (dated Novem-

ber 16, 1994);

6. Response of Washington Mutual to Lynn’s

Motion to Dismiss for Lack of Jurisdiction

Over Montana Investors (dated December 1,

1994);

7. Declaration of James A. Oliver (dated Novem-

ber 16, 1994);

8. Declaration of James A. Oliver in Response to

Paul Lynn’s Motion to Dismiss for Lack of

Jurisdiction (dated December 1, 1994);

9. Further Declaration of Robert E. Hibbs (dated

November 30, 1994);

10. Plaintiffs’ Memorandum in Opposition to

Motion by Paul Lynn to Dismiss Montana

Investors (dated December 1, 1994);

11. Murphey Favre and Individual Defendants’

Memorandum in Opposition to Motion to Dis-

miss for Lack of Jurisdiction Over Montana

Investors (dated December 1, 1994); and

12. Supplemental Declaration of Tim J. Filer (dated

December 1, 1994).

| The Court held a hearing in open court on the Joint

Motion and the Jurisdiction Motion on December 2,

1994. The Court heard oral argument from counsel of

record for the parties to this action and from Mentene

fot ME. LA 5

Counsel. The Court determined at the December 2, C

ABLE COPY ®

22a

1994 hearing that the Jurisdiction Motion should be

denied and directed the parties to prepare an order to

that effect. A copy of the transcript of the Court’s oral

ruling is attached to this Order as Exhibit A.

Having considered the record and the arguments of

counsel, the Court makes the following findings:

rp Poe ad

1. Mentana Counsel represent the persons who have

filed requests for exclusion from this action, including

rv Pot MA. Low

Paul M. Lynn. Mentana Counsel have presented no evi-

dence that any person or entity other than the persons

who have opted out of the settlement in this case have

At. Wa

actually authorized either Mentena Counsel or Mr. Lynn

to act on their behalf. The only class members in this

case who have requested exclusion from the settlement

are the persons and entities actually represented by

pie Ae. Leda.

Mentana Counsel.’ In addition, the deadline for class

members to submit objections to the settlement has now

passed, and the Court has not received any objections

from members of the class.

pat Line

2. Mr. Lynn, through Mentene Counsel, filed a law-

suit in Montana state court in February 1993, against

Murphey Favre, Inc., Washington Mutual Savings Bank

and certain individuals relating to Murphey Favre’s sale

of Homestead Bonds (the “Montana case”). The initial

complaint in the Montana case was not served. The First

Amended Complaint in the Montana case was not served

until July 1993, approximately four months after com-

mencement and service of the initial complaint in this

action.

23a

3. The Montana case is a putative class action. Mr.

Lynn is the sole proposed class representative on behalf

of a proposed class consisting of all Montana residents

who purchased Homestead Bonds from Murphey Favre

and all other persons who purchased Homestead Bonds

through Murphey Favre’s offices in Missoula, Montana.

To date, no motion for class certification has been filed

and no class has been certified in the Montana case. There

has been no agreement among counsel in the Montana

case to postpone the filing of the class certification

motion.

p— Fen a. LA

4. Mentana Counsel and Mr. Lynn have known since

at least May 1994, that the proposed settlement in this

case included all purchasers of Homestead Bonds, regard-

less of their state of residence or place of purchase. Men-

LS aad

tana Counsel objected to this Court’s personal jurisdic-

tion over Montana purchasers of Homestead Bonds based

on alleged deficiencies in the form of the Notice of

Pendency of Class Action, Proposed Settlement of Class

Action, and Hearing on Proposed Settlement (the “Class

Notice’’), and on the alleged inability of the class repre-

sentatives in this case to adequately represent the Mon-

tana purchasers on November 28, 1994, when they filed

the Jurisdiction Motion. In light of the passage of time

and the expenditures of funds from the settlement funds

for mailing and publishing notice of the settlement to the

class and the expenditure of resources by the parties, the

delay in asserting these objections was not reasonable

and could result in unfair prejudice to the parties to this

case.

24a

yfoe Me. ta’

5. Mentana Counsel ‘and their clients have had a full

and fair opportunity to raise their objections to (a) the

form of the Class Notice, (b) the adequacy of the class

representatives in this case with respect to Montana pur-

Ah

(

\

chasers of Homestead Bonds and (c) this Court’s personal .

jurisdiction over the absent class members. Mentene

Fen 00. ' SW

Counsel“and their clients have submitted the Jurisdiction

Motion, papers in opposition to Plaintiffs’ Motion for

Order Allowing Communications to Class and by heaving

Mr. Youtz has appeared and argued in hearings before

this Court on November 17, 1994, and December 2,

1994.

6. The requirements for certifying this case as a plain-

tiff class action for settlement purposes have been satis-

fied.

7. The class representatives in this case have more than

adequately represented all members of the class, includ-

ing Montana purchasers of Homestead Bonds. The record

before the Court demonstrates that Class Counsel is

qualified to act as counsel for the class, that there is a

lack of antagonism among the interests of the class mem-

bers and that there is absolutely no evidence that the

settlement entered into by the parties was a result of

collusion. To the contrary, the record shows that this

case was vigorously contested and that the settlement

was entered into after good faith, arms-length negotia-

tions.

8. The Class Notice and the mechanisms used in this

case to notify the class of the settlement fully satisfy all

of the requirements of CR 23 and the requirements of

4

25a

constitutional due process. The Class Notice fairly advises

class members of the terms of the settlement, their rights

under the settlement and the steps necessary to assert a

claim under the settlement or to exclude themselves from

the settlement class. The Class Notice also fairly advises

class members of the consequences of not responding to

the Class Notice.

Accordingly, the Court rules and orders as follows:

1. Standing. Mr. Lynn is not authorized to challenge

this Court’s jurisdiction over absent members of the

settlement class. Mr. Lynn’s status as a putative class

representative in a case in which no class has been certi-

fied does not authorize him to raise the question of this

Court’s jurisdiction over absent class members. Mr. Lynn

also lacks standing to object to this Court’s jurisdiction

over absent class members because he has opted out of

the settlement class. Finally, Mr. Lynn, individually is

barred from raising these objections under the doctrines

of laches and equitable estoppel.

Fod M4, lYAtw

2. Jurisdiction. However, because Montana Counsel

have raised questions conceming this Court’s jurisdiction,

the Court has considered the merits of the Jurisdiction

Motion. The Court rules that it has personal jurisdiction

over the absent class members in this case, including the

Montana purchasers of I” -mestead Bonds.

a. Sufficiency of Notice. Neither CR 23 nor con-

cerns of constitutional due process dictate that the Class

Notice should have contained a comparison of the class

26a

members’ rights under the laws of the various states in

which they reside, nor should the Class Notice have set

forth counsel’s competing viewpoints conceming which

state’s laws are more beneficial to class members. Includ-

ing these items in the Class Notice would have rendered

it unwieldy and potentially confusing to class members.

~

Tees

The Court rejects Mentana—Counsel’s contention that

the “opt out” procedures set forth in the Class Notice

are too onerous. The Class Notice properly advised the

class members of the settlement and their rights under

the settlement and was sufficient for all purposes under

CR 23 and the requirements of due process.

b. Adequacy of Representation. Class Counsel and

the class representatives have vigorously represented the

interests of the absent class members. The absent class

members have been adequately represented such that

the Court may exercise personal jurisdiction over them.

3. Fairness. The Court reserves consideration of the

fairness of the proposed settlement for the Final Settle-

ment Hearing scheduled for December 15, 1994. At that

hearing, the Court will consider, among other things,

comparisons between the potentially applicable state

law which could govern the class members’ claims as part

of the overall determination of the fairness of the settle-

ment.

Accordingly, the Jurisdiction Motion is DENIED.

DATED: 12-15-94.

/s/Steven Scott

HON. STEVEN SCOTT

Presented by:

FOSTER PEPPER & SHEFELMAN

(

~

-

\

27a

/s/ Camden M. Hall

Camden M. Hall, WSBA No. 146

Tim J. Filer, WSBA No. 16285

Attorneys for Murphey Favre, Inc., and

All Individual Defendants except Hobbs

Approved as to form; notice of

presentation and entry waived:

SIRIANNI & YOUTZ RIDDELL, WILLIAMS,

BULLITT & WALKINSHAW

/s/ Chris R. Youtz /s/ John D. Lowery

Chris R. Youtz John D. Lowery

WSBA #7786 WSBA #6633

Attorneys for Plaintiffs in Attomeys for Defendants

the Montana Action Washington Mutual Savings

Bank, Inc., and WM Financial, Inc.

SHORT CRESSMAN &

BURGESS

/s/ James A. Oliver

James A. Oliver WSBA #217

Attorneys for the Class

BOGLE & GATES

/s/ Evan L. Schwab (per telephone authority for)

Evan L. Schwab WSBA #2174

Attorneys for Defendants Hobbs

28a

APPENDIX E

No. 95-381

IN THE SUPREME COURT

OF THE STATE OF MONTANA

THE STATE OF MONTANA ON

THE RELATION OF MURPHEY FAVRE, INC., et al.,

Relators,

Vv.

THE DISTRICT COURT OF THE FOURTH

JUDICIAL DISTRICT OF THE STATE OF

MONTANA, IN AND FOR THE COUNTY OF

MISSOULA, THE HONORABLE JOHN S. HENSON,

Presiding Judge, and PAUL M. LYNN, on behalf

of himself and all similarly situated persons, et al.,

Respondents.

On Application from the District Court of the

Fourth Judicial District of the State of Montana,

in and for the County of Missoula

RELATORS’ APPLICATION FOR WRIT

OF SUPERVISORY CONTROL OR ANY

OTHER APPROPRIATE WRIT OF RELIEF

AND REQUEST FOR STAY

APPEARANCES:

CAMDEN M. HALL

ROGER D. MELLEM

TIM J. FILER

FOSTER PEPPER &

SHEFELMAN

1111 Third Avenue,

Suite 3400

Seattle, Washington 98101

(206) 447-4400

R. KEITH STRONG

DORSEY & WHITNEY

507 Davidson Building

8 Third Street North

Great Falls, Montana

59401

(406) 727-3632

Attorneys for Relators

29a

DONALD V. SNAVELY

SNAVELY LAW OFFICES

201 West Main, Suite 310

Missoula, Montana 59802

(406) 728-4310

CHRIS R. YOUTZ

SIRIANNI & YOUTZ

1700 Westlake Center

Seattle, Washington

98101-1625

(206) 223-0303

Attorneys for Respondents

TO THE SUPREME COURT OF THE STATE

OF MONTANA:

Relators Murphey Favre, Inc.; Douglas Springer;

Gregory Ondrak; and James Royan (‘Relators’) apply

for a writ of supervisory control or other appropriate

relief pursuant to the authority vested in the Supreme

Court by Mont. Constitution Article VII, Section 2(2)

(1994), and M.R. App. P. 17.) In support of this applica-

tion, Relators allege:

1 Relators seek this relief against all of the named plaintiffs

in the action below. With two exceptions, those plaintiffs are

identified in the caption of the Second Amended Complaint for

[footnote continued]

30a

1. Nature Of The Case. Relators seek relief in this

Court to correct a manifest error of law committed

below. On July 27, 1995, the trial court certified this

case (a case involving securities known as “Homestead

Bonds”) as a class action. That order was entered in error

because on December 15, 1994, a court in the state of

Washington approved a class action settlement and

entered a final judgment dealing with the same claims

and the same class (the “Homestead Class”) part of which

was certified by the trial court below. The class-wide

settlement approved by the Washington court extin-

guished the claims of all members of the Homestead

Class except the 16 named plaintiffs in this case. The

claims of the named plaintiffs in this case survived

because they expressly requested exclusion from the

Homestead Class settlement. No other Homestead Class

members requested exclusion.

At the request of counsel for the Montana plaintiffs,

the Washington court considered extensive briefing. and

argument on the question of its jurisdiction over Montana

residents who were members of the Homestead Class.

After carefully considering the arguments presented by

counsel for the Montana plaintiffs, the Washington court

ruled that all of the requirements of Rule 23 and consti-

tutional due process had been satisfied and that it had

personal jurisdiction over all Homestead Class members

except those expressly requesting exclusion by opting out

of the Homestead Class settlement. Despite this ruling,

which was before the court below, that court certified a

Damages and Other Relief and Demand for Jury Trial. A copy of

the caption is included at Tab 1 of the Appendix to this Applica-

tion. Plaintiffs Sharon Schroeder and James Schroeder are not

necessary parties to this appeal because their claims were dis-

missed pursuant to an order entered on January 10, 1995.

3la

class (respondent Lynn as class representative) of all

Montana residents who purchased Homestead Bonds

from Murphey Favre, whether or not they had excluded

themselves from the Homestead Class.

2. Purely Legal Issue Presented. The trial court’s order

certifying a class in this case violates the Full Faith and

Credit clause of the United States Constitution and

M.C.A. §26-3-203, causes unnecessary confusion con-

cerning the effect of the Washington settlement, and has

the potential to impose significant and unnecessary

litigation expenses on all parties. This Application raises

a purely legal question:

Is the Washington court’s Final Judgment, entered

after full briefing and oral argument in Washington

by both sides in the present action, which dismissed

the claims of all members of the Homestead Class

who did not properly opt out of the Washington

action, including those residing in Montana, entitled

to Full Faith and Credit by the courts of the state

of Montana?

The issuance of a writ of supervisory control is especi-

ally appropriate when the relator seeks review of purely

legal issues. See Grossman v. State Dep't of Natural

Resources, 209 Mont. 427, 682 P.2d 1319, 1324 (1984).

Early consideration of the effect of the Washington

settlement will also promote the strong Montana public

policy in favor of resolving litigation through settlement.

See DeTienne Assocs. Ltd. Partnership v. Montana

RailLink, Inc., 264 Mont. 16, 869 P.2d 258, 267 (1994)

(public policy is to encourage compromises and settle-

ments). The only facts relevant to his Court’s considera-

tion of this Application relate to the procedural history

of the cases. These facts are summarized below.

32a

3. Washington Class Action Filed. In March 1993, a

securities class action (the “Washington action”) was

filed against and served upon Murphey Favre, Inc., and

other defendants in the Superior Court of Washington for

King County. The resulting Homestead Class was defined

to include all persons who had purchased Homestead

Bonds from Murphey Favre, Inc., including purchasers

residing in Washington, Oregon, Idaho, California and

Montana.

4. Washington Class Action Settled. After conducting

discovery and motion practice, counsel for the Home-

stead Class representatives engaged in settlement negotia-

tions with the defendants. After several days of intense

mediation, the parties reached a settlement on May 17,

1994, under which Relators agreed to pay $12 million

for dismissal of the claims of all Homestead Class mem-

bers against all parties. Plaintiff Lynn’s counsel was

notified of the scope and terms of the settlement the

next day. A stipulation of settlement was entered in the

Washington action on August 11, 1994. The Washington

court then granted preliminary approval of the settlement

and certified the Homestead Class for settlement pur-

poses. Class Counsel in the Washington case mailed

personal notices to all class members and published

notice of the settlement in national and regional publica-

tions (including the Missoulian in Missoula, Montana) in

accordance with the Washington court’s order. Missoula

is the location of Murphey Favre’s office in Montana.

During the opt-out period specified in the notice, only

the 16 named plaintiffs in the Montana action excluded

themselves from the settlement in Washington so they

could pursue their claims in the action below. These

were the only members of the Homestead Class who

excluded themselves from the settlement. Under the

33a

terms of the settlement, anyone not requesting exclu-

sion was bound by its terms. Montana residents who

submitted claims in accordance with the requirements

of the settlement have either been paid or have had their

claims approved for payment by the Washington court.

5. Montana Plaintiffs Challenged Washington Court’s

Jurisdiction. On November 28, 1994, more than six

months after receiving notice of the settlement of the

Washington action, counsel for Lynn filed in the Washing-

ton action a motion to dismiss the claims of all Montana

Homestead Bond purchasers on the grounds that the

Washington court had no personal jurisdiction over those

purchasers. Subsequently, the question of the Washington

court’s personal jurisdiction over the Montana members

of the Homestead Class was thoroughly briefed and

argued before the Washington court. See Appendix at

Tabs 8-11.?

6. Washington Court Decided The Jurisdiction Ques-

tion. The Washington court heard oral argument on the

matter on December 2, 1994. On December 15, the Hon.

2 Relators have included in the Appendix to this Application

the order from which Relators seek relief (Appendix Tab 3), the

relevant orders from the Washington court (Appendix Tabs 4, 5

and 6) and excerpts of the briefing submitted to the Washington

court on the jurisdiction issues (Appendix Tabs 8-11) and before

the Montana court on the Full Faith and Credit and jurisdiction

issues (Appendix Tabs 12-17). All of these materials were before

the trial court below as exhibits to the Affidavit Of Camden M.

Hall In Support Of Murphey Favre, Inc.’s Motion To Vacate

Order Allowing Communication With Montana Bond Purchasers

(Docket No. 100). A certified copy of the relevant portion of the

trial court’s docket sheet demonstrating the record before the

trial court is included at Appendix Tab 2. Relators incorporate

those materials by reference and will make them available to the

Court upon its request.

34a

Steven Scott entered his Order Denying Montana Plain-

tiffs’ Motion To Dismiss For Lack Of Jurisdiction Over

Montana Investors (‘Jurisdiction Order”), which ex-

pressly stated, in part:

The Court heard oral argument from counsel of

record for the parties to this action and from

Counsel for Mr. Lynn....

In light of the passage of time and the expenditures

of funds from the settlement funds for mailing and

publishing notice of the settlement to the class

and the expenditure of resources by the parties,

the delay in asserting these objections was not

reasonable and could result in unfair prejudice to

the parties in this case....

Counsel for Mr. Lynn and their clients have had a

full and fair opportunity to raise their objections to

(a) the form of the class notice, (b) the adequacy of

the class representatives in this case with respect to

Montana purchasers of Homestead Bonds, and (c)

this Court’s personal jurisdiction over the absent

class members. Counsel for Mr. Lynn and their

clients have submitted the Jurisdiction Motion,

Papers in opposition to Plaintiffs’ Motion for Order

Allowing Communications to Class and Mr. Youtz

has appeared and argued in hearings before this

court on November 17, 1994, and December 2,

1994.

Accordingly, the Court rules and orders as follows:

1. ... Mr. Lynn, individually, is barred from raising

these objections under the doctrines of laches and

estoppel.

2. . . . because counsel for Mr. Lynn have raised

questions concerning this court’s jurisdiction, the

court has considered the merits of the Jurisdiction

Motion. The Court rules that it has personal juns-

35a

diction over the absent class members in this case,

including the Montana purchasers of Homestead

Bonds.

a. . . . The Class Notice properly advised the class

members of the settlement and their rights under

the settlement and was sufficient for all purposes

under CR 23 and the requirements of due process.

Appendix Tab 5 (Jurisdiction Order at 5-6 (emphasis

added)). See also Appendix Tab 4 (Order Granting Joint

Motion For Order Directing Claims Administrator To

Disregard Improper Request For Exclusion From Settle-

ment Class).

7. Washington Court Enters Final Judment. On

December 15, 1994, Judge Scott entered a Final Judg-

ment And Order Of Dismissal With Prejudice (‘Final

Judgment”) in the Washington action. Judge Scott’s

Final Judgment stated:

Both in the litigation and the settlement negotia-

tions, the Class Representatives adequately repre-

sented all persons in the Class, including, without

limitation, Montana Homestead Bond purchasers.

The Court has jurisdiction over the subject matter

of this litigation and has personal jurisdiction over

all parties to this litigation, including all class

members.

This action is DISMISSED on the merits and with

prejudice against all Class Members in favor of each

and all of the Defendants.

All Class Members are forever barred and perma-

nently enjoined from prosecuting, commencing or

continuing any Released Claims, either directly,

representatively, or in any other capacity, based

upon the facts, transactions, events, occurrences,

acts, misrepresentations or omissions alleged in,

36a

arising out of, or in any way related to the allega-

tions. . . . All Class Members shall be conclusively

deemed to have released and discharged any and

all of the Released Parties of and from any and all

Released Claims, whether or not they have filed a

Proof of Claim and Release.

Appendix Tab 6 (Final Judgment at 3-4 (emphasis

the 16 named plaintiffs, the members of Lynn’s proposed

class are Homestead Class members whose claims were

completely resolved by the Washington court’s Final

Judgment.

9. Attempts To Communicate With Montana Investors.

On December 5, 1994, the Hon. John Henson entered an

Order Allowing Communication With Montana Investors

(“Communication Order”), granting Lynn’s motion for

Permission to inform each Montana purchaser of the

pendency of the case below. See Appendix Tab 7. Rela-

tors filed a motion to vacate the communication order

based on the Final Judgment in the Washington action.

See Appendix Tab 2 (Docket No. 98).

10. Montana Court Denied Full Faith And Credit To

Washington Judgment. Relators filed separate briefs in

support of their motion to vacate the Communication

Order and in Opposition to Lynn’s motion for class

certification. See Appendix Tab 2 (Docket Nos. 99-101,

108, 109, 112-114); Appendix Tabs 12-17 (excerpts of

briefing on Motion to Vacate). The trial court heard oral

37a

argument on these motions on January 11, 1995. On

July 27, 1995, the court issued an order certifying a

class in the Montana action which encompasses all Mon-

tana purchasers of Homestead Bonds, denied Relators’

motion to vacate, and ordered notification of the Mon-

tana action to be sent to each Montana purchaser. Appen-

dix Tab 3. This order is the subject of relators’ applica-

tion.

11. Supervisory Control Writ Appropriate For Resolv-

ing Legal Issues. A writ of supervisory control issues

when the District Court’s mistake of law will cause a

gross injustice, for which an appeal is an inadequate

remedy. State ex rel. Fitzgerald v. District Court, 217

Mont. 106, 703 P.2d 148, 153-54 (1985). The writ of

supervisory control is intended to advance the goals of

judicial economy and justice by allowing immediate

review in appropriate cases. /d. Here a writ is appropriate

and necessary to uphold and give effect to the Full

Faith and Credit clause of the U.S. Constitution. It is

also necessary to avoid the extreme injustice that will

result from forcing Relators to answer to allegations of

liability made by Montana purchasers whose claims have

already been extinguished in the Washington settlement.

Relators will be substantially injured by incurring the

costs of litigation they sought to avoid through settle-

ment, with respect to the very same individuals with

whom they have already settled and paid. Even if Rela-

tors successfully defend against the Montana class action,

this will not erase either the substantial expense incurred

in doing so or the trial court’s direct contravention of

Montana public policy favoring both the recognition of

@ sister state judgments and the conclusiveness of settle-

® ment agreements.

38a

12. Failure To Give Full Faith And Credit Is Clear

Legal Error. The United States Constitution mandates

that “full faith and credit shall be given in each state to

the public acts, records, and judicial proceedings of every

other state.” U.S. Const. art. IV, § 1. Montana recognizes

its obligations under the Full Faith and Credit Clause,

M.C.A. §26-3-203 (stating, in pertinent part: ‘The effect

of a judicial record of a sister state is the same in this

state as in the state where it was made.”). The Final

Judgment in the Washington case dismissed the settled

and released claims of all Homestead Bond purchasers

with prejudice, except for those of the named plaintiffs

in the Montana lawsuit. After entry of the Final Judg-

ment, the doctrine of res judicata precludes any member

of the Homestead Class from raising Released Claims

before a Washington court. Under the Full Faith and

Credit Clause, identical treatment must be accorded

class members bringing such claims before the courts of

another state.

The Washington court’s ruling that it had personal

jurisdiction over absent class members is also entitled to

Full Faith and Credit. This outcome is dictated by man-

datory United States Supreme Court precedent set forth

in Durfee v. Duke, 375 U.S. 106, 11 L. Ed. 2d 186, 84

S. Ct. 242 (1963).

In Durfee, the Supreme Court held that the Full Faith

and Credit Clause extends to a court’s decision regarding

its own jurisdiction. The Court stated: “‘A judgment is

entitled to full faith and credit—even as to questions of

jurisdiction—when the second court’s inquiry discloses

that those questions have been fully and fairly litigated

and finally decided in the court_which rendered the

original judgment.” Durfee, 375 U.S. at 111. Judge

Scott invited, and Lynn submitted, extensive briefing

39a

and oral argument on the question of the Washington

court’s personal jurisdiction over Montana purchasers.

Judge Scott ultimately concluded that Lynn had received

a “full and fair opportunity” to raise objections to the

court’s personal jurisdiction over Montana purchasers

and found that personal jurisdiction existed. See Appen-

dix Tab 5 (Jurisdiction Order at 4, 6); Appendix Tab 6

(Final Judgment at 3). Judge Scott’s finding regarding

this issue was a necessary prerequisite to his entry of the

Final Judgment dismissing the claims of those individuals.

The Full Faith and Credit Clause, as well as notions of

public policy advanced by the United States Supreme

Court, preclude Lynn from raising again his argument

that the Washington court had no personal jurisdiction

over Montana purchasers. As stated in Durfee:

[T] hose who have contested an issue shall be bound

by the result of the contest, and... matters once

tried shall be considered forever settled as between

the parties. We see no reason why this doctrine

should not apply in every case where one voluntarily

appears, presents his case and is fully heard, and

why he should not, in the absence of fraud, be

thereafter concluded by the judgment of the tn-

bunal to which he has submitted his cause.

375 U.S. at 111-12. Despite the Washington court’s ruling

that Lynn himself was personally barred from raising

jurisdictional objections, and the entry of final judgment

which extinguished the claims of all Montana Bond Pur-

chasers who did not opt out, Lynn pursued his class

action efforts in Montana and the trial court below

certified a class in this case.

The trial court’s class certification implicates each and

every concern underlying the existence of the Writ of

Supervisory Control. The trial court’s effective disregard

40a

of the Final Judgment in the Washington action violates

the Full Faith and Credit clause of the U.S. Constitution,

as well as M.C.A. §26-3-203. It raises the possibility that

Relators will bear substantial expense defending a claim

against individuals whose claims it has already paid sev-

eral million dollars to extinguish.

13. Request For Stay. In connection with this Appli-

cation, Relators respectfully request that this Court stay

the effectiveness of the trial court’s order directing

delivery of notice to “members” of the improperly cer-

tified class. Delivery of such a notice before the resolu-

tion of this application will create the possibility for con-

fusion among the recipients of the notice. In addition, if

the notice is determined to be improper, plaintiffs’

counsel will have been required to incur an unnecessary

expense.

WHEREFORE, Relators Murphey Favre, Springer,

Ondrak, and Royan respectfully request that this Court

accept jurisdiction of this cause under its power of

supervisory control, vacate the trial court’s Communica-

tion Order, and direct the District Court to enter an order

decertifying the class and dismissing, with prejudice, all

claims of Montana purchasers who did not affirmatively

opt out of the Washington action. They also request a

stay of the trial court’s order directing delivery of a

notice to class members pending resolution of these

proceedings.

Respectfully submitted this 16th day of August, 1995.

4la

FOSTER PEPPER & DORSEY & WHITNEY

SHEFELMAN R. Keith Strong

Camden M. Hall Dorsey & Whitney

Roger D. Mellem 507 Davidson Building

Tim J. Filer 8 Third Street North

Foster Pepper & Great Falls, Montana

Shefelman 59401

1111 Third Avenue, Telephone:

Suite 3400 (406) 727-3632

Seattle, Washington Attorneys for Relators

98101

Telephone:

(206) 447-4400

Attorneys for Relators

CERTIFICATE OF SERVICE

I, Tim J. Filer, do hereby certify that I served a copy

of the foregoing Application for Writ of Supervisory

Control or any Other Appropriate Relief and the support-

ing Appendix on the respondents in the above captioned

action on the 16th day of August, 1995, by mailing

copies addressed as follows:

Donald V. Snavely

Snavely Law Offices

201 West Main, Suite 310

Missoula, Montana 59802

Chris R. Youtz

Sirianni & Youtz

1700 Westlake Center

Seattle, Washington 98101

John D. Lowery

Riddell Williams Bullitt & Walkinshaw

1001 Fourth Avenue, Suite 4400

Seattle, WA 98154

The Honorable John S. Henson

District Court for the County of Missoula

200 West Broadway

Missoula, Montana 59802

/s/Tim J. Filer

TIM J. FILER

43a

APPENDIX F

[Filed JAN 05 1995]

CAMDEN M. HALL

TIMOTHY J. FILER

FOSTER PEPPER & SHEFELMAN

1111 THIRD AVENUE, SUITE 3400

SEATTLE, WASHINGTON 98101

(206) 447-4400

Attorneys for Defendants Murphey

Favre, Inc., Springer, Ondrak & Royan

R. KEITH STRONG

BRUCE A. MACKENZIE

DORSEY & WHITNEY

8 THIRD STREET NORTH

GREAT FALLS, MONTANA 59401

(406) 727-3632

Attorneys for Defendants

MONTANA FOURTH JUDICIAL DISTRICT COURT,

MISSOULA COUNTY

DEPARTMENT NO. 2

(HENSON)

CAUSE NO. 77454/113

PAUL M. LYNN, on behalf of all

similarly situated persons,

Class Plaintiff,

tha

MURPHY FAVRE, INC., et al.,

Defendants.

PAUL M. LYNN, et al.,

Individual Plaintiffs,

MURPHEY FAVRE, INC., et al.,

Defendants.

MURPHEY FAVRE’S REPLY MEMORANDUM

IN SUPPORT OF MOTION TO VACATE ORDER

ALLOWING COMMUNICATION

WITH MONTANA INVESTORS

ITI.

45a

TABLE OF CONTENTS

SUMMARY OF ARGUMENT.................

Fe Ce et) re ee re 2 rrr

A. Murphey Favre Sold Homestead Bonds

Sy 8 ys eee yee Te err Tere ee Teer eT. 0

B. Mr. Lynn Unreasonably Delayed This

Ef” PPPPTETTeRTT ETT Cee er rere cee 0

PX ci 66) eer errre err re cr Teer ereree. 0

A.Class Certification Should Be Denied

Because This Court Must Give Effect

to the Washington Final Judgment

Extinguishing All Claims Against

Defendants Relating to Homestead

Bonds Except Claims Asserted by

it CIE I a ck career eeedeenevevecen’ 0

1. This Court Must Accord Full Faith

and Credit to the Washington Final

2. Mr. Lynn Is Precluded From Relitigat-

ing the Question of Whether the Wash-

ington Court Had Personal Jurisdiction

Over Montana Homestead Bond Pur-

oseeoeoeeeeeeeeneeeeeeeee#eeeeeeee#ee

a. Jurisdictional Determinations Are

Entitled to Full Faith and Credit

if the Issue Was Litigated Before

the Court Issuing the Judgment.......... 0

b. Mr. Lynn Litigated and Lost His

Jurisdiction Objections Before the

Washington Court and is Bound

yr GO TNE on kas bade ceccsrsevaci

46a

3. Mr. Lynn Is Barred From Raising Jur-

isdictional Challenges by the Doctrines

of Collateral Estoppel, Laches, and

GGUURME TOUOIEE 6 6 hoch 0e vs cciceccsese

4. The Washington Judgment Is Entitled

to Res Judicata Effect in Montana .........

a. The Washington Court Expressly

Ruled That Lynn Would Be Bound

By Its Judgment In The Montana

FUMIE 60 86s d ccc eWeeei evs oc ccced

b. The Washington Court Necessarily

Decided That It Had Personal Jur-

isdiction Over Absent Montana

ee eee

c. The Final Judgment Does Not Vio-

late Montana Public Policy .............

B. The Washington Court Properly Exercised

Personal Jurisdiction Over the Absent

Class Members, Including Montana

Homestead Bond Purchasers................

1. Neither Mr. Lynn Nor His Counsel Had

Authority to Exclude Absent Class

Members From the Washington Set-

Sy pe

2. The Class Notice Satisfies the Require-

ments of Rule 23 and the Due Process

NN cca e cae cunedee coe de

3. Lynn’s Technical Objections to the

Form of the Class Notice Do Not

Render It Constitutionally Defective. .......

47a

a. Due Process Does Not Require

Disclosure of Other Pending

Actions or Comparative Law

Analyses to Be Included in

SR Te FU ode vececdkesnctvrcsaesi

b. The Opt Out Procedures in the

Class Notice Comply With Due

SS A ene

TABLE OF AUTHORITIES

Cases:

Baldwin v. Iowa State Traveling Men’s Ass’n,

283 U.S. 522, 51S. Ct. 417, 75 L. Ed.

SEED ad vin daa bide hcaesehbec cea danows

Bowling v. Pfizer, Inc., 143 F.R.D. 141

ee ee ee en re

Brown v. Ticor Title Ins. Co., 982 F.2d 386

ED ob dain te eNWawauke bes sa 605

Corngan v. Janney, 192 Mont. 99, 626 P.2d

ok Re eee

Cosgrove v. First Merchants Nat'l Bank, 68

Fees SO ME WE BOFEP cnet ndessvcecvecvess

Durfee v. Duke, 375 U.S. 106 (1963) ...............

Fontana v. Elrod, 826 F.2d 729 (7th Cir.

PT ECT E TTC ETO E TE LULT TCP TTT CTT

48a

In re Anderson’s Estate, 121 Mont. 515, 194

Fie GER CAPO 6 60d ben ey Reser seeded oaectcceas

In re Armored Car Antitrust Litig., 645 F.2d

Ge Ce Ge. RUPE 6 od icescrieceescccnceseads

In re Baldwin United Corp., 607 F. Supp.

bok g SA a A | errs eee er Pee ee Teer eer

In re Corrugated Container Antitrust

Litig., 643 F.2d 194 (5th Cir.

i) rer ere Vee ee err eee Pe Tee eee Pee

In re Gypsum Antitrust Cases, 565 F.2d

pte 2 > Pg, errr Peer ere ree

Korn v. Franchard Corporation, 50 F.R.D.

ee | eee rer errr rT Treererrey

Lejeune v. Clallam County, 64 Wn. App. 257,

ee Bt ree eer reer

Mars Steel v. Continental Ill. Nat'l Bank &

Trust Co., 834 F.2d 677 (7th Cir. 1987)........... 0

Nottingham Partners v. TransLux Corp.,

S25 F.26 FP Chat Git. BGT) a secs cccccvcccscess 0

Phillips Petroleum Co. v. Shutts, 472 U.S.

FERTILE hob 6 eR abodes CeeeVenecséiasawess

Real Estate Title, 869 F.2d at 763 ..........2eceees

Roberts v. Heim, 130 F.R.D. 416 (N.D. Cal.

SOA oc date ee Chee ee

Roper v. Consurve, Inc., 578 F.2d 1106 _

CP. BTR 0 ohn Pewee 6b hee eae ad hens COR E488

Sarafin v. Sears, Roebuck & Co., 73 F.R.D.

585 (N.D. IL. 1977) ..-cccccccccccscsccccccees

Schillinger v. Brewer, 215 Mont. 333, 697 ;

P.BG GED CIGD ooo oc eke se rvewnsvanerecetund

49a

Shepherd v. Continental Bank, 28 Wn. App.

346, 622 P.2d 1310 rev. dented, 95

Wn.2d 1019 (1981). 0... ccc ccc c secre versccens

Silber v. Mabon, 18 F.3d 1449 (9th Cir.

| peer ore Tre rr rer er rey Pee eee eee

Stoll v. Gottlieb, 305 U.S. 165 (1938) .........-----

Thoring v. LaCounte, 225 Mont. 77, 733 P.2d

Ee oe A One ree eee ee

Underwriters Assur. v. North Carolina Life, 455

U.S. 691, 71 L. Ed. 2d 558, 102 S. Ct.

1857 (1982)... ccc cccecccccrcccccccvscceres

Weinberger v. Kendrick, 698 F.2d 61 (2d

oy: re ee ee ee eee ee

White v. State, 203 Mont. 363, 661 P.2d 1272

1) eS ee ee re

Statutes:

28 U.S.C. $1738 (1948).... 2... cece rece cre ercees

ak So ae ee} ee ee eee ee ee

Miscellaneous:

3 Newberg on Class Actions § 16.16 (3d ed.

1992) (emphasis added) ..........+- ee ee eeeeees

Restatement (Second) of Judgments, §27,

COE Eas bcc scke revues PEE ere errr cee

50a

I. SUMMARY OF ARGUMENT

Murphey Favre, Inc., respectfully submits this memo-

randum in further support of its motion to vacate this

Court’s December 5, 1994 Opinion and Order. Murphey

Favre and the Individual Defendants are also filing

separately their Memorandum in Opposition to Plaintiffs’

Motion for Class Certification. For the reasons set forth

below, however, this Court need not consider or rule on

the class certification motion because the claims of the

putative class members (other than the plaintiffs in this

case) have been extinguished by a previous judgment.

On December 15, 1994, the King County Superior

Court entered its Final Judgment and Order of Dismissal

With Prejudice (the ‘Final Judgment’’) in a Washington

state class action arising, as does this case, from the sale

of Homestead Bonds by Murphey Favre, Inc.’s registered

representatives to some of their customers. The Final

Judgment approved the class-wide, $2 million settlement

reached by the parties in the Washington action in May

1994. In consideration of the settlement funds, the Final

Judgment extinguishes the claims of every person who

purchased Homestead Bonds from Murphey Favre except

the claims asserted by the named plaintiffs in this action.

Because Mr. Lynn and the other plaintiffs in this case

opted out of the Washington settlement, the Final Judg-

ment does not preclude them from pursuing their indi-

vidual claims.!

1a copy of the Final Judgment is attached as Exhibit B to

the Supplemental Affidavit of Camden M. Hall in Support of

Murphey Favre, Inc.’s Motion to Vacate Order Allowing Communi-

cation With Montana Bond Purchasers dated December 16, 1994

(“Supp. Hall Affid.”). Other documents referred to in this memo-

randum are attached to the Affidavit of Camden Hall in Support

of Murphey Favre, Inc.’s Motion to Vacate Order Allowing Com-

[footnote continued]

5la

By seeking to certify a class in this case, Mr. Lynn

admits he is asking the Court to disregard the Final

Judgment. Mr. Lynn’s request should be denied under

mandatory United States Supreme Court precedent for

at least two reasons.

First, the Washington court’s Final Judgment is en-

titled to full faith and credit under the United States

Constitution and Montana statutes. This Court must

therefore give the Final Judgment the same preclusive

effect that it would be given in Washington. Because Mr.

Lynn voluntarily appeared in Washington and litigated

each of the objections to the Washington court’s jurisdic-

tion that he raises now before this Court, he is precluded

from relitigating that issue by the law of full faith and

credit and collateral estoppel. Mr. Lynn had:

a full and fair opportunity to raise their objections

to (a) the form of the Class Notice, (b) the ade-

quacy of the Class Representatives in this case with

respect to Montana Purchasers of Homestead Bonds,

and (c) [the Washington] court’s personal jurisdic-

tion over the absent class members.

Order Denying Montana Plaintiffs’ Motion to Dismiss For

Lack Of Jurisdiction Over Montana Investors (‘‘Jurisdic-

tion Order”) (Supp. Hall Affid. Ex. A) at 4. Having had

one opportunity to litigate his jurisdictional challenges,

Mr. Lynn is not entitled to another bite at this apple.

Mr. Lynn’s jurisdictional challenges are also barred under

the doctrine of laches and equitable estoppel. Like his

belated motion for class certification, Mr. Lynn’s chal-

lenges to the Washington court’s jurisdiction were simply

munication With Montana Bond Purchasers dated December 7,

1994 (“Hall Affid.”’). References to the exhibits to these affidavits

will be by abbreviated name and exhibit reference, ¢.g., “Final

Judgment (Supp. Hall Affid. Ex. B) at __.”

52a

too little and came far too late in light of his early knowl-

ege of the scope of the Washington settlement class and

the prejudice to defendants.

Second, even if this Court does not defer to the Wash-

ington court’s jurisdictional determination, the record

before this Court demonstrates that the Washington court

properly exercised personal jurisdiction over absent class

members from any state in the nation. Because the Final

Judgment was entered by a court with jurisdiction to

bind the absent class members, the Final Judgment

properly extinguishes their claims for damages, precludes

certification of a class in this case and removes any need

for a communication to the absent Montana investors.”

Murphey Favre and the Individual Defendants contend that

the Full Faith and Credit clause precludes this Court from reaching

the merits of the issues raised in plaintiffs’ Brief in Opposition to

Defendants’ Motion to Vacate Order Allowing Communication

With Montana Bond Purchasers (‘“‘Opp. to Motion to Vacate”).

The Court should also refuse to consider the Opp. to Motion to

Vacate because it was filed and served after the filing deadline

imposed by Mont. Unif. Dist. Ct. Rule 2(a) and was received just

four business days before the hearing on the motion. Murphey

Favre’s Motion to Vacate was served on Mr. Lynn’s Seattle, Wash-

ington, counsel on December 7, 1994 and was delivered to Mr.

Snavely on December 8, 1994. Rule 2(a) required Mr. Lynn to

file his Answer Brief (the Opp. to Motion to Vacate) not more

than 10 business days later—by December 22, 1994. Murphey

Favre’s counsel did not receive the Opp. to Motion to Vacate until

December 29, 1994. Under Rule 2(b), “[f] ailure to file an answer

brief within ten days shall be deemed an admission that the motion

is well-taken.” Mont. Unif. Dist. Ct. Rule 2(b) (emphasis added).

Mr. Lynn’s counsel’s untimely filing, combined with his refusal to

continue the hearing date to accommodate the intervening holidays

and to facilitate an orderly briefing schedule has prejudiced defend-

ants by depriving them of the ten business days for preparing a

reply brief provided under Mont. Unif. Dist. Ct. Rule 2(b). Unlike

the agreed-upon briefing schedule for the class certification motion,

Mr. Lynn’s counsel neither requested nor obtained an extension

for filing the Opp. to Motion to Vacate. Accordingly, it is untimely

and should not be considered.

53a

Il. BACKGROUND

A. Murphey Favre Sold Homestead Bonds In the

1980's.

Defendant Murphey Favre, Inc. (“Murphey Favre’’), is

a regional, century-old securities brokerage firm. In the

mid-to-late 1980’s Murphey Favre sold bonds issued by

Homestead Savings and Loan Association (“Homestead

Bonds”), a federally chartered savings and loan associa-

tion based in California. Those bonds had a market value

of par (100) or better until early 1989, when the price

of the bonds began a precipitous decline. By this time

Mr. Lynn purchased his bonds in May 1989, the price

had dropped to 75. By the end of 1989, the price had

dropped to 50. During 1990, the market price of the

Homestead Bonds dropped to almost nothing. In the

spring of 1991, Homestead defaulted on the Homestead

= Bonds, and like many savings and loans, Homestead

® eventually failed due, in large part, to the troubled

California real estate market in the late 1980's. Instead of

the 13-3/8 percent or 15 percent yields for which they

hoped, Homestead Bond purchasers lost a portion of

their investments. In this action, Plaintiffs attempt to

shift the risk of loss to Murphey Favre.

B. Mr. Lynn Unreasonably Delayed This Litigation.

Mr. Lynn served this action on defendants in July

1993, approximately four months after a putative class

® action had been commenced in Washington state court.

The Washington action was commenced on behalf of all

= purchasers of Homestead Bonds from Murphey Favre.

®@ Mr. Lynn, in his putative class action, sought to represent

a subset of those purchasers—those who resided in Mon-

tana or who purchased Homestead Bonds through Mur-

phey Favre’s Missoula, Montana office.

Ce

54a

After extensive discovery, motion practice, settlement

discussions and three days of mediation before two well-

respected retired judges, the parties in the Washington

case agreed to a settlement in principle on May 17, 1994,

calling for defendants to pay $12 million in retum for a

global release from all class members who did not request

exclusion from the settlement class. Mr. Lynn’s counsel

was notified of the settlement, and the fact that it en-

compassed ALL Homestead Bonds purchasers, including

his clients, the very next day.

The parties in the Washington action negotiated the

fine points of their settlement throughout the summer,

and on August 11, 1994, entered a Stipulation of Settle-

ment. The Washington court preliminarily approved the

settlement and certified a class for settlement purposes,

and, a few days later, issued the notice that was mailed

to the class members. All of the settlement documents

were delivered to Mr. Lynn’s counsel as exhibits to

Defendants’ Supplemental Status Report dated August

23, 1994.

Pursuant to the settlement, the sixty-day claim and

opt-out period commenced on August 25, 1994. On

September 27, 1994, more than halfway through the

claim period, Mr. Lynn’s counsel requested leave to com-

municate with the members of the putative Montana

class. Two months later, on November 28, 1994, (amonth

after the expiration of the claim and opt-out period) Mr.

Lynn’s counsel filed papers before the Washington court

seeking to have Montana investors dismissed from the

Washington class on the grounds the Washington court

lacked personal jurisdiction over them. The Washington

court denied that motion on December 15, 1994. Juris-

diction Order (Supp. Hall Affid. Ex. A).

55a

On December 15, 1994, the court also entered its

Final Judgement and Order of Dismissal With Prejudice

(“Final Judgment’’) which provides in pertinent part as

follows:

2. The proposed Settlement set forth in the

Stipulation is fair, reasonable and adequate. In

reaching this determination, the Court has con-

sidered, among other things, a comparison of the

potentially applicable provisions of Montana law

and Washington law. In light of the benefits and

detriments to persons in the Class arising under each

state’s law, the Court finds that the Settlement is

fair, reasonable and adequate to all members of the

Class, including, without limitation, Montana Home-

stead Bond purchasers.

j 3. Approval of the Stipulation will result in sub-

stantial savings in time and money to the litigants

and will further the interests of justice.

4. The Stipulation and the Settlement are the

product of extensive arm’s length negotiations by

the parties on whose behalf they were signed. Both

in the litigation and the settlement negotiations, the

Class Representatives adequately represented all

persons in the Class, including, without limitation,

Montana Homestead Bond purchasers.

Now therefore, it is ORDERED that:

1. The Court has jurisdiction over the subject

matter of this litigation and has personal jurisdiction

over all parties to this litigation, including all Class

Members.

2. The Court approves the Settlement set forth

in the Stipulation and concludes that the Settlement

is, in all respects, fair, reasonable and adequate to

the Class and Class Members and within the author-

ity of the parties.

56a

5. All Class Members are forever barred and

permanently enjoined from prosecuting, commenc-

ing or continuing any Released Claims, either

directly, representatively, or in any other capacity,

based upon the facts, transactions, events, occur-

rences, acts, misrepresentations or omissions alleged

in, arising out of, or in any way related to the

allegations in the Second Amended Complaint, or

based on, related to, or arising out of the subject

matter of the Second Amended Complaint, against

any of the Released Parties. All Class Members shall

be conclusively deemed to have released and dis-

charged any and all of the Released Parties of and

from any and all Released Claims, whether or not

they have filed a Proof of Claim and Release.

Final Judgment (Supp. Hall Affid. Ex. B) (emphasis

added).

Although the plaintiffs in this action opted out of the

Washington settlement and are free to pursue their indi-

vidual claims, no other Montana residents or any other

class members opted out of the Washington Class Action

settlement. Hall Affid. 45. In addition, no class member

filed any objections to that settlement.

Approximately 22 months after filing this lawsuit,

after having known about the Washington settlement for

more than six months, after the claim period in the

Washington settlement had been over for more than two

months, after litigating and losing on his objections to

the Washington court’s jurisdiction over Montana pur-

chasers before the Washington court and after the Wash-

ington court entered the Final Judgment extinguishing

the claims of all Homestead Bond purchasers other than

the opt outs (plaintiffs herein), Mr. Lynn filed his motion

for class certification. Lynn seeks certification of a class

under M. R. Civ. P. 23(b)(3). Mr. Lynn’s motion should

57a

be denied because the class he seeks to represent no

longer has claims against any of the defendants.

Ill. ARGUMENT

A. Class Certification Should Be Denied Because

This Court Must Give Effect to the Washington

Final Judgment Extinguishing All Claims Against

Defendants Relating to Homestead Bonds Ex-

cept Claims Asserted by the Opt Outs.

On December 15, 1994, the Washington court entered

both the Jurisdiction Order and the Final Judgment. See

Supp. Hall Affid. Exs. A, B. Several days prior to that,

the Washington court entered an order determining that

Mr. Lynn had no authority to exclude absent class mem-

bers from the Washington settlement class. See Order

Granting Joint Motion For Order Directing Claims Ad-

ministrator To Disregard Improper Request For Exclu-

sion From Settlement Class (“Opt Out Order”) (Hall

Affid. Tab 257). Prior to entering the Opt Out Order,

the Jurisdiction Order and the Final Judgment, the Wash-

ington court considered and rejected each of the argu-

ments advanced before this Court by Mr. Lynn’s counsel

as to why the Final Judgment should not be binding on

Montana Homestead Bond purchasers. Counsel for Mr.

Lynn and their clients were given a “full and fair oppor-

tunity”’ to litigate these issues before the Washington

court. Jurisdiction Order (Supp. Hall Affid. Ex. A) at 4.

Mr. Lynn would have this Court reconsider the issues

which Mr. Lynn voluntarily presented to the Washington

court. Under the Full Faith and Credit clause of the

United States Constitution and an applicable Montana

statute, Mr. Lynn is not entitled to this second bite at

the apple. So long as the question of the Washington

court’s jurisdiction over the absent class members was

58a

“fully and fairly litigated in the court which rendered the

original judgment{[,]’’ Mr. Lynn is bound by the Washing-

tion court’s determination that it had personal jurisdic-

tion to bind the absent class members to the Final Judg-

ment. Durfee v. Duke, 375 U.S. 106, 111 (1963).

There is no question that Mr. Lynn litigated the juris-

diction issues in the Washington court. Accordingly this

Court should give full effect to the Final Judgment’s

dismissal of the claims of all absent class members who

did not opt out of the Washington settlement class and

deny Mr. Lynn’s motion for class certification.

1. This Court Must Accord Full Faith and Credit

to the Washington Final Judgment.

The Full Faith and Credit clause of the United States

Constitution provides: “Full Faith and Credit shall be

given in each State to the public Acts, Records, and

judicial Proceedings of every other state.”” U.S. Const.,

Art. IV, §1. The Montana legislature has recognized this

mandate by enacting a statute to the same effect. See

M.C.A. §26-3-203 (“The effect of a judicial record of a

sister state is the same in this state as in the state where

it was made . . .”) (emphasis added).> The Full Faith

and Credit clause requires the courts of each state to

accord the same degree of finality to the judgment that

it would be given by the court that issued the judgment.

Thoring v. LaCounte, 225 Mont. 77, 733 P.2d 340

(1987); see also Underwriters Assur. v. North Carolina

3This constitutional protection is also codified by 28 U.S.C.

§1738 (1948), which requires that: “Acts, records, and judicial

proceedings . . . shal] have the same full faith and credit in every

court within the United States . . . as they have by law or usage in

the courts of such State . . . from which they are taken.”

. — seaaaia

Se ee ee te athe Nee een ne oe head

59a

Life, 455 U.S. 691, 71 L. Ed. 2d 558, 570, 102 S. Ct.

1357 (1982) (‘[I]n order to fulfill this constitutional

mandate, ‘the judgment of a state court should have the

same credit, validity, and effect, in every other court of

the United States, which it had in the state where it was

pronounced.’”’), As the United States Supreme Court

has noted, the Full Faith and Credit clause promotes

the public policy of putting an end to litigation. Baldwin

v. lowa State Traveling Men’s Ass’n, 283 U.S. 522, 525-

26,51 S. Ct. 517, 75 L. Ed. 1244 (1931).

The law of the state in which the original judgment

was rendered determines whether a judgment is final, as

well as the issues decided by the judgment. Thoring, 733

P.2d at 342. Under Washington law, a dismissal pursuant

to an agreement between the parties constitutes a final

judgment on the merits. Shepherd v. Continental Bank,

28 Wn. App. 346, 622 P.2d 1310, rev. denied, 95 Wn.2d

1019 (1981). This is consistent with the view of the

Montana courts regarding settlements. See Schillinger v.

Brewer, 215 Mont. 333, 697 P.2d 919 (1985) (judgment

by stipulation is accorded the same finality as any judg-

ment or verdict). Thus, this Court must afford the Final

Judgment the same preclusive effect that it would be

given by a Washington court.

60a

2.Mr. Lynn Is Precluded From Relitigating the

Question of Whether the Washington Court

Had Personal Jurisdiction Over Montana

Homestead Bond Purchasers.

a. Jurisdictional Determinations Are Entitled

to Full Faith and Credit if the Issue Was

Litigated Before the Court Issuing the Judg-

ment.

Despite having opted out of the Washington settlement

class, Mr. Lynn, through his counsel, voluntarily appeared

before the Washington court and filed papers objecting to

the Washington court's exercising personal jurisdiction

over Montana purchasers of Homestead Bonds. In fact,

Mr. Lynn’s counsel filed a motion before the Washington

court seeking dismissal of the claims asserted in that case

on behalf of the Montana purchasers on the ground that

the Washington court lacked jurisdiction over those

people. See Jurisdiction Motion (Hall Affid. Tab 248).

The Washington court rejected Mr. Lynn’s arguments and

held that it could constitutionally exercise personal juris-

diction over nonresident Homestead Bond purchasers

for the purpose of binding them to the Final Judgment.

See Jurisdiction Order (Supp. Hall Affid. Ex. A). Having

litigated and lost that issue, Mr. Lynn seeks to relitigate

it here. The Full Faith and Credit clause of the United

States Consitution precludes such abusive forum shop-

ping.

The strictures of the Full Faith and Credit clause

extend to a court’s decision regarding its own jurisdic-

tion. The United States Supreme Court expressly recog-

nized this principle more than 30 years ago in Durfee v.

Duke, 375 U.S. 106, 11 L. Ed. 2d 186, 84 S. Ct. 242

(1963). In Durfee, one party sued in Nebraska to quiet

title to land located on the Missouri River, which divided

6la

the states of Missouri and Nebraska. The defendant in the

Nebraska case challenged the jurisdiction of the Nebraska

court, alleging that the land was actually located in Mis-

souri, and had only been moved to the other side due to a

shift in the river’s course. The Nebraska court made a

finding of fact that led it to conclude that the land was

located in Nebraska, and presided over the action. Durfee,

375 U.S. at 108.

After the Nebraska court entered a judgment in favor

of the plaintiff, the defendant filed an action in Missouri

to quiet title in the same land. The Missouri court of

appeals permitted the second action to proceed by accept-

ing the contention that the Full Faith and Credit clause

applies only when the original court has jurisdiction over

the persons and subject matter involved in the original

action. Because the Missouri court found that the Ne-

braska court did not have jurisdiction, it held the Mis-

souri trial court could revisit the merits of the lawsuit.

The United States Supreme Court decided that juris-

diction issues should only have to be litigated and de-

cided once. The Court held that a court must conduct a

very limited inquiry in considering a challenge to the

jurisdiction of a court which has previously issued a judg-

ment:

While it is established that a court in one State,

when asked to give effect to the judgment of a court

in another State, may constitutionally inquire into

the foreign court’s jurisdiction to render that judg-

ment, the modern decisions have carefully deline-

ated the scope of such an inquiry. From these deci-

sions there merges the general rule that a judgment

is entitled to full faith and credit—even as to ques-

tions of jurisdiction—when the second court's

inguiry discloses that those questions have been

62a

fully and fairly litigated and finally decided in the

court which rendered the original judgment. |

Durfee, 375 U.S. at 111 (emphasis added). The Durfee

holding reiterated the Court’s holding in Stoll v. Gottlieb,

305 U.S. 165, 172 (1938), in which the Court stated:

After a party has his day in court, with opportunity

to present his evidence and his view of the law, a

collateral attack upon the decision as to jurisdiction

there rendered merely retries the issue previously

determined. There is no reason to expect that the

second decision will be more satisfactory than the

first.

Thus, the Full Faith and Credit clause requires Mr.

Lynn to abide by the Washington court’s decision that it

had jurisdiction over the absent class members. Public

policy, according to the United States Supreme Court:

dictates that there be an end to litigation; that those

who have contested an issue shall be bound by the

result of the contest, and that matters once tried

shall be considered forever settled as between the

parties. We see no reason why this doctrine should

not apply in every case where one voluntarily

appears, presents his case and ts fully heard, and

why he should not, in the absence of fraud, be

thereafter concluded by the judgment of the tri-

bunal to which he has submitted his cause.

Durfee, 375 U.S. at 111-12 (emphasis added) (quoting

Baldwin, 283 U.S. at 525-26). In other words, Mr. Lynn

gets only one opportunity to litigate his objections—he

cannot keep trying different forums until he gets a result

he likes.

ee eee

This outcome is particularly appropriate in a class

action context. The United States Supreme Court has

unequivocally ruled that a state court may exercise juris-

63a

diction over absent, non-resident plaintiff class mem-

bers’ by providing them with ‘minimal’ due process

protections. Phillips Petroleum Co. v. Shutts, 472 U.S.

790 (1985). This result can arise even if the absent class

members are not given an opportunity to opt out of the

settlement. See Nottingham Partners v. TransLux Corp.,

925 F.2d 29, 32-33 (1st Cir. 1991). In Nottingham

Partners, an absent class member appeared and objected

to the terms of a settlement in a Delaware state court

class action. Jd. The class member vigorously objected to

being included in the class and to being denied the oppor-

tunity to “opt out.”” Those objects were rejected by the

Delaware court. The class member then attempted to

pursue its damages claims in a previously-commenced

lawsuit before the federal district court in Massachusetts.

On the settling defendants’ summary judgment motion,

the Massachusetts federal district court dismissed the

class member’s claims because they were precluded by

the judgment on the class action settlement. In affirming

this result, the First Circuit recognized the precise prin-

ciple which applies to Mr. Lynn:

appellants attempt. . . to have us review the propri-

ety of the class certification and their inclusion in

the class. . . . The short of it is that we must give

full faith and credit to what the Delaware courts

have lawfully found and ordered.

Nottingham Partners, 925 F.2d at 32 (emphasis added;

citations omitted).

Because Mr. Lynn, like the objecting plaintiff in Not-

tingham Partners, was “given, and vigorously exercised,

a constitutionally adequate opportunity to be heard,”

Mr. Lynn is bound by the result in the Washington court.

Mr. Lynn had had his day in court; he is not entitled to

another one.

64a

b. Mr. Lynn Litigated and Lost His Jurisdic-

tion Objections Before the Washington

Court and is Bound By the Result.

Under Durfee, this Court must inquire only as to

whether the Washington court’s personal jurisdiction over

absent class members was litigated in the Washington

action. To make that determination, the Court need look

no further than the Jurisdiction Order:

counsel for Mr. Lynn and their clients have had a

full and fair opportunity to raise their objections

to (a) the form of the Class Notice, (b) the adequacy

of the class represcatatives in this case with respect

to Montana purchasers of Homestead Bonds, and

(c) this Court’s personal jurisdiction over the absent

class members.

Jurisdiction Order (Supp. Hall Dec. Ex. A) at 4 (em-

phasis added). The record before this Court also reflects

that counsel for Mr. Lynn and their clients submitted

evidence and legal memoranda and that counsel for Mr.

Lynn personally appeared before the Washington court

on three separate occasions. See, e.g., Hall Affid. Tabs

233, 234, 235, 240, 241, 248, 249, 258 (documents sub-

mitted to the Washington court by counsel for Mr.

Lynn); Juris. Order (Supp. Hall Affid. Ex. A) at 4-5.

By comparing the papers recently submitted to this

Court to those filed by Mr. Lynn’s counsel in connection

with the Jurisdiction Motion the Washington court, the

Court can see that the arguments here are the same objec-

tions that were made to (and rejected by) the Washington

court.

65a

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66a

In short, Mr. Lynn is simply raising before this Court the

same objections he raised in his papers submitted to the

Washington court.

As is demonstrated by the Final Judgment, the Wash-

ington court expressly rejected every one of Mr. Lynn’s

objections. In summary, the court made the following

findings:

e “The Notice properly informed persons in the

Class of their rights under the Settlement, includ-

ing, without limitation, the right to opt out and

pursue individual actions, and the consequences

of failing to opt out.”

e The Notice “constituted valid, due, and sufficient

notice to members of the Class, complying fully

with due process and Rule 23... .”

e “Both in the litigation and the settlement negoti-

ations, the Class Representatives adequately

represented all persons in the Class, including,

without limitation, Montana Homestead Bond

purchasers.”

e “The Court has jurisdiction over the subject

matter of this litigation and has personal juris-

diction over all parties to this litigation, including

all Class Members.”

e “In light of the benefits and detriments to per-

sons in the class under [Montana and Washing-

ton] law, the Court finds that the settlement is

fair, reasonable and adequate to all members of

the Class, including, without limitation, Montana

Homestead Bond purchasers.”

Final Judgment (Supp. Hall Affid. Ex. B) at 2-3; see also

Jurisdiction Order (Supp. Hall Affid. Ex. A); Opt Out

Order (Hall Affid. Tab 257). Because the record before

this Court unquestionably demonstrates that Mr. Lynn

EDIE ee DO EOE OEM ED

67a

had a full and fair opportunity to litigate his objections,

this Court need go no further to rule that Mr. Lynn is

bound by the Washington court’s determination of juris-

diction.

Counsel for Mr. Lynn argue strenuously that an absent

class member must be entitled to attack a class action

settlement in “this home forum.” See Class Cert. Brief at

18 (citing Jn re Real Estate Title and Settlement Services

Antitrust Litig., 869 F.2d 760 (3d Cir. 1980)); see also

Opp. to Motion to Vacate at 7-8. This argument is both

wrong and unsupported by the case cited by Mr. Lynn’s

counsel.

In Real Estate Title, the “‘sole issue’ addressed by the

court was whether absent class members could properly

be enjoined from pursuing an individual action for

damages when the class members both (a) lacked mini-

mum contacts with the forum issuing the injunction and

(b) had not previously been given an opportunity to opt

out of the class. Id. at 769. This class in Real Estate Title

had been certified under Rules 23(b)(1) and (b)(2), and

the trial court denied the motion of the objecting absent

class members to opt out of the class action settlement.

The absent class members did not raise their jurisdictonal

attack (inadequate representation) in their motion to opt

out. Real Estate Title, 869 F.2d at 763 (school boards

“did not participate in the objections to adequacy of

representation.”’).

The Third Circuit held that, under these circumstances,

the federal district court could not enjoin the school

boards from litigating their adequacy of representation

claims in a collateral attack in a forum other than the

court issuing the judgment. The court specifically limited

its holding to injunctions against individual suits when

the court issuing the judgment had not given the class

68a

members an opportunity to opt out in the class certifica-

tion process. Id. at 769.

Mr. Lynn, of course, is not faced with that situation.

Pursuant to Rule 23(b)(3), Mr. Lynn, and all the other

persons in the Washington settlement class, were given a

constitutionally sufficient notice of their opportunity to

opt out and pursue individual actions. Final Judgment

(Supp. Hall Affid. Ex. B) at 3. Under these circum-

stances, even the Real Estate Title court recognized that

absent class members in Rule 23(b)(3) damages actions

could be bound by a judgment, whether or not they had

‘minimum contacts’’ with the class action forum. Jd. at

762. According to the Real Estate Title court:

Shutts stands for the proposition that a court can

bind all members of a plaintiff “opt out” class toa

judgment for damages even if the class members

do not meet the traditional requirements of in

personam jurisdiction “‘so long as the named parties

adequately represented the absent class and the

prosecution of the litigation was within the common

interest.”

Real Estate Title, 869 F.2d at 766 (emphasis added).

Mr. Lynn has already litigated his claim of inadequate

representation before the Washington court, as he ex-

pressly raised it in his motion to dismiss for lack of juris-

diction. Jurisdiction Motion (Hall Affid. Tab 248) at

13-19. For the reasons stated above, the Full Faith and

Credit clause precludes Mr. Lynn from relitigating that

issue in this court.

Mr. Lynn appears to have confused himself with a

member of the Washington settlement class who neither

filed a claim nor opted out. It is true that a member of

the Washington settlement class who had not litigated the

jurisdiction issue could have collaterally attacked the

69a

Washington court’s jurisdiction. Hansberry v. Lee, 311

U.S. 32, 45 (1940). Having voluntarily appeared and con-

tested the jurisdiction issue, however, Mr. Lynn is “‘bound

by the result of the contest.” Durfee, 375 U.S. at 111. /f

a member of the Washington settlement class ever chal-

lenges jurisdiction, they will have to prove “not only that

the prior representative ‘failed to prosecute or defend the

action with due diligence and reasonable prudence,’ but

also that ‘the opposing party was on notice of facts

making that failure apparent.’” Brown v. Ticor Title Ins.

Co., 982 F.2d 386, 390-91 (9th Cir. 1992). This Court

need not decide such a challenge on Mr. Lynn’s motion,

however, as he had already litigated his objections in

Washington.*

*The Montana purchasers who submitted claims in the Wash-

ington action voluntarily submitted themselves to the jurisdiction

of the Washington court. Each Proof of Claim and Release form

provides:

I also submit to the jurisdiction of the Superior Court of the

State of Washington for King County (the “Court”) with

respect to my claim as a Class Member and for purposes of

enforcing the release set forth herein.

Proof of Clairn at 6. A copy of the Proof of Claim form is attached

to the Affidavit of Tim J. Filer in Opposition to Plaintiffs’ Motion

for Class Certification (‘Filer Affid.”) as Exhibit A. Given this

express submission to the Washington court’s jurisdiction, the

Montana purchasers who filed claims must be deemed to have

waived any objection to that jurisdiction. Shutts, 472 U.S. at 812

(“Any plaintiff may consent to jurisdiction.”) (citing Keeton v.

Hustler Magazine, Inc., 465 U.S. 470, 79 L. Ed. 2d 790, 104 S. Ct.

1473 (1984)). Counsel for Mr. Lynn admitted as much at the hear-

ing on the Jurisdiction Motion in the Washington action. December

2, 1994 Hearing Transcript (Hall Affid. Ex. C) at 37:21-41:12.

70a

3. Mr. Lynn Is Barred From Raising Jurisdictional

Challenges by the Doctrines of Collateral

Estoppel, Laches, and Equitable Estoppel.

There are two additional reasons for precluding Mr.

Lynn from relitigating his jurisdiction objections.

First, under Washington law (which is the law this

Court must apply to determine the preclusive effect of

the Final Judgment), Mr. Lynn is collaterally estopped

from challenging the Washington court’s jurisdiction over

the absent class members. Mr. Lynn’s appearance through

counsel and participation in the Washington action are

sufficient to bind him to that court’s resolution of his

objections. See Lejeune v. Clallam County, 64 Wn. App.

257, 267, 823 P.2d 1144 (1994) (judgment precludes

relitigation of claims of a person “‘who appears and par-

ticipates in the proceeding, . . . or ‘one whose interests

are properly placed before the court.’”’); see also Notting-

ham Partners, 925 F.2d at 32 (person who objects to

class action settlement before the court approving the

settlement is barred by collateral estoppel from reliti-

gating same objections in another court).

Second, Mr. Lynn is bound by the Washington court’s

determination that he was barred from objecting to

jurisdiction because his unreasonable delay in asserting

the objections would unfairly prejudice the settling

parties:

In light of the passage of time and the expenditures

of funds from the settlement funds for mailing and

publishing notice of the settlement to the class and

the expenditure of resources by the parties, {Mr.

Lynn’s] delay in asserting these objections was not

reasonable and could result in unfair prejudice to

the parties to this case.

*x* * %*

LL

ee Me

7la

Finally, Mr. Lynn, individually, is barred from rais-

ing these objections under the doctrines of laches

and equitable estoppel.

Jurisdiction Order (Supp. Hall Affid. Ex. A) at 4-5.

For these additional reasons, Mr. Lynn’s objections to

the Final Judgment should be rejected. Mr. Lynn is

bound by the Washington court’s determination that it

had jurisdiction to bind the absent class numbers to a

judgment dismissing their claims. Because that determi-

nation eliminates the class Mr. Lynn seeks to represent,

his motion for class certification must be denied.

4. The Washington Judgment Is Entitled to Res

Judicata Effect in Montana.

Mr. Lynn’s counsel argues in the alternative that the

Final Judgment should not be afforded res judicata effect

in Montana even if the Washington court had personal

jurisdiction over the absent class members. See Opp. to

Motion to Vacate at 24-28. Each of the arguments ad-

vanced on this issue misses the point.

a. The Washington Court Expressly Ruled

That Lynn Would Be Bound By Its Judg-

ment In The Montana Proceeding.

On two separate occasions, the Washington court

expressly rejected Lynn’s jurisdictional arguments, hold-

ing that it had jurisdiction over all absent bond pur-

chasers who had not opted out, and thus could dismiss

their claims through final judgment. Mr. Lynn’s counsel

mischaracterizes the transcript of the Washington pro-

ceedings in an attempt to negate the clear mandate of

the Washington court’s Final Judgment. Contrary to

plaintiffs’ contentions, Judge Sctt did not reserve judg-

72a

ment concerning his jurisdiction over the Montana pur-

chasers. In his Jurisdiction Order, Judge Scott expressly

stated: “The Court rules that it has personal jurisdiction

over the absent class members in this case, including the

Montana purchasers of Homestead Bonds.” Jurisdiction

Order (Supp. Halli Affid. Ex. A) at 6. The transcript

snippets quoted in plaintiff’s brief constitute nothing

more than the Washington court’s acknowledgment that

absent class members (not Mr. Lynn) may assert a colla-

teral attack on the Final Judgment.

No absent Montana Bond purchaser has challenged

Judge Scott’s jurisdictional findings. Rather, Mr. Lynn

brought the motion for class certification presently before

this Court. Mr. Lynn is bound by the Washington court’s

jurisdictional determination. Consequently, the claims of

the Montana purchasers who did not opt out of the

Washington action cannot be included in the putative

class before this Court for certification.

b. The Washington Court Necessarily Decided

That It Had Personal Jurisdiction Over

Absent Montana Bond Purchasers.

Mr. Lynn’s characterization of the Washington Court’s

jurisdiction ruling as “‘in the alternative,” is equally incor-

rect. Although Judge Scott concluded that Mr. Lynn did

not have standing to challenge the court’s jurisdiction

over Montana purchasers who did not opt out or file

claims in the action, he went on (as he had been urged to

do by Mr. Lynn’s counsel) to address the merits of Mr.

Lynn’s objections to the exercise of jurisdiction over the

absent Montana purchasers. Judge Scott’s Final Judgment

dismissing the claims of Montana class members was

based upon his finding that personal jurisdiction existed—

73a

without such a determination the Final Judgment could

not have been entered.

Plaintiff's Opp. to Motion to Vacate cites both case

law and commentary for the proposition that preclusive

effect should not be accorded alternative holdings. This

argument, however, ignores plain wording of the Jurisdic-

tion Order: “However, because counsel for Mr. Lynn

have raised questions concerning this Court’s jurisdiction,

the Court has considered the merits of the Jurisdiction

Motion. The Court rules that it has personal jurisdiction

over the absent class members in this case, including the

Montana purchasers of Homestead Bonds.” Jurisdiction

Order (Supp. Hall. Affid. Ex. A) at 6.

Mr. Lynn’s citation of the Restatement is also mis-

directed. Restatement (Second) of Judgments, §27,

comment i, states: “If a judgment of a court of first

instance is based on determination of two issues, either of

which standing independently would be sufficient to sup-

port the result, the judgment is not conclusive with

respect to either issue standing alone.” (emphasis added).

In order to dismiss the claims of all Homestead Bond pur-

chasers—whether residing in Washington or other states—

Judge Scott had to determine whether the notice given

the absent members of the Washington class satisfied CR

23 and due process, thus giving the Washington Court

personal jurisdiction over them. After extensive briefing

and argument on those issues, the Washington Court con-

cluded that it had personal jurisdiction. Only after mak-

ing such a finding could the Washington Court dismiss

the claims of the absent class members—including Mon-

tana purchasers—who did not opt out. Judge Scott’s

entry of the Final Judgment could not have been based

on his finding Mr. Lynn lacked standing to challenge the

court’s jurisdiction. Consequently, those two conclusions

74a

do not constitute “alternative” holdings with regard to

the doctrine of res judicata. The issue was fully litigated,

decided, and necessary to the court’s final judgment, and

consequently should be accorded full res judicata effect.

c. The Final Judgment Does Not Violate Mon-

tana Public Policy.

Plaintiffs’ public policy arguments are equally unavail-

ing. The case law cited by Mr. Lynn for the proposition

that res judicata should not be allowed to negate the

claims of Montana Bond purchasers does not support that

proposition. Rather, both the Montana Constitution and

the case law interpreting it support the unspectacular

notion that individuals should not be unjustly prohibited

from vindicating and protecting their rights. The Wash-

ington class action afforded the Montana Bond pur-

chasers a sufficient opportunity to do just that—the same

opportunity absent class members would be afforded in

a Montana class action under M. R. Civ. P. 23(b)(3)—and

thus does not violate the public policy of the state of

Montana.

Montana and Washington, like many other states, have

adopted a class action rule nearly identical to Fed. R. Civ.

P. 23. See M. R. Civ. P. 23. Consequently, the means of

recovery provided by Washington’s CR 23(b)(3) is con-

sistent with Montana’s public policy favoring recovery by

members of an injured class. As stated by the Montana

Supreme Court in Jn re Anderson’s Estate, 121 Mont.

515, 524, 194 P.2d 621 (1948) (a case cited by plain-

tiffs): “Unless the public policy of the state would pre-

vent the recognition of the decree or such recognition

would be injurious to the best interests of the state we

must recognize the force and effect of the decrees of our

sister states . . .”" Id. at 626 (emphasis added). The pro-

75a

cedures followed in dismissing the claims of purchasers

who did not opt out were not only consistent with Mon-

tana public policy they were identical to the procedures

that would have been employed by a Montana court.

Montana and Washington have chosen to protect the

interests of those within their jurisdiction by identical

means. Thus, the Montana purchasers have been afforded

the same opportunity to protect their interests in the

Washington action as they could have under Montana

law. This hardly constitutes the outright denial of redress

complained of in Mr. Lynn’s brief.° Furthermore, plain-

tiff has failed to cite a single case in which the court

employs the public policy exception to deny full faith

and credit the judgment of a sister state’s court.®

The cases cited in plaintiffs’ brief demonstrate instances in

which the Montana courts have concluded that Montana statutes

unjustifiably abridge the rights of those governed thereby to

recover for their injuries caused by others. In White v. State, 203

Mont. 363, 661 P.2d 1272 (1985), cited in Plaintiffs’ Brief at 27,

the Montana Supreme Court struck down a Montana statute

establishing governmental tort immunity. In Corrigan v. Janney,

192 Mont. 99, 626 P.2d 838 (1981), cited in Plaintiffs’ Brief at

27, the court struck down a statute precluding a tenant from

recovering certain tort damages from their landlord for his failure

to repair the leased property. The public policy exception is

intended to prevent unjustified wholesale limitations on recovery,

rather than individual instances where plaintiffs complain about an

unfavorable judgment. Montana’s class action procedure, like

Washington's, provides a sufficient means of recovery to a group of

similarly situated plaintiffs. Since the Washington statute provides

essentially the same mechanism for obtaining redress, it does not

contravene Montana public policy.

® Plaintiffs’ Brief repeatedly recites that “Montana residents

have a fundamental right to full legal redress for any injuries they

suffer.” Plaintiffs’ Brief at 27. While this rule is intended to prevent

the legislature from denying individuals their fundamental rights

through clearinghouse damage recovery exclusions, plaintiff would

have this Court believe that this right is violated whenever a court

enters a judgment unfavorable to a plaintiff.

76a

Accordingly, Mr. Lynn, who raised and argued this

very issue before the Washington Court, may not raise it

in the present action.

B. The Washington Court Properly Exercised Per-

sonal Jurisdiction Over the Absent Class Mem-

bers, Including Montana Homestead Bond

Purchasers.

Without waiving their contention that this Court need

not and should not consider Mr. Lynn’s objections to

the Washington court’s exercise of personal jurisdiction,

Murphey Favre and the Individual Defendants respond to

them below. Like the Washington court, this Court will

see that the Washington court’s procedures fully com-

plied with both Rule 23 and the dictates of constitutional

due process.

If this Court, despite the mandate of Durfee, considers

Mr. Lynn’s objections, the Court should rule that the

Washington court constitutionally exercised jurisdiction

over the absent class members. Mr. Lynn’s counsel admit

that the due process standards for exercising personal

jurisdiction over absent class members are set forth in

Phillips Petroleum Co. v. Shutts, 472 U.S. 790 (1985).

Like the Washington action, Shutts involved a class action

in which the absent members of the plaintiff class resided

in multiple states. Jd. at 816 n.6 (listing residence states

of absent plaintiffs). Under Shutts, the forum state

(Washington), in order to bind an absent class member to

a judgment for money damages, must only “provide

minimal due process protection.” Jd. at 812. This protec-

tion is limited to giving absent class members (a) a notice

describing the action and the plaintiffs’ rights in it, (b) an

opportunity to appear and participate in the litigation,

(c) an opportunity to opt out and (d) adequate represen-

ad BAe

77a

tation. Jd. The Washington court afforded each of these

protections, and, therefore may bind the absent class

members whether or not they filed claims. See Silber v.

Mabon, 18 F.3d 1449, 1451 (9th Cir. 1994). In other

words, once these steps are taken, absent class members

may be constitutionally bound by the judgment and the

release of their claims on the basis of “implied consent

to jurisdiction when a class member fails to opt out of

the class.” Jd.

Murphey Favre and the Individual Defendants respond

to each of Mr. Lynn’s contentions below.

1. Neither Mr. Lynn Nor His Counsel Had Author-

ity to Exclude Absent Class Members From

the Washington Settlement Class.

Counsel for Mr. Lynn contend that they effectively

excluded the Montana Homestead Bond purchasers from

the Washington settlement class by filing a ‘“‘blanket opt

out” request with the company administering the Wash-

ington settlement. See Opp. to Motion to Vacate at

9-10. The Washington court expressly rejected this argu-

ment and ordered the claims administrator to ‘disregard

and give no effect to the October 7, 1994 letter from Mr.

Donald Snavely which purports to exclude unnamed

Montana purchasers of Homestead Bonds from the settle-

ment class previously certified in this case.’’ Opt Out

Order (Hall Affid. Tab 257) at 3.

Mr. Lynn cites to this Court the same cases that were

cited to the Washington court in support of his argument

that Mr. Lynn was authorized, as a putative class repre-

sentative, to act on behalf of the absent class members.

The cases cited by Mr. Lynn’s counsel on this point do

not support this extraordinary proposition. The first

78a

case says nothing about a class representative’s authority

to act on behalf of the class in a different lawsuit. Roper

v. Consurve, Inc., 578 F.2d 1106 (5th Cir. 1978). In that

case, the trial court denied class certification and the

defendant then offered full payment of the class repre-

sentative’s claim. The Fifth Circuit ruled that the offer

did not render the class representative’s claim moot and

that he could appeal the order denying class certification.

Mr. Lynn’s second case is also of no help to his posi-

tion. In that case, the court held that the Maryland

Attorney General was authorized, under provisions of the

Maryland state constitution and Maryland statutes, to

request exclusion from a class settlement on behalf of

certain political subdivisions of the state of Maryland.

In re Armored Car Antitrust Litig., 645 F.2d 488, 493

(5th Cir. 1981). The Attorney General’s authority to

opt out had nothing to do with the authority granted a

putative class representative under Rule 23. Jd. Indeed,

the court specifically held that a class representative may

not act on behalf of persons who have not authorized

him to do so:

The notice and opt-out procedures of Rule 23(c)(2)

were aimed at protecting parties from being bound

to judgment without having authorized the class

representative to act on their behalf.

Id. (emphasis added; citation omitted). As a leading com-

mentator on class action litigation, one recognized as

generally to take positions advantageous to plaintiffs,

has noted, “‘the decision to exercise the right of exclusion

in a Rule 23(b)(3) action is an individual decision of each

class member and may not be usurped by the class repre-

sentative or class cor:nsel.”” 3 Newberg on Class Actions

§ 16.16 (3d ed. 1992) (emphasis added).

79a

Thus, Mr. Lynn’s purported “‘blanket opt out”’ was, as

the Washington court determined, entitled to “‘no effect”’

and cannot serve as a basis for finding that Montana

Homestead Bond purchasers were not included in the

Washington settlement class.

2. The Class Notice Satisfies the Requirements of

Rule 23 and the Due Process Clause.

Mr. Lynn’s counsel contend that the notice sent to the

persons in the Washington settlement class describing the

settlement and their rights under it was defective for a

variety of reasons. See Opp. to Motion to Vacate at 10-

16. As noted above, Mr. Lynn raised each of these argu-

ments before the Washington court. The Washington

court expressly rejected them, holding:

The Notice properly informed persons in the Class

of their nghts under the Settlement, including,

without limitation, the right to opt out and pursue

individual actions, and the consequences of failing

to opt out. ... [The Notice] constituted valid, due,

and sufficient notice to members of the Class, com-

plying fully with due process and Rule 23.

Final Judgment (Supp. Hall Affid. Ex. B) at 2.

Under both Washington’s and Montana’s Rule 23, the

notice in a Rule 23(b)(3) action must provide certain

information:

The notice shall advise each member of the class

that (A) the court will exclude him from the class

if he so requests by a specified date; (B) the judg-

ment, whether favorable or not, will tmclude all

members who do not request excluston; and (C)

any member who does not request exclusion may, if

he desires, enter an appearance through his counsel.

80a

Washington Civil Rule 23(c)(2) (emphasis added). In the

context of Rule 23(b)(3) class actions for damages,

{t]he procedural protections of [Rule] 23 replace the

rigid rules of personal jurisdiction in this context and

are all that is needed to meet the requirements of due

process.” Real Estate Title, 869 F.2d at 766 (emphasis

added; citing Shutts).

The Class Notice provides all of the information

required by Rule 23. See Hall Affid. Ex. E. The Class

Notice has an entire section entitled “RIGHTS OF

CLASS MEMBERS AND PROCEDURES FOR FILING

PROOFS OF CLAIM AND FOR EXCLUSION FROM

CLASS.” Jd. The Class Notice carefully explains at page

4 the consequences of failing to request exclusion from

the class:

4. If you do not request to be excluded from the

Class, you will be bound by any and all determina-

tions or judgments in the litigation whether or not

concerning the Settlement entered or approved by

the Court, whether favorable or unfavorable to the

Class and whether or not you submit a Proof of

Claim and Release.

Id. (emphasis added). This message is reinforced in bold-

faced, all capital letters at page 5 of the Notice. Jd. The

other information required by CR 23(c)(2) is also set

forth in the Class Notice. Jd. at 4 V(B) (class members

may appear personally or by counsel and may object to

the settlement) and § VI(C)(5), (7) (same). In short, the

Class Notice fully satisfies the requirements of CR 23

and due process.

The Class Notice also provides an appropriate basis for

this Court to exercise personal jurisdiction over absent

class members because it meets all of the requirements of

the Due Process Clause of the Fourteenth Amendment of

8la

the U.S. Constitution. According to the United States

Supreme Court, in order to bind absent, non-resident

plaintiffs to a class action judgment in a class action for

money damages, a state court must:

provide minimal due process protection. The plain-

tiff must receive notice plus an opportunity to be

heard and participate in the litigation, whether in

person or through counsel.

Shutts, 472 U.S. at 812 (emphasis added).’

The Supreme Court also gave explicit directions con-

cerning what the notice must contain to satisfy this

“minimal due process” standard:

The notice should describe the action and the plain-

tiffs’ rights in it. Additionally, we hold that due

process requires at a minimum that an absent plain-

tiff be provided with an opportunity to remove

himself from the class by executing an “opt out”’ or

“request for exclusion” form to the court.

Id. (emphasis added). Once these steps are taken, absent

ciass members may be constitutionally bound by the

judgment on the basis of “‘implied consent to jurisdiction

when a class member fails to opt out of the class.’’ Silber,

18 F.3d at 1454.

7 As the Supreme Court noted, the “notice must be the best

practicable, ‘reasonably calculated, under all the circumstances, to

apprise interested parties of the pendency of the action and afford

them an opportunity to present their objections.’” Shutts, 472

U.S. at 812. Subsequent decisions have made it clear that Shutts

does not require actual receipt of the notice, so long as the efforts

to provide notice were the best practicable under the circumstances.

Silber, 18 F.3d at 1451 (because notice efforts were “best prac-

ticable,” due process rights not violated when absent class member

was denied right to opt out even though he did not acutally receive

the notice until after the opt out deadline had passed). There is no

challenge to the procedures by which the parties provided notice

to the class.

82a

As noted above, the Class Notice provides each of the

disclosures required by Shutts and, therefore, satisfies

the ‘“‘minimal due process” requirements necessary for

the Washington court to exercise personal jurisdiction

over the absent plaintiffs and bind them to the Final

Judgment.

3. Lynn’s Technical Objections to the Form of

the Class Notice Do Not Render It Constitu-

tionally Defective.

Mr. Lynn’s counsel have raised essentially two objec-

tions to the form of the Class Notice. First, they argue

that the Class Notice should have informed absent class

members of the pendency of the putative class action in

Montana and compared Washington law to Montana law.

Second, Montana Counsel argue that the “opt out” and

proof of claim provisions in the Class Notice are too

onerous. Once again, the Washington court has already

rejected these arguments as being without merit. See

Jurisdiction Order (Supp. Hall Affid. Ex. A); Final Judg-

ment (Supp. Hall Affid. Ex. B). This Court should also

reject these arguments.

a. Due Process Does Not Require Disclosure of

Other Pending Actions or Comparative Law

Analyses to Be Included in the Class Notice.

Mr. Lynn’s counsel argue that the Class Notice should

have disclosed the pendency of this action. This argument

is flatly contrary to the mandate of Shutts, which re-

quires that the notice ‘‘should describe the action and the

plaintiffs’ nights in it.” Shutts, 472 U.S. at 812 (emphasis

added). Lynn’s contention that the pendency of a parallel

class action was required to be disclosed in the Class

Notice has been rejected by the courts. See, e.g., In re

83a

Corrugated Container Antitrust Litig., 643 F.2d 194,

223-24 (5th Cir. 1981) (notice approved without discus-

sion of claims in parallel state court action); Bowltng v.

Pfizer, Inc., 143 F.R.D. 141, 160-61 (S.D. Ohio 1992)

(“notice need not include information about a parallel

proceeding in a state court.’’). Lynn’s cases on this point

approve notices containing information about other

pending cases, but they do not stand for the proposition

that such information must be included in the notice in

order to comply with Rule 23 and provide due process.

See Mars Steel v. Continental Ill. Nat’l Bank & Trust Co.,

834 F.2d 677, 683 (7th Cir. 1987) (description of

parallel case not so “‘seriously misleading”’ as to invalidate

approval of the settlement); Weinberger v. Kendnck, 698

F.2d 61, 70 (2d Cir. 1982) (disclosure that participation

in the settlement would preclude participation in another

pending case); Roberts v. Heim, 130 F.R.D. 416, 422

(N.D. Cal. 1988) (disclosure of pending tax court cases

necessary because class members would be taking posi-

tions inconsistent with positions they would advance in

tax court proceedings). At most, the decision of whether

to include a discussion of another pending case in the

class settlement notice is an issue left to the Court’s dis-

cretion under Rules 23(d), (e). Jn re Corrugated Con-

tainer Antitrust Litig., 643 F.2d at 223 (content of

notice is an issue within the trial court’s discretion).

Likewise, Lynn’s counsel’s argument that the Class

Notice needed to set out a comparison of Washington

and Montana law before it could satisfy due process is

simply wrong. If Lynn’s counsel had been permitted to

present in the Class Notice their views as to why Mon-

tana law is more favorable to Montana purchasers, the

Washington court would have been “bound to allow the

proponents to respond” by describing their views as to

84a

why the settlement was a fair one. Jn re Corrugated Con-

tainer Antitrust Litig., 643 F.2d at 224. Such a procedure

“would have made the notice’s neutrality difficult to

maintain and may have become so detailed that the

notice would ‘confuse class members and impermissibly

encumber their rights to benefit from the action.’” Jd.

(quoting Jn re Nissan Motor Corp. Antitrust Litig., 552

F.2d 1088, 1105 (5th Cir. 1975).®

Thus, Rule 23 and due process under the Shutts rule

and due process require only that class members be

advised of their rights to exclude themselves from the

settlement. If the class members wish additional informa-

tion, they are free to consult counsel of their own choos-

ing. See Shutts, 472 U.S. at 813 (if a “plaintiff's claim is

sufficiently large or important that he wishes to litigate

it on his own, he will likely have retained an attorney or

have thought about filing suit, and should be fully

capable of exercising his nght to ‘opt out’”’). As one

case cited by Lynn’s counsel recognizes, when the over-

whelming portion of the class members have chosen not

to opt out of the settlement, the presumption is that they

have made an informed decision to accept the results of

the settlement. See In re Baldwin United Corp., 607

F. Supp. 1312, 1325 (S.D.N.Y. 1985).

8iynn’s counsel cites Nissan Motor Corp. for the proposition

that the Class Notice should have disclosed the Montana action. It

does not stand for that proposition. In Nissan Motor Corp., the

notice sent to class members informing them of the action and of

their right to opt out did not include information about a proposed

settlement with one class of defendants. Jd. at 1104. The court

found this information was ‘‘material” to the decision of whether

to opt out. Jd. Nothing in that case supports the proposition that a

class notice needs to discuss parallel actions or give comparative

law analyses.

85a

The sole case cited by Lynn’s counsel requiring dis-

closure concerning applicable law does not apply in this

case. Sarafin v. Sears, Roebuck & Co., 73 F.R.D. 585

(N.D. Ill. 1977). In Sarafin, the court merely held that

the settlement notice had to inform class members that

the federal Truth-in-Lending Act imposed a limitation on

class action recoveries and that individual lawsuits were

not subject to that limitation. /d.

Finally, Mr. Lynn’s counsel argues without authority

that the Class Notice should have indicated that partici-

pation in the Washington settlement was “‘likely” to lead

to a smaller recovery than in the Montana case. Even

assuming this is true (defendants do not concede this

point), this is an issue going to the fairness of the settle-

ment and not to the adequacy of the Class Notice. See

Jurisdiction Order (Supp. Hall Affid. Ex. A) at 6 (court

will consider “‘comparisons of applicable state law which

could govern the class members’ claims as part of the

overall determination of the fairness of the settlement.”);

see also In re Baldwin United Corp., 607 F. Supp. at

1323 (comparing state and federal law claims in settle-

ment approval analysis).°

9Lynn’s counsel vaguely complains that the Class Notice

does not inform class members of the extent of their recovery.

Opp. to Motion to Vacate at 13-14. Lynn’s counsel’s own cases

recognize, however that “very general descriptions of the pro-

posed settlement” are sufficient. Weinberger, 698 F.2d at 70; Cos-

grove v. First Merchants Nat'l Bank, 68 F.R.D. 555, 561 (E.D. Va.

1975) (notice should disclose “average figures or rates of recovery

on an individual scale.”"). The Washington Class Notice, like the

notice in Weinberger, disclosed the maximum amount of attorney

fees that would be awarded. Class Notice (Hall Affid. Ex. E) at

4 V.A. With this information, class members could calculate their

potential recovery, using their unique purchase and sale informa-

tion, by applying the formula set out in the Class Notice. Nothing

further is required by Rule 23 or due process.

86a

Due process requires class members to be advised of

their nghts under a proposed class action settlement and

of their right to exclude themselves from such a settle-

ment. The Class Notice in this case notifies class members

of these rights. The additional requirement proposed by

Mr. Lynn’s counsel would require disclosure of legal

issues to laypersons that are being vigorously contested

by the parties in this case. Providing laypersons with this

information in a class notice would likely cause more

confusion than it would resolve.

b. The Opt Out Procedures in the Class Notice

Comply With Due Process.

Mr. Lynn’s counsel also argues that the opt out proce-

dures in the Class Notice are so onerous that they violate

due process. This objection also fails under Shutts.

As the Supreme Court held in Shutts, it would be a

“rare species of class member who is unwilling to execute

an ‘opt out’ form, but whose claim is nonetheless so

important that he cannot be presumed to consent to

being a member of the class by his failure to do so.”

Shutts, 472 U.S. at 813. The information requested in

the opt out procedure is hardly onerous—name, address

and purchase and sale activity with regard to Homestead

Bonds. Indeed, the opt out information is less detailed

than the information necessary to file a claim. Moreover,

the information requested is critical to determining

whether or not the person requesting exclusion from the

class was a class member or has authority to request

exclusion on behalf of a class member.

Thus, while the opt out procedure asks for slightly

more detail than the “postcard” approach advocated by

Lynn’s counsel, there are good reasons for requesting

as a

87a

the information. According to the Supreme Court,

“(t]he interests of the absent plaintiffs are sufficiently

protected by the forum State when those plaintiffs are

provided with a request that can be returned within a

reasonable time.” Shutts, 472 U.S. at 814. That is exactly

the procedure employed in this case, and it satisfies due

process. Accordingly, Montana Counsel’s objections on

this point should be rejected.

Similarly, the proof of claim process used in the Wash-

ington settlement is common in class action settlements.

See 3 Newberg on Class Actions §12.07 (4d. ed. 1992)

(formula settlements ordinarily require class members

to file a proof of claim to recover). Failure to file a

claim, or the failure to file a claim by the deadline set by

the court in the class notice, is a sufficient ground for

denying recovery to an absent class member. Jn re Gyp-

sum Antitrust Cases, 565 F.2d 1123, 1127 (9th Cir.

1977) (‘‘a cutoff date is essential and at some point the

matter must be terminated.”); Fontana v. Elrod, 826

F.2d 729, (7th Cir. 1987). Mr. Lynn’s sole case on this

issue holds nothing more than class members who were

required to file a proof of claim before liability was

established might not be barred from participating in a

class recovery. Korn v. Franchard Corporation, 50

F.R.D. 57 (S.D.N.Y. 1960). Again, the proof of claim

requirements lie within the court’s discretion under

Rules 23(d) and (e) and do not give rise to due process

considerations.

Because the Class Notice satisfies all of the require-

ments of CR 23 and provides the “minimal due process

protection” required by Shutts, the notice properly

serves as the basis for this Court’s exercise of personal

jurisdiction over the absent class members, including the

Montana purchasers.

88a

4. Montana Investors Were Adequately Repre-

sented in the Washington Action.

Mr. Lynn’s counsel also contend that the Montana

purchasers (and presumably the purchasers from every

other state other than Washington) were not adequately

represented because all of the class representatives are

Washington residents. Opp. to Motion to Vacate at 17-20.

As Lynn’s counsel is forced to concede, the class alleged

in the Washington action included, from the outset, all

purchasers of Homestead Bonds from Murphey Favre,

regardless of their residence.

In determining whether the Montana Homestead Bond

purchasers were adequately represented, the Court must

examine the qualifications of class counsel, an absence of

antagonism, a sharing of interests between representatives

and absentees, and the unlikelihood that the suit is collu-

sive. Brown v. Ticor Title Ins. Co., 982 F.2d 386, 390

(9th Cir. 1992). The Washington court ruled that the

class representatives “more than adequately represented

all members of the class, including Montana purchasers

of Homestead Bonds,” and that each of the other require-

ments for adequate representation was satisfied. Jurisdic-

tion Order (Supp. Hall Affid. Ex. A) at 5; Final Judgment

(Supp. Hall Affid. Ex. B) at 4.

Apparently, Mr. Lynn’s counsel contends that a con-

flict existed between the Washington class representatives

and his clients for two reasons. First, his client “‘felt that

a larger pro rata share of the settlement proceeds should

be attributable to their claims.” Opp. to Motion to

Vacate at 19. These plaintiffs can hardly claim to have

been prejudiced by this “conflict,” as they have opted

out and are pursuing their claims in this action. No other

Montana purchasers of Homestead Bonds shared this feel-

89a

ing, as no other Montana purchasers opted out or filed

objections to the settlement. Hall Affid. 45.

Second, Lynn’s counsel contends the Washington court

considered an inaccurate summary of applicable Montana

law in deciding that the Washington settlement was fair

to all class members, including Montana purchasers. Opp.

to Motion to Vacate at 19-24. This argument misses the

point for at least two reasons.

First, the Washington court was not limited to Wash-

ington’s class counsel’s memorandum on Montana law in

reaching its fairness determination. Mr. Lynn’s counsel’s

views of Montana law were set forth in the record con-

sidered by the Washington court in reaching its fairness

determination. Those views were stated in the Jurisdic-

tion Motion and in a letter submitted as an exhibit by Mr.

Lynn’s counsel. See Jurisdiction Motion (Hall Affid. Tab

248) at 13-17; December 6, 1994 letter to Judge Scott

(Hall Affid. Tab 258) at Ex. C (Affidavit of Donald V.

Snavely, purporting to “explain why the claims of Mon-

tana purchasers are more valuable than those of Washing-

ton purchasers.”’). The Washington court also had the

benefit of this Court’s February 16, 1994 Opinion and

Order on defendants’ motions to dismiss and this Court’s

December 5, 1994 Opinion and Order vacating the stay in

this case. See Jurisdiction Motion (Hall Affid. Tab 248)

(attaching February 16 Order and Opinion); December 6,

1994 letter (Hall Affid. Tab 258) at Ex. E (December 5

Order). The mere fact that Washington class counsel may

have interpreted Montana law differently than Mr. Lynn’s

counsel does not give rise to an “adequate representa-

tion” challenge when the court approving a class action

settlement fully considers the issues. Brown, 982 F.2d at

$91.

90a

Second, even assuming Montana law is more beneficial

to Montana purchasers than Washington law (defendants

do not concede this), Lynn’s counsel fails to identify any

“‘antagonism’”’ between the interests of the class members

and the class representatives. The Washington class settle-

ment treated each class member equally, providing a

recovery higher than the national average for securities

fraud class actions. See Oliver Declaration (Hall Affid.

Tab 254). Lynn’s counsel has also failed to identify a

single step taken by Washington class counsel that did not

benefit each class member equally, regardless of their

state of residence. Moreover, Washington class counsel’s

declarations make clear that the interests of Montana

purchasers were taken into consideration both in the

litigation and in the settlement negotiations. /d. ; see also

Oliver Declaration (Hall Affid. Tab 237). In short, Wash-

ington class counsel achieved a good settlement for all

members of the settlement class, and Mr. Lynn’s counsel

has advanced no good reason to question the adequacy

of their representation.’

101+ is instructive to note that to succeed on a collateral

attack on a class action judgment based on the adequacy of repre-

sentation, an absent class member would have to demonstrate “not

only that the prior representative ‘failed to prosecute or defend

the action with due diligence and reasonable prudence’, but also

that ‘the opposing party was on notice of facts making that failure

apparent.’”” Brown, 982 F.2d at 390-91 (quotation omitted).

Based on the record before this Court, it is highly unlikely an

absent class member could sustain this heavy burden.

he al teh vt wh

9la

IV. CONCLUSION

For all the reasons stated by the Washington court in

the Opt Out Order, the Jurisdiction Order and the Final

Judgment, and for the reasons stated above, this Court

should rule that the Washington court had personal

jurisdiction over the absent class members for purposes

of binding them to the Final Judgment. Accordingly, the

Final Judgment extinguishes the claims of the absent

class members. Neither a class notice nor class certifica-

tion in this case are necessary or appropriate. Mr. Lynn’s

motion for class certification should be denied and

Murphey Favre’s motion to vacate the order permitting

communication with Montana investors should be granted.

Respectfully submitted this 4th day of January, 1995.

FOSTER PEPPER & SHEFELMAN

/s/ Tim J. Filer

Camden M. Hall

Timothy J. Filer

Attorneys for all Defendants

except Washington Mutual Savings Bank

Foster Pepper & Shefelman

1111 Third Avenue,

Suite 3400

Seattle, Washington 98101-3299

(206) 447-4400

92a

APPENDIX G

[Filed JAN 05 1995]

CAMDEN M. HALL

TIMOTHY J. FILER

FOSTER PEPPER & SHEFELMAN

1111 THIRD AVENUE, SUITE 3400

SEATTLE, WASHINGTON 98101

(206) 447-4400

Attorneys for Defendants Murphey

Favre, Inc., Springer, Ondrak & Royan

R. KEITH STRONG

BRUCE A. MACKENZIE

DORSEY & WHITNEY

8 THIRD STREET NORTH

GREAT FALLS, MONTANA 59401

(406) 727-3632

Attorneys for Defendants

MONTANA FOURTH JUDICIAL DISTRICT COURT,

MISSOULA COUNTY

DEPARTMENT NO. 2 (HENSON)

CAUSE NO. 77454/112

PAUL M. LYNN, on behalf of

all similarly situated persons,

Class Plaintiff,

MURPHEY FAVRE, INC., et al.

Defendants.

93a

PAUL M. LYNN, et al.,

Individual Plaintiffs,

MURPHEY FAVRE, INC., et al.,

Defendants.

MURPHEY FAVRE’S AND INDIVIDUAL

DEFENDANTS’ MEMORANDUM IN

OPPOSITION TO PLAINTIFF LYNN’S

MOTION FOR CLASS CERTIFICATION

II.

94a

TABLE OF CONTENTS

INTRODUCTION 0.0. cee chsh eneeus enue eee 0

ARSGUAGEINS 6s iss cave oes00 60 ee eee 0

A.Mr. Lynn Must Prove That He Has Satis-

fied Every Element of MLR. Civ. P. 23......... 0

B. The Claims on Which Mr. Lynn Seeks

Class Certification Present Such an

Overwhelming Predominance of Indi-

vidual Issues That Class Treatment Is

a er rerr rye err er 0

1. Claims Based on Nonstandardized Oral

Representations Do Not Present Com-

mon Issues of Fact That Predominate

Over Individual Issues and Cannot Be

Certified for Class Treatment ............. 0

2. Class Treatment Is Not Appropmiate for

Claims Requiring Individual Determin-

ations Of TROUMMNGE . 605s ds ew easeeaeaweel 0

3. The Court Must Make Individualized

Determinations as to Whether Inves-

tors’ Claims Are Time-Barred ............. 0

C. Mr. Lynn’s Claims Are Not Typical Because

He Is Subject to Unique Defenses............ 0

1. Mr. Lynn’s Claims Are Not Typical

Because His Claim of Reliance Is

Subject to Unique Challenges ............. 0

2. Mr. Lynn’s Claims Are Not Typical

Because He Is Subject to a Unique

Statute of Limitations Defense............ 0

D. Class Litigation Would Impose Excessive

Managerial Burdens on the Court and Is

95a

Not Superior to Other Available Methods

for Resolving Investors’ Claims..............

E. Plaintiff Lynn Is Not an Adequate Class

eae sob cs ence ccc ces

SG sb cesses cc cece.

TABLE OF AUTHORITIES

Cases:

Affiliated Ute Citizens v. United States, 406 U.S.

ETUC G EGG sb bac cc scdcccccccc cece

Ash v. Brunswick Corp., 405 F. Supp. 234 (D.

URES SESE SEN e sso seccccccccscccce.

Basic, Inc. v. Levinson, 485 U.S. 224 (1988)..........

Blankner v. Chicago, 504 F.2d 1037 (7th Cir.

1974), cert. denied, 421 U.S. 948 (1975)..........

Chiarella v. United States, 445 U.S. 222 (1980) .......

Chmieleski v. City Products Corp., 71 F.R.D.

SS TTT

Clark v. Watchie, 513 F.2d 994 (9th Cir.), cert.

Gomes eee Oe. O88 (1975)....................

Cook v. Avien, Inc., 573 F.2d 685 (1st Cir.

EOE S GREG GCS e we ccesccccccccccse.

Davis v. Birr, Wilson & Co., 839 F.2d 1369 (9th

cece ccc c cece

EEOC v. General Tel. Co. of Northwest, 599 F.2d

322 (9th Cir. 1979), aff'd, 445 U.S. 318

ES Oe

Efros vu. Nationwide Corp., 98 F.R.D. 703

EE Eee

96a

General Telegraph Co. of Southwest v. Falcon,

S57 Wis TOF CODE 6a 65s es eae eee es oe a Sees 0

Glick v. E.F. Hutton & Co., 106 F.R.D. 446

Cae | PURE TCVTT ETT eT ere rT er eree 0

Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct.

BOLL, 20 bs Ge. BS BET CII) 5 vce ckcccsdceneens 0

Graham v. Security Savings & Loan, 125 F.R.D.

687 (N.D. Ind. 1989), aff’d sub nom. Veal v.

First America Savings Bank, 914 F.2d 909

(7th CHE, SON Ws dca pact awed cer svsa tasivawens 0

Green v. Wolf Corp., 406 F.2d 291 (2d Cir.

1968), cert. denied, 395 U.S. 977 (1969).......... 0

Greenspan v. Brassler, 78 F.R.D. 130 (S.D.N.Y.

| ae rr rrr Perea er ren Tar 0

Hanon v. Dataproducts Corp., 976 F.2d 497

(Rt GME. ROOD o5cekrtod cesncedscewensbuacess 0

Holman v. Hansen, 237 Mont. 198, 773 P.2d 1200

fo errr ee er Tere eT TT rer er ee 0

Huddleston v. Hesman & MacLean, 640 F.2d 534

(5th Cir. 1981), aff'd in part & rev'd in part

on other grounds, 459 U.S. 375 (1983)............ 0

Hudson v. Capital Management International, Inc.,

565 F. Supp. 615 (N.D. Cal. 1983)...............

In re Consumers Power Co. Secunty Litigation,

105 F.R.D. 565 (B.D, Mich. 1908) on 0.5 ccc censs 0

In re Control Data Corp. Security Litigation,

FIG F.2D. 2EG CE BOs BRGGb 6 a 5s nee caas ven

In re Hotel Telegraph Charges, 500 F.2d 86 (9th

oe Peer er re roe ee re Cree Pe Pere

In re ML-Lee Acquisition Fund II, L.P., 149

ee a ee ere

Eee POT et ee ‘

97a

In re Transit Co. Tire Antitrust Litigation, 67

TOD. 80 OND: Mo. 1978). ............200 004

Irving v. School District No. 1-1A, 248 Mont.

ee AO: |} Re eee

Jacob v. Roberts, 223 U.S. 261, 32 S. Ct. 303,

ae Te, re

Kaser v. Swann, 141 F.R.D. 337 (M.D. Fila.

| SER A PR See rer

Kassover v. Computer Depot, Inc., 691 F. Supp.

1205 (D. Minn. 1987), aff'd, 902 F.2d 1571

ee Sn eee

Katz v. Comdisco, Inc., 117 F.R.D. 403 (N.D.

ee ee erie dues

Kennedy v. Josepthal & Co., 814 F.2d 798

(1st Cir. 1987), affirming 635 F. Supp.

Pr Ge ROD oe CNC d ee eked a esd seees

Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718

CE TG FOIE oo ooo ks 50 cdbc baedenecavcsss

Kitchen Krafters, Inc. v. Eastside Bank of Mon-

tana, 242 Mont. 155, 789 P.2d 567 (1990).........

Klein v. Bower, 421 F.2d 338 (2d Cir. 1970) .........

Koos v. First National Bank, 496 F.2d 1162 (7th

re era ee i ens ou

Kuper v. Quantum Chemical Corp., 145 F.R.D.

80 (S.D. Ohio 1992), summ. judgment dented,

in part, mot. granted, in part, 829 F. Supp.

ee OR ee ee er er

Levine v. NL Industnal, Inc., 717 F. Supp. 252,

summ., judgment granted, 720 F. Supp. 305

(S.D.N.Y. 1989), aff'd, 926 F.2d 199 (2d

ee ee a re ee eee

98a

Lubin v. Sybedan Corp., 688 F. Supp. 1425 (S.D.

Cal. 1968). ..sc-45:dadake Wena ee a eed bees seeas

McDonald v. Washington, 261 Mont. 392, 862

P.2d 1150 (10GS) a scene edetesmdwasecteteisess

McNichols v. Loeb Rhoades & Co., 97 F.R.D.

551 (N.D, EB. Se Fe bce eee ee beeen adesvonces

Miller v. Central Chinchilla Group, Inc., 66

F.R.D. 411 €0.5D. Ce Ries oa beer cvcsccccnsscs

Mirkin v. Wasserman, 5 Cal. 4th 1082, 858 P.2d

568 (19903) ..< iccenevaeeeeneeee sabes ene encees

Mobley v. Holman, 202 Mont. 227, 657 P.2d

604 (1903)... c.ccnupeeaeebaebaewhaecsssceaeas

Parker v. George Thompson Ford, Inc., 83

F.R.D. 373 (EE Giie S PE cee sb weeetehetceeses

Perelman v. Pennsylvania Real Estate Investment

Trust, 432 F. Supp. 1298 (E.D. Pa. 1977) .........

Piel v. National Semiconductor Corp., 86 F.R.D.

557 (B.D. Pa So as ee eae be ee eee 55 5500s

Plekowskt v. Ralston Purina Co., 68 F.R.D. 443

(MLD. Ga. FRVES xc 'cune cee cee abe sees 0 ts02s 0

Proposed Amendments to Rules of Civil Procedure

for the United States District Courts, 39

F.R.D. O...scctanee nee een es ee ane aes

Rolex Employees Retirement Trust v. Mentor

Graphics Corp., 136 F.R.D. 658 (D. Or.

1991) ... «+ sos eae eee eee oa ee «ass

Rubin v. Long Island Lighting Co., 576 F. Supp.

608 (E.D.N.Y. TUUGh 6s cadecceeeccesacunssefac

Seiden v. Nicholson, 69 F.R.D. 681 (N.D. III.

1976) ..« casts Rae ee ee ed eae ors

——

99a

. Seiler v. E.F. Hutton & Co., 102 F.R.D. 880

4 PE TEE ETT eee 0

: Phillips Petroleum Corp. v. Shutts, 472 U.S. 790

ise e assis nsccecscees secs’ 0

' Soper v. Valone, 110 F.R.D. 8 (W.D.N.Y. 1985)....... 0

) Taylor v. First Union Corp., 857 F.2d 240 (4th

| Cir, 1988), cert. denied, 489 U.S. 1080

4 ee ee ee 0

) Taylor v. Safeway Stores, Inc., 524 F.2d 263 (10th

0a eta sd seed ss des cvcss cess 0

) Thiel v. Taurus Drilling Ltd. 1980-1, 218 Mont.

: ee A” OO Eee je a

\ Toberv. Charnita, Inc., 58 F.R.D. 74

i Cee ae bees bees Ke eec eases 0

Townsend v. Columbia Operations, 667 F.2d 844

EE eee ere eee ere eeeere 0

Turner v. Lundquist, 377 F.2d 44 (9th Cir. 1967) ..... 0

Twining v. New Jersey, 211 U.S. 78, 29 S. Ct. 14,

RT CEUMEED we cbsesescctssccocsesccess 0

Vaughn v. Teledyne, Inc., 628 F.2d 1214 (9th Cir.

ee ee 0

Westlake v. Abrams, 575 F. Supp. 58 (N.D. Ga.

ES 0

Williams v. Balcor Pension Investors, 150 F.R.D.

EC MMEEE Wide edee cect essereescecee 0

Zimmerman v. Bell, 800 F.2d 386 (4th Cir. 1986) ..... 0

Statutes and Court Rules:

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10la

I. INTRODUCTION

Murphey Favre and the Individual Defendants respect-

fully submit this memorandum in opposition to plain-

tiffs’ motion for class certification. For the reasons stated

in Murphey Favre’s Reply Memorandum in Support of

Motion to Vacate Order Allowing Communication With

Montana Investors (“‘Reply Memorandum’’), this Court

need not consider or rule upon the class certification

motion. As demonstrated in the Reply Memorandum

(which is incorporated into this memorandum by refer-

ence), the Final Judgment entered in the parallel Wash-

ington class action extinguishes the claims of all investors

who purchased Homestead Bonds from Murphey Favre

except the claims asserted by the plaintiffs in this action.

Plaintiffs’ claims in this case are not extinguished because

they (and they alone) excluded themselves from the

Washington settlement class.

Even if the Final Judgment had not been entered,

however Mr. Lynn’s motion for class certification as to

the Montana Secunties Act, common law fraud, negligent

misrepresentation and constructive fraud claims should

be denied. Mr. Lynn has not made, or even attempted to

make, a factual showing that he had met the require-

ments of M. R. Civ. P. 23. In fact, he cannot meet these

requirements for at least three reasons.

First, Mr. Lynn may obtain certification only if com-

mon issues of law or fact predominate over individual

questions. M. R. Civ. P. 23(b)(3). It is almost hornbook

law that the variations in oral representations (like the

ones alleged by Mr. Lynn), and the variations in indi-

vidual investors’ circumstances render class treatment

inappropriate for oral misrepresentation or omission

claims. Individual issues will unquestionably predominate

over common ones in this oral misrepresentation case

7

102a

because (a) each investor will have to prove what he or

she was told orally before the jury can determine whether

those representations were false or were rendered mis-

leading by virtue of one or more omissions; (b) each

investor will have to convince the jury that he or she

actually and justifiably relied on the alleged misrepresen-

tations or omissions in making the investment decision;

and (c) each investor will have to prove that this action

was filed in a timely fashion as to him or her and that it

was reasonable for him or her to ignore the signs of

trouble demonstrated by the dramatic drop in the price

of the Homestead Bonds more than two years before this

action was filed.

With the overwhelming amount of individualized

proof that is required from each investor, there is simply

no possibility that common issues of law or fact will

“predominate” over questions of the individual members

as required by M. R. Civ. P. 23(b)(3). See McDonald v.

Washington, 261 Mont. 392, 862 P.2d 1150, 1155

(1993). As the United States Supreme Court has recog-

nized, such individualized proof requirements effectively

prevent a class action, “since individual issues then would

have overwhelmed the common ones.” Basic, Inc. v.

Levinson, 485 U.S. 224, 242 (1988).

Second, these individualized determinations, requiring

literally hundreds of separate minitrials, would impose

such a managerial burden and would consume so much of

this Court’s time that a class acticn is not “‘superior’’ to

other means of resolving these claims as required by M.R.

Civ. P. 23.

Third, class certification should be denied because Mr.

Lynn’s claims are not typical, nor is he an adequate class

representative. Mr. Lynn will face individual defenses

which are not applicable to the class members he seeks

103a

to represent. Mr. Lynn bought his bonds at more than a

20% discount, unlike the other named plaintiffs (and

most Homestead Bond purchasers) who purchased

Homestead Bonds at par value or at a premium. This

fact calls into serious question Mr. Lynn’s ability to

prove justifiable reliance on the “safe, secure, conserva-

tive” representations he alleges and his ability to ade-

quately represent the class. Mr. Lynn will also face

significant statute of limitations defenses beyond those

generally applicable to class members. These unique

defenses threaten to be Mr. Lynn’s focus in this litiga-

tion, render his claims not typical of the class and make

him an inadequate representative of the putative class.

Mr. Lynn’s apparent lack of control of, commitment to

and involvement in the litigation also raise serious ques-

tions about his adequacy as a class representative.

Il. ARGUMENT

A. Mr. Lynn Must Prove That He Has Satisfied

Every Element of M.R. Civ. P. 23.

Class actions must be brought and maintained in strict

conformity with the requirements of R. Civ. P. 23.

General Tel. Co. of Southwest v. Falcon, 457 U.S. 147,

160 (1982). Plaintiffs must prove that each of the four

elements of Mont. R. Civ. P. 23(a) and every element of

M. R. Civ. P. 23(b)(3) have been satisifed as to each

claim that they seek to certify.! McDonald v. Washing-

1M. R. Civ. P. 23(a) and M. R. Civ. P. 23(b)(3) provide as

follows:

(a) Prerequisites to a Class Action. One or more members

of a class may sue or be sued as representative parties on

behalf of all only if (1) the class is so numerous that joinder

of all members is impracticable, (2) there are questions of

[footnote continued]

104a

ton, 261 Mont. 392, 862 P.2d 1150, 1155 (1993). The

requirements for establishing and maintaining M. R. Civ.

P. 23(b)(3) class actions are more exacting than those

applicable to M. R. Civ. P. 23(b)(1) or M. R. Civ. P.

23(b)(2) actions. See Proposed Amendments to Rules of

Civil Procedure for the United States District Courts, 39

F.R.D. 69, 102-03 (1966) (advisory committee’s notes

to Rule 23). Defendants have a strong interest in ensuring

the requirements are satisifed so that any judgment

issued in a class action will have the broadest possible

preclusive effect. Shutts, 472 U.S. 790, 805 (1985).?

To ensure that putative class actions actually conform

to the requirements of M. R. Civ. P. 23, trial courts

must perform a rigorous analysis and may “probe behind

the pleadings before coming to rest on the certification

law or fact common to the class, (3) the claims or defenses of

the representative parties are typical of the claims or defenses

of the class, and (4) the representative parties will fairly and

adequately protect the interests of the class.

(b) Class Actions Maintainable. An action may be main-

tained as a class action if the prerequisites of section (a) are

satisfied, and in addition:

(3) The court finds that the questions of law or fact

common to the members of the class predominate over any

questions affecting only individual members, and that a class

action is superior to other available methods for the fair and

efficient adjudication of the controversy. The matters perti-

nent to the findings include: (A) the interest of members of

the class in individually controlling the prosecution or de-

fense of separate actions; (B) the extent and nature of any

litigation concerning the controversy already commenced

by or against members of the class; (C) the desirability or

undesirability of concentrating the litigation of the claims in

the particular forum;

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