Opposition Brief — Glavaris v. Young

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“Supreme Court, U.S,

j , riLes

No. 98-389 SED an 1998

OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1997

JOHN AND PATRICIA GLAVARIS; BENNY L. TOLLEY;

JOEL BINDER; MARIT FIDEL; BERNARD FIDEL,

Petitioners,

VS.

HERBERT J. YOUNG; et ai.,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

RESPONDENTS’ BRIEF IN OPPOSITION

Martin C. WASHTON STEPHEN A. KROFT

Counsel of Record Counsel of Record

Rory M. HERNANDEZ ALLAN L. SCHARE

Gipson, DuNN & CRUTCHER LLP McDermott, WiLL & EMERY

333 South Grand Avenue 2049 Century Park East

Los Angeles, CA 90071 Suite 3400

(213) 229-7000 Los Angeles, CA 90067

Attorneys for Respondents (310) 277-4110

Herbert J. Young, James N. Thayer, Attorneys for Respondent

Jay Janis, John R. Williamson, Gibson, Dunn & Crutcher LLP

Michael W. Mooney, Lynne Crawford,

Linda K.S. Blount, Robert R. Sprague,

Houston I. Flournoy, Bernice H. Hutter,

Melvin P. Spitz and Rafael E. Vega

148800 @ Counsel Press LLC

FORMERLY LUTZ APPELLATE SERVICES

(800) 274-3321 » (800) 359-6859

RULE 29.6 STATEMENT

Respondent Gibson, Dunn & Crutcher LLP is a California

limited liability partnership that has no parent company,

subsidiaries or affiliates.

Respondents Herbert J. Young, James N. Thayer, Jay Janis,

Jon> R. Williamson, Michael W. Mooney, Lynne Crawford,

Linda K.S. Blount, Robert R. Sprague, Houston I. Flournoy,

Bernice H. Hutter, Melvin P. Spitz and Rafael E. Vega have no

parent companies, subsidiaries or affiliates.

Respondents Gibson, Dunn & Crutcher LLP, Herbert J.

Young, James N. Thayer, Jay Janis, John R. Williamson, Michael

W. Mooney, Lynne Crawford, Linda K.S. Blount, Robert R.

Sprague, Houston I. Flournoy, Bernice H. Hutter, Melvin P. Spitz

and Rafael E. Vega respectfully submit this opposition to

petitioners John and Patricia Glavaris,Benny L. Tolly, Joel Binder,

Marit Fidel and Bernard Fidel’s Petition for Writ of Certiorari.

STATUTORY PROVISIONS INVOLVED

iu addition to the statutes and rules cited in the Petition, the

following California statutes are involved in this case, as they form

the basis for the district court’s decision (affirmed by the Ninth

Circuit) that certain of the federal and state claims asserted in the

complaint were time-barred:

California Code of Civil Procedure § 335

“The periods prescribed for the commencement of

actions other than for the recovery of real property,

are as follows:”

California Code of Civil Procedure § 338(d)

“Within three years:

(d) An action for relief on the ground of fraud or

mistake. The cause of action in that case is not to be

deemed to have accrued until the discovery, by the

aggrieved party, of the facts constituting the fraud or

mistake.”

California Code of Civil Procedure § 339

“Within two years: 1. An action upon a contract,

obligation or liability not founded upon an instrument

of writing... .”

California Corporations Code § 25506

“No action shall be maintained to enforce any liability

created under [certain provisions of the Corporate

Securities Law of 1968] unless brought before the

expiration of four years after the act or transaction

constituting the violation or the expiration of one year

after the discovery by the plaintiff of the facts

constituting the violation, whichever shall first expire.”

REASONS FOR DENYING THE WRIT

The Petition raises no federal issues worthy of this Court’s

consideration. The Ninth Circuit’s unpublished memorandum

decision neither decided any novel federal questions nor conflicts

with any decision of another circuit. The Ninth Circuit simply

affirmed the district court’s rulings, contained in two lengthy, fact-

bound and similarly unpublished memoranda decisions (see

Appendix 1d-78d, le-117e) “for the reasons set forth by the district

court” without itself articulating any rules of law. See Ninth

Circuit’s Memorandum filed Feb. 19, 1998 at Appendix 4a. For

this reason alone, and for the following additional good reasons,

the Petition should be denied.

* The primary issue raised below and in the Petition —

i.e., whether the district court correctly dismissed petitioners’

federal securities law claims based on the statute of limitations

— is moot. This case, brought for violations of Section 10(b)

of the Securities Exchange Act of 1934, was filed on

November 16, 1990, before this Court’s decision in Lampf,

Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S.

350 (1991). Accordingly, the Lampf statute of limitations did

not apply to petitioners’ federal securities fraud claims.' See

15 U.S.C. § 78aa-1. The district court therefore correctly

followed applicable Ninth Circuit precedent by applying

California’s three year state law limitations period (Cal. Code

Civ. Proc. § 338(d)) to this action. Because the Lampf statute

of limitations — rather than California’s three year fraud

period of limitations — applies to all private civil actions

commenced under Section 10(b) after June 19, 1991, review

t_ ‘his Court of the district court’s application of the California

state law statute, and the Ninth Circuit’s affirmance thereof,

would have no precedential value whatsoever.

¢ Petitioners’ request that this Court review the district

court’s decision to re-define the class period into subclasses

is not worthy of review for two reasons. Fist, Federal Rule

of Civil Procedure 23(c)(4)(B) expressly authorizes district

courts — and authorized the district court here — to subdivide

the class period based upon the court’s analysis of the

particular facts of this case. See Fed. R. Civ. P. 23(c)(4)(B)

(“When appropriate . . . a class may be divided into subclasses

and each subclass treated as a class... .”). See also

Memorandum of Decision filed Sept. 10, 1992 at Appendix

20d-25d (analysis of petitioners’ “fraud on the market” theory

of reliance and the significant interim public disclosures during

the purported class period in this case). Second, this Court

and the circuit courts have uniformly held that a district court

may split a proposed class into subclasses when the facts aid

circumstances suggest that doing so would be appropriate.’

1. Petitioners do not contend otherwise.

2. See United States Parole Comm'n v. Geraghty, 445 U.S. 388, 408

(1980) (district court may consider appropriateness of subclasses, but has

(Cont'd)

The district court here applied these settled principles of law

to the factual allegations of petitioners’ complaint. There is

no reason for this Court to reconsider this fact-bound question.

¢ Petitioners’ contentions (a) that they were entitled to

tolling under this Court’s American Pipe doctrine’ (see

Petition at i) and (b) that Messrs. Binder and Fidel should

have been permitted to intervene in this case to resurrect claims

dismissed by the district court (see Petition at 17) are not

worthy of review. In deciding these two questions, the district

court merely applied settled rules of law to the facts and

circumstances of this case. See Second Memorandum of

Decision filed Aug. 11, 1994 at Appendix 49e-55e, 75e-87e.

Petitioners make no showing to the contrary. Because

petitioners’ only assertion of error consists of the district

court’s (and the Ninth Circuit’s) purported misappiication in

this unique case of settled legal principles, the Petition does

not satisfy any of the criteria which would justify granting

review on certiorari. See Supreme Court Rule 10.

¢ The Ninth Circuit’s decision in this case does not, as

petitioners assert, conflict with a decision of the Third Circuit

Court of Appeals concerning the requirements for pleading

the existence of a RICO “enterprise.” See Petition at 26-27;

Cont'd

= sua pli obligation to do so). See also In re Syntex Corp. Sec. Litig.,

95 F.3d 922, 935 (9" Cir. 1996) (treating subclasses differently for statute

of limitations purposes because different market conditions existed at various

times during the purported class period); Lundquist v. Security Pac.

Automotive Fin. Servs. Corp., 993 F.2d 11, 14 (2d Cir. 1993); Mendoza v.

United States, 623 F.2d 1338, 1350 (9" Cir. 1980), cert. denied, 450 U.S.

912 (1981); Geraghty v. United States Parole Comm'n, 579 F.2d 238, 253

(3d Cir. 1978), vacated on other grounds, 445 U.S. 388 (1980); Carr v.

Conoco Plastics, Inc., 423 F.2d 57, 58 (5* Cir.), cert. denied, 400 U.S. 951

(1970). ay

3. American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974).

18 U.S.C. § 1961(4). The Ninth Circuit affirmed the district

court’s dismissal of petitioners’ RICO claims without even

mentioning the RICO “enterprise” issue. Accordingly, this is

hardly an appropriate case for this Court to consider the

pleading requirements for a RICO “enterprise.”

* The remaining issues raised by petitioners assert error

with respect to (a) the district court’s fact-bound analysis of

the allegations of petitioners’ 154 page Second Amended

Complaint, (b) the district court’s fact-based conclusion that

petitioners failed adequately to plead a cause of action for

violation of Section 10(b) or for state law fraud or negligent

misrepresentation, and (c) the district court’s application of

state law concerning inquiry notice, fiduciary duty, fraudulent

concealment and equitable estoppel. None of these fact-

specific questions, and in particular none of the California

state law issues decided in this case, satisfy Rule 10 criteria.

CONCLUSION

The Petition for Writ of Certiorari should be denied.

4. Petitioners are also incorrect in their assertions (see Petition at 26

n. 16) that “[p]rior to [this case], the Ninth Circuit had not previously had

the occasion to address [the RICO enterprise] issue” and that the Third

Circuit subscribes to a different approach. See Chang v. Chen, 80 E.3d 1293,

1298 (9" Cir. 1996) (adopting majority view that a RICO enterprise must

“have an ascertainable structure separate and apart from the pattern of

racketeering activity in which it engages”); United States v. Pelullo, 964

F.2d 193, 211-12 (3c Cir. 1992) (same). Indeed, Chang expressly adopts

the RICO enterprise pleading requirements set forth by the Third Circuit in

United States v. Riccobene, 709 F.2d 214 (3d Cir.), cert. denied, 460 U.S.

849 (1983). See Chang, 80 F.3d at 1299.

Dated: September 30, 1998

Respectfully submitted,

MartIN C. WASHTON STEPHEN A. KROFT