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IN RE TURKCELL ILETISIM HIZMETLER

November 2, 2001

IN RE TURKCELL ILETISIM HIZMETLER, A.S. SECURITIES LITIGATION.


The opinion of the court was delivered by: Buchwald, District Judge.

MEMORANDUM AND ORDER

This is a class action brought on behalf of those who purchased the American Depository Shares issued by defendant Turkcell Iletisim Hizmetleri A.S. ("Turkcell") in an initial public offering in July 2000. Plaintiff class alleges violations of sections 11 and 15 of the Securities Act of 1933. The defendants include Turkcell, its underwriters, Goldman Sachs International, Morgan Stanley & Co. International Limited, Credit Suisse First Boston (Europe), Lehman Brothers International AG London, and UBS AG, its Chief Executive Officer, Cuneyt Turktan, and its Chief Financial Officer Ekrem Tokay. Now pending is the defendants' joint motion to dismiss the claims, pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons discussed below, the motion is granted in part and denied in part.

BACKGROUND

This complaint stems from alleged omissions in a Prospectus issued by Turkcell, a mobile communications service provider in Turkey, in connection with an initial public offering of American Depository Shares in July 2000. The Prospectus was filed with the SEC on or about June 26, 2000, and became effective on or about July 10, 2000.

Plaintiffs second allegation concerns Turkcell's failure to include financial statements for the quarter ending June 30, 2000. The Prospectus contained audited financial statements for the fiscal years ending December 31, 1997, 1998, and 1999. It also contained unaudited financial statements for the quarters ending March 31, 1999, and March 31, 2000. Plaintiffs allege that this data showed a series of increases in operating income through the first quarter of 2000. On August 11, 2000, Turkcell released financial results for the first half of 2000, which showed that operating income fell by 9% from the first quarter of 2000 to the second quarter of 2000.

Plaintiffs initially filed suit on November 22, 2000, and the various class actions were consolidated on March 8, 2001. By letter dated May 4, 2001, defendants sought leave to move to dismiss the complaint and set forth their proposed arguments. On May 23, 2001, the Court sent a letter to counsel confirming plaintiffs' advice to chambers that they would not seek to amend their complaint in response to the motion to dismiss. This Court heard oral arguments on defendants' motion to dismiss on October 12, 2001.

DISCUSSION

I. Standard on a Motion to Dismiss

For purposes of a motion to dismiss, we are required to accept as true the factual assertions in the complaint. Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); Charles W. v. Maul 214 F.3d 350, 356 (2d. Cir. 2000). Additionally, for purposes of a Fed.R.Civ.P. 12(b)(6) motion, a complaint is deemed to include any statements or documents incorporated in it by reference, Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000), Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989), as well as publicly disclosed documents required that have been filed with the SEC. Rothman, 220 F.3d at 88; Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991).

II. Applicability of the Rule 9(b) Heightened Pleading Standard

As a threshold issue, defendants assert that the Fed.R.Civ.P. 9(b) heightened pleading standard for fraud claims applies to this complaint and that, therefore, plaintiffs must plead their claims with particularity. The case law is unclear as to whether claims under section 11 of the Securities Act must allege facts with particularity, or whether they are subject to the more liberal standards of Fed.R.Civ.P. 8(a)(2). There are numerous decisions in this district that have found that, where section 11 claims sound in fraud, the heightened pleading requirements of Rule 9(b) apply. See In re Complete Management Inc., 153 F. Supp.2d 314, 340 (S.D.N.Y. 2001); In re N2K Inc. Securities Litigation, 82 F. Supp.2d 204, 210 n. 10 (S.D.N.Y. 2000). But see In re AnnTaylor Stores Securities Litigation, 807 F. Supp. 990, 1003 (S.D.N.Y. 1992) (stating that "courts have long held that Rule 9(b) does not apply to a Section 11 claim."). The Second Circuit has not yet ruled on this issue, in fact expressly reserving any discussion of it. See In re N2K Inc. Securities Litigation, 202 F.3d 81 n. 1 (2d Cir. 2000).

In this case, we need not determine whether section 11 claims that sound in fraud require satisfaction of the heightened pleading requirements of Rule 9(b). At oral argument, plaintiffs argued that, if the Court found that Rule 9(b) applied, it should also find that they have alleged the who, what, when, and where, and why of their claim, notwithstanding the apparent admission in their brief that "[d]efendants are correct that the Complaint does not plead fraud with particularity." See Luce v. Edelstein, 802 F.2d 49, 54 (holding that Rule 9(b) requires that plaintiff specify the time, place, speaker, and content of the alleged fraudulent ...


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