IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TEXARKANA DIVISION

Transcription

1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TEXARKANA DIVISION Lane McNamara, et al. Plaintiffs, v. Bre-X Minerals Ltd., et al., Defendants. Civil Action No CV-159 (Jury) PLAINTIFFS RESPONSE TO DEFENDANT P.T. KILBORN S MOTION TO DISMISS Plaintiffs respectfully submit this memorandum of law in opposition to the motion to dismiss (Dkt. #232) of defendant P.T. Kilborn Pakar Rekayasa. P.T. Kilborn provided engineering services and feasibility studies to Bre-X and issued written reports of resource calculations substantiating Bre-X s claims concerning the purported unparalleled gold at Busang. The supposed gold deposits were a fraud, and the information in the feasibility studies and resource calculations provided by the Kilborn Defendants was demonstrably false and misleading. See, e.g., Am Compl ; 75-76; 85-86; 104, 110, 114, 139, ; 159; 175. The Kilborn Defendants were an integral part of the Bre-X scandal. P.T. Kilborn, an Indonesian affiliate of Kilborn Engineering and SNC-Lavalin -- the entity directly involved in the performance of feasibility studies and resource calculations for Bre-X on site in Indonesia in connection with the Busang mine -- moves to dismiss the Amended Complaint on numerous purported grounds. As set forth below, the challenges largely parrot the previouslybriefed arguments of other defendants, including those of the other Kilborn Defendants. All of P.T. Kilborn s challenges should be rejected.

2 1. This Court Has Personal Jurisdiction Over P.T. Kilborn. P.T. Kilborn incorporates by reference and, with few exceptions, regurgitates the personal jurisdiction arguments already briefed by Kilborn Engineering and SNC-Lavalin. 1 These same arguments fare no better in averting this Court s jurisdiction over P.T. Kilborn. 1. The Standards For Jurisdiction Are Met Here. Importantly, like the other Kilborn Defendants, P.T. Kilborn does not challenge and thus concedes that it has sufficient contacts with the United States to satisfy the governing national contacts standard required by 27 of the 1934 Act and upheld by Busch v. Buchman, Buchman & O Brien, 11 F.3d 1255, 1257 (5th Cir. 1994) Plaintiffs accordingly incorporate by reference herein and respectfully refer the Court s attention to plaintiffs opposition to these personal jurisdiction challenges. See Dkt. ## 76, 115, 158, 161, , 218, 237, 242. Section 27 also plainly governs personal jurisdiction over the common law claims asserted in the Amended Complaint. See, e.g., GRM v. Equine Inv. & Mgmt. Group, 596 F. Supp. 307, 311 (S.D. Tex. 1984). -2-

3 Rather, P.T. Kilborn s jurisdiction challenge and its supporting Affidavit argue that minimum contacts do not exist with this District. 3 These factual arguments simply ignore the governing national contacts standard and are, in their entirety, irrelevant. In any event, P.T. Kilborn and all of the Kilborn Defendants were, among other things, responsible for intentionally or recklessly issuing numerous false and misleading statements concerning the purported gold at Busang, which statements were directly included in false and misleading press releases issued by Bre-X and Bresea. See, e.g., Am. Comp. 9, 27, 48-52, 85, 87, 89, 93, 99, , 112, 114, 120, 128, 139, 148, 154, These press releases were carried on international and national news wires and as such reached U.S. investors in this District. These allegations alone constitute specific jurisdiction as to this District. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) This Court Also Has Jurisdiction Over P.T. Kilborn As a Co-Conspirator in The Busang Scheme. P.T. Kilborn's motion fails to even mention that a court has jurisdiction over all participants in a stock fraud scheme. If personal jurisdiction is proper under Section 27 as to: 3 4 P.T. Kilborn, like the other Kilborn Defendants, tosses out the argument that jurisdiction requires minimum contacts with the Eastern District, yet acknowledges the prevailing law in the Fifth Circuit is that properly pled 1934 Act claims permit a district court to exercise personal jurisdiction based solely on a national contacts standard. P.T. Kilborn Mem. at 8. Notwithstanding controlling precedent to the contrary, the cases cited by P.T. Kilborn are plainly distinguishable and have already been fully briefed for the Court. See Dkt. # 76 at P.T. Kilborn also makes the empty assertion that specific jurisdiction is lacking under Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). Of course, if either of the specific or general jurisdictional tests is satisfied, jurisdiction is established. Moreover, there has been no discovery in this action, and as recognized in one of the cases cited by SNC-Lavalin, when a diligent plaintiff present[s] a non-frivolous claim of jurisdiction and request[s] jurisdictional discovery, the district court [is] required to allow that discovery. Villar v. Crowly Maritime Corp., 990 F.2d 1489, 1501 (5th Cir. 1993). Jurisdictional discovery is so important that a defendant s failure to comply therewith allows the district court to sanction the defendant by assuming that personal jurisdiction exists. Id. -3-

4 any one codefendant in a common securities fraud scheme... then personal jurisdiction... [is] proper as to all other codefendants even in the absence of any contact or substantial contact by those other codefendants in the forum. GRM, 596 F. Supp. at 311, quoting Hilgeman v. National Ins. Co. of Am., 547 F.2d 298, 302 n. 12 (5th Cir. 1977). Thus, if personal jurisdiction lies as to any of the defendants included in the scheme alleged in the Amended Complaint, this Court has personal jurisdiction over all defendants. The evidence supporting jurisdiction over P.T. Kilborn s co-defendants is overwhelming, and has already been fully briefed. See Dkt. ## 76 at 63-72; 115 at 44-54; 158, 161, 163, 200, 218, 237, 242. Importantly, to be subject to jurisdiction under the co-conspirator theory of jurisdiction, it is not necessary that P.T. Kilborn committed any act in the U.S., Hilgeman, 547 F.2d at 302 n. 12; GRM, 596 F. Supp. at , or that it even knew that other defendants performed acts within the forum. See Rose v. Arkansas Valley Environment and Utility Authority, 562 F. Supp. 1180, 1212 (W.D. Mo. 1983) (co-defendant s knowledge of other s in-state acts is immaterial). Indeed, the acts of P.T. Kilborn as a co-conspirator need not have been of crucial importance to the fraud, Hilgeman, 547 F.2d at 301, although in this case, they clearly were of material importance to the overall scheme. If any conduct by any co-defendant co-conspirator reaches into the forum district to obtain investors, GRM, 596 F. Supp. at 312, jurisdiction lies as to all defendants, including P.T. Kilborn. Thus, as long as plaintiffs allegations (taken as true) and the record before the Court (resolving any conflicts in favor of finding jurisdiction) establish a prima facie case that P.T. Kilborn was a co-conspirator, this Court has jurisdiction over it. See Amoco at 1199, Irving v. Owens- Corning Fiberglas Corp., 864 F.2d 383, (5th Cir. 1989); DeMelo v. Toche Marine, Inc.,

5 F.2d 1260, (5th Cir. 1983); Black v. Acme Markets, Inc., 564 F.2d 681, 683 n. 3 (5th Cir. 1977). This standard is easily met here. Even a cursory reading of the Amended Complaint evidences a prima facie case that P.T. Kilborn was a co-conspirator in the Busang fraud. For example, the Amended Complaint alleges: The Kilborn Defendants provided engineering services to Bre-X and issued written reports calculated to substantiate Bre-X s claims concerning Busang. The Kilborn Defendants intentionally withheld critical information from their reports: most importantly, that independent testing performed by other laboratories, pursuant to Kilborn feasibility studies and prefeasibility studies in 1995 and 1996, indicated that the gold appearing in Bre-X s samples was completely different, in shape, size and degree of weathering, from gold that would be found in volcanic hard-rock formations like Busang; and that tests performed by independent firms revealed that the gold in the Bre- X samples was of an origin that was not the underground hard-rock source in Busang. The Kilborn Defendants also intentionally withheld their knowledge that Bre-X s core samples had been crushed on site in Busang, rather than being sent whole to test labs, and had languished for weeks in open bags at the Bre-X office in Samarinda and in an open warehouse in Loa Duri, Indonesia, leaving the samples susceptible to the tampering that obviously occurred. Am. Comp. 9. The Amended Complaint further alleges: [T]he Kilborn Defendants provided their written resource reports to Bre-X, knowing that Bre-X and Bresea were distributing those reports and their contents to the investing public, during the Class Period. The Kilborn Defendants knew or recklessly disregarded that the reports were materially false and misleading... intentionally misrepresented and/or failed to disclose: (a) that the gold purportedly found in Bre-X s samples was not of the shape, size and/or unweathered state of gold indigenous to volcanic hard-rock deposits, which was the type purportedly found in Busang; (b) that after Bre- X's samples were extracted they sat for weeks unsupervised at the Bre-X offices in Samarinda and in open bags in a warehouse in Loa Duri, Indonesia, thereby compromising the security and integrity of the samples; and (c) that when Kilborn finally sent samples for -5-

6 independent mineralogical studies in 1995 and 1996, to Normet, Pty. Ltd. (in Australia), Hazen Research Inc. (in Colorado), and Roger Townend & Associates (in Australia), it did not reveal or disclose the results, which, among other findings, showed that the gold extracted from the Bre-X samples did not have the geological characteristics that would be evident if the gold had actually been extracted from the Busang site. * * * The Kilborn Defendants duty of disclosure and liability derives from, among other things, their knowledge that Bre-X and Bresea were distributing the assay studies and methodologies of the Kilborn Defendants to the investing public and that investors would be relying on the statements made therein when purchasing and selling Bre-X and Bresea stock.... The Kilborn Defendants intended to and did profit from their association with Bre-X and believed that their business would benefit because of, among other reasons, investors access to their statements and reports regarding Bre-X and the potential for further business from Bre-X. Am. Compl. 51, 52. See Am. Compl. 75, 76, 85, 87, 104, 110, 114, 139, , 159, 175. P.T. Kilborn is unquestionably subject to this Court s jurisdiction as a co-conspirator. -6-

7 3. The Exercise Of Personal Jurisdiction Over P.T. Kilborn Satisfies Due Process. Finally, the exercise of jurisdiction must comport with constitutional due process. However, for traditional notions of fair play and substantial justice to preclude exercising jurisdiction over P.T. Kilborn, it must present a compelling case that such exercise would actually be unreasonable in the circumstances of this case. Burger King Corp. v. Rudzewicz, 471 U.S. 462, (1985). In making this determination, courts consider the burden on the defendant, the interests of the forum state, the plaintiff s interest in obtaining relief, public policy concerns, and judicial efficiency. Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 113 (1987). P.T. Kilborn s assertions in this regard fall far short of establishing a compelling case to avert proper jurisdiction. For reasons that have been briefed before, the interest of this Court in exercising jurisdiction over this massive fraud perpetrated on U.S. investors outweighs any inconvenience to P.T. Kilborn. See Dkt. ## 76 at 67-72; 115 at Additionally, P.T. Kilborn clearly should have anticipated being haled into court in the United States, and cannot genuinely assert a meaningful burden under Asahi. P.T. Kilborn, by intentionally or recklessly allowing and affirmatively supporting the fraudulent gold assay samples at Busang in its engineering consulting services, feasibility studies, and resource calculations, purposefully directed its actions toward the United States. The involvement of P.T. Kilborn in preparing or approving materials that it knew, or should have known, would cause injury in the United States is central to the Bre-X fraud and suffices to confer personal jurisdiction over them. See Itoba Ltd. v. LEP Group PLC, 930 F. Supp. 36, (D. Conn. 1996); Reingold v. Deloitte Haskins & Sells, 599 F. Supp. 1241, 1259 (S.D.N.Y. 1984). P.T. Kilborn knew -7-

8 or should have known that its actions would adversely affect U.S. investors. It should not be heard to complain when haled into court here. 5 In sum, the exercise of jurisdiction over P.T. Kilborn in this case is consistent with constitutional due process. 2. Venue Is Proper in this District P.T. Kilborn s half-hearted venue challenges are also easily defeated. As with the other Kilborn Defendants (whose venue arguments have been largely repeated), P.T. Kilborn plainly fails to satisfy its burden to demonstrate affirmatively that the plaintiff filed the lawsuit in an improper venue. Bounty-Full Entertainment, Inc. v. Forever Blue Entertainment Group, Inc., 923 F. Supp. 950, 957 (S.D. Tex. 1996). 5 The arguments concerning P.T. Kilborn s minimum contacts with the United States have already been briefed and are otherwise unnecessary here because P.T. Kilborn concedes jurisdiction under the national contacts standard. Of course, the clear evidence that P.T. Kilborn s conduct was designed to harm investors here independently satisfies the required prima facie showing. See Amoco, 925 F. Supp. at

9 While almost all of the substantive venue issues before the Court have already been fully briefed, 6 venue is clearly proper over P.T. Kilborn in this District for three reasons. First, venue is proper under the operation of the general venue provisions in 28 U.S.C. 1391(b) and (c) and the nationwide service of process provision in Section 27 of the 1934 Act. Second, the acts of P.T. Kilborn as alleged in the Amended Complaint support venue in this District. Third, P.T. Kilborn cannot avoid the result of the well settled co-conspirator venue doctrine, whereby if venue is proper as to one or more conspirator defendants in a fraudulent scheme (as is the case here), then venue is proper as to all conspirators. 1. Venue Is Proper In This District Under The Specific And General Venue Provisions Governing This Action. The general venue provision in 28 U.S.C. 1391(b) states that venue is proper in a case based on federal question jurisdiction, in a judicial district where any defendant resides, if all defendants reside in the same state. The general venue provision in 28 U.S.C. 1391(c) states that a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. 6 Plaintiffs again incorporate by reference herein and respectfully refer the Court to plaintiffs' oppositions to other defendants venue challenges. See Dkt ## 76 at 72-80; 165 at

10 As set forth above, all defendants, including P.T. Kilborn, are subject to personal jurisdiction in this District under the national contacts test required by the nationwide service of process provision in Section 27 of the 1934 Act (which also governs venue). E.g., Busch v. Buchman, Buchman & O'Brien Law Firm, 11 F.3d 1255, 1258 (5th Cir. 1994). Thus P.T. Kilborn, like all defendants in this case, resides in this District for venue purposes under 1391(b) and (c). See ICON Industrial Controls Corp. v. Clonetrix, 921 F. Supp. 375, (W.D. La. 1996), citing Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406 (9th Cir. 1989) (nationwide service of process provisions under 12 of the Clayton Act provides residence for venue purposes under 1391(b) and (c)). 7 Accordingly, venue is proper in this District. P.T. Kilborn argues, incorrectly, that the general venue provisions of section 1391 are inapplicable because Congress has provided a special venue provision under the 1934 Act in Section 27. P.T. Kilborn Mem. at 4 n.4. At the threshold, this ignores the well established rule that 7 While ICON and Go-Video were decided under the venue and service provisions in 12 of the Clayton Act, those provisions are virtually identical to the venue and service provisions in 27 of the 1934 Act. Section 12 states: Any suit... under the antitrust laws against a corporation may be brought... in any district wherein it may be found or transacts business; and all process in such cases may be served... wherever it may be found. 15 U.S.C

11 special venue statutes ordinarily do not preempt general venue rules in the absence of some inclination that Congress intended the special rules to be exclusive. ICON, 921 F. Supp. at Moreover, P.T. Kilborn s argument was rejected by a court in this Circuit, in the context of the analogous specific venue provision in 12 of the Clayton Act. The Court held that [t]here is no basis for concluding that Section 12 is intended to preempt any of the general rules of venue. ICON, 921 F. Supp. at 380. Underlying this holding was the recognition that under the Clayton Act, the special venue and service of process provisions were designed to expand the reach of the antitrust laws and make it easier for plaintiffs to sue for antitrust violations. Id. at 382, quoting Go-Video, 885 F.2d at The policies underlying the special venue and service provisions in 27 of the 1934 Act are as similar to the Clayton Act counterparts as the provisions themselves: Without question, the intent of the venue and jurisdiction provisions of the securities laws is to grant potential plaintiffs liberal choice in their selection of a forum. Securities Investor Protection Corp. v. Vigman, 764 F.2d 1309, 1317 (9th Cir. 1985). See also Seariver Martine Fin. Holdings, Inc. v. Pera, 952 F. Supp. 455 (S.D.Tex. 1996). 8 The factors governing such exclusivity include evidence of concurrent congressional action of both the special venue provision and the general venue provision from which it could be inferred Congress meant the two statutes to stand separately ; and evidence of an original congressional intent behind the enactment of the special venue provision that venue... be restrictive. General Elec. Co. v. Bucyrus- Erie Co., 559 F. Supp. 1037, 1039 (S.D.N.Y. 1982). P.T. Kilborn does not suggest such evidence exists as to

12 In sum, P.T. Kilborn s argument amount to a challenge to the nationwide venue provided in the statutory framework. However, had Congress desired to do so, it could have provided that 1391(c) did not apply to securities fraud actions. But that is a policy issue best settled in the legislative arena. ICON, 921 F. Supp. at 283. In this action, venue is proper over P.T. Kilborn. 9 9 The two cases cited by P.T. Kilborn for its purported preemption theory are easily distinguishable. In Pioneer Properties, Inc. v. Martin, 557 F. Supp (D. Kan. 1983), venue was not contested. Id. at Rather, the court found reliance on 28 U.S.C. 1391(d) -- governing alien defendants -- unnecessary [not inapplicable as P.T. Kilborn suggests] where plaintiff states claims which contain special venue provisions. Id. at Indeed, potential overlap between the general and specific venue provisions was recognized by the court in ICON as the prerogative of Congress. 921 F. Supp. at 383. Additionally, Zorn v. Anderson, 263 F. Supp. 745, 747 (S.D.N.Y. 1966) -- wrongly cited by P.T. Kilborn as a 1996 case -- found venue in that case determined not by reference to the general venue provisions, 28 U.S.C. 1391, but to the special venue provisions of the Investment Company Act of 1940 and the 1934 Act. Not surprisingly, both cases cited by P.T. Kilborn were decided under a version of 1391(c) that was more restrictive than the current 27 of the 1934 Act. The 1988 amendment to 1391(c)... now provides that a corporate defendants residence, for venue purposes, is equivalent to whether a corporation is subject to service of process, i.e., subject to personal jurisdiction. 1A Moore s Federal Practice 342 at P.T. Kilborn s preemption theory is without merit. -12-

13 2. The Allegations Against P.T. Kilborn Are Sufficient To Establish Venue In This District. P.T. Kilborn s acts, as alleged in the Complaint, support venue in this District. Importantly, the act contemplated by the statute need not be crucial, nor must the fraudulent scheme by hatched in the forum district. Hilgeman, 547 F.2d at 301, quoting Hooper v. Mountain State Sec. Corp., 282 F.2d 195, 204 (5th Cir. 1960). Moreover, to support venue under 27, the defendant need not be physically present in the forum district nor need he commit more than a single act in the district if that act is important to the consummation of the scheme. Id. at 302 n.11. This standard is easily met as to P.T. Kilborn. The distribution of false or misleading statements through press releases on national and international news wires establishes proper venue. See Eacho v. N.D. Resources, 1984 WL 2398 *2 (D.D.C. Feb. 2, 1984) ( dissemination of a single allegedly false and misleading press release into a district is sufficient to satisfy the venue requirement of Section 27 ). 10 As already explained above, many of the press releases of Bre-X and Bresea contained the false and misleading statements of the Kilborn Defendants, including P.T. Kilborn. These acts were central to and of obvious material importance to the consummation of the scheme alleged in the Amended Complaint. Hilgeman, 547 F.2d at 301. Moreover, as an extraterritorial or alien defendant, P.T. Kilborn may be sued in any district. 28 U.S.C. 1391(d). As stated in the affidavit filed in support of P.T. Kilborn s motion, P.T. Kilborn is a limited liability company organized under the laws of the Republic of Indonesia, 10 See also Lemberger v. Westinghouse Elec. Corp., Fed. Sec. L. Rep. 95,762 (E.D.N.Y. 1976); S-G Secs., Inc. v. Fuqua Investment Corp., 466 F. Supp. 1114, 1121 (D. Mass. 1978). -13-

14 and has its principal place of business in Jakarta, Indonesia. Booker Aff. 2. Venue is thus proper on this independent ground as well. Bronette Mach. Works, Ltd. v. Korkum Indus., Inc., 406 U.S. 706 (1972). 3. Venue Is Proper in this District Under the Co-Conspirator Venue Doctrine. Finally, venue is also proper in this District under the co-conspirator venue doctrine. In its motion, P.T. Kilborn fails to even mention this doctrine: [I]n a multi-defendant securities proceeding, where a common scheme of acts or transactions to violate the securities act is alleged, if venue is established for any of the defendants in the forum district there is sufficient justifications to establish venue as to the other defendants, even in the absence of any contact or substantial contract by any one defendant within that district. Hilgeman v. National Ins. Co. of Am., 547 F.2d 298, 302 n.12 (5th Cir. 1977). Thus, once venue is established for one defendant in this securities fraud action, venue is proper as to all See also Wright, Miller & Cooper, Federal Prac. & Pro.: Jurisdiction 3824 at 250 (1986); Sovereign Bank F.S.B. v. Rochester Community Sav. Bank, 907 F. Supp. 123, 125 (E.D. Pa. 1995) (venue will be proper in any district where it is alleged that any one defendant has committed acts that are violative of this chapter [ 78aa] and in furtherance of the alleged illegal scheme ); Vigman, 764 F. 2d at

15 and 1318 n. 4, 5 ( The strong policy favoring the litigation of related claims in the same forum supports the application of a co-conspirator venue theory in actions based upon violations of the federal securities statutes... [and even] the inconvenience of requiring one defendant in a multi-defendant action to litigate in a distant forum is greatly outweighed by the interest of judicial economy and bringing together in one lawsuit, all related claims and alternative theories); GRM, 596 F. Supp. at (if an act or transaction of any one codefendant in a common securities fraud scheme satisfies Section 78aa, then personal jurisdiction and venue are proper as to all other co-defendants ); Sargent v. Genesco, Inc., 492 F.2d 750, 759 (5th Cir. 1974) ( Under 78aa venue is proper in any district where any act or transaction by any defendant in furtherance of any allegedly fraudulent scheme occurred. ); Clement v. Pehar, 575 F. Supp. 436, 442 (N.D. Ga. 1983); SEC v. Diversified Indus., Inc., 465 F. Supp. 104, 111 (D.D.C. 1979) ( [A]ny allegation of a securities act violation is sufficient for venue purposes even as to a defendant who did not act within the district. ). -15-

16 Venue lies in this District as to one or more of the defendants in this action. For example, the distribution of misleading statements through press releases disseminated by national and international newswire is sufficient to establish venue. See Eacho, supra. Defendants Bre-X and Bresea disseminated numerous press releases over U.S. and international news wires, which press releases constitute a significant part of the fraud perpetrated on the class. Many of these press releases contained false statements by other defendants, including P.T. Kilborn and the other Kilborn Defendants. Additionally, defendants Lehman and J.P. Morgan disseminated false statements during the class period. All of these statements were directed toward and found their way into the U.S. and this District. Accordingly, venue is proper here This Court Has Subject Matter Jurisdiction Over the Claims of Canadian Purchasers. Incorporating the briefing already before the Court, P.T. Kilborn challenges this Court s subject matter jurisdiction over the 1934 Act claims of non-u.s. purchasers of Bre-X and Bresea stock on Canadian exchanges (the Canadian Purchasers ). 13 As indicated in plaintiffs prior briefing, the United States clearly has a sufficient nexus with the Bre-X fraud under the conduct/effects test, thereby supporting subject matter jurisdiction over the Canadian Purchasers. 12 In addition, venue is also proper over all of the alien defendants in this action (including P.T. Kilborn), pursuant to 1391(d), which provides that [a]n alien may be sued in any district. Since venue is proper as to these defendants, it is proper as to all defendants under the co-conspirator venue doctrine. 13 Plaintiffs incorporate by reference herein and respectfully refer the Court to plaintiffs briefings on -16-

17 subject matter jurisdiction. See Dkt. ## 76 at 51-63, 115 at 25-31, 163, 165 at 1-14, 200,

18 Moreover, the Court has subject matter jurisdiction on the basis of supplemental jurisdiction. As indicated in the briefs already before the Court, because the Canadian Purchasers common law claims arise out of the same common nucleus of operative fact as the 1934 Act claims, supplemental jurisdiction over such claims is warranted. 4. Principles of International Comity Do Not Favor Dismissal of the Claims of Canadian Purchasers. Contrary to P.T. Kilborn s assertions, principles of international comity do not favor dismissal of Canadian Purchasers claims. P.T. Kilborn argues that the existence of investor suits relating to the Bre-X scandal pending in Canadian courts demonstrates Canada s and Canadian courts profound interest in resolving claims available to Canadian citizens allegedly harmed in the scandal. P.T. Kilborn Mem. at 3. This is merely a conclusory statement of defendants preference for Canadian adjudication of Canadian Purchaser claims. In fact, the suits filed in Canada actually favor a U.S. adjudication on the grounds of the promotion of judicial efficiency and fairness. Defendants do not challenge the Court s subject matter jurisdiction over American purchasers of Bre-X on the NASDAQ or Canadian exchanges; over American purchasers of Bresea on Canadian exchanges; or over foreign purchasers of Bre-X shares on the NASDAQ exchange. Judicial efficiency weighs in favor of this Court retaining jurisdiction over all plaintiffs, including Canadian Purchasers. In that way, all claims surrounding the Bre-X fraud claims could be adjudicated in a single forum, one with effective securities fraud laws and established class action procedures. The alternative is piecemeal litigation across the continent. -18-

19 In addition to being inefficient, piecemeal litigation is prejudicial to all parties. Given that most Canadian provinces do not allow class actions, among other reasons, a Canada-wide class is of questionable legality. Nor has it been decided if a class action judgment in one province would have a preclusive effect against a Canadian resident in another province. All this raises the possibility of inconsistent adjudications and the attendant risk of inequity to the parties. As previously briefed by plaintiffs, no factor in an international comity analysis weighs decisively in favor of staying this action in deference to Canadian proceedings that, as plaintiffs have explained in its earlier papers, focus on client/broker issues almost exclusively. V. Plaintiffs State a Claim Against P.T. Kilborn Upon Which Relief Can Be Granted. In its final challenge, P.T. Kilborn again largely incorporates by reference the substance of defendants prior briefing in its argument that plaintiffs have failed to state a claim upon which relief can be granted. P.T. Kilborn purports four grounds for dismissal: (1) failure to allege fraud with particularity, (2) failure to adequately allege scienter, (3) failure to allege a primary securities law violation, and (4) failure to allege valid common law claims. 14 All of these grounds are easily defeated. A. Plaintiffs Allege Fraud With Requisite Particularity. 14 Once again, plaintiffs incorporate by reference herein and respectfully refer the Court to their prior briefings on those issues. See Dkt. ## 76 at 8-49; 115 at 2-25; 163; 165 at 14-24; 200;

20 The Amended Complaint adequately pleads fraud with the requisite particularity as to defendant P.T. Kilborn. The only challenge appears to address allegations that refer to the Kilborn Defendants. P.T. Kilborn Mem. at 6 (incorporating other prior defendants briefings). However, under the group publication doctrine, a plaintiff fulfills the particularity requirement of Rule 9(b) by pleading the misrepresentations with particularity and where possible the roles of the individual defendants in the misrepresentations. Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1440 (9th Cir. 1987) (emph. added; cites omitted). The misrepresentations have been pleaded with particularity in the Amended Complaint, which states the who, what, when, where and how of at least 58 fraudulent statements. Additionally, the Amended Complaint describes the role of the Kilborn Defendants in issuing the feasibility studies and resource calculations that were included in press releases issued by Bre-X and Bresea to the investing public on national and international newswires. Furthermore, plaintiffs specifically allege that P.T. Kilborn performed analyses, studies, and related services for Bre-X at Busang, an allegation uncontested by P.T. Kilborn Plaintiffs have alleged the role of P.T. Kilborn in making misrepresentations to the extent possible; however, given that the exact roles of the Kilborn Defendants in connection with the resource reports is, at this time, exclusively within their knowledge, plaintiffs are limited in their ability to precisely state the involvement of each of these defendants. The case law does not require more. -20-

21 B. Plaintiffs Adequately Allege Scienter. P.T. Kilborn incorporates the scienter arguments already briefed by other defendants. P.T. Kilborn Mem. at 7. In turn, plaintiffs incorporate by reference herein and respectfully refer the Court to their prior arguments concerning scienter. See Dkt. ## 76 at 9-30; 115 at 2-15; 165 at C. Plaintiffs Allege A Primary Securities Law Violation By P.T. Kilborn. Plaintiffs have adequately alleged primary violations against P.T. Kilborn under each of the two existing tests for primary violations. Under the Anixter approach, if a defendant makes a misstatement that is communicated to investors, and the defendant is aware that such representation would be communicated to investors, then it may be held primarily liable for the statement. Anixter v. Home-Stake Prod. Corp. Co., 77 F.3d 1215, (10th Cir. 1996); see also, In re Kendall Square Research Corp. Sec. Litig., 868 F. Supp. 26, 28 (D. Mass. 1994). Under the significant role approach, primary liability will lie if a defendant has played a significant role in preparing a false statement that is actually uttered by another. See, e.g., In re Software Toolworks, Inc., 50 F.3d 615, 628 n.3 (9th Cir. 1994), cert. denied, 516 U.S. 907 (1995); Philips v. Kidder Peabody & Co., 933 F. Supp. 303, 316 (S.D.N.Y. 1996), aff d, 108 F.3d 1370 (2d Cir. 1997); Cashman v. Coopers & Lybrand, 877 F. Supp. 425, (N.D. Ill. 1995); In re ZZZZ Best Sec. Litig., 864 F. Supp. 960 (C.D. Cal. 1994). As alleged in the Amended Complaint, P.T. Kilborn issued resource calculations and feasibility studies containing misrepresentations to Bre-X and Bresea, knowing full well that such reports would promptly be made available to the investing public. These allegations satisfy the Anixter test. Additionally, as alleged, there is no question that P.T. Kilborn played a significant role in preparing the information contained in numerous press releases, public filings, and other statements -21-

22 made by Bre-X and Bresea, which contained false and misleading information. P.T. Kilborn therefore carries primary liability under the 1934 Act. D. Plaintiffs State Valid Claims For Fraud And Negligent Misrepresentation Under State Law. P.T. Kilborn raises no new arguments regarding the pleading sufficiency of plaintiffs allegation of common law claims. Plaintiffs incorporate by reference herein and respectfully refer the Court to their prior briefing on this issue. Dkt. # 76 at Kilborn s motion to dismiss. Conclusion For the foregoing reasons, plaintiffs respectfully ask this Court to deny defendant P.T. -22-

23 Dated: June 15, 1998 Damon Young State Bar No John M. Pickett Young & Pickett 4122 Texas Boulevard Texarkana, Texas (903) Attorney-in-Charge for Plaintiffs Charles Edward Miller State Bar No A. Paul Miller State Bar No Miller, James, Miller, Wyly & Hornsby 1012 Olive Texarkana, Texas (903) Of Counsel: Respectfully submitted, R. Paul Yetter State Bar No Autry W. Ross Yetter & Warden, L.L.P. 600 Travis, Suite 3800 Houston, Texas (713) H. Lee Godfrey State Bar No Charles R. Eskridge, III James T. Southwick Susman Godfrey L.L.P Louisiana, Suite 5100 Houston, Texas (713) Lead Counsel for Plaintiffs Michael C. Spencer U. Seth Ottensoser Milberg Weiss Bershad Hynes & Lerach LLP One Pennsylvania Plaza, 49th Floor New York, New York (212) Certificate of Service I hereby certify that on the day of June, 1998, a copy of the foregoing was served on all counsel of record by facsimile, hand-delivery, and/or certified mail, return receipt requested. Damon Young 21.DOC -23-