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RICHLAND & F. L. SALOMON & CO. v. CHEATHAM

July 27, 1967

Richland and F. L. Salomon & Co.
v.
Cheatham, et al.; Stull v. Georgia-Pacific Corporation, et al.; Schwartz v. Brooks, et al.; Schein v. Brooks, et al.; Weintraub v. Georgia-Pacific Corporation, et al.


Ryan, District Judge.


The opinion of the court was delivered by: RYAN

RYAN, District Judge:

We have before us a motion by defendants for an order determining that these five actions are not to be maintained as class actions because they do not meet the requirements of Rule 23(a) (4) or Rule 23(b) (3) and because the notice required under Rule 23(c) (2) cannot be given.

 Specifically, defendants contend that the actions

 (1) fail to meet the requirements that they will fairly and adequately protect the interests of the members of the alleged classes;

 (2) fail to meet the additional requirements that (i) questions of law or fact common to the members of the alleged classes predominate over individual issues, and that (ii) the class action is superior to other available methods for the fair and efficient adjudication of the controversy. They also contend that no adequate notice could be given to the multitudes referred to in the Market Purchase Actions, and that other forms of adjudication could more fairly and judiciously be used to adjudicate claims of persons allegedly aggrieved, such as consolidation, for which they have separately moved.

 The plaintiffs, of course, disagree with defendants and endeavor to show that they can comply with the requirements of Rule 23 in all respects.

 There are five market purchase actions brought under Section 10(b) of the Securities Exchange Act of 1934, and Rules 10b-5 and 10b-6 thereunder, on behalf of the plaintiffs themselves, and representatively on behalf of all persons who purchased common stock of Georgia-Pacific Corporation during or after certain time periods described below. The plaintiffs claim that they and all persons were required to pay higher prices for such common stock than they would have paid, but for certain alleged acts and practices of the defendants.

 The basic time periods referred to in the complaints are those initially described in the complaint in an action entitled "Securities and Exchange Commission v. Georgia-Pacific Corporation, et al." (66 Civ. 1215 (S.D.N.Y.)) *fn1" and roughly relate to certain dates which became relevant under the terms of certain acquisition agreements between Georgia-Pacific and other companies - (1) St. Croix Paper Company, (2) Vanity Fair Paper Mills, Inc., (3) Royal Fiber Corporation and Royal Container Co., San Francisco, and (4) Bestwall Gypsum Company. Such basic periods referred to in the complaints are:

 
(1) February 21 through April 15, 1963 (St. Croix);
 
(2) February 4 through March 24, 1964 (Vanity Fair);
 
(3) July 9 through July 29, 1964 (Royal); and
 
(4) February 17 through March 19, 1965 (Bestwall).

 The gravamen of the allegations in the Market Purchase Actions is that during the basic periods the defendants, pursuant to a plan to manipulate the market, affected the price of Georgia-Pacific common stock on the New York Stock Exchange by causing Georgia-Pacific common stock to be bid for and purchased by the Georgia-Pacific Stock Bonus Trust, and by Georgia-Pacific itself for its treasury, in a manner which caused an artificial rise in the price of Georgia-Pacific common stock. The alleged purpose of the defendants' acts and practices was to avoid or reduce Georgia-Pacific's obligations in respect of the above-mentioned acquisition.

 The defendants who have been served have denied the commission of the alleged acts and practices or any other acts alleged to ...


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