Free Declaration in Support - District Court of California - California

Case 3:07-cv-04777-SI

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Filed 10/26/2007

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Bingham McCutchen LLP STEVEN N. MACHTINGER (SBN 61973) JOHN D. PERNICK (SBN 155468) GEOFFREY S. BECKHAM (SBN 224126) Three Embarcadero Center San Francisco, CA 94111-4067 Telephone: 415.393.2000 Facsimile: 415.393.2286 Attorneys for Plaintiff Herbert J. Sims & Co., Inc.

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

HERBERT J. SIMS & CO., INC., Plaintiff, v. MARK ROVEN, JAMES DARDEN III, ROD BUTTERFIELD, STEVE BARES, JAY MAGWIRE, CAROLYN MAGWIRE, DOROTHY MCCARTY, RICHARD TEERLINK, ELENORA CRONE, NELLIE MORISON, SCOTT M. CRONE, SCOTT R. CRONE, AND NADINE VANDERLANES, Defendants.

No. C07-04777 MJJ DECLARATION OF STEVEN N. MACHTINGER IN SUPPORT OF PLAINTIFF'S NOTICE OF MOTION AND MOTION FOR PRELIMINARY INJUNCTION Date: Time: Dept: Before: December 4, 2007 9:30 a.m. 11, 19th Floor Judge Jenkins

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DECLARATION OF STEVEN N. MACHTINGER ISO MOTION FOR PRELIMINARY INJUNCTION

Case 3:07-cv-04777-SI

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DECLARATION OF STEVEN N. MACHTINGER I am a partner at Bingham McCutchen LLP, attorneys for Plaintiff Herbert

J. Sims & Co., Inc. ("Sims") in this litigation. I make this declaration based on personal and first-hand knowledge and, if called and sworn as a witness, I could and would testify competently thereto. 2. On April 1, 2007, Mark Roven, James Darden III ("Darden"), Rod

Butterfield, Steve Bares, Jay Magwire, Carolyn Magwire, Dorothy McCarty, Richard Teerlink, Elenora Crone, Nellie Morrison, Scott M. Crone, Scott R. Crone and Nadine Vanderlanes (collectively "claimants" and, with the exception of Darden, the "Investors") initiated an arbitration proceeding against Sims before what is now known as FINRA-DR by filing a Statement of Claim. A true and correct copy of claimants' Statement of Claim is attached hereto as Exhibit A. 3. On September 17, 2007, I notified FINRA-DR that Sims was declining to

submit to arbitration of the claimants' claims because Sims had not entered into any arbitration agreements with any of the claimants and because none of the claimants are or have been its customers. A true and correct copy of that September 17, 2007 correspondence is attached hereto as Exhibit B. 4. Subsequently, FINRA-DR senior case administrator Derek Sorrells

informed me in a telephone call that FINRA-DR's policy is to continue to move a claim through the arbitration process unless and until the parties stipulate to a stay of the arbitration or a court orders that the arbitration be stayed. I communicated this FINRA-DR policy to claimants' counsel, and the claimants did not agree to a stay. As a result, on September 17, 2007, Sims filed with the United States District Court for the Northern District of California a Complaint for Declaratory and Injunctive Relief. Nonetheless, Sims has continued with the administrative process of FINRA-DR, delivering its rankings of potential arbitrators by the deadline of October 17, 2007. Sims reserved that, by participating in the arbitrator selection process, it was not submitting to have this dispute heard by a FINRA-DR arbitration panel. Indeed, for that reason,
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Sims has not executed a Uniform Submission Agreement, which by its terms would submit the 2
DECLARATION OF STEVEN N. MACHTINGER ISO MOTION FOR PRELIMINARY INJUNCTION

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current controversy to arbitration. 5. With respect to disputes submitted to FINRA-DR (or to the legacy NASD-

DR) after April 16, 1997, Rule 12200 of the NASD Code of Arbitration, entitled "Arbitration Under an Arbitration Agreement of the Rules of NASD," defines those disputes that a member firm such as Sims is required to arbitrate. A true and correct copy of NASD Code of Arbitration Rule 12200 is attached hereto as Exhibit C.

DATED: October 26, 2007 Bingham McCutchen LLP

By:

/s/ Steven N. Machtinger Attorneys for Plaintiff Herbert J. Sims & Co., Inc.

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DECLARATION OF STEVEN N. MACHTINGER ISO MOTION FOR PRELIMINARY INJUNCTION