To see more documents/articles regarding this group/organization/subject click here.
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
|
|
|
|
||
|
HELEN
RHODES, on behalf of herself and all others similarly situated, |
|
|
||
|
|
|
|
|
|
|
|
Plaintiff,
|
|
|
|
|
|
Civil Action 92-10877K |
|
||
|
vs. |
|
|
||
|
|
|
|
||
|
KEITH
RANIERE and CONSUMERS'
BUYLINE, INC. |
|
|
||
|
|
|
|
||
|
|
Defendant.
|
|
|
|
|
|
|
|
||
STIPULATION AND AGREEMENT OF
SETTLEMENT
WHEREAS:
A. On our about August 21, 1992,
Plaintiff filed her First Amended Class Action Complaint ("Amended
Complaint") on behalf of herself and all others similarly situated, in the
United States District Court for the District of Massachusetts against
Consumers' Buyline, Inc. ("CBI") and Keith Raniere
('"Raniere") (hereinafter jointly referred to as
"Defendants"). The action was brought on behalf of all persons who
purchased membership in CBI from May 1, 1990 through the date of the filing of
the Amended Complaint (August 21, 1992) and who allegedly suffered economic
loss thereby.
B.
In
her Amended Complaint, Plaintiff alleged violations of the following
by each of the defendants: (I) Sections 12(1) and
12(2) of the Securities act of 1933; (ii) Section 10(b) of the Securities
Exchange Act of 1934; (iii) civil provisions of the Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C. ξ1962 (a), ξ 1962 (c) and
ξ1962(d) ("RICO"); (iv) common law fraud and deceit; (v) false
advertising in violation of N.Y. Gen. Bus. Law ξ350; (v) operating a chain
distributor scheme in violation of N.Y. Gen. Bus. Law ξ359-fff; (vi)
deceptive acts and practices in violation of N.Y. Gen. Bus. Law ξ349; and (vii) operating an illegal
lottery in violation of the United States postal lottery law, 39 U.S.C.
ξ3005.
C.
In
response to the amended Complaint, Defendants served and filed a
motion to dismiss all counts of the Amended
Complaint. In an Order dated May 10, 1993, Judge Robert Keeton of the U.S.
District Court for the District of Massachusetts denied Defendants' motion to
dismiss the counts alleging violations of federal securities law, false
advertising, common law fraud and deceptive acts and practices, and granted
Defendants' motion to dismiss each of the counts alleging violation of the
civil RICO provisions, as well as the counts under N.Y. Gen. Bus. Law ξ359-fff and 39 U.S.C. ξ3005.
D.
Also
in response to the amended Complaint, Defendants moved to compel
arbitration of this matter, pursuant to an
arbitration clause in the CBI Affiliate Agreement which was signed by Plaintiff
and all members of the putative class, and requested that the Court stay the
matter pending resolution of the arbitration proceeding. On May 10, 1993, as
part of the same Order referred to above, Judge Keeton denied the motion to stay and refused to compel
arbitration, on the grounds that Plaintiff had made a prima facie showing
that Defendants' marketing plan violated N.Y. Gen. Bus. Law ξ359-fff, as well as the public policy
of both New York and Massachusetts.
E. Defendants have appealed judge
Keeton's ruling on their Motion to Stay to the U.S. Court of Appeals for the
First Circuit. Their appeal is pending.
F.
Plaintiff has served requests for production of documents upon each of the
Defendants, In partial response to those requests, Defendants have produced
nearly 8,000 pages of documents. Plaintiff's counsel have had the opportunity
to review such documents and have spend substantial amounts of time in
connection with the document review and analysis. Additionally, plaintiff's
counsel have engaged experts who have consulted with counsel and assisted with
the analysis of the records produced by defendants.
G.
As part of the appellate process, the Court of Appeals directed the parties to
participate in pre-argument mediation pursuant to the Civil Appeals Management
Program (CAMP) The First Circuit's Office of settlement Counsel appointed the
Honorable Alice Daniel, a former judge of the New York Supreme Court, to serve
as mediator. The parties attended a series of mediation sessions before Judge
Daniel, both in person and by telephone, in order to discuss the possibility of
settlement.
H. Counsel of plaintiff have made a
thorough study of the legal principles applicable to the Settled Claims, have
conducted extensive discovery relating to those claims, have thoroughly
evaluated the likelihood of success if the case proceeded to trial. The
decision of Plaintiff and her Counsel to settle is not an admission that the
Amended Complaint lacks merit, but is based primarily on Defendants' weak
financial condition and inability to pay an significant judgement which might
be rendered in this matter. Based upon these undertakings, the Plaintiff and
her counsel have concluded that it will be impossible to obtain a judgment,
whether by trial or settlement, which will provide any restitution for the
putative Class alleged in Plaintiff's Amended Complaint, that the d
Defendants are unable to pay the costs of any settlement to the putative Class,
that the injunctive relief provided for herein will benefit the putative Class,
and that nothing herein will bar or prejudice any member of the putative Class
from seeking any relief against the Defendants.
I. The Defendants contend that the
Amended Complaint is meritless and have at all times denied, and contain to
deny, that they have committed, or have threatened to committed, or have
threatened to commit, any wrongful acts or violations of law to any nature
whatsoever in connection with the allegations in either the original complaint
or Amended Complaint, or any other matter related in any way to any aspect of
CBI or its business and operations, or its dealings with CBI members or
distributors.
J.
Plaintiff's
Counsel have engages in extensive arms-length negotiations with
counsel for the Defendants with respect to the
settlement of the claims. Those negotiations included conferences before the
mediator, as set forth above. The Defendants, while continuing to deny all
allegations of liability, also desire to settle and terminate the claims
against them so as to avoid further lengthy and time-consuming litigation and
the burden, inconvenience and expense connected therewith.
NOW,
THEREFORE, IT IS HEREBY STIPULATED, CONSENTED TO AND AGREED, by and among the
undersigned attorneys, on behalf or their respective clients, as follows:
A.
DEFINITIONS:
1."Person"
means any individual, corporation, partnership, association, joint
stock company, trust, unincorporated association,
entity, government and any political subdivision thereof, or any other type of
legal entity.
2."Claims"
means any and all causes of action under federal, state or
common law or equity, claims, suits, demands,
rights, liabilities, damages, losses, fees, costs or expenses of any kind
whatsoever, whether class, direct, representative or individual in nature,
known, unknown or otherwise, suspected or unsuspected, fixed or contingent,
accrued or unaccrued, and whether or not concealed or hidden, which have been,
could have been or might in the future be asserted by Plaintiff and her agents,
heirs, executors, administrators, successors, or assigns or any of them against
any of the Defendants, their officers, directors or employees, or the agents, heirs,
executors, administrators, successors or assigns of any of them, arising from,
or relating in any manner to, any of the following: (i) any matter complained
of in this litigation; (ii) the presentation, offering or sale of any CBI
memberships; (iii) any presentation, offering, recruitment, sale or
participation with respect to any CBI distributor or Affiliate position; and
(iv) any matter complained of in any other pending litigation relating to or
involving any of the above.
3. "CBI Membership"
means only those amounts paid to purchase a CBI membership.
4. "Membership Fee"
means only those amounts paid to purchase a CBI membership.
5. "Distributors"
or "Affiliates" means individuals who have submitted
applications to CBI to be authorized to sell CBI memberships and recruit other
affiliates, and who have been approved as such by CBI.
B.
EQUITABLE RELIEF
As consideration for the
release of all claims by Plaintiff against the Defendants,
Defendants agree to the following equitable relief:
1.
Defendants
CBI agrees to cease and desist from all business activities
involving the recruitment of members, distributors
or affiliates through a multi-level form of direct marketing.
2.
Defendant
Raniere shall implement and strictly enforce the following policies
and procedures with respect to any multi-level
marketing program of which he is an officer, director or controlling person:
a.
All
promotional materials for such program will specify that individuals wishing to
become affiliates/distributors, or the equivalent of such person, are not
required to make any purchase or payment which violates any federal or state
securities or consumer protection law. The purchase of any product or service
by an affiliate/distributor will not in any manner affect the level of
commissions to be earned by that affiliate/distributor. Such program will
require anyone who becomes an affiliate or distributor to sign a disclaimer
stating that he/she has been informed of the above policy.
b.
Such
program will provide for separate and distinct marketing materials for the sale
of products or services to members or consumers and for the recruitment of
affiliates/distributors, or the equivalent of such persons.
c.
No
claims concerning the potential for commission earnings by
affiliates/distributors, or the equivalent of such persons, including
testimonial earnings claims, shall be made in any promotional materials for
such program, unless the average earnings of affiliates/distributors, or the
equivalent of such persons, are also disclosed.
d.
Such
program will not implement any requirement that affiliates/distributors, or the
equivalent of such persons, must sell
one membership for each affiliate or distributor he/she recruits, nor engage in
marketing which has the effect of creating a one-to-one relationship between
members and affiliates/distributors.
e.
Such
program will not make unsubstantiated representations about the amount, type,
nature or frequency of savings realized by its members who purchase products
and services through its program. Such program shall also affirmatively
disclose all limitations, terms or conditions of all such transactions at the
time of membership solicitations.
The Equitable Relief
described above shall remain binding upon the Defendants
for a period of three years from the entry of final
judgment in this matter. The parties agree that the above Equitable Relief
constitutes valuable consideration to be given by the Defendants and received
by the Plaintiff Helen Rhodes.
C. PLAINTIFF'S
ATTORNEYS' COSTS
As further consideration for
Plaintiff's release of all claims against
Defendants, Defendants agree to reimburse
Plaintiff's counsel in the amount of $25,000.for costs incurred in the
prosecution of this matter. This consideration shall be paid by Defendants as
follows: (i) $10,000.upon the execution of this Stipulation of Settlement; (ii)
45,000.thirty (30) days after execution of this Stipulation of Settlement;
(iii) $5,000.sixty (60) days after execution of this Stipulation of Settlement;
and (iv) $5,000.nently (90) days after execution of this Stipulation of
Settlement. The parties agree that the above payment of Plaintiff's attorneys'
costs constitutes valuable consideration to be given by the Defendants and
received by the Plaintiff Helen Rhodes.
D. FINANCIAL
CONSIDERATIONS
As
stated above, one of the major considerations for Plaintiff in entering into
the proposed settlement is the weak financial condition of the Defendants and
the apparent inability of the Defendants to satisfy any significant monetary
judgement, to pay an meaningful restitution to the Members of the Class, or
even to pay the costs of notice to the Members of the Class, or even to pay the
costs of notice to the Members of the Class. Therefore, as a condition
precedent to the settlement, Defendants shall submit to Plaintiff's counsel on
or before July 8, 1994, affidavits and documentary proof of their financial
condition and inability to satisfy a judgment, including as to Raniere, an
attestation that his total current net worth does not exceed negative
one million dollars (-$1,000,000.), and for each, that no insurance coverage is
available for the claims asserted in the Amended Complaint.
E.
RELEASE OF CLAIMS
1.
Individual Plaintiff's Release Of Defendants.
Upon the entry of final judgment, Plaintiff, individually
and not on behalf of the putative Class Members, completely, voluntarily,
knowingly, unconditionally and forever releases, remises, acquits and
discharges each of the Defendants, their current and former officers,
directors, employees, trustees, attorneys, insurers, and their respective
heirs, executors and administrators, representatives, successors and assigns,
from each and every claim on behalf of herself, her heirs, executors and
administrations, legal representatives, successors, and assigns, for good and
sufficient consideration, the receipt of which is herein acknowledged; and
shall be deemed to have released each Defendant, their current and former
officers, directors, employees, trustees, attorneys, insurers, and their
respective heirs, executors and administrators, legal representatives,
successors and assigns from any and all Claims, together with attorneys fees,
interests and costs, except that nothing herein releases any claim arising out
of a violation of this Stipulation of Settlement. It is expressly understood
and agreed that nothing in this Release shall bar any putative Class member
from seeking any remedy from the Defendants arising out of or related to the
amended complaint or otherwise.
2.
Defendants' Release Of Plaintiffs And Plaintiff's Counsel.
Upon the entry of final judgment, the Defendants
shall be deemed to have individually, completely, voluntarily, knowingly,
unconditionally and forever released, remised, acquitted and discharged
Plaintiff and Plaintiff's Counsel from every and all asserted of potential,
separate, joint, individual, or other claims, actions, rights, causes of
action, demands, liabilities, losses and damages of every kind and nature,
anticipated or unanticipated, direct or indirect, fixed or contingent, known or
unknown, under federal, state or common law, or any other law or regulation, or
at equity, against Class counsel and the Plaintiff or any of them for, based
upon or by reason of the institution, prosecution, assertion or resolution of
this litigation or the Claims, except that nothing herein releases any claim
arising out of a violation of this Stipulations of Settlement.
3.
Without
in any way limiting the preceding, the parties acknowledge that they
may have sustained damages, expenses and losses in
connection with the subject matter of the Claims which are presently unknown or
not suspected and that such damages, expenses and losses, if any, may give rise
to additional damages, expenses or losses in the future which are not now
anticipated by them. The Parties acknowledge that this Stipulation and the
foregoing releases have been negotiated and agreed upon in light of this
realization and, being fully advised thereof, hereby expressly waive any and
all rights that they may have under any statue or common law principle which
would limit the effect of the foregoing releases to those claims actually known
or suspected to exist at the time of execution of this Stipulation of
Settlement.
F. TOLLING AGREEMENT
This
Settlement Agreement does not settle or release any claims of any putative
Class members arising out of or related to the causes of action asserted in the
Amended Complaint, other than those of the Plaintiff Helen Rhodes. The filing
of the Complaint tolled the statute of limitations as to any such claims, which
were not already barred at the time the Complaint was filed, until the date a
final judgment is entered in this actions. Nothings in this agreement shall
preclude or stop the Defendants from raising any defense to any claim which may
be asserted by any Class Member, other than the tolling of nay applicable
statute of limitations during the pendency of this action as set forth in this
paragraph.
G. NOTICE
It
is the understanding of the parties that in light of the Plaintiff's voluntary
dismissal of her motion for class certification, and in light of the provisions
of this agreement which expressly recognize the rights of putative class
members to asset any and all claims against the Defendants, that no notice to
the members of the putative class is required under Rule 23 of the Federal
Rules of Civil Procedure.
H. EFFECT OF DISAPPROVAL
CANCELLATION OR TERMINATION
1. This Stipulation of Settlement
shall become null and void in the event that the Court modifies or refuses to
approve any material apart of this Stipulation, or if, on appeal, an appellate
court materially modifies the final judgement or the terms of the Stipulation
of Settlement, unless all parties hereto promptly agree in writing to proceed
with the settlement effected by this Stipulation of Settlement as and if
modified after the determination of the Court or an appellate court. In
particular, if the Court requires either or both of the parties to provide
notice of this settlement to the putative class, this shall constitute a material
modification of this Stipulation, making such Stipulation null and void. a) In the event that the Stipulation
of Settlement is not approved by the Court, then: a) this Stipulation of
Settlement shall become null and void, and of no further force and effect; (b)
this Stipulation of Settlement and all negotiations, statements, releases, and
proceedings relating there to shall be, except with respect to disputes arising
in connection with subpart (c) below, without prejudice to the rights of nay and
all parties hereto, shall not be used for nay purpose whatsoever in any
subsequent proceeding in this litigation or in any other action in any court or
tribunal, and shall not be construed to be an admission or concession by any
party hereto; and (c) any amounts paid to Plaintiff or Plaintiff's counsel in
consideration of the settlement of this matter shall be refunded to the
Defendants. In such event, the parties to this Stipulation shall be deemed to
have reverted to their respective status as of the date and time immediately
prior to the execution of this Stipulation and they shall proceed in all
respects as if this Stipulation and related orders had not been executed.
I.
SUBMISSION
OF SETTLEMENT TO COURT FOR REVIEW:
FINAL JUDGMENT
1.
Promptly
following execution of this Stipulation of Settlement, and
the payment of the Plaintiff's Attorney's Costs as
set forth in Section C. above, the parties shall apply to the Court for the
entry of an Order:
a.
approving
the settlement;
b.
withdrawing
Plaintiff's Motion for Class Certification; and
c.
dismissing
Defendants' appeal to the First Circuit.
2.
If
the Court approves the settlement as set forth in this Stipulation
of Settlement, then an Agreed Order and Judgment
(the "Final Judgment") substantially in the form attached hereto as
Exhibit shall be entered in this action:
a. directing that this action be dismissed as to named
Plaintiff only,
without costs and without costs and without
prejudice as to the other Class Members, in full and final discharge of the
Claims against the Defendants;
b. reserving jurisdiction over all
further proceedings in this actions, including the administration and
consummation of this settlement and the enforcement of the provisions hereunder
for equitable relief;
c.
finding
that all claims for contribution, indemnification, or
reimbursement, however denominated, against
Defendants arising under federal or state law, including those based in tort,
contract, or statute, or any other body of law, in favor of persons who are
asserted to be or who may be joint tortfeasors or wrongdoers, however
denominated, with the Defendants, are extinguished discharged, satisfies,
barred, enjoined and/or otherwise unenforceable;
d.
directing
that the judgement entered pursuant hereto be deemed final pursuant to Fe. R.
Civ. P. 54(b).
J. NON-ADMISSION OF LIABILITY OF THE DEFENDANTS
Neither
this Stipulation of Settlement, nor the settlement embodied therein, nor the
payment or provision of any consideration provided for in this Stipulation of
Settlement nor any action taken in accordance with the terms and conditions set
forth here in (a) is or shall be construed or deemed to be an admission by the
Defendants or their past or present officers, directors, employees,
predecessors, executors, administrators, legal representatives, successors,
representatives, agents, attorneys, heirs or assigns respecting the validity or
invalidity of any of the claims asserted or of damages or of the Defendants'
liability with respect to any such claim, or of any alleged wrongdoing by any of
them whatsoever; or (b) shall be offered for admission in any proceeding or
utilized in any manner whatsoever as evidence of any such alleged liability or
wrongdoing or of any such amount of damages; provided, however, that nothing
contained in this paragraph shall preclude the Stipulation of Settlement from
being used, offered or received in evidence in any proceeding to approve,
enforce or otherwise effectuate the settlement.
K. MISCELLANIOUS
PROVISIONS
1.
The
parties hereto and their attorneys agree to cooperate fully with one
another in seeking Court approval of this
Stipulation of Settlement and to use their best efforts to effect the
consummation of this Stipulation of Settlement and the settlement provided for
herein.
2.
This
Stipulation of Settlement, including the Exhibits hereto, shall be binding
on and inure to the benefit of the Parties hereto,
including all Class Members, and their respective heirs, successors, assigns,
executors, administrators and legal representatives.
3. All of the Exhibits attached hereto are
hereby incorporated by this reference as though fully set forth herein.
4. This Stipulation may be amended or modified only by a written instrument
signed by all Parties or their
successors-in-interest. Counsel may sign the written instrument on behalf of
Parties.
5. The waiver by one Party of any breach of this Stipulation by an
other Party
shall not be deemed a waiver of any other prior or
subsequent breach of this Stipulation.
6.
This
Stipulation and its exhibits constitute the entire agreement among the
parties hereto, and no representations, warranties
or inducements have been made to any Party concerning this Stipulation or its
exhibits other than the representations, warranties and covenants contained and
memorialized in such documents.
7.
This
Stipulation may be executed in one or more counterparts. All executed
counterparts and each of them shall be deemed to be
one and the same instrument provided that counsel for the Parties to this
Stipulation shall exchange among themselves original signed counterparts.
DATEDD:
July____,1994
GILMAN
AND PASTOR
By: ________________________
Kenneth
G. Gilman
BBO#
192760
David
Pastor
BBO
# 391000
One
Boston Place
28th
Floor
Boston, Massachusetts 02108
Telephone:
(617)589-3990
By: _________________________
Douglas
M. Brooks
BBO#
058850
One
Boston Place
28th
Floor
Boston,
Massachusetts 02108
Telephone:
(617)589-3990
Counsel
for Plaintiff
PATTON, BOGGS & BLOW
By: _________________________
Garret
G. Rasmussen
BBO#
412420
Glenn
T. Reynolds
2550
M Street, N.W.
Washington,
D.C. 20037
(202)457-6000
MASTERMAN, CULBERT &
TULLY
By: __________________________
James
D. Masterman
BBO#
324000
Mary
Elizabeth O'Neal
1
Lewis Wharf
Boston,
MA 02110