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December 5, 1996

ADINA COHEN, Plaintiff,
CITIBANK, N.A., DAVID BLECH and D. BLECH & CO., INC. Defendants.

The opinion of the court was delivered by: JONES



 In 1992, defendant Citibank, N.A. ("Citibank"), a banking institution, extended an advance of $ 1,120,000 to plaintiff Adina Cohen ("Cohen"). Two years later, Citibank notified Cohen that the amounts outstanding on the advance were due and payable. At least a portion of the loan still remains outstanding.

 Cohen now asserts seventeen causes of action, essentially alleging that Citibank acted in concert with defendants David Blech ("Blech") and D. Blech & Company, Incorporated ("DBC") to grant her the advance in violation of various federal and state laws, thereby rendering any obligation based on the advance void and unenforceable. Pending is Citibank's motion to dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)(6).


 Cohen and Blech met in the early 1980s. (Am. Compl. P 24.) Over time, Blech became Cohen's investment advisor and broker and asserted control over the day-to-day handling of her financial affairs. (Id. P 26.)

 On or about February 9, 1990, Blech opened DBC as a registered broker-dealer under the Securities Exchange Act of 1934 (the "1934 Act"). (Id. P 10.) DBC specialized in the promotion, placement, sale, and marketing of "bio-technology" securities (the "Blech Securities"). (Id. P 13.) At all times relevant to this motion, Blech was DBC's sole shareholder, director, and controlling person. (Id. P 11.) In addition, Blech was the beneficial owner of a large portion of the Blech Securities. (Id. P 14.) However, it was Citibank that financed the securities operations of both Blech and DBC, maintaining and operating various accounts on behalf of Blech, DBC, and others. (Id. P 15-18.)

 In or about December 1992, Cohen obtained a line of credit from Citibank for $ 1,120,000 (the "1992 Advance"). (Id. PP 36-37.) Cohen signed a Demand Note and other documents reflecting the loan (Id. P 38), but Blech guaranteed the loan. (Id. P 39.)

 Over the course of the next two years, Citibank maintained in Cohen's name a collateral account, a loan account, a regular checking account, and money market accounts. (Id. P 43.) From December 1992 through September 1994, Blech, DBC and Citibank transferred money into and out of Cohen's collateral account and various other accounts maintained by Citibank. (Id. PP 47, 17-19.) With a few exceptions, Cohen, herself, never authorized these transfers. (Id. P 48.) In fact, Cohen alleges that the transfers were effected in order to further a parking and manipulation scheme between Citibank, Blech, and others to manipulate the market and bolster the value of the Blech Securities. (Id. PP 51-53.) In this connection, Cohen maintains that the 1992 Advance was a "sham" constituting an unlawful extension of credit with the sole purpose of allowing Blech to acquire biotechnology securities. (Id. PP 39-40, 77.) Accordingly, she states that Blech is the true obligor on the loan. (Id.)

 In the spring of 1994, the market value of the Blech Securities fell, causing Blech, DBC, and Citibank to experience financial problems. (Id. PP 52 & 59.) Around that time, Citibank "looked to" Blech and DBC to provide it with additional securities in connection with and to pay interest on the 1992 Advance. (Id. PP 59-60.)

 In September 1994, with the prices of the Blech Securities falling, DBC began to collapse. (Id. P 63.) On September 22, 1994, Citibank declared the 1992 Advance due and informed Cohen of its intent to sell the collateral in her collateral account. (Id. P 67.) On April 12, 1995, Citibank sent a letter to Cohen reminding her of her obligations under the terms of the 1992 Advance and notifying her of its intent to seek legal redress if necessary. (Id. PP 73-74.)

 On June 27, 1995, Cohen filed (but did not serve) this federal action against Citibank, alleging that the 1992 Advance was illegally effectuated and seeking declaratory relief to that effect. On October 3, 1995, Citibank filed and served a motion for summary judgment in lieu of complaint in the Supreme Court for the State of New York, seeking a judgment in the amounts then due under the 1992 Advance. That day, Cohen served Citibank with the complaint in this action. The state court action is fully briefed and awaiting decision.

 On November 13, 1995, Cohen filed an Amended Complaint in this case, adding Blech and DBC as defendants and asserting seventeen causes of action seeking declaratory and monetary relief against the defendants. Of those seventeen claims, thirteen are levied against Citibank, six of which assert federal causes of action under the 1934 Act.



 Since there is a parallel action pending in state court, the threshold issue is whether this court should stay these proceedings until the state court action is resolved. See Colorado River Conservation District v. United States 424 U.S. 800, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976). In this connection, Citibank argues that the court should dismiss the complaint under the principles expressed by the Supreme Court in both Colorado River, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236, and Wilton v. Seven Falls Co., 515 U.S. 277, 115 S. Ct. 2137, 132 L. Ed. 2d 214 (1995). Cohen disagrees. For the following reasons, we decline to abstain at this time.

 A. The Colorado River Abstention Doctrine

 The Supreme Court in Colorado River held that district courts have a "virtually unflagging obligation" to exercise the jurisdiction conferred on them by Congress. Colorado River, 424 U.S. at 813; accord Moses H. Cone Memorial Hospital v. Mercury Construction Corp. 460 U.S. 1, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983). Indeed, only "the clearest of justifications" ...

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