Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 1U.S.

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9 PageID 7722
COURT
;,;t NOR'llmRN DISTRICT OF TEXAS

THE UNITED STATES DISTRICT qURT

NORTHERN DISTRICT OF TE AS~
If FILED

FEB J 82011
DALLAS DIVISION

BILLITTERI v. SECURITIES 3:09-cv-O1568-F

AMERICA, INC., et al. (Provident AND RELATED CASES
Royalties Litigation)

THIS DOCUMENT RELATES TO:

ALL ACTIONS

C. RICHARD TOOMEY, et al. v.

3:10-cv-01833-F
SECURITIES AMERICA, INC., et al.

IN RE: MEDICAL CAPITAL Case No. ML 10-2145 DOC

SECURITIES LITIGATION (RNBx) (C.D. Cal.)

THIS DOCUMENT RELATES TO: Limited transfer for settlement

McCoy, SACV09-1084 DOC (RNBx) (C.D. purposes as Case No. 3-11-cv-
Cal.) 00191-F (N.D. Tex.)

ORDER GRANTING PLAINTIFFS' MOTION FOR

TEMPORARY RESTRAINING ORDER

BEFORE THE COURT are Plaintiffs Joseph Billitteri, the Sharon Kreindel

Revocable Trust DTD 02/09/2005, Henry Mitchell, Alvin Sabroff, and June Sabroff's

("the Representative Plaintiffs") Motion for Temporary Restraining Order under the All

Writs Act (Billitteri Docket No. 202, Toomey Docket No. 67, and McCoy Docket No.

124), filed February 17, 2011. Defendants Securities America, Inc. and Securities

America Financial Corporation ("the Settling Defendants") do not oppose the Motion.
1

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Earlier on February 17, 2011, the Representative Plaintiffs and the Settling Defendants

jointly filed a Motion for Preliminary Approval of Partial Class Action Settlement

(Billitteri Docket No. 199, Toomey Docket No. 64, and McCoy Docket No. 121), which

notified the Court of a Settlement Agreement reached between the Representative

Plaintiffs and the Settling Defendants. The parties' Motion seeks the Court's approval of

a Settlement Agreement between the Representative Plaintiffs as representatives of the

prospective classes in this case and the Settling Defendants. The Representative

Plaintiffs seek preliminary approval of the a Settlement Agreement "on behalf of persons

who invested through Securities America, Inc. in (I) a series of shale gas ventures

sponsored by Provident Royalties, LLC between September 2006 and January 2009, and

(2) a series of notes sponsored by Medical Capital Holdings, Inc. between November

2003 and July 2008." Mot. for Prelim. Approval, Billitteri Docket No. 199, Toomey

Docket No. 64, McCoy Docket No. 121, at 1. Among the relief sought by the parties is a

court order "to preserve the status quo pending the Court's final settlement approval

determination, preliminarily enjoining all proceedings in federal or state court and all

arbitration proceedings by or on behalf of members of the proposed Settlement Classes

against Settling Defendants or their Registered Representatives asserting claims arising

from its offer and sale of Provident Securities or Medical Capital Notes." See id. at 2.

More immediately, the parties seek a Temporary Restraining Order that would

temporarily stay an arbitration proceeding scheduled to begin on February 22, 2011 in

Los Angeles, California, entitled Bryan v. Securities America, which is being conducted

before the Financial Industry Regulatory Authority ("FINRA") and has been captioned as

 Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 3 of 9 PageID 7724

FINRA Arbitration No. 10-01437. The parties also ask the Court to stay two additional

FINRA arbitrations: Guillaume v. Securities America, FINRA Arbitration No. 09-05740,

scheduled to begin in Atlanta, Georgia on February 28, 2011, and Albino v. Securities

America et ai, FINRA Arbitration No. 09-06150, scheduled to begin in Los Angeles,

California on March 1, 2011. The claimants in these arbitrations would apparently be

members of the proposed settlement class. If the arbitration were to proceed, it would

expend funds for legal defense that would otherwise be made available to class members.

Additionally, if the claimants in these arbitrations are fully successful, they could receive

a significant portion of the funds available to potential class members under the proposed

Settlement Agreement. Should the arbitrations be temporarily restrained, funds that

would otherwise be equitably distributed to members of the potential settlement class

would not be depleted. In the Motion for Preliminary Approval, the parties before the

Court seek similar injunctive relief to enjoin other arbitration proceedings scheduled to

take place throughout 20 II that would have the same potential effect on the funds

available to all potential class members as the aforementioned upcoming arbitrations.

The Representative Plaintiffs and the Settling Defendants ask the Court to exercise

its authority under the All Writs Act to temporarily restrain the arbitrations from

proceeding. The All Writs Act provides, "The Supreme Court and all courts established

by Act of Congress may issue all writs necessary or appropriate in aid of their respective

jurisdictions and agreeable to the usages and principles of law." 28 U.S.c. § 16S1(a). In

a complex class action such as this one, district courts have been ruled to have the

authority to stay proceedings taking place elsewhere "in aid of their respective

 Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 4 of 9 PageID 7725

jurisdictions" to assist the courts in the complex task of ensuring resolutions to the claims

before it. See In re Baldwin-United Corp., 770 F.2d 328, 338 (2d Cir. 1985) ("An

important feature of the All-Writs Act is its grant of authority to enjoin and bind non-

parties to an action when needed to preserve the court's ability to reach or enforce its

decision in a case over which it has proper jurisdiction."); see also United States v. New

York Tel. Co., 434 U.S. 159, 174 (1977) ("The power conferred by the Act extends, under

appropriate circumstances, to persons who, though not parties to the original action or

engaged in wrongdoing, are in a position to frustrate the implementation of a court order

or the proper administration of justice . . . , and encompasses even those who have not

taken any affirmative action to hinder justice.") (citations omitted).

Furthermore, other courts have held that districts courts have the authority in

similar situations to enjoin litigation in other courts pending the approval of a class

certification and a settlement. For example, in Liles v. Del Campo, 350 F.3d 742 (8th

Cir. 2003), the Eighth Circuit wrote:

The district court enjoined proceedings in related litigation to preserve the

settlement fund, to eliminate the risk of inconsistent or varying
adjudications that would deplete the fund, to avoid confusion among the
class members, and to save scarce judicial resources. The court acted
within its discretion in issuing the injunction because enjoining related
litigation was necessary to ensure the enforceability of the order approving
the preliminary settlement and to prevent further draining of the limited
settlement fund. As the district court found, neither settlement nor
notification of class members could be achieved if the settlement fund were
eaten up by litigation in other courts. Without enjoining related litigation,
the court ran the risk of undermining the settlement that had been
negotiated and preliminarily approved and of exhausting the only asset
available for class recovery. We conclude that the court did not abuse its
discretion in enjoining related litigation.

 Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 5 of 9 PageID 7726

Id. at 746-47; see also In re Joint Eastern & Southern Dist. Asbestos Litig., 134 F.R.D.

32, 37-39 (E.D.N.Y. 1990) (enjoining all asbestos litigation pending against the

defendant to preserve a settlement fund pending approval based in part on the Court's

authority under the All Writs Act). District courts have similarly used this authority

under the All Writs act to enjoin arbitration proceedings that would interfere with class

action settlements. See Demint v. NationsBank Corp., 208 F.R.D. 639, 644, 644 n.8

(M.D. Fla. 2002) (enjoining under the All Writs Act the arbitration of claims that were

resolved under a class action settlement); In re Painewebber Ltd. P'ships Lltig.,

No. 94 CIY. 8547 SHS, 1996 WL 374162, at *4 (S.D.N.Y. July 1, 1996) (holding that the

district court "may enjoin arbitration-even before judgment has been entered in this

action-where that injunction would be 'in aid of its jurisdiction' within the terms of the

Baldwin-United line of cases").

While the Court has not yet ruled on the pending Motion for Preliminary

Approval, it is the opinion of the Court that a temporary restraining order is appropriate

to preserve the status quo and ensure that the conditions for reaching a Settlement

Agreement remain in place as the Court considers the Motion for Preliminary Approval.

It is true that, unlike in Baldwin-United or Liles, the Court is enjoining arbitration

proceedings rather than litigation in another court. However, this Order does not provide

for a long-standing injunction of arbitrations involving the Settling Defendants' sale of

Provident Securities, but merely provides for a temporary restraining of those

proceedings while the Court considers the Motion for Preliminary Approval. Therefore,

the Court will have an opportunity to consider the question of whether the Court has the

 Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 6 of 9 PageID 7727

authority to enjoin an arbitration being pursued subject to a potential class member's

agreement with the Settling Defendants, or whether such relief would be appropriate,

when the Court rules on the pending Motion for Preliminary ApprovaL See In re Piper

Funds, Inc., 71 F.3d 298, 302-03 (8th Cir. 1995) (holding that a district court's reason for

enjoining an arbitration, preserving a carefully negotiated class settlement agreement,

was not a sufficient basis to limit an opted-out class member's contractual right to

arbitrate); contra Painewebber, 1996 WL 374162 at *4 (holding that "it would be

incongruous if the Court had the authority to stay pending litigation, but not to enjoin

arbitration, 'in aid of its jurisdiction' even before judgment is entered.").

In Baldwin-United, a case in which the Second Circuit affirmed a district court's

actions in staying potential state court litigation by non-parties, the district court issued a

temporary restraining order on other litigation and held a hearing before issuing an

injunction upon state court litigation. Baldwin-United, 770 F .2d at 333. The Court

believes such an action is appropriate here. For the purposes of this Temporary

Restraining Order, the Court's exercise of its authority under the All Writs Act will

preserve the funds available to the Settling Defendants for the proposed Settlement

Agreement from being depleted by the costs to defend the arbitration and potential

arbitration awards until the Court determines whether to grant preliminary approval of the

partial class action settlement and whether to preliminarily enjoin all federal, state, and

arbitration proceedings related to the Settling Defendants' sale of Provident Securities or

Medical Capital Notes. A Temporary Restraining Order issued at this time is "needed to

 Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 7 of 9 PageID 7728

prevent third parties from thwarting the court's ability to reach and resolve the merits of

the federal suit before it." Id. at 338-39.

Accordingly, the instant Motion for Temporary Restraining Order is GRANTED. I

It is ORDERED that the following arbitrations are TEMPORARlLY RESTRAINED

FROM PROCEEDING:

1. Bryan v. Securities America, FINRA Arbitration No. 10-01437, February 22 ­

March 4, 2011, Los Angeles, CA: $2.5 million damages sought.

2. Guillaume v. Securities America, FINRA Arbitration No. 09-05740, February 28 ­

March 4, 2011, Atlanta, GA: $200,000 damages sought.

3. Albino v. Securities America et ai, FINRA Arbitration No. 09-06150, March 1 ­

March 4, 2011, Los Angeles, CA: $2.1 million damages sought.

This Temporary Restraining Order shall remain in effect until the Court has issued a

decision on the pending Motion for Preliminary Approval, including the decision to

enjoin any arbitrations against the Settling Defendants for claims arising out of its sale of

Provident Securities or Medical Capital Notes, which shall be issued no later than March

7, 2011 at 5:00 p.m., unless such deadline is altered by the Court. A hearing regarding

the Motion for Preliminary Approval and its request for additional injunctive relief shall

take place on March 3, 2011 at 2:00 p.m.

In accordance with the requirement that those subject to a temporary restraining

order receive appropriate notice of its terms, the Clerk's office is instructed to provide

notice of this Order to the following individuals at its earliest opportunity:

IThis resolves Billitteri Docket No. 202, Toomey Docket No. 67, and McCoy
Docket No. 124.

Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 8 of 9 PageID 7729

Brvan et af v. Securities America. Inc. - FINRA No. 10-01437

Counsel
Robert Uhl
Philip M. Aidikoff
Ryan Bakhtiari
Aidikoff, Uhl & Bakhtiari
9454 Wilshire Boulevard, Suite 303
Beverly Hills, CA 90212
Tel: 310-274-0666
Fax: 310-859-0513
paidi@aol.com
robertauhl@aol.com
rbakhtiari@aol.com

Bryan Arbitration Panel (Contact Through FINRA Case Administrator)

Case Administrators: Christina Rovira and Ianthe Philips
Arbitrators: Kendall C. Reed (Chair); Kenneth E. Kreh; Chester Firestein
FINRA Dispute Resolution
300 South Grand Avenue, Suite 900
Los Angeles, CA 90071
Tel: 213-613-2680
Fax: 310-527-4766
christina.rovira@finra.org
ianthe.philips@finra.org
westemprocessingcenter@finra.org

Albino v. Securities America. Inc. and Steve Hoshimi - FINRA No. 09-06150

Counsel
Andrew Stoltmann
David Neeman
Stoltmann Law Offices, P.e.
lOS. LaSalle Street, Suite 3500
Chicago, IL 60603-1002
Tel: 312-332-4200
Fax: 312-332-4201
Andrew@stoltlaw.com
DaveNeuman@stoltlaw.com

Case 3:09-cv-01568-F Document 210 Filed 02/18/11 Page 9 of 9 PageID 7730

Albino Arbitration Panel (Contact Through FINRA Case Administrator)

Case Administrator: Arjan Singh
Arbitrators: George L. Tindall (Chair); Mark A. Levy; Dana L. Bigman
FINRA Dispute Resolution
300 South Grand Avenue, Suite 900
Los Angeles, CA 90071
Tel: 2l3-6l3-2680
Fax: 310-527-4766
arj an.singh@finra.org
westernprocessingcenter@finra.org

Guillaume v. Securities America. Inc. - FINRA No. 09-05740

Counsel
Edward J. Dovin
Dovin Malkin & Ficken LLC
Five Concourse Parkway, Suite 2775
Atlanta GA 30328
Tel: 770-829-3869
Fax: 770-829-3865
ejdovin@dmflawfirm.com

Guillaume Arbitration Panel (Contact Through FINRA Case Administrator)

Case Administrator: Joan M. Pendergast
Arbitrators: John D. Mattingly (Chair); David E. Hulstrom; Brock Bingham
Gordon, Sr.
FINRA Dispute Resolution
Boca Center Tower 1
5200 Town Center Circle, Suite 200
Boca Raton, FL 33486-1015
Tel: 561-416-0277
Fax: 301-527-4868
FL-Main@finra.org

IT IS SO ORDERED.

Signed this 18th day of February, 2011.

Senior United States District Judge