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SASSAN SHAHROKHINIA, 11678 Chippenham
Way, San Diego, CA 92128, Individually and On
Behalf of All Others Similarly Situated, CLASS ACTION COMPLAINT
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Plaintiff, JURY TRIAL DEMANDED
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vs. CIVIL ACTION NO.:1:05cv00620
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3900 Wisconsin Avenue , NW Washington, DC BEFORE THE HONORABLE
20016 , FRANKLIN RAINES , c/o Federal JUDGE RICHARD J. LEON
National Mortgage Association , 3900 Wisconsin
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Avenue , NW Washington , DC 20016 , TIMOTHY
HOWARD , c/o Federal National Mortgage
Association , 3900 Wisconsin Avenue, NW
Washington, DC 20016 , and LEANNE G.
SPENCER, c/o Federal National Mortgage
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Association , 3900 Wisconsin Avenue, NW
Washington , DC 20016,
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Defendants.
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I. OVERVIEW:
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For the reasons set out below, Plaintiffs in the above-styled case respectfully
assert that the Court should not consolidate this case with in re Fannie Mae Securities
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Please be advised that the Plaintiff is concurrently filing an "Objection to the Stipulated Order of
Consolidation" in In re Fannie Mae Securities Litigation (Consolidated Civil Action No. 1:04-cv-
01639).
Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 2 of 11
The Shareholders' Class Action is brought on behalf of all those who purchased
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Fannie Mae common stock.2 In contrast, this case (Option Traders' Class Action) is
brought on behalf of a different class -- all those who purchased call options or sold put
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options on Fannie Mae common stock.3
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Plaintiffs respectfully assert that consolidation of these cases is unwarranted
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• Courts treat option traders and shareholders as different classes;
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Action, abandoned option traders when they defined their class;
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• The Public Securities Litigation Reform Act (PSLRA) requires the
Court to appoint lead counsel for the option traders; and
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• Coordination , rather than consolidation , is a better way to avoid
unnecessary costs and delay.
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II. PROCEDURAL HISTORY:
In September 2004, Vincent Vinci filed the first of several class action lawsuits on
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behalf of purchasers of Fannie Mae securities.4 The plaintiffs in these actions stipulated
The terms of this Order apply to any action hereinafter filed in this
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4 See Vinci v. Federal National Mortgage Association, et al. (Civil Case No. 1:04-cv-01639)
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Complaint at ¶1.
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 3 of 11
In January 2005, the Court appointed the Ohio Public Employees Retirement
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System and State Teachers Retirement System of Ohio (collectively referred to as Lead
Plaintiffs) as lead plaintiffs for the Shareholders' Class Action. Two months later, Lead
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Plaintiffs filed a "Consolidated Class Action Complaint for Violations of Federal
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Securities Laws" (Consolidated Complaint). Unlike the various underlying complaints,
the Consolidated Complaint seeks relief solely for "a class comprised of all those who
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purchased Fannie Mae common stock (emphasis added).s6
Plaintiff Sassan Shahrokhinia did not purchase Fannie Mae common stock, he
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sold put options on Fannie Mae's common stock. As a result, he does not qualify as a
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class member of the class in the Consolidated Complaint. Because Lead Plaintiffs in the
Shareholders' Class Action have chosen to exclude option traders like him from the
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class, he has filed Option Traders' Class Action "on behalf of a class comprised of all
those who purchased call options or sold put options on Fannie Mae common stock.,7
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On April 7, Shahrokhinia received a copy of the Consolidated Order indicating his case
was consolidated with the Shareholders ' Class Action. Shahrokhinia has now timely
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Options traders do not stand in the same shoes as shareholders. While option
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traders and shareholders both have an interest in proving the same allegations against
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 4 of 11
defendants , they have different and competing interests in the outcome of the litigation.
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Put bluntly, Fannie Mae shareholders and option traders are competing with each other
for the highest possible recovery . Every penny option traders recover is one less penny
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available for shareholders.
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Based on this inherent conflict of interest , a number of courts have treated option
traders and shareholders as separate and distinct classes when both bring a securities-
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fraud class action against the same defendant.
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securities-fraud class actions were filed. "The cases were subsequently consolidated
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into two separate putative class actions, one consisting of purchasers of Green Tree
stock ... (the 'stock' action ) and the other consisting of traders of options on Green
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Tree stock ... (the `options action ) (emphasis added)."9
Similarly, in in re Arakis Energy Corp. Sec. Litig.10, stock purchasers sued Arakis
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and its officers and directors, accusing them of disseminating false information to
artificially inflate the price of Arakis' stock. The court consolidated 22 individual actions
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and certified a class of individuals who purchased Arakis stock during the class period.
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Three years later, several options traders sought to certify a new class based on the
Like the courts in Green Tree and Arakis, this Court should treat Fannie Mae
options traders as a separate class than those who purchased Fannie Mae common
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stock.
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8 In re Green Tree Financial Corp. Options Litigation 2002 U.S. Dist. LEXIS 13986 (Minn. 2002).
9 Id. at p. 2.
to In re Arakis Energy Corp. Sec. Litig. 1999 U.S. Dist. LEXIS 22246 (E.D. NY 1999).
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 5 of 11
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Although none of the individual plaintiffs in the Shareholders' Class Action were
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options traders, all of their individual complaints were brought on behalf of the
purchasers of Fannie Mae securities. Under the Securities and Exchange Act, the term
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"securities" means both shareholders and options traders." Thus, options traders would
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arguably be included under an action brought under the Act. However, as the
Consolidated Complaint reflects, Lead Plaintiffs have abandoned option traders and
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have limited the class to common shareholders only.
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Consolidated Complaint's class definition are significant. It is not hard to picture a
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scenario down the road where Lead Plaintiffs or defendants argue options traders
should not share in any recovery in the Shareholders' Class Action based on the fact
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that (1) they are not part of the defined class, and / or (2) the interests of some options
Moreover, Lead Plaintiffs' exclusion of option traders prevents them from now
including options traders in the Shareholders' Class Action. A party cannot seek to
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include a group in the class when it has previously taken an inconsistent position in the
litigation with regard to the definition of the class.12 By not including option traders in the
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Consolidated Complaint's definition of the class, Lead Plaintiffs cannot now say they
Finally, Lead Plaintiffs' omission of option traders from the Shareholders' Class
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Action cannot be excused as merely inartful pleading. An adequately defined class must
" 15 U.S.C. § 78c(a)(1) provides: "The term security means any ... put, call, straddle, option ..
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12 See W. Alton Jones Foundation v. Chevron U.S.A., Inc. 97 F.3d 29 (2d Cir. 1996) (Defendants
could not argue group was included in class settlement when they had previously argued group
was not included in the class).
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 6 of 11
delineate the class with a "fair degree of specificity or some precision.03 Here, Lead
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Plaintiffs have clearly defined the class to exclude option traders, expressly describing
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The Option Traders' Class Action should not be consolidated with the
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Shareholders Class Action because options traders were intentionally abandoned from
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V. OPTION HOLDERS WILL SUFFER PREJUDICE IF THE CASES ARE
CONSOLIDATED
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Rule 42 of the Federal Rules of Civil Procedure empowers a trial judge to
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consolidate actions for trial when there are common questions of law or fact to avoid
unnecessary costs or delay. But considerations of convenience and economy must yield
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to a paramount concern for a fair and impartial trial.15 Consolidation is inappropriate
when it will adversely affect the rights of the parties, including where "management of
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the consolidated case is vested in lead counsel, whose efforts are likely to focus on the
interests of the majority, thereby depriving the minority of full discovery and
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preparation."'s
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Here, we respectfully assert that Fannie Mae options traders will clearly suffer
severe prejudice if their case is consolidated with the Shareholders' Class Action.
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As mentioned above, Lead Plaintiffs expressly defined the class as "those who
purchased Fannie Mae common stock,"" effectively abandoning Fannie Mae options
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13 7 Newberg on Class Actions (4th Ed.) Shareholder & Derivative Suits, § 22:76, p. 333.
15 Johnson v. Celotex Corp. 899 F.2d 1281, 1285 (2nd Cir. 1990).
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16 8 Moore's Federal Practice (3d Ed. 2004) Consolidation: Separate Trials, § 42.10[6][a], p. 42-
21.
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 7 of 11
traders from coverage by the Consolidated Complaint. We believe that the reasons for
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this exclusion are quite simple: Lead Plaintiffs are large State pensions boards that
purchased Fannie Mae stock and did not trade in Fannie Mae options. Lead Plaintiffs
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have no interest in including options traders in their class and even less interest in
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looking out for the best interests of options traders in this litigation. In fact, Lead
Plaintiffs have an incentive to direct this litigation such that option traders receive no
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recovery at all.
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VI. IN ORDER TO ENSURE THAT THE INTERESTS OF OPTION TRADERS ARE
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PROPERLY REPRESENTED, THE COURT SHOULD FOLLOW THE PSLRA S
REQUIREMENTS AND APPOINT A LEAD PLAINTIFF FOR THE OPTION
TRADERS CLASS. su
As the record reflects, Shahrokhinia filed Option Traders' Class Action on March
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24, 2005. As required by the Private Securities Litigation Reform Act 1995 (PSLRA), a
press release, informing the business world of his lawsuit, was filed on the following day,
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March 25, 2005. The press release further informed other option traders that they had
until May 24, 2005 to move the Court to serve as lead plaintiffs for the class.
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Although Shahrokhinia's attorney has received calls from several option traders,
he is not aware of any other option traders who have filed a lawsuit or moved the Court
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to be appointed lead plaintiff. Accordingly, after May 24, 2005, Shahrokhinia will ask the
class members.s18
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 8 of 11
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In order to avoid waste of time and money, confusion, and burden on the court,
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the Federal Manual for Complex Litigation suggests that district courts appoint liaison
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Unlike consolidation, coordination achieves "efficiency and economy without
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jeopardizing fairness to the parties.s2°
As discussed above, consolidating the Option Traders' Class Action with the
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Shareholders' Class Action will result in prejudice to Fannie Mae option traders. Based
on the foregoing, Shahrokhinia respectfully urges that this Court should coordinate
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rather than consolidate these actions, and appoint a liaison counsel from each case to
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coordinate discovery, law and motion practice, settlement negotiations, and any other
pretrial activities. Through the coordination, rather than consolidation of these actions, it
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our client's sincere belief that the goals of judicial economy will be served and the
VIII. CONCLUSION
Fannie Mae options traders are not included in the Shareholders' Class Action's
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definition of the class. Nor should they be since they stand in different shoes than
Fannie Mae's shareholders and will suffer prejudice if they are included in the Class.
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Thus, the Court should not consolidate this case with the Shareholders' Class Action;
but instead coordinate the two actions for all pre-trial purposes.
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19 Manual for Complex Litigation, Fourth (Federal Judicial Center 2004) Coordination in Multiparty
Litigation - Lead/Liaison Counsel and Committees, § 10.22, p. 24.
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 9 of 11
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LAW OFFICE OF FRANK J. JOHNSON
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(Admitted Pro Hac Vice on April 12, 2005)
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(Admitted Pro Hac Vice on April 12, 2005)
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402 W. Broadway, 27th Floor
San Diego, CA 92101
Telephone: (619) 230-0063
Facsimile: (619) 230-1839
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Local Counsel
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MARTIN LILES, PLLC
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Robert W. Liles (DC Bar # 473876)
1054 31st Street, N.W.
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Suite 415
Washington, DC 20007
Telephone: (202) 965-3060
Facsimile: (202) 965-3063
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E-mail: rliles@martynliles.com
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 10 of 11
CERTIFICATE OF SERVICE
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I certify that on April 15, 2005, I electronically filed the foregoing with the Clerk of Court
using the CM/ECF system, which will send notification of such filing to the following
counsel of record in this matter who are registered on the CM/ECF. Service was
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accomplished on any of the following counsel not registered through the CM/ECF
system via regular U.S. mail on the 15th day of April 2005.
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John H. Beisner, Esq.
Jeffrey W. Kilduff, Esq.
Kimberly A. Newman, Esq.
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Michael J. Walsh, Jr., Esq.
O'Melveny & Myers LLP
1625 Eye Street, N.W.
Washington, DC 20006
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-and-
Seth Aronson
O'Melveny & Myers LLP
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400 South Hopr Street, 15th Floor
Los Angeles, CA 90071-2899
Steven M. Salky
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Erin Delinsky
Zuckerman Spaeder LLP
1201 Connecticut Ave., N.W.
12th Floor
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Washington, DC 20036-2638
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Case 1:05-cv-00620-RJL Document 7 Filed 04/15/2005 Page 11 of 11
Local Counsel
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MARTIN LILES, PLLC
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V
ZA' U,
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By:
Robert W. Liles (DC Bar # 473876)
1054 31st Street, N.W.
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Suite 415
Washington, DC 20007
Telephone: (202) 965-3060
Facsimile: (202) 965-3063
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E-mail: rliles@martynliles.com
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Case 1:05-cv-00620-RJL Document 7-2 Filed 04/15/2005 Page 1 of 3
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SASSAN SHAHROKHINIA, 11678 Chippenham CLASS ACTION COMPLAINT
Way, San Diego, CA 92128, Individually and On
Behalf of All Others Similarly Situated, JURY TRIAL DEMANDED
d.
Plaintiff,
CIVIL ACTION NO.:1:05cv00620
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vs.
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3900 Wisconsin Avenue , NW Washington, DC BEFORE THE HONORABLE
20016 , FRANKLIN RAINES , c/o Federal JUDGE RICHARD J. LEON
National Mortgage Association , 3900 Wisconsin
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Avenue, NW Washington , DC 20016 , TIMOTHY
HOWARD, c/o Federal National Mortgage
Association , 3900 Wisconsin Avenue, NW
Washington, DC 20016, and LEANNE G.
SPENCER, c/o Federal National Mortgage
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Association , 3900 Wisconsin Avenue, NW
Washington, DC 20016,
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Defendants.
ORDER
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Upon application of plaintiff Sassan Shahrokhinia, and after good cause shown:
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1. The above-styled case is hereby relieved from the Court's April 7, 2005 Order
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consolidating it with in re Fannie Mae Securities Litigation (Consolidated Civil Action No.
1:04-cv-01639).
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2. Any action bought on behalf of those who traded in options on Fannie Mae
common stock, involving substantially related questions of law and fact, hereafter filed in
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or transferred to this Court, shall be consolidated with this case and not with in re Fannie
3. All future pleadings involving Fannie Mae option traders shall be filed under Case
No. 1:05-cv-00620 and shall have the following caption: In re Fannie Mae Options
Case 1:05-cv-00620-RJL Document 7-2 Filed 04/15/2005 Page 2 of 3
Traders Litigation, Consolidated Civil Action No. 1:05-cv-00620. The consolidation will
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be for all purposes through final judgment.
4. The Clerk of the Court shall maintain a Master Docket and case file under the
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Caption "In re Fannie Mae Options Traders Litigation, Master Civil Action No. 1:05-cv-
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00620." All orders pleadings, motions and other documents shall when filed and
docketed in the master case file, be deemed filed and docketed in each constituent
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action to the extent applicable. When an order, pleading, motion or document is filed
with a caption indicating that it is applicable to fewer than all of these consolidated
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actions, the Clerk shall file such pleadings in the Master File and note such filing in the
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Master Docket and in the docket of each action referred.
5. The terms of this Order apply to any action hereafter filed in this District or
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transferred to this Court that involve claims on behalf of those who traded in options on
Fannie Mae common stock and that arise out of the same facts and assert the same or
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substantially similar claims as alleged in this case, under the following procedures:
shall:
Document.
b. This order will apply to each such case that arises out of or
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Case 1:05-cv-00620-RJL Document 7-2 Filed 04/15/2005 Page 3 of 3
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provision of this Order filed, within (10) days after the date upon
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application for relief from this Order or any provision herein and
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this Court deems it appropriate to grant such application.
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Clerk of This Court the filing or transfer of any case that might
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7. The terms of this Order shall not have the effect of making any person,
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corporation or other party to any action in which he, she or it has not been named,
served or added as such in accordance with the Federal Rules of Civil Procedure.
8.
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The Court shall appoint liaison counsel from this case and liaison counsel from in
re Fannie Mae Securities Litigation to coordinate the pretrial activities between the two
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cases, including, but not limited to, discovery, law and motion practice, and settlement
, 2005.
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10. The Clerk of The Court shall mail a copy of this Order to the attorney of record for
Dated: , 2005
Judge Richard J. Leon
United States District Court Judge
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