Free Brief - District Court of Colorado - Colorado

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 1 of 9

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge Robert E. Blackburn Civil Case No. 04-cv-0781-REB-KLM (Consolidated with Civil Action 06-cv-02189) SHRINERS HOSPITALS FOR CHILDREN, a Colorado Corporation, Plaintiff, v. QWEST COMMUNICATIONS INTERNATIONAL INC., et al., Defendants. _______________________________________________________________ MEMORANDUM OF SUPPLEMENTAL CITATIONS OF AUTHORITY BY QWEST COMMUNICATIONS INTERNATIONAL INC. AND QWEST CAPITAL FUNDING IN CONNECTION WITH THEIR MOTION TO DISMISS CLAIMS FILED IN SHRINERS HOSPITAL FOR CHILDREN v. ARTHUR ANDERSEN & COMPANY, et al. ________________________________________________________________ Defendants Qwest Communications International Inc. ("Qwest") and Qwest Capital Funding, Inc. ("QCF") respectfully submit the attached opinions issued by (i) the United States Court of Appeals for the Ninth Circuit in the matter of In re: Hanford Nuclear Reservation Litig., No. 05-35648, --- F.3d ----, 2007 WL 2302365 (9th Cir. Aug. 14, 2007) (Exhibit 1 hereto), and (ii) the United States Court of Appeals for the Second Circuit in In re WorldCom Secs. Litig., No. 05-6979-cv, --- F.3d ----, 2007 WL 2127874 (2d Cir. July 26, 2007) (Exhibit 2 hereto), in further support of their motion to dismiss the complaint filed in Shriners Hospitals for Children v. Arthur Andersen & Company, et

1

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 2 of 9

al., No. 06-CV-02189-REB-MEH ("Shriners II") [Docket No. 117, filed Jan. 16, 2007].1 These authorities speak directly to the consequences of prematurely opting out of a class by filing a separate action, which is one of the main points at issue in Qwest's motion to dismiss. Qwest advanced two primary statute of limitations arguments in support of its motion to dismiss in Shriners II. First, Qwest maintained that the tolling doctrine of in American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974), was unavailable to Plaintiff because it had abandoned the class action and instituted its separate litigation prior to the class certification decision. (See Docket. No. 117, Sec. I.A.) Second, Qwest maintained that even if Plaintiff were entitled to invoke American Pipe tolling, that doctrine applies only to claims that are identical to those advanced in the class action on which the tolling is based. (See Docket No. 117, Sec. I.B.) QCF separately argued that American Pipe tolling did not apply to it at all since QCF had never been named as a defendant in the class action litigation. In the attached opinion, the United States Court of Appeals for the Second Circuit held that American Pipe tolling benefits plaintiffs who abandon the class action prior to a class certification determination to pursue their own litigation. See 2007 WL 2127874 at *10. In so ruling, the Second Circuit reversed the district court's decision, which was one of the cases on which Qwest and this Court had previously relied. See, e.g. Shriners Hospitals for Children v. Qwest Communications International Inc., No. 04-CV-

Other relevant pleadings are Plaintiff's Memorandum In Opposition [Docket No. 126, filed March 19, 2007] and Qwest's Reply To Plaintiff's Memorandum [Docket No. 129, filed April 16, 2007]. 2

1

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 3 of 9

0781, 2005 WL 2350569, at *5 (D. Colo. Sept. 23, 2005) ("Shriners I") quoting In re WorldCom, Inc. Secs. Litig., 294 F. Supp. 2d 431, 451 (S.D.N.Y. 2003). A copy of the opinion in Shriners I is attached hereto as Exhibit 3. The Second Circuit's ruling does not, however, save the untimely claims advanced in Shriners II for a number of reasons. First, with due respect to that court of appeals, Qwest submits that this Court's reasoning, which finds solid support in the Sixth Circuit's opinion in Wyser-Pratt Management Co. v. Telxon Corp., 413 F.3d 553 (6th Cir. 2006) and the many other cases Qwest and QCF cited in their Motion To Dismiss, properly interprets American Pipe on the applicability of tolling to premature opt-outs. That reasoning is further supported by the Ninth Circuit's In re: Hanford opinion, in which it, too, squarely held that "any . . . Plaintiffs who filed independent suits pending class certification lost the benefits of class action tolling, thus potentially rendering their suits untimely." In re: Hanford, 2007 WL 2302365 at *2. . It would be particularly inappropriate to apply the new WorldCom principle to this case, where the record demonstrates a persistent abuse of the litigation process by Plaintiff. As noted previously, by the time Plaintiff filed its initial complaint in March of 2004, numerous lawsuits presenting broad challenges to Qwest's financial statements had already been pending for years, including the putative class action proceeding in In re Qwest. Instead of advancing the claims plead in In re Qwest or the other filed cases, however, Plaintiff filed a narrow complaint that essentially copied the complaint filed by the SEC in SEC v. Arnold, et al., No. 03-CV-328-REB-MEH (filed February 25, 2003), and pursued claims that were limited to two discrete transactions. See Shriners I, No.

3

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 4 of 9

04-CV-0781, 2005 WL 2350569, at *4 (D. Colo. Sept. 23, 2005). Even after this Court ruled on Qwest's motion to dismiss the Amended Complaint in Shriners I, which was granted in part and denied in part, Plaintiff never moved to further amend its complaint. Instead, some thirteen months after this Court's decision and after having received answers to the Amended Complaint in Shriners I, Plaintiff commenced a new action against Qwest and a different group of defendants in Shriners Hospitals for Children v. Arthur Andersen & Company, et al., No. 06-CV-02189-REB-MEH ("Shriners II"). The two policy considerations identified by the Supreme Court in connection with the American Pipe tolling doctrine were "efficiency and economy of litigation" and "ensuring essential fairness to defendants and of barring a plaintiff who has `slept on his rights[.]'" See American Pipe, 414 U.S. at 553-54. Neither policy would be served by extending American Pipe tolling to this Plaintiff. Whatever policies the Second Circuit mistakenly thought it was advancing in WorldCom should not be enlisted to condone Plaintiff's wasteful gamesmanship here. As the Ninth Circuit explained in reaching its recent decision in In re: Hanford, "[w]e should not allow a plaintiff to file an individual suit, which is in essence a signal that the plaintiff is opting out of a class, and then simultaneously give the same plaintiff class action benefits." In re: Hanford, 2007 WL 2302365 at *15 (emphasis added). At a minimum, the relevant statutes of limitations on the claims that Plaintiff purports to advance in Shriners II began to run when Plaintiff filed its initial complaint in Shriners I in March of 2004. Since all of the claims that Plaintiff seeks to advance

4

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 5 of 9

against Qwest are governed by statutes of limitations of three years or less,2 they would have been required to be filed by March of 2007 to be timely. As they were not filed until October 31, 2007, they are all time-barred. Moreover, even if American Pipe tolling were to apply to the claims advanced in Shriners II, the state law claims in Counts 3-6 are still time-barred. This Court has previously explained that American Pipe tolls "only . . . claims that are identical to the claims asserted in the putative class action complaint." Shriners I, 2005 WL 2350569, at *5 (emphasis added). The WorldCom decision offers no reason to question this separate ruling. Indeed, the Second Circuit repeatedly emphasized in WorldCom that the claims that were to be tolled were the same claims as those that had been advanced in the class action. See In re WorldCom, 2007 WL 2127874 at *1 (identifying the question to be "whether the filing of a complaint asserting a class action tolls the statute of limitations for putative class members who file individual suits (asserting the same claims) prior to the class certification decision." (Emphasis added)); id. at *6 (repeating that the individual action and the class action asserted "the same claims."). Finally, regardless of the scope of American Pipe tolling that might apply to the claims against Qwest, the tolling doctrine is totally inapplicable with respect to the claims against QCF because QCF was never named as a defendant in any class action The Section 10(b) claim advanced against Qwest in Count 1 is governed by a two year statute of limitations. See generally In re Qwest Sec. Litig., 387 F. Supp. 2d 1130, 1140 (D. Colo. 2005). Qwest is also named in Counts 3-6, which allege violations of the Colorado Securities Laws, fraud and deceit under Colorado law, and negligent misrepresentation under Colorado law, respectively. Each of those claims is governed by a three-year statute of limitations. See Colo.Rev. Stat. §11-51-604(8), In re Qwest, 387 F. Supp. 2d at 1150-51 (Colo. Sec. Act); id. at 1150-51 (applying Colo. Rev. Stat. 13-80-101 to claims of common law fraud and negligent misrepresentation). 5
2

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 6 of 9

complaint. As demonstrated in the Motion To Dismiss, American Pipe tolling simply does not apply to claims against QCF. [See Docket No. 117; Section I.C]. Nothing in the recent WorldCom decision speaks to that issue at all. For the reasons stated here and previously, all claims against Qwest and QFC should be dismissed with prejudice.

DATED: August 17, 2007

Respectfully submitted, __s/ Alfred P. Levitt_______________ Jonathan D. Schiller David R. Boyd Alfred P. Levitt BOIES, SCHILLER & FLEXNER LLP 5301 Wisconsin Avenue, N.W.; Suite 800 Washington, DC 20015 Telephone: (202) 237-2727 Facsimile: (202) 237-6131 Terence C. Gill SHERMAN & HOWARD, L.L.C. 633 Seventeenth Street, Suite 300 Denver, CO 80202 Telephone: (303) 297-2900 Facsimile: (303) 298-0940 Attorneys for Qwest Communications International Inc. & Qwest Capital Funding, Inc.

6

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 7 of 9

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge Robert E. Blackburn

CERTIFICATE OF SERVICE I hereby certify that on this 17th day of August, 2007, a copy of the foregoing MEMORANDUM OF SUPPLEMENTAL CITATIONS OF AUTHORITY BY QWEST COMMUNICATIONS INTERNATIONAL INC. AND QWEST CAPITAL FUNDING IN CONNECTION WITH THEIR MOTION TO DISMISS CLAIMS FILED IN SHRINERS HOSPITAL FOR CHILDREN v. ARTHUR ANDERSEN & COMPANY, et al. was electronically filed with the Clerk of the Court using the USDC CM/ECF system, which will send notification of such filing to the following e-mail addresses: Karoline E. Jackson Douglas P. Lobel Larry A. Mackey Charles G. Michaels Stephen C. Peters John M. Richilano M. Robert Thornton [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Counsel for William L. Eveleth Counsel for Richard L. Weston Counsel for William L. Eveleth Counsel for Plaintiff Counsel for John M. Walker Counsel for Douglas K. Hutchins Counsel for Bryan K. Treadway

7

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 8 of 9

and, I also certify that I have served same by depositing in the U.S. Mail, first-class postage prepaid, addressed to the following: I. Walton Bader Bader & Bader, LLP 50 Main Street; PMB 1029 Suite 1000 White Plains, NY 10606 Counsel for Plaintiff Herbert J. Stern Edward S. Nathan Jeffrey Speiser Joel M. Silverstein Stern & Kilcullen 75 Livingston Avenue Roseland, NJ 07068 Counsel for Joseph P. Nacchio Mark T. Drooks Thomas V. Reichert Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenberg, A Professional Corporation 1875 Century Park East, 23rd Floor Los Angeles, CA 90067-2561 Counsel for Robin Szeliga James Miller Clifford Chance US LLP 31 West 52nd Street New York, NY 10166 Counsel for Robert Woodruff Robert N. Miller Stephanie E. Dunn Perkins Coie, LLP 1899 Wynkoop St., Ste. 700 Denver, CO 80202 Counsel for James Smith

James Nesland Paul Schwartz Jeff Smith Cooley Godward Kronish LLP 380 Interlocken Crescent, Suite 900 Broomfield, CO 80021-8023 Counsel for Drake Tempest Michael J. Hofman Martin D. Litt Holme Roberts & Owen LLP 1700 Lincoln Street, Suite 4100 Denver, CO 80203 Counsel for Philip Anschutz & Craig Slater

8

Case 1:04-cv-00781-REB-KLM

Document 139

Filed 08/17/2007

Page 9 of 9

Scott B. Schreiber John A. Freedman Elissa Preheim Tim Atkeson Jessica Brody Arnold & Porter 555 Twelfth Street, NW Washington, DC 20004-1206 Counsel for Arthur Andersen LLP Ty Cobb Andrew Shoemaker Daniel F. Shea Charles Mitchell Hogan & Hartson, LLP 1200 17th Street, Suite 1500 Denver, CO 80202 Counsel for Stephen Jacobsen & Lewis Wilks Walter Garnsey, Jr. Kelly Haglund Garnsey & Kahn LLC 1441 18th Street, Suite 300 Denver, CO 80202-1255 Counsel for Gregory Casey Forrest W. Lewis Forrest W. Lewis, P.C. 1600 Broadway; #1525 Denver, CO 80202 Counsel for Frank Noyes

David A. Zisser Isaacson, Rosenbaum P.C. 633 17th Street, Suite 2200 Denver, CO 80202 Counsel for Marc Weisberg

Barbara Moses Ashley Rupp Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C. 565 Fifth Avenue New York, NY 10017 Counsel for Afshin Mohebbi

Richard Jacobson Michael Trager Arnold & Porter LLP 555 Twelfth Street, NW Washington, DC 20004-1206 Counsel for Gregory Casey

s/ Eileen Gould Eileen Gould

9