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3699INTC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

------------------------------ X

INTERNET LAW LIBRARY,

PLAINTIFF,

01-CV-6600

V. 01-CV-0877

02-CV-0138

COOTES DRIVE, et al.,

DEFENDANTS.

----------------------------- X

JUNE 9, 2003

3:00 p.m.

Before:

HON. ROBERT L. CARTER,

District Judge

APPEARANCES

KOERNER SILBERBERG & WEINER, LLP

Attorneys for Plaintiff

BY: MARYANN PERONTI

- and-

CHRISTIAN SMITH & JEWELL

Attorneys for Plaintiff

BY: GARY JEWELL

JAMES W. CHRISTIAN

- and-

TATE & ASSOCIATES

Attorneys for Plaintiff

BY: RICHARD L. TATE

(Continue on next page)

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PIPER RUDNICK

Attorneys for Defendant

(Cootes Drive & Southridge)

BY: PERRY M. WEINER

CARYN MAZIN

- and-

MICHAEL S. ROSENBLUM, ESQ.

Attorney for Defendant

(Cootes Drive & Southridge)

MORRISON & FOERSTER

Attorneys for Defendant

(Mark Valentine)

BY: JOEL C. HAIMS

ALLISON G. SCHNIEDERS

KRAMER LEVIN NAFTALIS & FRANKEL

Attorneys for Defendant

(Citgo Group Limited)

BY: PATRICIA A. SEITH

GIBBONS DEL DEO DOLAN GRIFFINGER & VECCHIONE

Attorneys for Defendant

(Thompson Kernaghan & Co.)

BY: DEBRA CLIFFORD

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1 (In chambers)

2 THE COURT: I called this because I want to be very

3 clear what's before me. I'd like to know from the plaintiffs,

4 it's my understanding that Internet Law Library - - where is Ms.

5 Peronti?

6 MS. PERONTI: Yes, your Honor.

7 THE COURT: You represent the plaintiffs in this

8 action and in another case that has nothing to do with this

9 ASCA, that's your client as well?

10 MS. PERONTI: Yes, we represent ASCA.

11 THE COURT: And who is Mr. Jewell?

12 MR. JEWELL: Right here, your Honor.

13 THE COURT: Mr. Christian?

14 MR. CHRISTIAN: Right here, your Honor.

15 THE COURT: Mr. Tate?

16 MR. TATE: Right here, your Honor.

17 THE COURT: You're the one who is here. Brewer and

18 Caldwell are not here?

19 MR. TATE: No, your Honor.

20 THE COURT: OK, that's it.

21 Before we start, I better be sure I know everybody who

22 is here. Southridge Capital is on this side, right?

23 MR. ROSENBLUM: Yes, your Honor.

24 MR. WEINER: Yes, your Honor.

25 THE COURT: Who is representing?

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1 MR. WEINER: Perry Weiner.

2 MR. ROSENBLUM: Michael Rosenblum and Caryn Mazin.

3 THE COURT: So that's it - - no, we got more people,

4 All of you are representing Southridge, all theses defendants?

5 MR. ROSENBLUM: No. Representing Mark Valentine,

6 Citgo Group and Thompson Kernaghan are all separate counsel.

7 THE COURT: It's my understanding that you sought

8 subpoenas for various records, so I think what you might as

9 well do, so I can understand this, is tell me what's involved.

10 MR. JEWELL: Your Honor, if I'm following your

11 question correctly - -

12 THE COURT: Don't ask me if my question is correctly.

13 If you have any doubt about my question, ask me to ask it

14 again.

15 MR. JEWELL: The subpoenas that went out for the ATIS

16 records, it's been our position that we are collecting records

17 along with - -

18 THE COURT: I'm not asking you for an argument now.

19 I'm asking you for a statement of what the facts are. I'll

20 allow you to argue, but I want to know what the facts are. So

21 let's get that straight now. You are issuing subpoenas and the

22 subpoenas are seeking what?

23 MR. JEWELL: Trading records, your Honor.

24 THE COURT: Of this company, of Law Libraries, right?

25 MR. JEWELL: We're actually looking for trading

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1 records.

2 THE COURT: Come on. Don't start again making an

3 explanation. Give me the facts. Trading records of them and

4 trading records of a company that has no connection, correct?

5 MR. JEWELL: That is correct, your Honor.

6 THE COURT: Ok. All right. Now tell me.

7 MR. JEWELL: Simply, that we are not only seeking

8 trading records for INL in the INL matter, but we are seeking

9 trading records or pattern and practice records for other third

10 party companies - - not even third parties, non-party companies.

11 THE COURT: And on what basis are you doing that?

12 MR. JEWELL: Well, your Honor, as addressed in our

13 April letters, we're looking for this pattern and practice

14 evidence from these particular defendants that are held by

15 non-parties to show not only the intent, but also the scienter

16 of the parties.

17 One of the big issues we have in terms of - - I'm

18 sorry, did you want me to stop?

19 THE COURT: No.

20 MR. JEWELL: The primary purpose - - I'm saw you shake

21 your head.

22 THE COURT: You could still talk.

23 MR. JEWELL: The primary, I'm probably going to call

24 it probably the most important discovery issue in this case is

25 whether or not the plaintiffs are entitled to prove the

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1 allegations therein in their complaint.

2 In our complaint we've alleged that these defendants

3 have not only done it here in the INL case, but they've done it

4 with other small cap companies.

5 As a result, we want to go out and collect that

6 discovery that shows they had not only the intent, but also the

7 scienter in this particular case.

8 THE COURT: I thought that I had indicated to you that

9 the only thing that you're supposed to do in this case was to

10 seek witnesses and you were not to be seeking any other

11 companies. Was that clear? That was not clear?

12 MR. JEWELL: Obviously not, your Honor, because I'm

13 wondering how we collect this non-party - -

14 THE COURT: I'm not asking you that. I thought that I

15 had issued a short memorandum to you indicating that the only

16 thing - - I think somebody on the defendants wanted a protective

17 order and injunction, and I said I don't think that's

18 necessary.

19 MR. JEWELL: That's correct, your Honor.

20 THE COURT: And I think my endorsement says that I

21 don't think there's any need, it's clear that it not be used

22 while this case is impending to locate new clients or to

23 initiate new litigation. It could be used, however, to locate

24 additional witnesses or even to join parties on a showing of

25 good cause.

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1 MR. JEWELL: That is correct, your Honor. That's my

2 understanding also.

3 Back in September when the defendants made their

4 original argument for protective order, you decided this case

5 was not about trade secrets. In fact, you basically dispelled

6 the notion of even having a protective order. The issue was

7 raised during that September time whether or not we could

8 conduct discovery against non-party, in other words to try and

9 find this pattern and practice.

10 THE COURT: What has the trading records got to do

11 with your getting witnesses in your own case, the trading

12 records and the trading records of some foreign company?

13 MR. JEWELL: They're actually separate and distinct.

14 THE COURT: No, they're not. No, they're not.

15 MR. JEWELL: I'm looking for information and discovery

16 beyond a simple trading records in the subpoenas, and in the

17 subpoenas I'm looking for trading records because I'm looking

18 for documents. However, we're also looking for, asking the

19 defendant specifically what did you do in this particular case,

20 what was your trading strategy employed in that particular

21 case, and they refused to answer.

22 The pattern and practice issue basically encompasses

23 not only the document request to third parties, but it also

24 encompasses our direct questions on point to prove our

25 complaint. We can't prove our complaint without asking them.

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1 what they did in this X case, Y case or Z case.

2 THE COURT: Well, I understand that one of you told

3 Judge Kaplan, and I suppose maybe on the basis of your

4 interpretation, that I had authorized the subpoena, that I

5 authorized you to issue the subpoena. I understand that

6 someone told Judge Kaplan that I had authorized the issuance of

7 these subpoenas and that they were consistent with my order.

8 But he had doubts about it because he read my order, he had

9 some doubts that that wasn't so. So I understand you're on

10 hold with him at the present time?

11 MR. JEWELL: That is correct, your Honor.

12 THE COURT: To determine what my interpretation of my

13 order is?

14 MR. JEWELL: Partly - -

15 THE COURT: Well, before I hear anything else, let me

16 hear from somebody on this side in terms of what your position

17 is about the trading records that they are seeking. They're

18 seeking trading records, your trading records for - - isn't that

19 Law Library - - and they're also seeking trading records for

20 some foreign - - you have no connection with this case, do they

21 have any connection with you?

22 MR. ROSENBLUM: ATSI has absolutely no connection with

23 this case. They are not managed by the same - -

24 THE COURT: I know that.

25 MR. ROSENBLUM: They have no connections with

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1 Southridge Capital.

2 THE COURT: No connection with you?

3 MR. ROSENBLUM: None whatsoever, zero.

4 THE COURT: OK. And what is your position about their

5 view that they're seeking witnesses?

6 MR. ROSENBLUM: It would be akin to their being a

7 Ford Firestone case and them issuing subpoenaing in the Ford

8 Firestone cases to General Motors, subpoenaing General Motors.

9 We're talking about different tire companies, different auto

10 manufacturers. Here you're talking about different issues,

11 different people, absolutely no relationship.

12 It was clearly an attempt to circumvent the PLSRA.

13 There was standing in that case. The subpoena was issued on

14 the same day that the defendants were served with the

15 complaint. The complaint was filed a couple of months prior.

16 It was done without notice to ATSI, from what I understand to

17 any of the parties in ATSI. There was absolutely no notice.

18 It was specifically a discovery abuse to try and get evidence

19 so they could file an amended complaint, without giving any

20 notice to the parties whatsoever in ATSI.

21 THE COURT: You are not to - - the subpoenas will be

22 quashed and you are not to make any other efforts in this

23 regard. You're barred and you have sought to dismiss some

24 action, I think, against some of these people.

25 MR. JEWELL: That's correct, your Honor.

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1 THE COURT: And who are they?

2 MR. JEWELL: There are a certain number of

3 plaintiff shareholders. I believe there are 28 that are listed

4 in that stipulation that I forwarded to the Court back in

5 April.

6 THE COURT: These are your people?

7 MR. JEWELL: No, no, theses are my folks. I want them

8 out of the lawsuit. They no longer wish to pursue their

9 claims. I'm simply looking for dismissal.

10 THE COURT: They're none of your people?

11 MR. WEINER: The only thing from us is whether the

12 dismissal should be with or without prejudice.

13 THE COURT: The dismissal is with prejudice. And if

14 there's any further violation of my order in any way, I'm going

15 to dismiss your case.

16 That's all. You may go.

17 That's all. Goodbye.

18 Goodbye.

19 Goodbye!

20 MR. JEWELL: Thank you, your Honor.

22 o0o

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