This just scrolled by on my Bloomberg:
In re Solv-ex Corp. Sec. Litig., Andrews' Corporate Officers & D
2003-05-06 14:12 (New York)
Securities Fraud (Settlement Issues):
In re Solv-ex Corp. Sec. Litig.
2d Cir. Rejects Insolvent Solv-ex Ex-CEO's Objection to Suit Dismissal
In an unusual turn of events, a federal appeals court in Manhattan rejected
an ex-CEO's objection to the dismissal of shareholder securities fraud
charges against him. Plaintiff attorneys, recognizing that neither the
insolvent Solv-Ex Corp. nor John Rendall and the other ex-officers and
directors had any assets, won permission to voluntarily dismiss all
defendants, and the appellate panel denied Rendall's petition to let him
pursue his counterclaims as a pro se defendant. In re Solv-ex Corp.
Securities Litigation, No. 02-7668, (2d Cir. Apr. 17, 2003).
Shareholders brought securities fraud charges against Solv-ex and its
officers and directors, including CEO John Rendall; but during the period
between August 1997 and January 1999, while defendants received 10 extensions
of time to file their answers, Solv-ex filed for protection under the federal
bankruptcy laws. The plaintiffs dismissed their claims against Solv-ex as
part of the bankruptcy reorganization; then after looking at the assets of
Rendall and the other individual defendants, they found no significant assets
to pay a judgment or settlement and moved to voluntarily dismiss the officers
and directors as well.
Meanwhile Rendall, who acted as his own counsel after 2000, brought
counterclaims of bad faith against the plaintiff attorneys, withdrew them,
tried to amend his answer to the suit to include them, tried to refile the
counterclaims against the group of plaintiffs who allegedly "sold short,"
betted that the Solv-ex stock price would go down and then sought leave to
amend the claims when plaintiffs moved for dismissal.
The District Court found that Randall's counterclaims were non-specific
"bordering on incoherent and frivolous" and named non-parties to the suit, so
he did not merit leave to amend. The lower court judge granted the move to
dismiss and Rendall appealed.
The appellate panel reviewed the ruling based on:
* The plaintiffs' diligence in bringing the motion;
* Undue vexatiousness;
* The progress of the suit;
* The duplicative expense of re-litigation; and
* The adequacy of plaintiffs' explanation of the need to dismiss.
After reviewing those factors, the panel found that:
* The District Court did not abuse its discretion in granting voluntary
dismissal;
* The plaintiffs did not attempt to harass Rendall in pursuing their claims;
* The case has hardly progressed, since no discovery has taken place Rendall
has had little expense; and
* The plaintiffs reason for dismissal - individual defendants lack
significant assets - is entirely reasonable.
The appeals court also rejected Rendall's remaining two arguments regarding
his motion to amend as meritless because he sought to bring counterclaims
against non-parties and because the notice to the class was adequate,
The plaintiffs are represented by Robert Walker of Milberg, Weiss, Bershad,
Hynes & Lerach in New York.
Rendall appeared pro se.
Provider ID: 00005051
-0- May/06/2003 18:12 GMT |
