Case 3:11-cv-00191-F Document 203 Filed 03/10/11 Page 1 of 6 PageID 3390 IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION BILLITTERI v. SECURITIES AMERICA, 3:09-cv-01568-F INC., el al. (Provident Royalties Litigation) AND RELATED CASES THIS DOCUMENT RELATES TO: ALL ACTIONS C. RICHARD TOOMEY, et al. v. 3:10-CV-01833-F SECURITIES AMERICA, INC., et al. IN RE: MEDICAL CAPITAL Case No. ML 10-2145 DOC (RNBx) SECURITIES LITIGATION (C.D. Cal.) THIS DOCUMENT RELATES TO: Limited transfer for settlement purposes McCoy, SACV09-1084 DOC (RNBx) (C.D. as Case No. 3-11-cv-00191-F (N.D. Tex.) Cal.) DOUGLAS COUNTY PLAINTIFFS' COMPLAINT IN INTERVENTION TO PARTICIPATE Douglas County Individual Practice Association, Inc. [DCIPA], Sharon Preston, Robert E. Ragan, John R. Atkinson, Donna M. Atkinson, Ronald D. Atkinson, and Bonnie Atkinson (collectively the Douglas County Plaintiffs), hereby intervene in this action for the limited purpose of objecting to the proposed settlement the Representative Plaintiffs have reached with Securities America, Inc. and Securities America Financial Corporation (collectively, "Securities America"). I. The Parties. I. The McCoy Plaintiffs are a putative nationwide class of investors who purchased promissory notes offered by Medical Capital Holdings, Inc. and its affiliated companies Wm. Randolph Turnbow Page 1 COMPLAINT IN INTERVENTION TO PARTICIPATE 800 Willamette Street, Suite 756 Ph: (541)677-6121/1'x: (541)677-6123
Case 3:11-cv-00191-F Document 203 Filed 03/10/11 Page 2 of 6 PageID 3391 (collectively "MedCap"). 2. Defendant Securities America, Inc. is a Delaware corporation with its headquarters in La Vista, Nebraska. 3. Defendant Securities America Financial Corporation is a Nebraska corporation with its headquarters in Omaha, Nebraska. 4. Intervenor Wells Fargo is a national banking association with its main office in Sioux Falls, South Dakota. 5, Intervenor Douglas County Plaintiffs (comprised of Douglas County Individual Practice Association, Inc. [DCIPA], Sharon Preston, Robert E. Ragon, John R. Atkinson, Donna M. Atkinson, Ronald D. Atkinson, and Bonnie Atkinson) are a group of plaintiffs with a case pending in Douglas County Circuit Court, Oregon, alleging, inter alia, claims for violation of Oregon securities law against Securities America, Inc., Securities America Financial Corporation and other defendants including Wells Fargo. The Douglas County Plaintiffs are all residents of Douglas County, Oregon. II. Background. 1. McCoy v. Cullum & Burks Securities, Inc., No. SACV 09-1084 (C.D. Cal.), is part of a multi-district proceeding pending before the Honorable David O. Carter in the Central District of California entitled In re Medical Capital Securities Litigation, No. SAML 10-2145 (C.D. Cal.). McCoy is a putative consolidated class action brought by investors in Medical Capital notes against the broker-dealers who sold them the notes, including Securities America. The McCoy Plaintiffs allege that the broker-dealers, including Securities America, were negligent and committed violations of the federal Securities Act of 1933. 2. Billittieri v. Securities America, Inc., No. 3:09-cv-0 1 568-F (N.D. Tex.), and Toomey v. Hofhines, No. 3:10-cv-018330-F (N.D. Tex.), are putative class actions (collectively, Billittieri") pending in this Court against broker-dealers who sold notes of another entity, Page 2 COMPLAINT IN INTERVENTION TO PARTICIPATE wm. Randolph Turnhow Ph: (541)677-6121/F%.- (541) 677-6123
Case 3:11-cv-00191-F Document 203 Filed 03/10/11 Page 3 of 6 PageID 3392 Provident Royalties, LLC. Securities America is a defendant in these actions. 3. Douglas County Individual Practice Association [DCIPA] v. Securities America, Inc., No. IO-CV-234000 (Douglas County, Oregon), is an action brought on behalf'of three individual investors ) against Securities America and against Wells Fargo Bank, pending in Oregon state court. The Douglas County Plaintiffs assert causes of action against Securities America for violations of Oregon's securities law and other state law claims. The complaint also alleges a cause of action against Wells Fargo under Oregon's securities laws for materially aiding or participating in the sale of the notes. The Douglas County action is not part of the consolidated McCoy action before Judge Carter. 4. The investors in Medical Capital notes also have brought actions to recover their losses from the trustees for Medical Capital's note offerings. Each series of Medical Capital notes was associated with a special purpose entity to hold the assets associated with those notes ("MP I" through "MP VI"), and either Wells Fargo Bank or The Bank of New York Mellon served as the trustee for each such entity. As far as we know, there are at least four cases pending against Wells Fargo or The Bank of New York 5. By order dated January 26, 2011, Judge Carter transferred McCoy to this Court for purposes of settlement negotiations only. 6. On February 17, 2011, the McCoy and Billitieri Plaintiffs filed a motion for preliminary approval of a settlement of all investor claims against Securities America. The proposed settlement is conditioned upon an order from this Court that "all claims for contribution, indemnification, or reimbursement, however denominated, against Settling Defendants arising under federal or state law, including those based in tort, contract or statute, or any other body of law, including such claims brought by the Non-Settling Defendants or any 1 The action started with only three plaintiffs; DCIPA, Preston and Ragon. Plaintiffs' motion to amend the complaint to, among other things, add the four Atkinson plaintiffs was denied with leave to refile. We expect that the claims of the Atkinson plaintiffs will eventually be added to the pending litigation in Douglas County, Oregon. Page 3 COMPLAINT IN INTERVENTION TO PARTICIPATE Wm. Randolph Turnbow U.S. Balk Building Ph. (541)677-6121/Fx: (541) 677-6123
Case 3:11-cv-00191-F Document 203 Filed 03/10/11 Page 4 of 6 PageID 3393 other third party, that allege Settling Defendants are joint tortfeasors, wrongdoers, or otherwise at fault or liable, in connection with the Settled Claims, are extinguished, discharged, satisfied, barred, enjoined and/or otherwise unenforceable." 7. The proposed settlement contemplates a no opt-out settlement class that will force the Douglas County Plaintiffs to accept pennies on the dollar for their state law claims against Securities America, Inc., Securities America Financial Corporation, and their parents, subsidiaries and agents. III. Grounds For Intervention. The Douglas County Plaintiffs intervene for the limited purpose of (1) opposing the Representative Plaintiffs' motion for certification of a mandatory settlement class and preliminary approval of the proposed settlement agreement, and (2) opposing final approval of the proposed settlement. The settlement agreement should not be approved for at least two reasons: First, the parties have not demonstrated that there is, in fact, a limited fund from which to pay the claims of persons harmed by the Settling Defendants. The "limited fund" alleged to exist here does not satisfy the requirements of Ortiz v. Fibreboard Corporation, 527 U.S. 815 (1999) (rejecting a $1.535 Billion settlement of asbestos claims proposed on a no opt-out, limited fund basis because it allowed the defendant to remain in business). The fund cobbled together by the parties here is not the maximum amount available to satisfy the claims of those harmed by Securities America's sale of the Medical Capital notes, as required by Ortiz. The "limited fund" the Settling Defendants' propose does not include the assets of Securities America's parent corporations, subsidiaries or agents, but still releases all claims against those entities. That is improper as well. See In re Telectronics Pacing Systems, Inc., 221 F.3d 870, 879 (6th Cir. 2000) (rejecting limited fund settlement class because assets of parent corporations not included in fund). Second, Representative Plaintiffs' counsel does not adequately represent our interests Page 4 COMPLAINT IN INTERVENTION TO PARTICIPATE W rn Randolph Turnbow Ph: (54. 1)677-6121/Fx: (541)677-6123
Case 3:11-cv-00191-F Document 203 Filed 03/10/11 Page 5 of 6 PageID 3394 because whatever the litigation risk that the Representative Parties' counsel perceive as to their. claims, the Douglas County Plaintiffs face different, and we think significantly lesser, risk because our claims are not controlled by federal securities law. Oregon securities law is very plaintiff friendly. See Prince v. Brydon, 307 Or. 146, 150, 764 P.2d 1370 (1988) (recognizing high burden on defendants in Oregon securities laws). IV. Requested Relief. The Douglas County Plaintiffs therefore request that the Court: 1. Allow them to participate in this action for the limited purpose of (1) opposing Plaintiffs' motion for certification of a mandatory settlement class and preliminary approval of the proposed settlement agreement, and (2) opposing final approval of the proposed settlement; and 2. Deny Plaintiffs' motion for certification of a mandatory settlement class and preliminary approval of the proposed settlement agreement, and/or deny final approval of the proposed settlement. DATED: March 10, 2011. By /s/ Wm Randolph Turnbow Wm. Randolph Turnbow, OSB 803910 Attorney for the Douglas County Plaintiffs Trial Attorney Wm. Randolph Turnbow Page 5 COMPLAINT IN INTERVENTION TO PARTICIPATE Ph: (541) 677-6121/Fx. (541) 677-6123
Case 3:11-cv-00191-F Document 203 Filed 03/10/11 Page 6 of 6 PageID 3395 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing was served on all counsel of record on March 10, 2011 via the Court's CM/ECF system. /s/ Wm Randolph Turnbow Wm. Randolph Turnbow, OSB 803910 Attorney for the Douglas County Plaintiffs Trial Attorney