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To: DRRISK who wrote (9572)	3/17/1999 8:47:00 AM
From: DRRISK	Read Replies (1) \| Respond to of 11888

PART II (2) Derivative Actions In a derivative action brought in federal court based upon diversity of citizenship, state "procedural" requirements relating to derivative actions (such as posting security for costs) [FN31] are substantive for Erie R.R. v. Tompkins [FN32] purposes and are, therefore, applicable in the federal courts. [FN33] If, on the other hand, the action is based upon the federal securities laws, the extent to which state requirements are appropriate is a federal question and is a matter of application of the policies underlying the federal securities laws. [FN34] If in a derivative action a claim based on the federal securities laws is combined with a state claim based on diversity, however, the state requirements must be complied with as to the state claim. [FN35] It is not wholly clear whether the same conclusion would be reached as to a claim based upon pendent jurisdiction since to do so might interfere with the underlying policy of that doctrine to resolve all pending controversies in one proceeding. Yet, the notion that the state requirements are part of the substantive state claim will probably prove to be decisive in this context. The courts which have considered the issue have applied the state security for cost provisions. [FN36] Further, one court, viewing the state and federal claims as inseparable, stayed both claims pending the posting of an appropriate bond. [FN37] However, the court did allow the plaintiff sixty days to solicit additional shareholders to join him in the suit in an effort to satisfy the state provision which excused the necessity for posting bond if plaintiffs represent 5 percent of the outstanding shares or shares with a value of $50,000. [FN38] Rule 23.1 of the Federal Rules of Civil Procedure contains a number of provisions that are expressly applicable to derivative actions in federal courts. [FN39] It is not entirely clear that Rule 23.1 applies to a derivative action based upon the federal securities laws although absent a special policy consideration, it probably does. Some portions of the rule have not been applied in Section 16(b) actions, although the reason for not doing so appears to be based upon special considerations applicable to Section 16(b). [FN40] The principal requirements of Rule 23.1 are: (1) The complaint must be verified. [FN41] Where the plaintiff inadvertently omitted the verification and the required allegation of an absence of collusion, a district court allowed the plaintiff ten days in which to rectify the deficiencies in the pleadings. [FN42] (2) The plaintiff must have been a shareholder at the time of the wrong. Beneficial ownership [FN43] and debentures convertible into shares [FN44] have been held sufficient to satisfy this shareholder requirement. The continuing-wrong theory is applied if appropriate. [FN45] A particularly appropriate situation in which to apply the requirement that plaintiff be a shareholder at the time of the wrong is the situation in which a purchaser of substantially all of the stock of a closely held corporation, knowing of prior misdeeds by management, attempts after the purchase to bring a derivative action on behalf of the corporation for alleged prior wrongs involving violations of the federal securities law. [FN46] (3) The plaintiff must make a demand on the board of directors to bring the action or show that such a demand would be futile. Futility is often readily found. [FN47] Where a majority of the directors are not affiliated with the defendants and were not themselves involved in a self-dealing transaction, however, some courts have insisted that demand be made upon the directors and they be given an opportunity to determine appropriate steps to be taken on behalf of the corporation. [FN48] The First Circuit in an action based on the antitrust laws has reached this conclusion even on the assumption that the transactions being attacked were previously approved by the unaffiliated directors. [FN49] It is not entirely clear as to what course of action would then be available to the plaintiffs if the board then refused to bring the action. If the board did determine to bring the action, one of the practical consequences would be that the board, rather than the original plaintiff would control the selection of counsel acting for the corporation. (4) The plaintiff must, if necessary, make a demand on the shareholders to bring the action. The First Circuit Court of Appeals has held that it is the policy behind the federal securities laws, rather than state law, which determines whether a demand on shareholders is necessary. [FN50] The court suggested that if the number of shareholders is small, the plaintiff could reasonably be expected to make a demand on shareholders, but if there is a large number of shareholders, it would be an unreasonable burden to expect the plaintiff to persuade a majority of the shareholders to take over the action. [FN51] (5) The plaintiff must fairly and adequately represent the interest of the shareholders. Where the corporation was in receivership, one district court has sensibly permitted only the receiver to represent the corporation in a derivative action. [FN52] (6) The action can be settled only with the approval of the court and after the giving of notice to shareholders. The federal courts have generally held that an action based upon Rule 10b-5 does not incorporate the security for cost provisions included in some of the express remedies under the federal securities laws. [FN53] If Section 12(2) or other express claims under the federal securities laws which include a security for cost provision (see Chapter 8) are included along with a Rule 10b-5 claim, however, such security for cost provisions are applicable. [FN54] To the extent that such security for cost provisions exist under the federal securities laws, they differ from state counterparts in that either party to the action can invoke them and costs can be recovered only from one whose case or defense had no merit. [FN55] There is some indication that the federal courts may reexamine their position in this area and apply security for cost provisions under circumstances deemed appropriate. [FN56] Some interesting questions can arise with respect to discovery in the context of a derivative action. The Fifth Circuit has held that the attorney-client privilege does not bar a shareholder-plaintiff in a derivative suit from discovering the communications between the corporation and its counsel. Here, the interest of the shareholders outweighs the interests served by confidentiality. [FN57] Further, while plaintiff's failure to answer interrogatories is usually grounds for entry of a default judgment, the dismissal of a derivative suit because of such failure without giving of notice to nonparty stockholders does not constitute a bar to another shareholder filing a derivative action. [FN58] DrRisk

To: DRRISK who wrote (9572)	3/17/1999 11:54:00 PM
From: Eric123	Respond to of 11888

Dr., I'd like to thank you for all the months I read your posts. Your positive attitude made me want to hope for the best. There were times where I thought you had a friend that worked for AIPN or maybe you even worked for AIPN. Then I read the one about the law firm and it makes me wonder a bit. Regardless, you aren't starting a shit storm are you? 'Cause if you are, I'm in. I'm a Scorpio (pissed and broke because of AIPN) and I love a good shit storm. Anyone else game? :) The list of possible successors is about as short as most people's patience at this point which IMHO has been taken for a ride. Granted the oil sector has been in a slump, but they are not selling any gas or oil at this point. They buy crude products for their refinery, which to me, even in a slump would be good news since they could buy stuff for the refinery at less of a cost. The refinery is the only thing that is actually generating revenue of any type. Everything else is a wet dream until a few or several chain of events occur. 1) Partner- Can they blow any more wind up our asses? See point #5 2) Real financing- what the hell did they hire that big shot company to do provide PR smoke and mirrors? They had some real money I recall a while ago, but needed more and hired (I can't remember the name of the company) this big firm to get them what they needed. Did it happen? I'm not sure, but I would guess not since we have been under a buck for a while now. See point #5 3) Completed connection to the natural gas supply lines. I heard it was too cold to work to do whatever it is they needed to do to get the rigs ready. Shit, at this point they should be moving mountains to get this shit done, but oops, no money see point #2 and 5 4) Deliver the goods...See point #1, #2, #3 and #5 5) Remove Ferris and all that are responsible. Sure GF did a great job getting the licenses, but this is business, what have you done for me lately? Not a damn thing. Actually, nothing positive since getting the licenses. Also see points 1,2,3 and 4. If any, most or all of these things happen the stock would be and stay above $1 Another thing, that guy that handles the investor relations (AIPN mouthpiece) is a tool. He's been feeding everyone shit for months. And were gonna this and it's always just around the corner...look ma no hands!!! To me no hands got him/us wrapped around a tree. Granted I haven't been following AIPN as close since my position is near worth the cost of a daily double value meal without super sizing, but by simply looking at the stock price tells me that we are even further away from the gold ring than we were two months ago. Maybe because of the GF stuff I've been reading here this evening. Maybe some of the things stated above. Bottom-line what have they done for me lately let alone the last year or so? Regards, E -This isn't G Ferris' Day Off. There are no shareholders that I can see with signs painted and shouting 'Save Ferris'. I think save is substituted with a variety of words that I will leave to everyone's capable creative imaginations.