Petition for Writ of Certiorari — Greenblatt v. Smith Barney Shearson, Inc.

Supreme Court, u.53.

(1) FILED

No. 94 949 NOV 25 199%,

OFFICE OF THE CLERK

IN THE ’

Supreme Court of the United States

OctToser TERM, 1994

LINDA M. GREENBLATT,

Petitioner,

VS.

SHEARSON LEHMAN HUTTON, INC.,

Respondent.

LINDA M. GREENBLATT,

Petitioner,

VS.

SHEARSON LEHMAN HUTTON, INC.,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

ELLEN B. FRIEDLAND

Counsel of Record

Davip J. MOLTON

MOLTON & MEEKINS

Attorneys for Petitioner

Linda M. Greenblatt

750 Lexington Avenue

New York, New York 10022

(212) 838-1500

QUESTIONS PRESENTED FOR REVIEW

Whether the Federal Arbitration Act,

9 U.S.C. § 1, et seg., requires the

arbitration of a party’s rights under

a court-approved class action settle-

ment and judgment -- which settlement

and judgment retains jurisdiction in

the approving District Court for the

purpose of enforcing the terms

thereof -- when that party, subse-

quent to the approval of the settle-

ment, voluntarily and with the repre-

sentation of counsel executes a

written arbitration submission agree-

ment which submits the determination

of said rights to arbitration?

Whether, as a matter of constitu-

tional due process, an absent class

member is bound by the provisions of

a court-approved class action settle-

ment when the notice of settlement of

ii

said class action, the only informa-

tion concerning said settlement that

was sent to all such absent class

members, inadequately and erroneously

describes the claim preclusion

consequences that would be binding

upon all absent class members who did

not opt out of the class?

$e ae 9 le Aaa ti

-iii-

PARTIES TO THE PROCEEDING

Zz. Active in this aspect of litigation:

Linda M. Greenblatt

Shearson Lehman Hutton, Inc.

II. Not active in this aspect of the

litigation:

Arthur W. Hartley and all

members of the plaintiff class

other than petitioner

Stamford Towers Limited

Partnership

Stamford Towers, Inc.

Stamford Towers Depositary Corp.

A. George Kallop

William M. Kahn

Paul W. Perkins

Gary D. Gallagher

Devon B. MacEachron

Richard D. Villari

Michael R. Milversted

Armonce Sullivan and all members

of the plaintiff class other

than petitioner

Shearson California

Radisson Plaza

Partners Limited Partnership

Shearson Lehman Commercial

Properties III, Inc.

Linda Miller

Robert Kelley

James E. Powlesland

Mark D. Powers

Michael R. Milversted

Douglas M. Harbaugh

Kenneth Braddock

Isabel A. Dempsey

Shearson Lehman Brothers

Group, Inc.

Shearson Lehman

Commercial Properties

Depositary III Inc.

U.S. Hotel Properties

Getty Financial Corporation

Horst Osterkamp

Manhattan Beach Hotel

Properties Ltd.

J. Ronald Getty

-V~=

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW .... ii

PARTIES TO THE PROCEEDING ...... iii

Zmmus OF CONTENIG © «© «© ec ec ec ew ew ew Vv

po ae i. yt - en | / © |

PETITION FOR A WRIT OF

nn «6 6 6° 6 # » « +s «© @ «@ @ «© e @

oe Ge a a a a a ee ee

“i 88 (os y («SS a a a a a

STATUTORY AND CONSTITUTIONAL

og ok Ge ee a a |

Gimzmemes OF Tee CASE . « ts ce ew ew ew eo es §

A. The Class Action Settlements ... 9

i. The Sullivan Action ..... 9

2- The Hartley Action .... 12

B. The Arbitration . : oe a a oe |

C. The District Courts’ Orders .. 23

D. The Ninth Circuit’s Decision . . 25

REASONS FOR GRANTING THE WRIT... . 28

I. THE NINTH CIRCUIT’S DECISION

CONTRAVENES THE FAA BY

EXEMPTING SHEARSON’S CLASS

ACTION SETTLEMENT DEFENSES

FROM ARBITRATION. ....... 28

-vi-

A. The Ninth Circuit Applied An

Incorrect Standard Of Review. . 28

B. The Legal Standard For

Determining Arbitrability ... 30

C. There Are No Legal Constraints

Which Foreclose Arbitration

Of Shearson’s Class Action

Settlement Defenses ...... 36

D. The Ninth Circuit Erred In

Holding That Shearson Had

Not Agreed To Submit To The

Resolution Of Its Class Action

Defenses In the Arbitration .. 45

II. THE SETTLEMENT NOTICES IN

SULLIVAN AND HARTLEY WERE

CONSTITUTIONALLY DEFECTIVE

AND VIOLATIVE OF DUE PROCESS

SINCE THEY FAILED ADEQUATELY

TO APPRISE GREENBLATT OF THE

CONSEQUENCES OF FAILING TO OPT

GWe sta s ae eee ee we es OHH

CONCLUSION ...-. «© «© « «© © «© «© « « S59

er am

POP BOI

-vii-

TABLE OF AUTHORITIES

Cases

Atsa of California, Inc. v._

28

702 F.2d 172 (9th Cir. 1983),

amended, 754 F.2d 1394

(PUm Gam. 2968), ..... 29

AT&T Technologies, Inc. v._

j j Ww ers of America,

475 U.S. 643 (1986) ... 46

Vv j Corp.,

96 F.R.D. 343 (S.D. Fla. 1982),

aff’d, 737 F.2d 982 (11th Cir. 1984) 54

se Cc ation v.

j 8... Ine.

466 U.S. 485 (1984) ..... 29

Champ v. Siegel Trading Co.,

1990 WL 19984

(N.D. Ill. Feb. 27, 1990) . 40

Cohen v. Wedbush, Noble, Cooke, ine.

841 F.2d 282 (9th Cir. 1988) .... 42

Wi Ss, Inc. v. Byrd,

470 U.S. 213 | ae 36-37,38

Delta Air Lines, Inc. v._

C.,

708 F.2d 582 (11th Cir. 1983) ... 38

-viii-

Drake Bakeries, Inc. v.

Local 5 erican Baker

& Confectionery Workers

Int’l (AFL-CIO),

37G Use Bee teeGay «© «6 « we we we ew 47

Eisen v. Carlisle and Jacqueline,

vip * = «&. .. | eee |

Gilmer v. Interstate/Johnson

Lane Corporation,

0.6. ~ Bae O, Cb.

1647 (31994) « « « «© «© «© «© «© 6,33,34,35,39

Halley Optical Corp. v.

Jagar Int’l Marketing Corp.,

752 F. Supp. 638 (S.D.N.Y. 1990) .. 44

In re Nissan Motor Corp.

Antitrust Litigation,

552 F.2d 1088 (5th Cir. 1977) .... 54

In re VMS Securities Litigation,

145 F.R.D. 456 (R.D. Iii. 1992),

aff'd, 21 F.3d 139

(7th Cir. 1994) ........ 53-54,59

Island Creek Coal Sales Co. v.

Indiana-Kentucky Electric Corp.,

366 F. Supp. 350

ie ne ak ok a a oe ce

Kelly v. Merrill Lynch, Pierce,

Fenner & Smith, Inc.,

985 F.2d 1067 (11th Cir.),

cert. denied, U.S. __,

te SY 2. pee

Vv ida agic —_, .

3950 F.2d 1173 (9th Cir. 1977) .... Si

Matter of VMS Ltd. Partnership

Securities Litigation,

26 F.3d 50 (7th Cir. 1994) .... 46-47

McCubbrey v. Boise Cascade

Home _ & Land Corp.,

71 F.R.D. 62 (N.D. Cal. 1976) . 53,56,59

Mediterranean Enterprises, Inc. v.

Ssangyong Corp.,

708 F.2d 1458 (9th Cir. 1983) .... 47

Miller Brewing Co. v.

Fort Worth Distributing Co.,

781 F.2d 494 (5th Cir. 1986) .... 29

Mitsubishi Motors Corporation v.

Soler Chrysler-Plymouth, Inc.,

473 U.S.

614 (1985) . . 6,31,32,33,34,35,37,39,48

Mullane v. Central Hanover

Bank & Trust Co.,

eam Weems Bee CEPOO) ws ts tt te et hl tl }e!®€6 CU

Nielsen v. Greenwood,

Fed. Sec. L. Rep. (CCH) § 97,408,

at 96,223, 96,226-27

(cms Bide Oe Oe, 2993)... . . . 46

Republic of Nicaragua v._

937 F.2d 469 (9th Cir. 1991),

cert. denied, U.S. __,

eae @s Gee Bees (1992) ....... «31

-xX=—

Reyes Compania Naviera, S.A. v.

Manumante, S.A.,

649 F. Supp. 789

eS ee

Richards Lumber & Supply Co. v.

United States Gypsum Co.,

545 F.2d 18 (7th Cir. 1976),

cert. denied, 430 U.S. 915 (1977)

SEC v. G.C. George

Securities, Inc.,

637 F.2d 685 (9th Cir. 1981) °

Shearson/American Express, Inc. v.

McMahon,

48

53

37

482 U.S. 220 (1987) .. 5,33,34,35,39,42

Simer v. Rios,

661 F.2d 655 (5th Cir. 1981),

cert. denied, 456 U.S. 917 (1982)

Tai Ping Insurance Co. v.

M/V_Warschau,

731 F.2d 1141 (5th Cir. 1984) ..

Trade & Transport, Inc. v.

Natural Petroleum Charters Inc.,

931 F.2G@ i93 (36 Cig. 7O91)...

United Steelworkers of America

v. Warrior & Gulf Navigation Co.,

363 Us. DO Sameer es « ew te we

Wolgin v. Shearson Lehman

ros. Capita —-. 7. or o)..

CA NO. 10972 (Del. Ch. Ct.). ..

52

39

47

32

16

ox io

Constitution, Statutes and Rules

Wes GCONBC. GUONE VV. - «+ ew wen eewe §

ON Se ae ee a er a ee

Fed. R. Civ. P. 23 os a 6 ee cas. 3 ae 50

Miscellaneous

Man. Complex Likic. Part III

S 20c8se 2 « + oe ae ae oe er 53

—— =

No.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

LINDA M. GREENBLATT,

Petitioner,

vs.

SHEARSON LEHMAN HUTTON, INC.,

Respondent.

LINDA M. GREENBLATT,

Petitioner,

vs.

SHEARSON LEHMAN HUTTON, INC.,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

LPL LS LS SS SS SS ee ee ee eee ee ee ee ee ee ee ee ee ee —_

LLL LS SS SS SS SS ee Gee Gee ee eee ee ee ee ee ee ee —

PETITION FOR A WRIT OF CERTIORARI

SSS SS SSS SSS SSS SSS Sess

Petitioner Linda M. Greenblatt

("Greenblatt") respectfully prays that the

aan

Supreme Court of the United States grant a

writ of certiorari to review the judgment

of United States Court of Appeals for the

Ninth Circuit entered on August 26, 1994

in appeal numbers 92-16802 and 92-56528.

OPINIONS BELOW

This petition seeks review of the

decision of the United States Court of

Appeals for the Ninth Circuit which

affirmed the Order of the United States

District Court for the Northern District

of California, entered on October 2, 1992

in the class action entitled Hartley v.

Stamford Towers Limited Partnership, No.

C-90-2146-JPV [hereinafter "Hartley"], and

the Order of the United States District

Court for the Central District of

California, entered on November 9, 1992

in the class action entitled Sullivan v.

ti rn is ewe

earso Cali i disso

Partners Limited Partnership, No. 89-5472-

JMI (rx) {hereinafter "Sullivan").

The Ninth Circuit’s decision is not

reported but appears in the Appendix to

this petition. App. A-1-28.' The Orders

of the District Court are not reported but

also appear in the Appendix. A-29-36

(Hartley); A-37-50 (Sullivan).

JURISDICTION

The United States Court of Appeals

for the Ninth Circuit issued its opinion

affirming the Orders of the District

Courts on August 26, 1994. No petition

for rehearing was filed. This Court has

jurisdiction to consider this petition

pursuant to 28 U.S.C. §§ 1254(1) and 2106.

' The form of citation used in this

petition is as follows: Citations to the

Appendix to this petition appear as "App."

An

STATUTORY AND CONSTITUTIONAL PROVISIONS

Greenblatt challenges the Orders of

the District Courts and the Ninth

Circuit’s decision as contravening section

2 the Federal Arbitration Act ("FAA"), 9

U.S.C. § 2, and the due process clause

contained in the Fifth Amendment to the

United States Constitution.

Section 2 of the FAA provides:

A written provision in any

maritime transaction or a

contract evidencing a

transaction involving commerce

to settle by arbitration a

controversy thereafter arising

out of such contract or

transaction, or the refusal to

perform the whole or any part

thereof, or an agreement in

writing to submit to arbitration

an existing controversy arising

out of such a contract,

transaction, or refusal, shall

be valid, irrevocable, and

enforceable, save upon such

grounds as exist at law or in

equity for the revocation of any

contract.

9 U.S.C. § 2.

-5-

The Fifth Amendment to the

Constitution provides:

No person shall be held to

answer for a capital, or

otherwise infamous crime, unless

on a presentment or indictment

of a Grand Jury, except in cases

arising in the land or naval

forces, or in the Militia, when

in actual service in time of War

or public danger; nor shall any

person be subject for the same

offence tc be twice put in

jeopardy of life or limb; nor

shall be compelled in any

criminal case to be a witness

against himself, nor be deprived

of life, liberty, or property,

without due process of law; nor

shall private property be taken

for public use, without just

compensation."

U.S. Const. amend. V.

STATEMENT OF THE CASE

Stating that "(t]he Arbitration Act

- -« #.« establishes a ‘federal policy

favoring arbitration’ .. . , requiring

that ‘we rigorously enforce agreements to

arbitrate," fe) erica ss

inc. v. McMahon, 482 U.S. 220, 226 (1987)

~

(citations omitted) {hereinafter

"McMahon"], the Court has often addressed

and uniformly rejected the lower courts’

reluctance to enforce (and, at times,

hostility to) arbitration agreements that

encompass claims founded upon statutory

rights which otherwise confer jurisdiction

upon a judicial forum to hear such claims.

See Gilmer v. Interstate/Johnson Lane

Corporation, _U.S.__, 111 S. Ct. 1647

(1991) {hereinafter "Gilmer"]; McMahon,

supra; Mitsubishi Motors Corporation v.

Soler Chrysler-Plymouth, Inc., 473 U.S.

614 (1985) [hereinafter "Mitsubishi").

This case concerns the relationship

between the strong mandates of the FAA and

the courts’ power to enforce their own

judgments. Simply put, this case presents

an opportunity for the Court to address an

important analogue to the issues

EO ——

- —

-Jo

determined in Gilmer, McMahon and

Mitsubishi, ji.e., whether the FAA also

requires the arbitration of claims founded

upon rights arising from court-approved

settlements and judgments (in class

actions or otherwise) which otherwise

confer jurisdiction upon a judicial forum

to hear such claims (most often the

approving court) in situations where a

party contractually submits the

determination of such rights to an

arbitral forum.

Here, the Ninth Circuit, determining

McMahon and Mitsubishi to be "inapposite

to the case before us," App. A-21-22,

agreed with the District Courts and, we

respectfully submit, erroneously held that

a party’s written submission to

arbitration of rights arising from court-

approved settlements and consent judgments

-R~

has "no effect on a District Court’s

ability to enforce its judgment to prevent

relitigation of claims, even in

arbitration." App. A-12-13. This case

therefore presents important federal

issues as to the scope and applicability

of the FAA which merits review by the

Court.

Further, this case presents’ an

opportunity for the Court to address the

constitutional sufficiency of class action

settlement notices which, on their faces,

were confusing, misleading and just plain

wrong as to the claim preclusion

consequences that would be binding upon

all absent class members who did not opt

out of the class.

A. he ctio ements

1. The Sullivan Action.

The original complaint in Sullivan

was filed on or about August 28, 1989

(jurisdiction in the District Court was

grounded upon 15 U.S.C. §§ 77v, 78aa and

28 U.S.C. § 1331), and concerned the

purchase by the class members of interests

in a limited partnership. The plaintiff

class in Sullivan sued respondent Shearson

Lehman Hutton, Inc. ("Shearson") and other

defendants for alleged material omissions

and misrepresentations in the prospectus

and other sales documents which were

issued by Shearson in connection with the

offering of the limited partnership.

The settlement of the class action

was approved by the District Court on July

16, 1990. The release given to the

settling defendants as part of the class

atG~

action Settlement applied only to the

"Settled Claims," which is defined in said

settlement. The court order approving the

settlement prohibited any member of the

plaintiff class from prosecuting any claim

"that is a Settled Claim (as that term is

defined in the Settlement Agreement) ."

The notice of class certification and

proposed settlement in the class action --

which constitutes the only notice and

explanation of the class action settlement

that an absent class member ever received

-- did not contain any explanation that

the release covered or would cover any and

all claims, known or unknown, against

Shearson and could be invoked as a defense

by a Shearson officer or agent that had no

involvement with or connection to the

subject of the class action. To the

contrary, the settlement notice

-lil-

specifically limited the extent of the

release:

By remaining a Class member, any

claims against the defendants for

damages arising from the defendants’

conduct as alleged by the Class will

be determined in this lawsuit and

cannot be presented by you in any

other lawsuit.

The settlement notice described the

allegations of the class action as being

directed to claims:

arising out of the offer and

sale of the Units of limited

partnership interest in the

Shearson California Radisson

Plaza Partners, L.P. ("Units")

- + + by way of [Shearson’s}

misrepresentations and omissions

of material fact which concealed

from purchasers important

information regarding the

operation and performance of the

Radisson Plaza Hotel & Golf

Course, and the potential

profitability and true risks of

the investment.

Ms. Greenblatt’s decision not to opt

out of the class action was grounded upon

her reasonable reliance on the information

ota

contained in the settlement notice, the

only document she ever received concerning

the terms of the Sullivan settlement and

the consequences thereof.

2. The Hartley Action

The original complaint in the Hartley

class action was filed on or _ about

November 21, 1990 (jurisdiction was

grounded upon 15 U.S.C. §§ 77v, 78aa and

28 U.S.C. § 1331), and concerned the

purchase by the class of interests in

another limited partnership.

The plaintiff class in the Hartley

class action sued Shearson and other

defendants for alleged material omissions

and misrepresentations in the prospectus

and other sales documents which were

issued by Shearson in connection with the

offering of the limited partnership.

The settlement of the Hartley action

-13-

was approved by the District Court and

entered nunc pro tunc as of May 9, 1991.

The release given to the settling

defendants as part of the class action

settlement applied only to the "Settled

Claims," as defined in said settlement.

The court order approving the Hartley

class action settlement prohibited any

member of the plaintiff class from

prosecuting any claim "that is a Settled

Claim (as that term is defined in the

Settlement Agreement) ." The notice of

class certification and proposed

settlement in the class action -- which

constitutes the only notice and

explanation of the settlement that an

absent class member ever received -- did

not contain any explanation that the

release covered or would cover any and all

Claims, known or unknown, against Shearson

anne

ata

and could be invoked as a defense by a

Shearson officer or agent that had no

involvement with the allegations contained

in the class action complaint. To the

contrary, the settlement notice

specifically limited the extent of the

release. The Hartley settlement notice

provides as follows:

By remaining a Class Member, any

claims against the Defendants

for damages arising from the

Defendants’ conduct as alleged

by the Class Action Complaint

will be determined in this

lawsuit and cannot be presented

by you in any other lawsuit.

The settlement notice described the

allegations of the Hartley complaint as

being directed to the following conduct:

[Djefendant Shearson[/’s]}

services as a selling agent in

connection with the offer and

sale of the Units of limited

partnership interest in the

Stamford Towers Limited

Partnership ("Units") as _ set

forth in the Prospectuses for an

aggregate sale of approximately

9 0 tate

-15-

$78 million.

B. The Arbitration.

Pursuant to the arbitration

provisions in her customers’ agreements

with Shearson, Greenblatt commenced her

arbitration against Shearson and her

Shearson broker Kenneth Silva (the

"Arbitration") in late May 1991 in the

National Association of Securities

Brokers, Inc. ("NASD"). The arbitration

included claims arising from Greenblatt’s

investments in the Sullivan and Hartley

limited partnerships.’

2 In 1990, Greenblatt received and

accepted a $1,370.67 reimbursement of her

$100,000 investment with respect to the

Sullivan settlement. In August 1991,

Greenblatt received and accepted an

approximately five percent (5%)

reimbursement of her $400,000 investment

with respect to the Hartley settlement.

As her arbitration was already commenced

at the time of her receipt of the Hartley

check, she immediately notified Shearson

that she considered this payment to be

“without prejudice to my rights and claims

athe

On September 20, 1991, Shearson,

represented by counsel, filed an answer to

Greenblatt’s arbitration Statement of

Claim. In its answer to the Statement of

Claim (the "Arbitration Answer"), Shearson

asserted the following defense:

22. The partnerships Radisson,

Stamford Towers and Jidfy Lube

are all subjects oof class

actions. Greenblatt is a member

of each of the classes and

therefore, cannot pursue any

claims related to those

partnerships in this lawsuit.

Hartiey v. Stamford Towers,

L.P., No. C 90 2146 JPV (N.D.

Calif. July 11, 1991); Sullivan

v. Shearson California Radisson

Plaza Partners, L.P., Case No.

89-5472-JMI (C.D. Calif. Aug.

28, 1989); Wolgin v. Shearson

Lehman Bros. Capital Ptrs. I, et

al., CA NO. 10972 (Del. Ch.

Ct.).

In and before September 1991, when

their Arbitration Answer was due, Shearson

asserted by me in my arbitration against

Shearson and Kenneth Silva {her Shearson

broker]."

vows

-17-

had every opportunity to move in the

District Courts for the relief that it

eventually sought there in August and

October 1992. Instead, Shearson

voluntarily and knowingly decided to

submit for resolution in the Arbitration a

motion to dismiss dated September 20,

1991, which was grounded on its class

action settlement defense and _ sought

enforcement in the Arbitration by the NASD

of Shearson’s purported rights under the

Sullivan and Hartley settlements (the

"Arbitration Motion"). The record shows

that there were no legal or _ other

impediments or constraints preventing

Shearson from seeking such relief in the

District Courts in or before September

1991. Neither Shearson’s Arbitration

Answer nor its Arbitration Motion reserves

any right of Shearson to seek enforcement

=e

of the Sullivan and Hartley class action

settlements in the District Courts or any

other judicial forun.

Indeed, Shearson’s Arbitration Motion

leaves no doubt that Shearson was

explicitly asking the NASD to enforce its

purported rights under the class action

settlements in the Arbitration (and not

reserving any right to seek enforcement in

the District Courts):

Respondents Shearson...and...

Silva hereby move to dismiss Linda

Greenblatt’s claims relating to the

[purchase] of [the limited

partnerships] on the basis of the

Final Judgment entered in the class

[actions]... .

Respondents respectfully request that

the Director of Arbitration rule on

this motion prior to it being

transmitted to the Panel,

alternatively Respondents request

that this motion be transmitted to

the Panel for determination before

any evidentiary hearing on the

merits. This motion is ripe for

decision and a pre-hearing

disposition (either by the Director

or the panel) may shorten the hearing

Ca aC Si ee Dither

-19=-

and limit the presentation of

evidence.

x *&

For the reasons stated above,

Respondents respectfully request that

this [NASD] Panel dismiss

Greenblatt’s claims relating to her

investments in {the limited

partnerships].

Greenblatt opposed Shearson’s

Arbitration Motion. In a memorandum dated

January 29, 1992, the NASD Director of

Arbitration denied Shearson’s request that

its Arbitration Motion be granted prior to

any evidentiary hearing on the merits and

referred said motion to the NASD Panel.

Again, Shearson did not seek

enforcement of the class action

settlements in the District Courts.

Instead, Shearson and Silva manifested

their agreement to submit the entire

matter in controversy to the NASD for

arbitration -- including the class action

-20-

settlement defense -- by executing

submission agreements. Shearson and Silva

executed the submission agreements on

February 7, 1992 and April 27, 1992,

respectively, with full knowledge of the

existence of the Sullivan and Hartley

class action settlements and their rights

thereunder. Both Shearson and Silva were

represented by counsel at the time that

they signed the submission agreements.

The submission agreements provide in

pertinent part:

The undersigned parties hereby submit

the present matter in controversy, as

set forth in the attached statement

of claim [and] answers .. . to

arbitration in accordance with the

Constitution, By-Laws, Rules,

Regulations and/or Code of

Arbitration Procedure of the

sponsoring organization.

App. A-60-67.

The submission agreements thus

provide that Shearson and Silva have

-21-

contractually agreed to act "in accordance

with @0e . «4 ® » Code of Arbitration

Procedure of the [NASD]." Section 6 of

that Code provides:

No party shall, during the

arbitration of any matter, prosecute

or commence any suit, action or

proceeding against any other party

touching upon any of the matters

referred to arbitration pursuant to

this Code.

The submission agreements do not

exempt from submission to arbitration any

issues raised in the pleadings filed in

the Arbitration or in Shearson’s

Arbitration Motion. Moreover, because the

submission agreements specifically submit

to arbitration the "present matter in

controversy" -- j.e., all the claims

raised in Greenblatt’s Statement of Claim

and all defenses raised in Shearson’s

Arbitration Answer and Arbitration Motion

-- Shearson and Silva expressly contracted

-22-

to submit their class action settlement

defenses to the NASD panel for decision.

From on or about September 20, 1991

(when Shearson filed its Arbitration

Answer and Arbitration Motion with the

NASD) to August 7, 1992 (when counsel for

Greenblatt was advised by Shearson’s

arbitration counsel that Shearson was

moving in the District Courts for the same

relief requested in the Arbitration

Motion), Shearson and Silva fully

participated in the Arbitration with

respect to all issues raised by

Greenblatt’s claims. Shearson (i)

submitted its class action settlement

defenses to arbitration in September 1991

in its Arbitration Answer, (ii) litigated

that issue in the Arbitration by its

Arbitration Motion, £223) then

contractually reaffirmed its submission of

=23-

this issue to arbitration by its and

Silva’s execution of the submission

Agreements in February and April 1992, and

(iv) unconditionally and without

reservation participated in the voluminous

discovery in the Arbitration, including

discovery concerning the Sullivan and

Hartley limited partnerships.

At the time Shearson finally filed

its motions to enforce that class action

settlements in the District Courts in

August and October 1992, the Arbitration

was scheduled to commence on November 30,

1992.

C. The District Courts’ Orders

On or about October 5, 1992, Shearson

filed a motion in the Sullivan District

Court, seeking a permanent injunction

against Greenblatt’s pursuit of her claims

in arbitration relating to the Sullivan

-24-

limited partnership. On or about November

9, 1992, the District Court’ signed

Shearson’s proposed order, granting

Shearson’s motion.’ App. A-37-50.

On or about August 10, 1992, Shearson

filed a motion in the Hartley District

Court, seeking a permanent injunction

against Greenblatt’s pursuit of her claims

in arbitration relating to the Hartley

limited partnership. On October 2, 1992,

the District Court entered its Order,

granting Shearson’s Motion. App. A-29-36.

3 Two months earlier, however, the

District Court specifically referred to

Shearson’s execution of the submission

agreements as one of the bases for the

District Court’s finding that it was "not

satisfied that Defendants have _ shown

irreparable injury or probable success on

the merits of the dispute" and denied

Shearson’s application for a Temporary

Retraining Order against Greenblatt’s

pursuit of her Sullivan limited

partnership claims in the Arbitration.

App. A-51-59.

aZG<

D. The Ninth Circuit’s Decision

Greenblatt appealed, arguing that,

inter alia, (i) Shearson, by written

agreement, submitted its class action

settlement defenses to arbitration and

should be bound to arbitrate that issue

pursuant to the FAA, and (ii) that in any

event Greenblatt should not be bound to

the Sullivan and Hartley class action

settlements since the settlement notices

in those actions violated due process by

failing to provide adequate notice of the

claim preclusion consequences of failing

to opt out. The Ninth Circuit affirmed

the District Courts. App. A-1-28.

The Ninth Circuit rejected

Greenblatt’s argument that the FAA

mandated that Shearsorn’s class action

settlement defenses lkv2 determined in an

arbitral forun. The court, determining

-26-

that McMahon and Mitsubishi were

"inapposite to the case before use," App.

A-21-22, that "the arbitration clauses in

the Shearson’s Clients Agreements and the

NASD Submission Agreements have no

effect on a District Court’s ability to

enforce its judgment to prevent

relitigation of claims, even in

arbitration." Id. at A-12-13. The

4 The Ninth Circuit described the

submission agreements as follows:

Shearson and Silva executed form

Submission Agreements, as

required by the Code of

Arbitration Procedure § 25(b),

to proceed with the arbitration

of Greenblatt’s other claims.

These agreements limited

arbitration to ‘the _ present

matter in controversy, as set

forth in the attached STAT enee

of claim and answers. .. .

App. A-10-11 (emphasis supplied).

Neither the face of the submission

agreements, id. at A-60-67, nor any thing

else in the record support the courts’

construction of the submission agreements

-27-

court further held that "Shearson’s

participation in the arbitration process

cannot affect the District Court’s

authority to enforce its judgments."* Id.

at A-18.

| The Ninth Circuit also rejected

Greenblatt’s constitutional challenge to

the Sullivan and Hartley notices of class

settlement, holding that said notices were

as excluding (or intending to exclude)

Greenblatt’s claims concerning the Hartley

and Sullivan limited partnerships or

Shearson’s defense thereto based on the

Class action settlements.

The court also erred in

Characterizing Greenblatt’s arbitration

Claims as seeking over $17 million in

damages. id. at A-14 n.l. There is

nothing in the record to support the

court’s statement. Indeed, Greenblatt’s

statement of claim specificly seeks

damages exceeding $3.5 million.

* In light of its holdings, the court

noted that "Shearson could have waited for

the ruling from the arbitration panel on

the question of arbitrability before

returning to district court to enforce the

injunctions. ..." App. at A-20.

-28-

"constitutionally adequate. ... "™ Id.

at A-25.

Greenblatt now petitions this Court

to review the Ninth Circuit’s decision,

which contravenes the FAA by establishing

an exemption therefrom with respect to

rights based on court~-approved settlements

or court judgments which confer

jurisdiction upon a judicial forum to hear

such claims.

REASONS FOR GRANTING THE WRIT

I. THE NINTH CIRCUIT’S DECISION

CONTRAVENES THE FAA BY EXEMPTING

SHEARSON’S CLASS ACTION SETTLEMENT

DEFENSES FROM ARBITRATION

A. The Ninth Circuit Applied An

Incorrect Standard Of Review

The Ninth Circuit reviewed the

District Courts’ Orders under an abuse of

discretion standard. App. at A-12.

However, questions concerning the

arbitrability of claim preclusion defenses

oOo ee le ee

-29-

such as Shearson’s class action settlement

defenses concern, inter alia, the scope of

arbitration agreements. Kelly v. Merrill

it nce., 985

F.2d 1067, 1069 (11th Cir.), cert. denied,

__U.S.__, 114 S. Ct. 600 (1993); Atsa of

California, Inc. v. Continental Insurance

Co., 702 F.2d 172, 175 (9th Cir. 1983),

amended, 754 F.2d 1394 (9th Cir. 1985),

thereby rendering the de novo standard

appropriate. In any event, most of the

facts at issue are undisputed. Under

these circumstances, "an appellate

tribunal has broad authority to substitute

its own conclusions of law for those of

the trial court." Miller Brewing Co. v.

Fort Worth Distributing Co., 781 F.2d 494,

496 (5th Cir. 1986); see also ose

Corporation v. Consumers Union of oo

inc., 466 U.S. 485, 501 (1984) (the

~3O~

clearly erroneous standard "does not

inhibit an appellate court’s power to

correct errors of law, including those

that may infect a so-called mixed finding

of law and fact").

B. The Legal Standard For Determining

Arbitrability

The Court has repeatedly held that

"(tjhe Arbitration Act . . . established

a ‘federal policy favoring arbitration’.

. . , requiring that ‘we rigorously

enforce agreements to arbitrate.’"

McMahon, 482 U.S. at 226. The Court has

established a two-part test for

determining whether a party’s agreement to

arbitrate will be enforced pursuant to the

FAA: (i) whether an arbitration or

submission agreement applies to a

particular dispute, and, if so, (ii)

whether legal constraints external to the

-31l-

party’s agreement foreclose the

arbitration of those claims. See

Mitsubishi, 473 U.S. at 628.

With respect to the first criterion,

the Court has held as follows:

‘(Qjuestions of arbitrability must be

addressed with a healthy regard for

the federal policy favoring

arbitration. . . . The Arbitration

Act establishes that, as a matter of

federal law, any doubts concerning

the scope of arbitrable issues should

be resolved in favor of arbitration.’

- «+ «+ Thus, as with any other

contract, the parties’ intentions

control, but those intentions are

generously construed as to issues of

arbitrability.

Mitsubishi, 473 U.S. at 626.

Accordingly, the standard for

establishing the arbitrability of a

dispute is not a high one, Republic of

Nicaragua v. Standard Fruit Co., 937 F.2d

469, 475 (9th Cir. 1991), cert. denied,

U.S. , 112 S. Ct. 1294 (1992), and

arbitration may not be denied "unless it

-32-

may be said with positive assurance ‘that

an arbitration clause is not susceptible

of an interpretation that covers the

asserted dispute." United Steelworkers of

America v. Warrior & Gulf Navigation Co.,

363 U.S. 574, 582 (1960).

The Court has held that "(t)here is

no reason to depart from these guidelines

where a party bound by an arbitration

agreement raised claims founded on

statutory rights," which otherwise confer

jurisdiction upon a judicial forum to hear

such claims. Mitsubishi, 473 U.S. at 626.

Similarly, the presumption in favor of

arbitration should not be diminished when,

as here, a party contractually agrees to

submit for resolution in a arbitral forum

its rights under a class action settlement

and judgment, which otherwise provide said

party with the right to seek redress in a

TT ee ee eee Pe ee et

_ a ee eee

=33=<

judicial forum. Id. at 626-28; see also

Gilmer, 111 S. Ct. at 1651-52; McMahon,

482 U.S. at 226-27.

Turning to the second criterion, the

FAA mandates that a pre-dispute

arbitration agreement or a post-dispute

submission agreement "shall be valid,

irrevocable, and enforceable," unless said

agreement “resulted from the sort of fraud

or overwhelming economic power that would

provide grounds ‘for the revocation of any

contract.’" Mitsubishi, 473 U.S. at 627

(quoting 9 U.S.C. § 2).

With respect to a party’s statutory

Claims which provide that party with a

judicial forum and judicial remedies, the

Court has held that "absent a well-founded

Claim" that would provide grounds for the

revocation of the arbitration or

submission agreement pursuant to section 2

-34-

of the FAA, “the Arbitration Act ‘provides

no basis for disfavoring agreements to

arbitrate statutory claims by skewing the

otherwise hospitable inquiry into

arbitrability.’" McMahon, 482 U.S. at 226

(quoting Mitsubishi, 473 U.S. at 627).

The Court has explained:

By agreeing to arbitrate a statutory

claim, a party does not forgo the

substantive rights afforded by the

statute: it only submits to their

resolution in a arbitral, rather than

a judicial, forum. . . . We must

assume that if Congress intended the

substantive protection afforded by a

given statute to include protection

against waiver of the right to a

judicial forum, that intention will

be deducible from text or legislative

history. . . . Having made _ the

bargain to arbitrate, the party

should be held to it unless Congress

has evinced an intention to preclude

a waiver of judicial remedies for the

statutory rights at issue.

Mitsubishi, 473 U.S. at 628; see Gilmer,

111 8. €C&. at i6sS2.

Simply put, the FAA, standing alone,

mandates the rigorous enforcement of all

bien tal ed <

eo

=3Se

agreements to arbitrate (subject to the

contract defenses noted in section 2 of

the FAA), and this mandate may only be

overridden by a specific congressional

command to the contrary. It should be of

no legal significance whether the

pertinent arbitration agreement

encompasses statutory claims which would

otherwise provide the protected party with

a judicial forum or, as here, purported

rights under Rule 23 class’~ action

settlements which would otherwise provide

the protected party with a judicial forum

to enforce those rights. See Gilmer, 111

S. Ct. at 1652; Mitsubishi, 473 U.S. 627-

28. The Ninth Circuit, however, in

holding McMahon and Mitsubishi to be

inapplicable, erroneously refused to

acknowledge that this case presents any

FAA issues.

~BGa

Cc. There Are No Legal Constraints Which

Foreclose Arbitration Of Shearson’s

ss tion 8 ement Def es

The Ninth Circuit, in its decision,

holds that the submission agreements "have

no effect on the District Court’s ability

to enforce its judgment," that "Shearson’s

participation in the arbitration process

cannot affect the District Court’s

authority to enforce its judgments," and

that Shearson could have sought

enforcement of the injunctions even after

the issue was determined in arbitration.

App. at A-12-13, A-18, A-20. In other

words, the Ninth Circuit has crafted a

judicial exemption to the binding mandates

of the FAA which not only contravenes the

paramount motive and intent of the FAA to

compel courts to enforce arbitration

agreements into which parties have

entered, see Dean Witter Reynolds, Inc. v.

SS ee Se ee ee

-37-

Byrd, 470 U.S. 213, 220 (1985), but has no

basis in law.°

The fact that important federal

interests may be conferred to the federal

courts for protection and enforcement does

not prevent a waiver of a party’s right to

seek judicial enforcement of those

interests when that party enters into an

arbitration agreement which encompasses

the dispute. The reason for this rule is

that by agreeing to arbitrate, "a party

does not forgo the substantial rights

afforded [to it); it only submits to their

resolution in an arbitral, rather than

judicial, forum." Mitsubishi, 473 U.S. at

623.

®° The Ninth Circuit relied on SEC v.

ecurities -, 637 F.2d 685

(9th Cir. 1981), a case that did not

concern arbitration and raised absolutely

no arbitration related issues.

~~

Because Shearson is not forgoing the

rights afforded to it by the Sullivan and

Hartley class action settlements and is

merely submitting to the resolution of

said rights in a arbitral (rather than a

judicial) forum, the interests encompassed

by the enforcement provisions of the class

action settlements and the District

Courts’ interest in protecting their

judgment are not seriously impaired. See

Delta Air Lines, Inc. “. McCoy

Restaurants, Inc., 708 F.2d 582, 583-85

(11th Cir. 1983). Whatever other federal

interests may allegedly be affected or

impaired by the submission to arbitration

of Shearson’s class action settlement

defenses are certainly not sufficient to

preclude the arbitration of this issue.

See Dean Witter Reynolds Inc. v. Byrd, 470

U.S. at 223 ("there is no reason to

=39<

require that district courts decline to

compel arbitration . . . simply to avoid

an infringement of federal interests") ;

see also Gilmer, supra; Mitsubishi, supra;

McMahon, supra; Tai Ping Insurance Co. vy.

M/V_Warschau, 731 F.2d 1141, 1143, 1146

(5th Cir. 1984) ("only the most

exceptional circumstances will justify any

action on the part of a federal court that

serves to impede arbitration oof an

arbitrable claim").

With respect to the interplay between

rule 23 of the Federal Rules of Civil

Procedure and the FAA, no authority holds

the FAA to be incompatible with any part

of rule 23, including settlements approved

under rule 23(e). Indeed, one court has

recently rejected the argument that there

is an “inherent conflict between the

purposes of FED. R. CIV. P. 23 and the

ee

-40-

Arbitration Act." Nielsen v. Greenwood,

Fed. Sec. L. Rep. (CCH) Q 97,408, at

96,223, 96,226-27. (N.D. Ill. Feb. 26,

1993) (Rule 23 does not express a

congressional intent to restrict

arbitration of a class member’s claim);

see also Champ v. Siegel Trading Co., 1990

WL 19984 (N.D. Ill. Feb. 27, 1990).

Further, the Ninth Circuit’s decision

would defeat and render null and void the

NASD’s October 1992 amendment of section

12 of its Code of Arbitration Procedure,

which was approved by the _ SEC. This

amendment attempts to- set forth a

procedure by which disputes as to whether

a claim submitted to arbitration "is

encompassed by a putative or certified

class action" can be resolved in a prompt

and logical manner. Indeed, the amendment

appears to be aimed at eliminating the

i a a

-41-

inefficient and unfair situation in which

a party challenges the arbitrability of a

claimant’s arbitration claim based on a

Class settlement but participates in the

arbitration before seeking a resolution of

the arbitrability issue in a judicial

forun.

Amended _ section 12(d)(2) provides

that any claim filed by a member of a

putative or certified class action is

ineligible for arbitration "if the claim

is encompassed by a putative or certified

Class action filed in federal or state

court. ..." Here, Greenblatt disputed

that her arbitration claims concerning the

Sullivan and Hartley limited partnerships

were "encompassed" by the class action

settlement. Amended section 12(d) (2)

provides a clear procedure for the

resolution of such disputes:

—_—_——————— i |

-42-

Disputes conterning whether a

particular claim is encompassed by a

putative or certified class action

shall be referred by the Director of

Arbitration to a panel of

arbitrators. . . . Either party may

elect instead to petition the court

with jurisdiction over the putative

or certified class action to resolve

such disputes. Any such petition to

the court must be filed within ten

business days of receipt of notice

that the Director of Arbitration is

referring the dispute to a panel of

arbitrators.

In other words, amended section

12(da) (2), which has SEC approval,’ clearly

envisions that the questions of whether a

claim "is encompassed by a putative or

. "As the Supreme Court has

recognized, the [SEC] has’- virtually

plenary authority over the arbitration ;

procedures adopted by the _ national

securities exchanges and securities

associations," en v. We u

Cooke, Inc., 841 F.2d 282, 286 (9th Cir.

> 1988) (citing McMahon, 482 U.S. at 233-

34), and “the SEC has7~ specifically

approved the arbitration procedures of . .

. the NASD, the organization mentioned in

the arbitration agreement at issue in this

case." McMahon, 482 U.S. at 234.

-43-

certified class action" -- i.e., whether

the claim is arbitrable -- shall be

properly submitted to and decided by the

arbitration panel if a petition to the

appropriate court for a resolution of this

issue is not made within "ten business

days of receipt of notice that the

Director of Arbitration is referring the

dispute to [the] panel of arbitrators."

The Ninth Circuit’s decision eviscerates

this SEC approved amendment.?

The Ninth Circuit’s decision,

allowing a party to the arbitration an

unfettered and absolute opportunity to

seek enforcement of its rights under a

* Under amended section 12(d) (2),

Shearson would be prohibited from seeking

enforcement of the Sullivan and Hartley

settlements in the District Courts because

it failed to do so within "ten business

days of receipt of [NASD’s January 29,

1992} notice that the Director of

Arbitration [was] referring the dispute to

the panel of arbitrators."

ain

class action settlement in the District

Court, is inherently unfair and unworkable

in the context of securities disputes

where, as here, the customer is usually

bound by the Client Agreement with the

broker to submit all of his or her claims

against the broker to arbitration. Such a

rule would permit the broker, as Shearson

did here, to submit to and participate in

the arbitration of this issue until, at a

time of its own choosing, it decides

unilaterally to remove this issue to a

judicial forum. Needless to say, the

absurdity and unfairness of the result

sanctioned by the Ninth Circuit is

apparent. See Halley Optical Corp. v.

Jagar Int’l]l Marketing Corp., 752 F. Supp.

638, 639-40 (S.D.N.Y. 1990) ("To find

otherwise would allow a- party to

participate in an arbitration, with the

Se ee

~T

assurance that if it loses it may later

challenge whether it had ever agreed to

arbitration. Such a result is contrary to

the clear policy favoring arbitration.").

Accordingly, because there are no

constraints external to the pertinent

arbitration and submission agreements here

which bar the arbitration of Shearson’s

Class action settlement defenses, the

Ninth Circuit erred in affirming the

Orders of the District Courts.

D. The Ninth Circuit Erred In Holding

That Shearson Had Not Agreed To

Submit To The Resolution Of Its Class

Actio

n Defenses In the Arbitration

The Ninth Circuit ignored both the

law as enunciated by the Court and the

indisputable facts in concluding that the

submission agreements executed by Shearson

and Silva -- which were entered into after

entry of the class action settlements --

excluded Greenblatt’s claims concerning

~46-

the Sullivan and Hartley limited

partnerships and Shearson’s defenses

thereto. App. at A-10-11.

This Court has held that parties may

submit questions pertaining to the

arbitrability of a dispute to the

arbitrators for determination. AT&T

Technologies, Inc. Vv. Communications

Workers of America, 475 U.S. 643, 649

(1986). Indeed, in a case involving the

claimed submission to arbitration of a

class action settlement defense similar to

Shearson’s defense here, the Seventh

Circuit stated that "{a]rbitrators possess

to power to decide whether earlier

decisions preclude new claims."® Matter

” In the VMS case, the Seventh

Circuit held that the District Court was

nonetheless the proper forum to enforce

said settlement rights since the class

action settlement in that case abolished

the appellant’s previously obtained

arbitration rights. 26 F.3d at 51. Here,

-47-

of Ss Ltd. Partnership Securities

Litigation, 26 F.3d 50, 51 (7th Cir.

1994).

"Ultimately, the issue of

arbitrability ‘is to be determined by the

contract entered into by the parties.’"

Mediterranean Enterprises, Inc. Vv.

Ssangyong Corp., 708 F.2d 1458, 1463 (9th

Cir. 1983) (quoting Drake Bakeries, Inc.

Vv. Local 50, American Bakery &

Confectionery Workers Int’l (AFL-CIO), 370

U.S. 254, 256 (1962)); see also Trade &

Transport, Inc. V. Natural Petroleum

Charters Inc., 931 F.2d 191, 195 (2d Cir.

1991) ("the submission by the parties

determines the scope of the arbitrator’s

however, Shearson, by the’ submission

agreements, determined and agreed to

submit its defenses to arbitration well

after the settlement agreements were

executed and with full knowledge of its

rights thereunder.

=48<

authority"). "The Arbitration Act

establishes that, as a matter of federal

law, any doubts concerning the scope of

arbitrable issues should be resolved in

favor of arbitration." Mitsubishi, 473

U.S. at 626. "Thus, as with any contract,

the parties’ intentions control, but those

intentions are generously construed as to

issues of arbitrability." Id; see also

Reyes Compania Naviera, S.A. v. Manumante,

S.A., 649 F. Supp. 789, 792 (S.D.N.Y.

1986) ("*the parties’ intention to

arbitrate [can] be determined not only by

the initial arbitration clause, but also

by the text of the submission agreement’")

(quoting Island Creek Coal Sales Co. v.

Indiana-Kentucky Electric Corp., 366 F.

Supp. 350, 353 (S.D.N.Y. 1973)).

Here, the plain language of the

submission agreements does not exclude

-49-

Greenblatt’s claims relating to the

Sullivan and Hartley limited partnerships

or Shearson’s class action settlement

defenses pertaining thereto. Indeed,

Greenblatt’s claims and Shearson’s

defenses are clearly and dispositively

encompassed by those contracts which

expressly submit to arbitration the

"present matter in controversy." At the

time of Shearson’s and Silva’s execution

of the submission agreements February and

April 1992 respectively, the "present

matter in controversy" Clearly included

the class action settlement defense

contained both in Shearson’s Arbitration

Answer and Shearson’s Arbitration Motion

to Dismiss (which had been referred to the

arbitration panel on January 29, 1992 by

the NASD Director of Arbitration). Simply

put, at no time until its motions in the

-50-

District Courts were filed in August and

October 1992 did Shearson qualify in words

or deeds its submission to arbitration of

its class action settlement defenses.

The Ninth Circuit’s decision

therefore failed to account for the strong

federal policies underlying the FAA and

ignored the rules of construction

enunciated by this Court with respect to

arbitrability issues.

II. THE SETTLEMENT NOTICES IN SULLIVAN

AND HARTLEY WERE CONSTITUTIONALLY

DEFECTIVE AND VIOLATIVE OF DUE

PROCESS SINCE THEY FAILED ADEQUATELY

TO APPRISE GREENBLATT OF THE

CONSEQUENCES OF FAILING TO OPT OUT

The Sullivan and Hartley class

actions were brought and certified

pursuant to, inter alia, rule 23(b) (3).

Accordingly, class members such as

Greenblatt were entitled to "the best

notice practicable under the

-5Si-

circumstances." Fed. R. Civ. P. 23(c) (2).

Here, the class action notices -- the only

documents ever sent to or received by

Greenblatt and other absent class members

concerning the class settlements --

Clearly failed to explain in clear and

unequivocal language that by failing to

opt out of the class, a class member would

be releasing and forever barred from

raising any and all other claims that such

class member might have concerning the

subject limited partnerships. The Ninth

Circuit erred in failing to hold said

notices to be constitutionally infirm.

"Notice in a class suit must present

a fair recital of the subject matter and

proposed terms. . .. "™ arsha Vv.

Holiday Magic, Inc., 550 F.2d 1173, 1177

(9th Cir. 1977) (citing Eisen v. Carlisle

and Jacqueline, 417 U.S. 156 (1974), and

-52-

Mullane _v. Central Hanover Bank & Trust

Ce., 229 U.S. 396 (3950)). Because

"important rights and remedies may be

bargained away in the [class action]

settlement process[,] . . . [adequate]

notice of the settlement is necessary as a

matter of constitutional due process -- an

individual’s claim cannot be extinguished

without notice and an opportunity to be

heard." Simer v. Rios, 661 F.2d 655, 664

(5th Cir. 1981), cert. denied, 456 U.S.

917 (1982) (citing, Mullane, 339 U.S. at

313-14).

In evaluating the adequacy of a class

action notice, the Northern District of

California has provided the following

guidelines:

[D]ue process demands that_ the

options available to class members

and the consequences of their

election be detailed with sufficient

Clarity to afford absent members a

realistic opportunity to evaluate

-53-

alternative options available to

them. See, Dole, ‘The Settlement of

Class Actions For Damages,’ 71 Co. L.

Rev. 971, 978 (1971).

McCubbrey _v. Boise Cascade Home & Land

Corp., 71 F.R.D. 62, 67 (N.D. Cal. 1976)

(emphasis added); see also Man. Complex

Litig. 2d, Part III, § 30.212 at 225 tat &

the [settlement] agreement itself is not

distributed [with or in the notice], the

notice must contain a Clear, accurate

description of the key terms.").

Courts have upheld or given approval

to class notices which have abided by this

rule. See Richards Lumber & Supply Co. v.

United States Gypsum Co., 545 F.2d 18, 20-

21 (7th Cir. 1976), cert. denied, 430 U.S.

915 (1977) notice included "all the

pertinent facts about the settlement in

the class action including the text of the

proposed covenant to sue"); In re VMS

Securities Litigation, 145 F.R.D. 458, 460

-54=-

(N.D. Ill. 1992) (class notice clearly and

unequivocally informed class members that

by not opting out they released defendants

from “every asserted or potential “claim

that in any manner related to their

purchase or sale of the VMS securities

that were the subject of the class

action"), aff’d, 21 F.3d 139 (1994);

Bennett v. Behring Corp., 96 F.R.D. 343,

353 (S.D. Fla. 1982) (notice "specifically

provided therein that copies of the

complete settlement agreement with

attachments be provided to each of the

subdivisions affected thereby, and the

court has received an affidavit attesting

this was done"), aff'd, 737 F.2d 982 (11th

Cir. 1984).

In In re Nissan Motor Corp. Antitrust

Litigation, 552 F.2d 1088 (5th Cir. 1977),

the Fifth Circuit explained why adequate

-55-

notice of the "essential terms of a [class

action) settlement" is so important to

absent class members such as Ms.

Greenblatt:

Absentee class members will generally

have had no knowledge of the suit

until they receive the initial class

notice. This will be their primary,

if not exclusive, source of

information for deciding how to

exercise their rights under rule 23.

Although absentee class members are

customarily encouraged to make

inquiry of the clerk of the district

court where the case is filed if they

have further questions, this

worthwhile advice cannot justify

omitting material information. This

is particularly plain in a case such

as the one at bar where class members

are numerous and widely dispersed.

Not only must the substantive claims

be adequately described but the

notice must also contain information

reasonably necessary to make a

decision to remain a class and be

bound by the final judgment or opt

out of the action. The standard then

is that the notice required by [Fed.

R. Civ. P. 23(c)(2)]) must contain

information that a reasonable person

would consider to be material in

making an _ informed, intelligent

decision of whether to opt out or

remain a member of the class and be

bound by the final judgment.

-56-

Id. at 1104-05 (footnote omitted).

The settlement notices here failed to

satisfy the due process standards set

forth above. With respect to the highly

material © information as to the

consequences of not opting out of the

class, the settlement notices thus were

not "detailed with sufficient clarity to

afford absent class members a realistic

opportunity to evaluate alternative

options available to them." McCubbrey,

guerra, T1 FRB. 2 BE GF: Indeed, the

information in the settlement notices

concerning the claim preclusion effects

thereof was erroneous and misleading, in

that they informed absent class members

that "(b]jy remaining a Class Member" the

only claims of that class member against

the class defendants for damages that

would be barred and precluded by the Class

ye

Action Settlement were limited to those

"arising from the Defendants’ conduct as

alleged by the Class Action Complaint."

The Sullivan settlement notice

described the allegations of the Class

Action Complaint as being directed to

claims:

arising out of the offer and sale of

the Units of limited partnership

interest in the Shearson California

Radisson Plaza Partner, L.P.

("Units") , , : by way of

[Shearson’s] misrepresentations and

omissions of material fact which

concealed from purchasers important

information regarding the operation

and performance of the Radisson Plaza

Hotel & Golf Course, and the

potential profitability and true

risks of the investment.

The Hartley settlement notice

described the class defendants’ conduct as

alleged in the Class Action Complaint as

"defendant Shearson’[{s] services as a

selling agent in connection with the offer

and sale [of interests in the limited

~~

partnership] as set forth in the

Prospectuses for an aggregate sale of

approximately $78 million."

Simply put, the notices given here

were not "the best notice practicable

under the circumstances," to which

Greenblatt was entitled. To the contrary,

they created, at the very least, a

material ambiguity as to the scope of the

release and res judicata effect of the

class settlements (especially because

Greenblatt’s arbitration claims relating

to the Sullivan and Hartley limited

partnerships did not concern alleged

misrepresentations in the offering or

sales materials).

Needless to say, the deficiencies of

the notices operate as a huge windfall for

class action defendants such as Shearson

since said deficient notices induce absent

-_

=89-

class members not to opt out without

adequately informing them that by

remaining a class member they are

releasing all claims that they have or

might have concerning the subject limited

partnerships. The magnitude of the

constitutional deficiency of the notices

here is apparent when one considers how

easy it would have been for the notices to

explain fully and adequately what were the

actual res judicata consequences. of

remaining a class member. See e.g., In re

VMS_ Securities Litigation, 145 F.R.D. at

460; see generally McCubbrey v. Boise

Cascade Home & Land Corp., 71 F.R.D. at

67.

CONCLUSION

Petitioner Linda M. Greenblatt

respectfully requests this Court to grant

her petition for writ of certiorari,

-60-

reverse the Ninth Circuit’s decision and

vacate the orders of the lower courts.

Dated: November 23, 1994

Respectfully submitted,

ELLEN B. FRIEDLAND

Counsel of Record

DAVID J. MOLTON

MOLTON & MEEKINS

750 Lexington Avenue

New York, New York 10022

(212) 838-1500

Attorneys for Petitioner

Linda M. Greenblatt

APPENDIX

FILED

AUGUST 26, 1994

CATHY A. CATTERSON, CLERK

U.S. COURT OF APPEALS

No. 92-16802

D.C. No. CV-90-02146-JFV

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ARTHUR W. HARTLEY,

Plaintiff,

and

LINDA M. GREENBLATT,

Plaintiff - Appellant,

STAMFORD TOWERS LIMITED

PARTNERSHIP,

Defendant,

and

)

)

)

)

)

)

)

)

)

)

vs. )

)

)

)

)

)

)

)

)

SHEARSON LEHMAN HUTTON INC., )

)

)

Defendant - Appellee.

|

|

|

A-2

Appeal from the United States District

Court for the Northern District of

California John P. Vukasin, Jr., District

Judge Presiding

ARMONCE SULLIVAN,

Plaintiff,

and

LINDA M. GREENBLATT,

Plaintiff - Appellant,

vs.

SHEARSON CALIFORNIA RADISSON

PLAZA

PARTNERS LIMITED PARTNERSHIP;

SHEARSON LEHMAN COMMERCIAL

PROP III INC.;

SHEARSON LEHMAN HUTTON, INC.,

ee ee ee ee ee eee ee ee

Defendants - Appellees.

No. 92-56528

D.C. No. CV-89-05472-JM

MEMORANDUM™

Appeal from the United States District

Court for the Central District of

*

This disposition is not

appropriate for publication and may not be

cited to or by the courts of this circuit

except as provided by 9th Cir. R. 36-3.

A-3

California James M. Ideman, District Judge

Presiding

Argued and Submitted: February 1, 1994

Pasadena, California

Before: TANG, PREGERSON, and NOONAN,

Circuit Judges.

OVERVIEW

Appellant Linda Greenblatt appeals

the orders of two District Courts granting

the motions of Appellee Shearson Lehman

Brothers, Inc. The District Courts’ orders

enforce the judgments and previous

injunctions regarding two class action

settlements involving Shearson.

Specifically, the orders enjoin Greenblatt

from relitigating in arbitration her

claims concerning investment in two of

Shearson’s limited partnerships, Stamford

Towers Limited Partnership ("Stamford

Towers") and Shearson California Radisson

Plaza Partners Limited Partnership

("Radisson Plaza"), which were the subject

of the class action suits. We have

-

A-4

jurisdiction pursuant to 28 U.S.C. § 1291.

We Affirm.

BACKGROUND

1. The Radisson Class Action

A class action complaint was filed in

the Central District of California against

Shearson Lehman Brothers, Inc. on August

28, 1989 for claims arising from the

purchase of units in the Shearson

California Radisson Plaza Limited

Partnership. The complaint alleged

violations of §§ 11 and 12(2) of the

Securities Act of 1933, violations of §

10(b) of the Securities and Exchange Act

of 1934 and Rule 10b-5, common law fraud,

negligent misrepresentation, and breach of

contract. The complaint was based in part

on alleged misrepresentation in the

written prospectus and advertisements

regarding the Radisson Plaza investment.

The class was certified on March 14, 1990.

A-5

On June 7, 1990 a notice of class

certification and proposed settlement was

sent to all class members. The notice

provided a siwamary of the causes of action

alleged in the suit and the settlement

agreement. The notice further suggested

that class members seek the advice of

counsel if they desired, and stated that

class members were free to examine or

photocopy the actual pleadings and records

in the suit at any time. In addition, the

notice informed all potential class

members that they had a right to exclude

themselves from the class by notifying

class counsel of their choice to opt out

of thr class, and stated the consequences

of failing to opt out of the class. The

notice also listed the time and place of

the fairness hearing for approval of the

final settlement, and informed class

members that they had a right to attend

A-6

the hearing or submit written objections

to the settlement.

The District Court gave final

approval of the settlement and entered

judgment on July 16, 1990. The settlement

bound all plaintiff class members and

Shearson, and enjoined all class members

from further prosecution of any action

based on any claim that was or could have

been asserted against Shearson or its

employees relating to the Radisson Plaza

investment. The District Court’s order

reserved jurisdiction over all parties to

enforce the settlement.

ae The Stamford Towers Class Action

A separate class action complaint was

filed in the Northern District of

California against Shearson on July 30,

1990, for claims arising out of the offer

and sale of Stamford Towers’ Limited

Partnership interests. The complaint

A-7

alleged violations of § 12(2) of the

Securities Act of 1922, §§ 10(b) and Rule

10b-5 of the Securities and Exchange Act

of 1934, as well as common law fraud,

negligent misrepresentation, negligence,

and unfair business practices under Cal.

Bus. & Prof. Code § 17200.

on June 3, 1991 a notice of class

certification and proposed settlement was

sent to all class members, which included

a list of each cause of action alleged in

the suit. - Like the notice in the

Radisson Plaza suit, the Stamford Towers

notice suggested that class members seek

the advice of counsel if they desired, and

Stated that class members were free to

examine or photocopy the actual pleadings

and records in the suit at any time.

Further, the notice informed all class

members that they had a right to opt out

of the class, and stated the consequences

A-8

of failing to opt out. The notice listed

the time and place of the fairness

hearing, and informed class members that

they had a right to attend the hearing or

submit written objections to the

settlement.

The parties submitted the Settlement

Agreement to the District Court, which

approved and entered judgment on July 11,

1991. This settlement also bound all

plaintiff class members and Shearson, and

enjoined all class members from further

prosecution of any action based on any

claim that was or could have been asserted

against Shearson or its employees relating

to the Stamford Towers investments. The

District Court’s order also reserved

jurisdiction over all parties to enforce

the settlement.

3. The Arbitration

On May 20, 1991, Linda Greenblatt, a class

A-9

member, filed an action before’ the

National Association of Securities

Dealers, Inc. ("NASD") pursuing’ the

arbitration of numerous claims against

Shearson and Kenneth Silva, Greenblatt’s

broker at Shearson. Greenblatt’s purchase

of interests in Radisson Plaza _ and

Stamford Towers. The "Client Agreements"

between Greenblatt and Shearson required

that disputes between Shearson and their

clients be arbitrated.

Shearson’s answer filed with the NASD

specifically asserted that Greenblatt was

precluded from pursuing "any claims

related to [the Stamford Towers’ and

Radisson Plaza) partnerships in this

lawsuit" because Greenblatt was a class

member in both class action. suits.

Shearson’s answer further moved for

dismissal of all renaining claims asserted

in Greenblatt’s statement of claims.

A-10

As a class member, Greenblatt did not

file any objections, appear at either

fairness hearing to challenge the

settlements, or opt out of either suit

pursuant to the notification which she

received. Greenblatt cashed the

settlement check for Radisson Plaza for

$1,370.67, and the Stamford Tower —

settlement check for $23,168.64.

Greenblatt cashed the Stamford Tower check

with the endorsement: "without prejudice

to my rights or claims asserted by me in

my arbitration."

Because of the substantive questions

of fact and law involved in the dispute,

on January 29, 1992 Shearson’s motion to

dismiss was referred to a hearing before a

panel of arbitrators, scheduled for

November 30, 1992. In the interim,

Shearson and Silva executed form

Submission Agreements, as required by the

A-11

Code of Arbitration Procedure § 25(b), to

proceed with the arbitration of

Greenblatt’s other claims. These

agreements limited arbitration to "the

present matter in controversy, as_ set

forth in the attached statement of claim

and answers ... ." In addition, Shearson

participated in discovery as part of the

arbitration process.

Before the November hearing, Shearson

filed motions in the Northern District of

California on August 10, 1992 and in the

Central District of California on October

5, 1992 to enforce the judgments of the

two class actions against Greenblatt. The

District Courts granted Shearson’s

motions, finding that Greenblatt’s

arbitration claims relating to the two

limited partnership investments were

precluded and enjoined.

ANALYSIS

A-12

We review the District Court’s

enforcement of a settlement agreement for

an abuse of discretion. Wil Ws

Federal Bureau of Investigation, 922 F.2d

555, 558 (9th Cir. 1991).

At the outset, we note that

Greenblatt devoted an extensive portion of

her briefs to the merits of arbitration as

a method for dispute resolution. Further,

Greenblatt frames the issue of whether

Shearson agreed to arbitrate its class

action settlement defense in terms of

examination of the scope and validity of

the arbitration clauses in Shearson’s

Client Agreements and the NASD Submiss:on

Agreements. While we certainly agree w-th

Greenblatt’s assertion that the law favors

arbitration where the parties have agreed

to arbitrate an issue, the arbitration

clauses in the Shearson’s Client

Agreements and the NASD Submission

A-13

Agreements have no effect on a District

Court’s ability to enforce its judgment to

prevent relitigation of claims, even in

arbitration. See SEC v. G.C. George

od © 4. Inc., 637 F.2d 685, 687 (9th

Car. iven). Thus, we find Greenblatt’s

various arguments regarding the scope and

validity of the arbitration clauses to be

facially without merit.

As the Northern District Court noted

in its order, judgment in a class action

binds all class members from bringing

subsequent claims grounded in the same

factual basis. W rn m a a

Ulloa, 958 F.2d 864, 871 (9th Cir. 1992),

cert. denied, 113 S. Ct. 970 (1993).

Thus, we first examine whether’ the

District Courts erred in finding that

Greenblatt’s claims against Shearson

regarding the Stamford Towers and Radisson

Plaza investments were precluded by the

A-14

class action settlements because of a

dissimilarity between the claims raised in

court as compared to those raised in the

arbitration.

Greenblatt contends that the

settlement releases apply only to the

"Settled Claims" raided in each class

action, which she interprets as being

limited to the specific claims in each

class action complaint. Further, she

contends that the settlement releases

cannot "immunize" Silva from his alleged

wrongful conduct in handling her

accounts.! We reject both of these

arguments. As the Northern District Court

noted, the settlement agreements to which

1 Greenblatt’s claimed damages in

arbitration of over $17 million resulted

from almost 220 different investments,

including the two limited partnerships at

issue here. Damages from her investment

in Stamford Towers "are only a relatively

small aspect of the overall case against

Shearson presented in Arbitration." (SER

at 17.)

A-15

Greenblatt did not object clearly state

that all class members are enjoined from

pursuing claims, known or unknown, that

could have been asserted against Shearson

or its employees in the class action suit.

This comports with the definition of

"Settled Claims"? found within both

2 "Settled Claims" are defined in

the Stamford Towers class. action

judgment as:

any and all existing causes of action

or claims, known or unknown, that

have been or could have been asserted

by Plaintiffs against Defendants,

based upon or related to investments

in the Units of limited partnership

interest in Stamford Towers Limited

Partnership . . . including claims

for breach of fiduciary duty,

negligence, breach of contract, or

any other alleged claim arising in

connection with the development,

construction and operation of the

Partnership and its assets or as a

result of , among other things,

Gefendant Shearson Lehman Hutton,

Inc.’s services as a selling agent in

connection with the offer and sale of

the Units of limited partnership

interest in Stamford Towers Limited

Partnership as set forth in the

Prospectuses.

The Radisson Plaza class action

A-16

settlement agreements.

Moreover, we find no_ substantive

difference between the basis for the class

action suits and Greenblatt’s claims

asserted in arbitration. Both of the

class actions and the arbitration dispute

sought damages for- alleged violations of

various securities laws and claims

grounded in common law fraud and

negligence. Although the class action

suits focused on material omissions and

misrepresentations in offering and sales

materials, the class actions and

arbitration claims stem from identical

factual grounds. Additionally, the fact

that Silva was not involved in the

material misrepresentations at issue in

this class actions has no impact on the

settlement releases barring claims against

judgment defines Settled Claims ina

substantially similar manner.

= a Pa ee ee

A-17

Shearson employees. The releases apply to

all Shearson employees who were in any way

involved in the matters at issue.

Further, Greenblatt’s failure to

exercise her right as an individual to

pursue the Stamford Towers claim against

Shearson by opting out of the class action

could not be cured by her notation on the

settlement check. The Northern District

Court properly found that Greenblatt’s

endorsement on the cashed check was an

invalid attempt to permit her to further

pursue the Stamford Towers claim in

arbitration.

Greenblatt also contends that the

District Courts are precluded from

enforcing the class action settlements

against her because Shearson participated

in the arbitration process. We disagree

for several reasons.

First, as noted above, federal

A-18

district courts have broad injunctive

powers to protect their own judgments. 28

U.8.€. § 2602- This grant of authority

includes jurisdiction to enforce a class

action judgment. See SEC v. G.C. George

Securities, Inc., 637 F.2d at 687. Here,

the District Courts expressly reserved

this right: the orders permanently enjoin

class members from instituting or further

prosecuting any action or proceeding in

any court or tribunal of this or any other

jurisdiction based upon any claim that is

a Settled Claim. Thus, Shearson’s

participation in the arbitration process

cannot affect the District Court’s

authority to enforce its judgments.

Second, Shearson’s participation in

the arbitration of Greenblatt’s claims,

absent Shearson’s express or implied

waiver, cannot waive the releases granted

by the District Courts in the class action

118 abit

A-19

judgments. "A party’s efforts to alert an

arbitration panel to its lack of

jurisdiction over some of the claims

before it is not a waiver of that party’s

substantive right to have a federal court

determine the scope of the arbitrator’s

jurisdiction." Edward D. Jones & Co. Vv.

Daniel Sorrels, 957 F.2d 509, 514 n.7 (7th

Cir. 1992). Nor do we find law to support

Greenblatt’s contention that Shearson’s

participation in general discovery in the

arbitration process waived its substantive

right to seek dismissal. Although

Greenblatt is correct that an agreement to

arbitrate may be implied from the conduct

of a party who has participated in the

arbitration process, Fortune, AlSweet, &

Eldridge, Inc., 724 F.2d 1355, 1356 (9th

Cir. 1983), Shearson objected to the

arbitrability of Greenblatt’s Stamford

Towers and Radisson claims from the

————

A-20

beginning of the arbitration process. As

this Court has noted, a party may preserve

the question of arbitrability of certain

issues while proceeding with the

arbitration process so long as the party

expressly made the objection before the

arbitrator. Van Waters & Rogers Inc. Vv.

Local Union 70, 913 F.2d 736, 740-41 (9th

Cir. 1990).

Although Shearson could have waited

for the ruling from the arbitration panel

on the question of arbitrability before

returning to district court to enforce the

injunctions, Shearson chose not to do so.?

The arbitration panel never ruled on

Shearson’s motion to dismiss or exclude

3 We also disagree with

Greenblatt’s characterization of

Shearson’s return to the District Court

for enforcement of the settlement as

"forum shopping." Shearson returned to

District Court before receiving any ruling

in arbitration. Shearson was not trying

to avoid a loss in arbitration by seeking

enforcement of the settlement releases.

A-21

the Stamford Towers and Radisson Plaza

matters from arbitration. Following the

Director of Arbitration’s decision to

refer the case to a panel of arbitrators,

Shearson withdrew its motion and put the

matter before the District Courts that had

jurisdiction over the class action

settlements. There was nothing improper,

nor was any right waived, by Shearson

first seeking dismissal of the settled

Claims in arbitration before seeking

relief in the District Court. Thus, we

find that Shearson properly preserved its

objection to arbitration of the Stamford

Towers and Radisson Plaza claims while

proceeding with the remainder of

Greenblatt’s claims.

Third, we find Greenblatt’s attempts

to find support in hearson/American

Express Inc. v. McMahon, 482 U.S. 220

(1987) and Mitsubishi Motors Corp. v.

A-22

Soler Chrysler-Plymouth, 473 U.S. 614

(1985) to be futile. These cases, which

uphold the arbitrability of statutory

claims, are inapposite to the case before

us.

Fourth, Greenblatt contends’ that

Shearson should be precluded from seeking

enforcement of the settlement releases

based on the doctrines of estoppel,

laches, and waiver. To establish laches

Greenblatt must show unreasonable delay by

Shearson in pursuing its rights in court

and, either acquiescence in the act about

which Shearson complains or prejudice to

Greenblatt resulting from the delay.

Transworld Airlines, Inc. v. American

Coupon Exchange, Inc., 913 F.2d 676, 696

(9th Cir. 1990).

We find that Shearson did not

acquiesce to arbitration of the Stamford

Towers or Radisson Plaza claims or waive

A-23

its right to pursue the issue in court by

proceeding in the arbitration process. As

we noted above, the arbitration focused on

the great bulk of Greenblatt’s other

claims. Shearson has consistently

asserted that the two class action claims

are barred by the settlement agreements.

Nor do we find that Shearson

unreasonably delayed in Pursuing this

matter in District Court. Shearson bought

this matter to the Court’s attention

several months'- before beginning the

arbitration process and before the

arbitration panel made a finding on this

issue.

Moreover, we find disingenuous

Greenblatt’s assertion that she has been

prejudiced because she "structured her

case and planned her discovery" in

reliance on the inclusion of the Stamford

Towers and Radisson Plaza claims. We fail

A-24

to see how Greenblatt would have to

"change her arbitration strategy" if she

is enjoined from pursuing these claims

when these claims relate to only two of

seven limited partnership investments,

eighty-nine municipal bond transactions,

and ninety-three stock trades at issue.

Even Greenblatt described the class

actions claims as "a relatively small

aspect of the overall case .. . ." As

the Northern District Court pointed out,

"Shearson raised this issue in arbitration

in September, 1991, thus putting

Greenblatt on notice." Therefore, we find

any prejudice to be of Greenblatt’s own

making.

Finally, Greenblatt argues that, even

if Shearson is not precluded from seeking

enforcement of the settlement releases in

District Court, we should reject

Shearson’s defense because the settlement

A-25

notices failed to adequately inform

Greenblatt of the consequences of not

opting out of the class actions and were

thus constitutionally defective. We

reject this argument as well.

Notice for the approval of a class

settlement by class members only fairly

apprise them of the subject matter of the

Suit, the proposed terms of the

settlement, and the members’ opportunity

to be heard. Marshall v. Holiday Magic,

iInc., 550 F.2d 1173, 1177 (9th Cir. 1977).

Thus, notice may contain only a "very

vague description" of the proposed

Settlement. Mendoza v. United States, 623

F.2d 1338, 1351 (9th Cir. 1980), cert.

denied, 450 U.S. 912 (1981).

We find that the notices were

constitutionally adequate and thus

Satisfied due process. Both District

Courts approved the notices, which listed

A-26

the causes of action for each suit. The

notices also stated that all claims

against Shearson and its employees

relating to the two partnership

investments would be released. Further,

the notice informed the class members of

their right to opt out, seek further

advice from counsel, or further review the

terms of the settlement agreements or any

other pleadings. Finally, the notices

provided the date and time of the

settlement hearings for each case.

Greenblatt argues that she did not

fully understand the import of the notices

because she is ail unsophisticated

investor. We must reject this contention

as well. The record indicates’ that

Greenblatt has an extensive history of

investment involvement and the financial

resources to obtain professional advice on

these matters. In addition, Greenblatt

A-27

was aware of her claims against Shearson

at least by the time she received the

Stamford Towers notice because she had

already retained counsel and filed her

arbitration dispute against Shearson one

month earlier. Yet Greenblatt did not opt

out of the Stamford suit, examine the

Class action pleadings or object to the

settlement; rather, she cashed her

settlement checks.

In sum, on the facts before us we

find that neither District Court erred in

‘permanently enjoining and barring

Greenblatt from further arbitrating any

claims against Shearson or its employees

which are %ased on or related to

investments in either the Stamford Towers

Limited Partnership or the California

Radisson Plaza Partners Limited

Partnership. When an individual is

properly noticed as a class member,

A-28

chooses not to opt out of the class, and

accepts the settlement payment, she must

abide by the complete terms and spirit of

the releases of claims contained in the

judgment.

WE AFFIRM.

A-29

ORIGINAL FILED

OCTOBER 2, 1992

RICHARD W. WIEKING

CLERK, U.S. DISTRICT COURT

NORTHERN DISTRICT CALIFORNIA

No. C-90-2146-JPV

ORDER GRANTING DEFENDANT SHEARSON {

LEHMAN’S MOTION TO ENFORCE JUDGMENT

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ARTHUR W. HARTLEY, JOHN J. WHITE,

RAYMOND M. KANE, RHETA D. STRONG and

JANET L. BRIA, on behalf of themselves

and all others similarly situated,

Plaintiffs,

Vv.

STAMFORD TOWERS LIMITED PARTNERSHIP;

STAMFORD TOWERS, INC.; STAMFORD TOWERS

DEPOSITARY CORP.; SHEARSON LEHMAN

HUTTON, INC.; A. GEORGE KALLOP;

WILLIAM M. KAHN; PAUL W. PERKINS;

GARY D. GALLAGHER; PAUL W. PERKINS;

GARY D. GALLAGHER; DEVON B. MacEACHRON;

RICHARD D. VILLARI; and MICHAEL R.

MILVERSTED,

Defendants.

me me eee eee”

INTRODUCTION

Defendant Shearson Lehman’s Motion to

4

se ke A) Os ee a ES ee te A

A-30

Enforce Judgment was scheduled to be heard

on September 10, 1992. After a review of

the briefs, this court considered it

appropriate to submit the motion on the

pleadings pursuant to Local Rule 220-1,

and now GRANTS the motion.

BACKGROUND

On July 30, 1990, a class action

complaint was filed against the defendants

for claims arising out of the offer and

sale of Stamford Towers Limited

Partnership interests. The complaint

alleged violations of § 12(2) of the

Securities Act of 1922, violations of §

10(b) and 10b-5 of the Securities and

Exchange Act of 1934, common law fraud,

negligent misrepresentation, negligence,

and unfair business practices under Cal.

Bus. & Prof. Code § 17200. On May 20,

1991, the parties submitted to this Court

a Settlement Agreement for approval. On

A-31

July 11, 1991, this Court approved and

entered judgment on the settlement,

binding on all plaintiff class members and

the defendants. This Court’s Order also

enjoined all members of the class from

further prosecuting any action based upon

any claim that was or could have been

asserted against the defendants related to

investments in the Stamford Towers Limited

Partnership, and reserved jurisdiction

over all parties to enforce the

settlement.

On May 20, 1991, Linda Greenblatt, a

class member, filed an action with the

National Association of Securities Dealers

against defendant Shearson Lehman and

Kenneth Silva, a Shearson Lehman broker

seeking damages for conduct premised in

Part on Shearson’s sale of limited

Partnership interests in Stamford Towers.

Greenblatt’s "Client Agreement" with

Shearson Lehman requires such disputes to

be arbitrated.

In the arbitration proceeding on

September 20, 1991 Shearson filed a motion

to dismiss Greenblatt’s claims arising

from the Stamford Towers investments.

Because of the legal and factual issues

involved, the motion was referred to a

hearing before a panel of arbitrators,

scheduled for November 30, 1992.?

Shearson Lehman then filed this motion to

enforce judgment. In opposition,

Greenblatt requests Rule 11 sanctions

against Shearson.

DISCUSSION

Judgment in a class action binds all

class members from bringing subsequent

Claims based upon the same _ factual

1 In the interim, Shearson has

participated in the arbitration process

regarding the other claims brought by

Greenblatt.

A-33

predicate. "[W)here there is a realistic

identity of issues between the settled

class action and the subsequent suit, and

where the relationship between the suits

is at the time of the class action

forseeably obvious to notified class

members. . . the paramount policy of

encouraging settlement takes precedence."

TBK Partners, Ltd. v. Western Union Corp.,

675 F.2d 456, 461 (2d Cir. 1982).

In this case, Greenblatt had received

court-approved notice of the proposed

class settlement and elected not to opt

out of the class. Although Greenblatt

cashed the settlement check with the

notation "without prejudice to my rights

or claims asserted by me in my

arbitration," such an objection after

judgment in a class action from which the

Claimant chose not to opt out has no

validity. Furthermore, in the Settlement

A-34

Approval Order this Court enjoined class

members from pursuing claims that could

have been asserted in the class action.

Greenblatt’s arbitration claims relating

to the Stamford Towers investments were

therefore both precluded and enjoined.

Shearson has not waived this Court’s

ability to enforce its injunction by

participating in the arbitration of

Greenblatt’s other claims. Shearson

raised this issue in arbitration in

September, 1991, thus putting Greenblatt

on notice. Greenblatt cites no authority

for the proposition that the preclusive

effects of the settlement and the

injunction may somehow be waived.

In its Order, this Court dismissed

all claims against Shearson and its

officers and employees. Greenblatt’s

Statement of Claim submitted to. the

arbitrator alleges that Kenneth Silva is

A-35

an officer of Shearson. Therefore, any

Claims which Greenblatt pursues against

Kenneth Silva premised on the Stamford

Towers investments are also barred. In

light of this decision, Ms. Greenblatt is

not entitled to requested sanctions under

Rule 11.

ORDER

In accordance with the foregoing

discussion, IT IS HEREBY ORDERED that:

The Defendant’s Motion to

Enforce Judgment is GRANTED.

me Linda M. Greenblatt is hereby

permanently enjoined and barred from

further arbitrating any claims against

Shearson or its officers and employees

that are based on or related to

investments in the units of limited

partnership interests in the Stamford

Towers Limited Partnership.

} Greenblatt’s request for Rule 11

A-36

sanctions is DENIED.

Dated: October 2, 1992

.P. Vukasin, Jr.

s J

J.P. Vukasin, Jr.

gd States District Judge

A-37

FILED

NOVEMBER 9, 1992

CLERK, U.S DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

BY DEPUTY

ROBERT H. LOGAN (57640)

DAWN M. SCHOCK (121746)

EMI A. MURPHY (144080)

KEESAL, YOUNG & LOGAN

A Professional Corporation

Catalina Landing - 310 Golden Shore

Post Office Box 1730

Long Beach, California 90801-1730

Telephone: (310) 436-2000

Attorneys for the Shearson Defendants

(Enumerated Below)

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

No. 89-5472-JMI (Jrx)

ORDER GRANTING MOTION OF THE SHEARSON

DEFENDANTS TO ENFORCE SETTLEMENT

Date: November 9, 1992

Time: 10:00 a.m.

Room: 5 (Hon. James M. Ideman)

ARMONCE SULLIVAN, on behalf of

herself and all others similarly

situated,

Plaintiff,

)

)

)

)

)

)

pene ar

A-38

vs.

SHEARSON CALIFORNIA RADISSON

PLAZA PARTNERS LIMITED

PARTNERSHIP, et al.,

Defendants.

MANHATTAN BEACH HOTEL PROPERTIES,

LTD., U.S. HOTEL PROPERTIES

CORPORATION, HORST D. OSTERKAMP,

Cross-Claimants,

Vs.

SHEARSON CALIFORNIA RADISSON PLAZA

PARTNERS, L.P., SHEARSON LEHMAN

COMMERCIAL PROPERTIES III INC.,

SHEARSON LEHMAN BROTHERS GROUP

INC., SHEARSON LEHMAN HUTTON INC.,

Cross-Defendants.

eee eee eee eee ee oe

THIS CONSTITUTES NOTICE OF ENTRY

AS REQUIRED BY FRCP RULE 77 (qd)

IT IS HEREBY ORDERED as follows:

he On October 5, 1992, defendants

SHEARSON CALIFORNIA RADISSON PLAZA

PARTNERS, L.P., SHEARSON LEHMAN COMMERCIAL

PROPERTIES III INC.,SHEARSON LEHMAN HUTTON

INC., LINDA MILLER, ROBERT KELLEY, JAMES

E. POWLESLAND, MARK D. POWERS, MICHAEL R.

A-39

MILVERSTED, DOUGLAS M. HARBAUGH, KENNETH

BRADDOCK, ISABEL A. DEMPSEY, SHEARSON

LEHMAN BROTHERS GROUP INC., and SHEARSON

LEHMAN COMMERCIAL PROPERTIES DEPOSITARY

III, INC. (the "Shearson Defendants")

filed a Motion to Enforce Settlement with

this Court. In said motion, the Shearson

Defendants seek an order directing

plaintiff class member LINDA M. GREENBLATT

("Greenblatt") to abide by the terms of

the class action settlement reached in the

above-referenced matter (hereafter the

"Sullivan class action") and this Court;s

July 16, 1990 Order and Judgment of Final

Settlement Approval ("Final Order"), to

withdraw her Radisson Claims from the

National Association of Securities Dealers

("NASD") arbitration encaptioned Linda M.

Greenblatt v. Shearson Lehman Brothers

inc. and Kenneth Silva, NASD No. 91-01644

(hereafter the "NASD arbitration"), and

permanently enjoining her from the

continued prosecution of her Radisson

Claims in arbitration.

ae On July 16, 1990, this Court

gave final approval to the proposed

settlement in the Sullivan class action

and entered final judgment. (Final Order,

attached as Ex. "E" to the Declarations of

Dawn M. Schock, Susan Freelin and Brian F.

McDonough (hereafter all references to

exhibits will be found attached to those

declarations). As part of the settlement,

the Shearson Defendants agreed to pay $5.5

million to the class action settlement

fund in exchange for a dismissal with

prejudice and full release of all claims.

(Settlement Agreement, Ex. "A"). This

Court’s Final Order dismissed with

prejudice the class action and all of the

claims asserted therein against’ the

Shearson Defendants as well as, among

Ae Te SP eon i,

A-41

other releases, their past and present

employees. (Final Order, | 2, Ex. "E").

The Final Order further provided that the

Settling Defendants were thereby "released

and discharged from any and all liability

under or based upon the Settled Claims,"

with "Settled Claims" being defined as

"any and all causes of action or claims,

known or unknown, that have been or could

have been asserted by plaintiffs against

the Settling Defendants, based upon or

related to: (i) an investment in Radisson

Securities. . . ." (Settlement Agreement,

EX. "A", p. 7, | 8; Final Order, 4 2, Ex.

"E"). The Final Order further contained a

permanent injunction providing that all

numbers of the settlement class were:

severally and permanently

enjoined and barred from instituting or

further prosecuting any action or

proceeding in any court or tribunal of

iii

A-42

this or any other jurisdiction based upon

any claim that is a Settled Claim (as that

term is defined in the Settlement

Agreement), all of which claims are hereby

declared to be released, discharged,

compromised, settled and extinguished.

(Final Order, Ex. “BE”, @ 3).

+ 2 Although Greenblatt was given

the opportunity to opt-out of the class in

order to pursue any alleged individual

claims, she chose to remain and accept the

benefits of the $5.5 million settlement.

(Ex. "B", | 2 and attached Notice; Freelin

Deci., BW 3. 3: Bx. *B” ti23~213 Oe Bee.

". S06 “s"}. Greenblatt received and

cashed her portion of the settlement

proceeds. (Freelin Decl., ¢@ 4-6 and Exs.

"o @ngd *7").

4. On May 20, 1991, Greenblatt

filed a settlement of claim with the

National Association of Securities Dealers

A-43

("NASD"), naming Shearson Lehman Brothers

2m. ("Shearson") and its account

executive, Kenneth Silva ("Silva"), as

respondents and alleging in part Radisson

Claims. (x. "R*). Shearson and Silva

filed a response to the statement of

claim, asserting as an affirmative defense

the Sullivan class action settlement.

(Ex. "L").

2% This Court expressly reserved

jurisdiction over "all parties to the

Settlement Agreement for the purpose of

enforcement and administrating the

Settlement. ..." (Final Order, 9 5, Ex.

"E"). A federal court has jurisdiction to

enforce a settlement agreement that was

previously before it when it has expressly

reserved such jurisdiction or it has

issued an injunction. McCall-Bey v.

Franzen, 777 F.2d 1178, 1188-90 (7th Cir.

1985); Ryan v. Dow Chem. Co.. 781 F. Supp.

A-44

902, 915-16 (E.D.N.Y. 1991) (x nsi

ran in r ni in ae r

The court’s jurisdiction to enforce the

terms of a eclass action settlement

agreement includes the power to enjoin

further prosecution of settled claims in

arbitration proceedings brought by class

members. In re VMS Sec. Litig., 1992 W.L.

38379 (N.D. Ill. Feb. 21, 1992); Hartley

.._.Aah. V. for Tower Limi

Partnership et al., case no. C-90-2146-JPV

(N.D.Cal. October 2, 1992).

6. Greenblatt received and

negotiated her portion of the class action

settlement proceeds, and therefore

ratified the class settlement and is

estopped from now objecting to the

settlement. Mungin v. Florida East Coast

Ry. Co,, 318 F. Supp. 720, 735 (M.D. Fla.

i870). afitd. 441 F.24 728 (Sth Cir.),

cert. denied, 404 U.S. 897 (1971).

A-45

iP The Radisson Claims in

Greenblatt’s NASD arbitration are based

upon the same factual predicate as the

claims asserted in the Sullivan class

action. (cs, Eee. “KK”. “3B” (ettached

Notice, ¢| 1) and "A"). The Radisson

Claims asserted by Greenblatt in her NASD

arbitration are barred by the prior final

judgment in this action and by the

principles of res judicata. In re Cement

Antitrust Litig., 688 F.2d 1297, 1309-10

(9th Cir. 1982), ff'd, 459 U.S. 1191

(1983). Res judicta bars Greenblatt’s re-

litigation of claims that could have been

alleged in the class action as well as

claims that were actually alleged. Mirin

Vv. f Nev Ex. Rel. Pub. rv.

Comm., 547 F.2d 91, 94 (9th Cir. 1976),

cert. denied, G32 . U8, 906 (1977);

Vallerio v. Boise Cascade Corp., 80 F.R.D.

626 (N.D. Cal. 1978), aff’d, 645 F.2d 699

A-46

(9th Cir.), cert. denied, 454 U.S. 1126

(1981).

8. The Sullivan class action

Settlement Agreement and this Court’s July

16, 1990 Final Order, which binds

Greenblatt as a class member, released the

Shearson Defendants from any and all

further liability for claims based upon or

related to a class member’s investment in

units of interest in SHEARSON CALIFORNIA

RADISSON PLAZA PARTNERS, L.P. ("Radisson

Ciai;ae”")}. tie. “AY. B. 2s 2 es ee

2). This release includes any investments

made by Greenblatt and permanently enjoins

and bars Greenblatt from any further

prosecution of her Radisson Claims. (Ex.

"2: ; q ai.

9. The Radisson Claims asserted by

Greenblatt in her NASD arbitration were

expressly released in the Sullivan class

action settlement. The Shearson

A-47

Defendants and Silva did not waive their

right to enforce the class action

settlement and this Court’s Final Order on

Greenblatt because they responded to her

NASD statement of claim and asserted the

class action settlement as an affirmative

defense. As a member firm and an

associated person subject to the NASD

rules and by-laws, Shearson and Silva were

obligated to respond to Greenblatt’s

statement of claim and participate in pre-

arbitration discovery. Moreover,

defending oneself in an arbitration

proceeding does not waive one’s right to

seek a judicial determination that a

matter was not properly before an

arbitration tribunal in the first place.

In Re VM Litig., 1992 W.L. 38379

(N.D. Ill. Feb. 21, 1992), attached as Ex.

"F"; Edward D. Jones & Co. v. Sorrels, 957

F.2d 509 (7th Cir. 1992); Hartley et al.

A-48

v. Stamford Towers Limited Partnership et

ai., cape no. C-$0-2146-JPV¥ (h.D. Cal.

October 2, 1992). Even if enforcement of

the settlement agreement and this Court’s

Finai Order could be waived, Greenblatt

has not established that a waiver occurred

and that she was’ prejudiced thereby.

Outboard Marine Corp. v. Superior Court,

52 Cal. App. 34 30, 41. 124 Cal. Rptr.

852 (1975); E.D. McGillicuddy Constr. Co.

v. Knoll Rec. Ass'n, 31 Cal. App. 3d 891,

901, 107 Cal. Rptr. 899, 905 (1973); Page

Vv. Moseley, Hallgarten, Esterbrook &

Welden, Inc., 806 F.2d 291 (1st Cir.

1986).

10. This court finds that an award

of the Shearson Defendants’ attorneys’

fees incurred in having to bring the

instant motion isS warranted based upon

Greenblatt’s inexcusable disregard of the

class action settlement and this Court’s

MA

A-49

Final Order which included a permanent

injunction barring class members, such as

Greenblatt, from further litigating their

Radisson Claims.

Accordingly, based upon the

foregoing, this Court HEREBY ORDERS that:

11. Greenblatt is permanently

enjoined and barred from instituting or

further prosecuting any action or

proceeding in any court or tribunal of

this or any other jurisdiction, including

her pending arbitration proceeding before

the NASD, involving any claim based upon

or related to her investment in units of

interest in SHEARSON CALIFORNIA RADISSON

PLAZA PARTNERS, L.P., pursuant to this

Court’s July 16, 1990 Order and Judgment

of Final Settlement Approval in the case

entitled Sullivan v. Shearson California

Radi n Plaz Partner Limite

A-50

Partnership, et al., Case No. 89-5472-JMI

(Jrx).

12. Greenblatt shall withdraw with

prejudice any and all claims asserted in

her pending arbitration before the

National Association of Securities

Dealers, Inc. entitled Linda M. Greenblatt

Vv. hearson Lehman Brother In n

Kenneth Silva, NASD Case No. 91-01644,

based upon or related to her investment in

units of interest in SHEARSON CALIFORNIA

RADISSON PLAZA PARTNERS, L.P.

The Court will consider a properly

noticed and filed motion by the Shearson

Defendants for attorney’s fees, which sets

forth briefly the amount of fees requested

and supporting materials.

Dated: November 9, 1992

s/s_ James M. Ideman

JAMES M. IDEMAN,

JUDGE OF THE UNITED STATES

DISTRICT COURT

A-51

FILED

AUC JST 27, 1992

CLERK, U.S. DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

BY DEPUTY

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CV-89-5472-JMI (Jrx)

ORDER GRANTING DEFENDANTS’ EX PARTE

APPLICATION FOR TEMPORARY RESTRAINING

ORDERS AND ORDER SHORTENING TIME FOR

HEARING ON PROPOSED MOTION

ORDER DENYING LINDA M. GREENBLATT’S

REQUEST FOR SANCTIONS

ARMONCE SULLIVAN, on behalf of

herself and all others similarly

situated,

Plaintiff,

Vv.

)

)

)

)

)

)

)

)

SHEARSON CALIFORNIA RADISSON PLAZA )

PARTNERS LIMITED PARTNERSHIP, )

)

)

)

)

)

)

)

)

)

et al.

Defendants.

MANHATTAN BEACH HOTEL PROPERTIES,

LTD., U.S. HOTEL PROPERTIES

CORPORATION, and HORST D.

OSTERKAMP,

A-52

Cross-Claimants,

Vv.

SHEARSON CALIFORNIA RADISSON

PLAZA PARTNERS, L.P., SHEARSON

LEHMAN COMMERCIAL PROPERTIES III

INC., SHEARSON LEHMAN BROTHERS

GROUP INC., and SHEARSON LEHMAN

HUTTON INC.,

Cross-Defendants.

THIS CONSTITUTES NOTICE OF ENTRY

AS REQUIRED BY FRCP RULE 77 (qd)

IT IS HEREBY ORDERED:

Ba On August 14, 1992, Defendants

SHEARSON CALIFORNIA RADISSON PLAZA

PARTNERS, L.P., SHEARSON LEHMAN COMMERCIAL

PROPERTIES III INC., SHEARSON LEHMAN

HUTTON INC., LINDA MILLER, ROBERT KELLEY,

JAMES E. POWLESLAND, MARK OD. _ POWERS,

MICHAEL R. MILVERSTED, DOUGLAS M.

HARBAUGH, KENNETH BRADDOCK, ISABEL A.

DEMPSEY, SHEARSON LEHMAN BROTHERS GROUP

IMC sa and SHEARSON LEHMAN COMMERCIAL

PROPERTIES DEPOSITARY Iil, INC.

A-53

[hereinafter "Shearson Defendants"] filed

an Ex Parte Application requesting a

Temporary Restraining Order and a hearing

re permanent injunction. The Shearson

Defendants seek to restrain Lanay Locher -

Alvarez and Donald R. Alvarez [hereinafter

"Alvarezes"] and Linda M. Greenblatt

[hereinafter "Greenblatt" ] from

arbitrating issues allegedly settled in

the above-named class action. In the

alternative, the Shearson Defendants

request an order shortening time for

hearing on their proposed motion to

enforce the July 16, 1990 Settlement

Agreement in the above-named action

[hereinafter "Settlement Agreement").

a The Settlement Agreement

provides that "([t]his Court reserves

jurisdiction over (a) implementation of

the settlement and distribution of the

Settlement Fund. ; ; P " Settlement

A-54

Agreement (dated July 16, 1990), at 4,

attached as Exhibit E to Declarations of

Dawn M. Schock, Susan Freelin, William

Olshan, and Brian F. McDonough, Etc.

[hereinafter "Schock Declaration"]. In

addition, the Settlement Agreement

"severally and permanently enjoined and

barred" all class members who had not

opted-out from instituting or further

prosecuting any action or proceeding in

any court or tribunal of this or any other

jurisdiction based upon a "settled claim."

aa. GO 2

\ Pursuant to Federal Rule of

Evidence 201, the Court SUA SPONTE TAKES

Judicial Notice of the following: (A)

National Association of Securities

Dealers, Inc. [hereinafter "NASD" ]

arbitration entitled Lanay Locher-Alvarez

& Donald R. Alvarez v. Shearson Lehman

Hutton, Inc. & Christopher Tara, NASD No.

A-55

91-02306, scheduled for hearing on

September 2, 1992, see Exhibit N attached

to Schock Declaration, (B) NASD

arbitration entitled Linda M, Greenblatt

Vv. Shearson Lehman Brothers, Inc. &

Kenneth Silva, NASD No. 91-01644,

scheduled for hearing on November 30,

1992, see Exhibit P Attached to Schock

Declaration.

4. In the Ninth Ci TFCusLs.

"preliminary injunction relief is

available to a party who demonstrates

either (1) a combination of probable

success and the possibility of irreparable

harm, or (2) that serious questions are

raised and the balance of hardship tips in

its favor." Arcamuzi v. Continental Air

Lin Inc., 819 F.2d 935, 937 (1987)

(citation omitted). "These two

formulations represent two points on a

sliding scale in which the required degree

A-56

of irreparable harm increases as_ the

probability of success decreases." Id.

(quotation and citation omitted).

5. Greenblatt, in her opposition to

Defendants’ Ex Parte Application, argues

that the Shearson Defendants have not

shown irreparable injury because the

Greenblatt arbitration is not scheduled to

commence until November 30, 1992 -- over

three months from now. Greenblatt directs

the Court’s attention to a NASD

determination that Shearson’s Motion to

Dismiss, which raises the issue of the res

judicata effect of the Settlement

Agreement, involves "Substantive questions

of fact and law" and is subject to the

factual determination of the Panel of

Arbitrators. See Exhibits B, D attached

to Declaration of Holly J. Fujie in

Support of Opposition to Defendants’ Ex

Parte Application, Etc. {hereinafter

A-57

"Fujie Declaration") (filed Aug. 18,

1992.)

Moreover, Greenblatt directs’ the

Court’s attention to a Uniform Submission

Agreement, executed on February 7, 1992,

which discloses an agreement to submit to

arbitration the entire controversy raised

by Greenblatt’s Statement of Claim. See

Exhibit E attached to Fujie Declaration.

This Court is not satisfied that

Defendants have shown irreparable injury

or probable success on the merits of the

dispute, and HEREBY DENIES the Shearson

Defendants’ requests for a Temporary

Restraining Order.

6. The Alvarezes did not file an

opposition to Defendants’ EX Parte

Application. Without expressing opinion

on the issues of whether participation in

arbitration proceedings constitutes a

Waiver of any right to stay those

A-58

proceedings, the Court notes that the

Shearson Defendants have participated in

the Alvarez arbitration for over one year.

Moreover, the Shearson Defendants’

Answer to the Alvarez arbitration

Statement of Claim provides that they

"will file a separate motion to dismiss"

the claims which the Alvarezes- are

allegedly barred from asserting due to

their participation in the class action.

See Answer, at 3-4, attached as Exhibit O

to Schock Declaration. The Shearson

Defendants’ Ex Parte Application does not

reveal the outcome or status of any such

motion. Because the Court is not

Satisfied with the Shearson Defendants’

showing of irreparable injury or probable

Success on the merits of the dispute, the

Court HEREBY DENIES the Shearson

Defendants’ requests for a Temporary

Restraining Order.

A-59

THEREFORE, the Court DENIES

Defendants’ Ex Parte Application for an

order restraining the Greenblatt and

Alvarez arbitrations, DENIES Defendants’

request for an order shortening time for

hearing on their proposed motion to

enforce the Settlement Agreement, and

HEREBY DENIES Greenblatt’s request for

sanctions. The Court will entertain a

properly noticed and filed motion by the

Shearson Defendants to enforce the

Settlement Agreement.

IT IS SO ORDERED.

DATED: AUGUST 26, 1992

J M. Ideman

JAMES M. IDEMAN

UNITED STATES DISTRICT JUDGE

A-60

NASD National Association

of Securities Dealers,

ane.

NASD Financial Center

33 Whitehall Street

New York, New York

UNIFORM SUBMISSION AGREEMENT

NATIONAL ASSOCIATION OF SECURITIES DEALERS

In the Matter of the Arbitration Between

Name of Claimant (s)

Linda M. Greenblatt

91-01644

Name of Respondent(s)

Shearson Lehman Brothers, Inc.

Kenneth Silva

Bs The undersigned parties hereby

Submit the present matter in controversy,

as set forth in the attached statement of

claim, answers, cross claims and all

related counterclaims and/or third party

claims which may be asserted, to

arbitration in accordance with the

Constitution, By-Laws, Rules, Regulations

and/or Code of Arbitration Procedure of

the sponsoring organization.

A-61

; The undersigned parties hereby state

that they have read the procedures and

rules of the sponsoring organization

relating to arbitration.

: The undersigned parties agree that in

the event a hearing is necessary, such

hearing shall be held at a time and place

as may be designated by the Director of

Arbitration or the arbitrator(s). The

undersigned parties further agree and

understand that the arbitration will be

conducted in accordance with the

Constitution, By-Laws, Rules, Regulations

and/or NASD Code of Arbitration Procedure

of the sponsoring organization.

4. The undersigned parties further agree

to abide by and perform any award(s)

rendered pursuant to this Submission

Agreement and further agree that a

judgment and any interest due thereon may

be entered upon such award(s) and, for

these purposes, the undersigned parties

hereby voluntarily consent to submit to

the jurisdiction of any court of competent

jurisdiction which may properly enter such

judgment.

. e IN WITNESS HEREOF, the parties hereto

have signed and acknowledged the foregoing

Submission Agreement:

Party(ies) Signature

s/s Kenneth Silva

Kenneth Silva

FOR PARTIES WHO ARE INDIVIDUALS

A-62

STATE OF NEW YORK )

> 88.2

COUNTY OF NEW YORK)

On the 27th day of April, 1992, before me

personally appeared Kenneth Silva to me

known and known to me to be the person who

executed the foregoing instrument, and he

acknowledged to me that he executed the

same.

s/s Tobius M. Simmons

Notary Public

Notary Stamp

FOR PARTIES WHO ARE CORPORATIONS

STATE OF )

) S8.:

COUNTY OF )

On the day of es

before me personally appeared

. to me known, who

first being duly sworn by me, did depose

and say that she is the

of

, the corporation described in

and which executed the foregoing

instrument, that she/he has full and

complete authority to file and execute the

said instrument and all papers contained

here, in the name of and on behalf of the

said corporation; that she knows the seal

of said entity, that is was so affixed by

order of the Board of Directors of the

A-63

said corporation; and that she signed her

name thereto by like order.

Notary Public

A-64

NASD National Association

of Securities Dealers,

Inc.

NASD Financial Center

33 Whitehall Street

New York, New York

UNIFORM SUBMISSION AGREEMENT

NATIONAL ASSOCIATION OF SECURITIES DEALERS

In the Matter of the Arbitration Between

Name of Claimant(s)

Linda M. Greenblatt

91-01644

Name of Respondent(s)

Shearson Lehman Brothers, Inc.

Kenneth Silva

ha The undersigned parties hereby

submit the present matter in controversy,

as set forth in the attached statement of

claim, answers, cross claims and all

related counterclaims and/or third party

claims which may be asserted, to

arbitration in accordance with the

Constitution, By-Laws, Rules, Regulations

and/or Code of Arbitration Procedure of

‘the sponsoring organization.

A-65

Be The undersigned parties hereby state

that they have read the procedures and

rules of the sponsoring organization

relating to arbitration.

LP The undersigned parties agree that in

the event a hearing is necessary, such

hearing shall be held at a time and place

as may be designated by the Director of

Arbitration or the arbitrator(s). The

undersigned parties further agree and

understand that the arbitration will be

conducted in accordance with the

Constitution, By-Laws, Rules, Regulations

and/or NASD Code of Arbitration Procedure

of the sponsoring organization.

4. The undersigned parties further agree

to abide by and perform any award(s)

rendered pursuant to this Submission

Agreement and further agree that a

judgment and any interest due thereon may

be entered upon such award(s) and, for

these purposes, the undersigned parties

hereby voluntarily consent to submit to

the jurisdiction of any court of competent

jurisdiction which may properly enter such

judgment.

-P IN WITNESS WHEREOF, the parties

hereto have signed and acknowledged the

foregoing Submission Agreement:

Party(ies) Signature

h n n Esther Koslow

Shearson Lehman Brother, Inc.

FOR PARTIES WHO ARE INDIVIDUALS

A-66

STATE OF )

> @e.%

COUNTY OF )

On the day of > a ,

before me personally appeared

to me known and

known to me to be the person who executed

the foregoing instrument, and she/he

acknowledge to me that she/he executed the

same.

Notary Public

FOR PARTIES WHO ARE CORPORATIONS

STATE OF NEW YORK )

) $s.:

COUNTY OF NEW YORK)

On the 17th day of February, 1992, before

me personally appeared Esther Koslow to me

known, who first being duly sworn by me,

Gid depose and say that she is the First

Vice President and General Counsel of

Shearson Lehman Brothers, Ime the

corporation described in and which

executed the foregoing instrument; that

she has full and complete authority to

file and execute the said instrument and

all papers contained here, in the name of

and on behalf of the said corporation;

that she knows the seal of said entity;

that is was so affixed by order of the

Board of Directors of the said

A-67

corporation; and that she signed her name

thereto by like order.

s/s Ellen F, Schwarz

Notary Public

Notary Stamp