Thomas H. Lee Equity Fund V, L.P. et al v. Mayer, Brown, Rowe & Maw L.L.P.

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------------------------------------- x THOMAS H. LEE EQUITY FUND V, L.P., THOMAS H. LEE PARALLEL FUND V, L .P . , and THOMAS H . LEE EQUITY (CAYMAN) FUND V, L .P ., Plaintiffs ,
V.

7 Civ . 6767 (GEL)

MAYER, BROWN, ROWE & MAW LLP, Defendant . --------------------------------------------------------------- x

PLAINTIFFS' MEMORANDUM OF LA W IN OPPOSITION TO DEFENDANT'S MOTIONS TO DISMIS S

Mark C . Hansen Silvija A . Strikis James M. Webster III Rebecca A . Beynon KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL P .L .L .C . Sumner Square 615 M Street, N .W ., Suite 400 Washington, D .C . 2003 6
Tel . : [phone]

Greg A . Danilow (GD-1621) Paul Dutka (PD-2568) Christopher R.J . Pace (CP-0001) Seth Goodchild (SG-2296 ) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenu e New York, NY 10153 Tel . : [phone] Attorneys for Plaintiffs Thomas H. Lee Equity Fund V, L .P., Thomas H. Lee Parallel Fund V, L.P., and Thomas H. Lee Equity (Cayman) Fund V, L .P.

Dated : November 9, 2007

NY 1 A1 524747V08\W_$308 S.DOC\77356.0062

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TABLE OF CONTENTS
Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii RELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2
1.

THE COMPLAINT STATES A FEDERAL SECURITIES LAW CLAIM . . . . . . . . . . . . . . . . . . . 1 2 A. B. C. D. Mayer Brown Is Liable As A Primary Violator Of Section 10(b) An d Rule 10b-5(b) For Its Material Misstatements And Omissions To Plaintiffs . . . . . . 1 2 Plaintiffs' Factual Allegations State A Claim For "Scheme Liability " Under Section 10(b) And Rule 10b-5(a) & (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Plaintiffs Have Alleged Particularized Facts Giving Rise To A Stron g Inference f Scienter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Mayer Brown's "No Reliance" Argument Is Fatally Flawed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1

II .

THE COMPLAINT STATES A RICO CLAIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 A. B. C. The PSLRA Does Not Bar The RICO Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 The Complaint Adequately Pleads Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 The Complaint Adequately Pleads A Violation Of § 1962(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

III . PLAINTIFFS HAVE STATED CLAIMS FOR COMMON-LAW FRAUD AN D NEGLIGENT MISREPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 A. B. C. Plaintiffs Have Stated A Claim For Common-Law Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Plaintiffs' Negligent Misrepresentation Claim Should Not Be Dismisse d Under The Martin Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Assuming New York Law Applies, Plaintiffs Have Satisfied Th e Requirement Of Showing Near Privity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

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TABLE OF AUTHORITIE S
Cases :

Page(s) :

ATSI Commc'ns, Inc . v . Shaar Fund, Ltd . , 34 357 F . Supp . 2d 712 (S .D .N .Y . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 ,,3 5 ATSI Commc'ns, Inc . v . Shaar Fund, Ltd . , 493 F .3d 87 (2d . Cir . 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 4 Abry Partners V, L .P . v . F&W Acquisition L.L.C. , 91 A .2d 1032 (Del . Ch. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 5 Ackerman v . Schwartz , 5 947 F .2d 841 (7th Cir . 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 ,,1 8 Adelphia Commc'ns v . Bank of Am ., N .A . ( In re Adelphia Commc'ns Corm . ) , 2007 WL 2403553 (Bankr . S .D .N .Y . Aug . 17, 2007) . . . . . . . . . . .t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 9 Affiliated Ute Citizens of Utah v . United States , 406 U .S . 128 (1972) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 5 Am . Buying Ins . Servs., Inc . v . S Kornreich & Sons Inc . , 944 F . Supp . 240 (S .D .N .Y . 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 5 Am . Tobacco Co . v . Patterson , 456 U .S . 63 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 Baisch v . Gallina , 346 F .3d 366 (2d Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 5 Bald Eagle Area Sch . Dist . v . Keystone Fin., Inc. , 189 F .3d 321 (3d Cir . 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37, 38, 3 9 Barnhart v . Sigmon Coal Co . , 534 U.S . 438 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 3 Bates v . Southgate , 31 N.E.2d 551 (Mass . 1941) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 5 Blue Cross & Blue Shield of New Jersey, Inc . v . Philip Morris, Inc . , 36 F . Supp . 2d 560 (E .D .N .Y . 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2 Blythe v . Deutsche Bank AG, 399 F . Supp . 2d 274 (S .D .N .Y . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 7

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Bonavire v . Wampler , 779 F .2d 1011 (4th Cir . 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 9 Caiola v . Citibank, N .A . , 295 F .3d 312 (2d Cir . 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 4 In re Charter Commc'ns, Inc ., Sec. Litig . , 443 F .3d 987 (8th Cir . 2006), cert . ranted , Stoneridg_e Inv . Partners L .L .C . v . Scientific-Atlanta Inc . , 127 S . Ct . 1873 (2007) . . . . . . . . .2 5 Compose v . INS , 961 F .2d 309 (1st Cir . 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 3 Castellano v . Young & Rubic, Inc . , 257 F .3d 171 (2d Cir . 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5 Cent . Bank of Denver N .A . v . First Interstate Bank of Denver N .A . , 511 U .S . 164 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 3 In re Crude Oil Commodity Lit] 9 . 1 2007 WL 1946553 (S .D .N .Y . June 28, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2 DeFalco v . Bernas , 244 F .3d 286 (2d Cir . 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2 DeLuca v . Jordan , 781 N .E .2d 849 (Mass . App . Ct. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 7 Dimon, Inc . v . Folium, Inc . , 48 F . Supp . 2d 359 (S .D .N .Y . 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 5 Divine Tower Int'l Coma . v . Kegler Brown, Hill & Ritter, Co . , 2007 WL 2572258 (S .D . Ohio Sept. 4, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 8 Doehla v . Wathne Ltd ., Inc. , 1999 WL 566311 (S .D .N .Y . Aug . 3, 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 6 Emergent Cgp iital Inv. Mgmt., L.L.C. v . Stonepath Group, Inc . , 343 F .3d 189 (2d Cir 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 4 In re Enron Corp. Sec . Derivative & ERISA Litig . , 235 F . Supp . 2d 549 (S .D . Tex . 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 8 In re Enron CoM . Sec., Derivative & ERISA Litig . , 310 F . Supp . 2d 819 (S .D . Tex . 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

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In re Enron Corp . Sec ., Derivative & ERISA Litig_ , 284 F . Supp . 2d 511 (S .D . Tex. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 1 Fenton v . Bryan , 604 N .E .2d 56 (Mass . App . Ct . 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Fezzani v . Bear Stearns & Co . , 2005 WL 500377 (S .D .N .Y . Mar . 2, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 ,,4 1 0 First Capital Asset Mgmt ., Inc . v . Satinwood, Inc . , 385 F .3d 159 (2d Cir . 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 0 Fleet Nat'l Bank v . Boyle , 2005 WL 2455673 (E .D . Pa. Sept . 12, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 7 Gaetano Assocs . Ltd . v . Artee Collections Inc . , 2006 WL 330322 (S .D .N .Y . Feb. 14, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 4 Gen . Accident Ins. Co. v . Fidelity Deposit Co . , 598 F. Supp . 1223 (E .D . Pa. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5 Gilmore v . Berg , 761 F . Supp . 358 (D .N .J . 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 In re Global Crossing Ltd . Sec . Litig . , 322 F . Supp . 2d 319 (S .D .N .Y . 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5, 17, 21, 22, 2 5 Globalnet Financial .co m Inc . v . Frank Crystal & Co. , 449 F .3d 377 (2d Cir . 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 4 Goren v . New Vision Int'1 Inc . , 156 F .3d 721 (7th Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 7 H .J . Inc . v . Nw . Bell Tel . Co . , 492 U .S . 229 (1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 , 49,5 0 Harbourvest v . Axent Technologies, Inc . , 2000 WL 1466096 (Mass . Super . Aug . 31, 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 4 Harsco Corp . v . S ~ , 91 F .3d 337 (2d Cir . 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 Hecht v . Commerce Clearing House, Inc . , 897 F.2d 21 (2d Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 5

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Henry v . Daytop Vill., Inc . , 42 F .3d 89 (2d Cir . 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 6 Hemispherx Biopharma, Inc . v . Asensio , 1999 WL 144109 (E .D . Pa. Mar . 15, 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 1 Hollinger Int'l, Inc . v . Hollinger Inc . , 2004 WL 2278545 (N .D . Ill . Oct. 8, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 1 Howard v . AOL Inc . , 208 F .3d 741 (9th Cir . 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 1 Hunt v . Alliance N . Am . Gov' t Income Trust Inc . , 159 F.3d 723 (2d Cir . 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 Jama v . Immigration & Customs Enforcement , 543 U.S . 335 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2 In re JP Morgan Chase Sec . Litig_ , 363 F . Supp . 2d 595 (S .D .N .Y . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 0 Jones v . Deustche Bank AG , 2005 WL 1683614 (N .D . Cal . July 19, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 7 Kehr Packages, Inc . v . Fidelcor, Inc , 926 F .2d 1406 (3d Cir . 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 9 Kennedy v . Miller , 582 N .E .2d 200 (Ill . App . Ct. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Kirkland Constr . Co . v . James , 658 N .E .2d 699 (Mass . App . Ct. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 7
Kline v . First W . Gov't Sec . Inc . ,

24 F .3d 480 (3d Cir . 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15, 16, 17, 18, 1 9 Knoll v . Schectman , 2006 WL 839428 (W .D .N .Y . Mar . 28, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Landers-Scelfo v . Corporate Office Sys ., Inc . , 827 N .E .2d 1051 (I11 . App . Ct. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Lattanzio v . Deloitte & Touche L .L .P . , 476 F .3d 147 (2d Cir . 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 13, 1 4

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Lentell v . Merrill Lynch & Co . , 396 F .3d 161 (2d Cir .), cert . denied , 564 U .S . 935 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 1 In re Lernout& Hauspie Sec . Litig . , 236 F . Supp . 2d 161 (D . Mass . 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 ,,2 3 1 Levin v . Dalva Bros . , 495 F .3d 68 (lst Cir . 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 3 Lippe v . Bairnco Corp . , 218 B.R. 294 (S .D .N .Y . 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 M'Baye v . New JerseySports Prod ., Inc . , 2007 WL 431881 (S .D .N .Y . Feb 7, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 In re MarketXT Holdings Corp . , 2006 WL 2864963 (Bankr. S.D.N.Y. Sept . 29, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 5 Marram v . Kobrick Offshore Fund Ltd . , 809 N .E .2d 1017 (Mass . 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 4 Merrill Lynch, Pierce, Fenner & Smith, Inc. v . Dabit ,
547 U .S . 71 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 8

Nat'l Group for Commc'ns & Computers Ltd . v . Lucent Techs . Inc . , 420 F . Supp . 2d 253 (S .D .N .Y . 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 7 Ne . Women's Ctr. Inc . v . McMonagle , 868 F .2d 1342 (3d Cir . 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2
Norton v . DrePanos ,

1994 WL 902881 (Mass . Super . Sept . 13, 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 4 OSRecovery, Inc. v . One Group Int'l, Inc . , 354 F . Supp . 2d 357 (S .D .N .Y . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Overton v . Todman & Co . CPAs P .C . , 478 F .3d 479 (2d Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 4 In re Parmalat Sec . Liti& , 23 383 F . Supp . 2d 616 (S .D .N .Y . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 ,,2 4 Payton v . Fly , 2006 WL 3087075 (N .D . 111 . Oct . 26, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 0

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Powers v . Wells Fargo Bank NA , 439 F .3d 1043 (9th Cir .), cert . denied , 127 S . Ct . 437 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 8 Prudential Ins . Co. v . Dewey Ballantine Bushby, Palmer & Wood , 80 N .Y .2d 377 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5 uaak v . Dexia, S .A . , 21 357 F . Supp . 2d 330 (D . Mass . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 ,,2 3 In re Refco, Inc . Sec . Litig. , 503 F . Supp . 2d 611 (S .D .N .Y . 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9, 25, 30, 3 1 Renner v . Chase Manhattan Bank , 1999 WL 47239 (S .D .N .Y . Feb. 3, 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 0 Republic of Colombia v . Diageo N. Am . Inc . ,
2007 WL 1813744 (E .D .N .Y . June 19, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 , 45,47

Resolution Trust Corn . v . Latham & Watkins , 909 F . Supp . 923 (S .D .N .Y . 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 6 Rogers v . Grimaldi , 875 F .2d 994 (2d Cir . 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 3
Rose v . Bartle ,

871 F .2d 331 (3d Cir. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 , 45,4 7 Rothman v . Gregor, 220 F .3d 81 (2d Cir . 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 5 In re Royal Ahold N .V . Sec. & ERISA Liti&, 351 F . Supp . 2d 334 (D . Md. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 5 Rubin v . Schottenstein Zox & Dunn , 143 F .3d 263 (6th Cir . 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 . 17,1 8 Rudin v . Dow Jones & Co . , 54 510 F . Supp . 210 (S .D .N .Y . 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 ,,5 5 SEC v . U . S . Envtl ., Inc . , 155 F .3d 107 (2d Cir . 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5, 22, 2 3 Salinas v . United States , 522 U .S . 52 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 4

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Schatz v . Rosenberg , 943 F .2d 485 (4th Cir . 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 9 Sedima, S .P .L .R . v . Imrex Co. , 473 U .S . 479 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 , 42,4 3 Shapiro v . Cantor , 123 F .3d 717 (2d Cir . 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 13,1 4 Southland Sec . Corp . v . INSpire Ins . Solutions, Inc . , 365 F.3d 353 (5th Cir . 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 0 Spira v . Nick, 876 F . Supp . 553 (S .D .N .Y . 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 State Farm Mut . Auto. Ins . Co. v . CPT Med. Servs, P .C . , 375 F . Supp . 2d 141 (E .D .N .Y . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 5 Steed Fin. LDC v . Nomura Sec . Int'1 Inc . , 2001 WL 1111508 (S .D .N .Y . Sept. 20, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 4
Sterling v . Sterling ,

800 N .Y .S .2d 463 (App . Div . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sterling Interiors Groups, Inc . v . Haworth, Inc. , 1996 WL 426379 (S .D .N .Y . July 30, 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2 Sterling Nat'l Bank v . A- 1 Hotels Int'l, Inc . , 2001 WL 282687 (S .D .N .Y . Mar . 22, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 1 Suez Equity Investors, L .P . v . Toronto-Dominion Bank , 250 F .3d 87 (2d Cir . 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5 Tellabs, Inc . v . Makor Issues & Rights, Ltd . , 127 S . Ct. 2499 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 7 Trust Co . of Louisiana v . N .N .P . Inc . , 104 F .3d 1478 (5th Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 5 United States v . Aulicino , 44 F .3d 1102 (2d Cir . 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 3 United States v . Regan , 937 F . 2d 823 (2d Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 3

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United States v . Zichettello , 208 F .3d 72, 99 (2d Cir.2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 5 Wittenberg v . Robinov , 9 N.Y.2d 261 (N .Y . 1961) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 In re WorldCom, Inc . , 374 B .R . 94 (Bankr . S.D .N .Y . 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 3 In re Worldcom, Inc . Sec . Litig., 352 F . Supp . 2d 472 (S .D .N .Y . 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 0 Wri ght v . Ernst & Young, L .L .P . , 152 F .3d 169 (2d Cir . 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 13, 1 4 Zito v . Leasecomm Corp . , 2003 WL 22251352 (S .D .N .Y . Sept. 30, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 0 Zito v . Leasecomm Corp . , 2004 WL 2211650 (S .D .N .Y . Sept. 30, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 1
Statutes & Rules :

18 U .S .C . § 1962(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 6, 44, 47 18 U .S .C . § 1962(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 6, 36, 44, 47 18 U.S .C . § 1964(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36, 38, 42, 43 Fed . R. Civ . P . 8(e)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 ed . R . Civ . P . 12(b)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Other Authorities : 141 Cong . Rec . H2760 (daily ed . Mar . 7, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Organized Crime Control Act of 1970, Pub . L . No . 91-452, § 904(a), 84 Stat . 947 (1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Prepared Testimony of Arthur Levitt, Chairman, SEC, Before the H . Subcomm . on Telecomms . & Fin . Comm . on Commerce, 104th Cong. (Feb . 10, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . 39 RESTATEMENT (THIRD) OF AGENCY § 6 .01 cmt . d(1) (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 4

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Plaintiffs Thomas H . Lee Equity Fund V, L .P . ; Thomas H . Lee Parallel Fund V, L.P . ; and Thomas H . Lee Equity (Cayman) Fund V, L .P . (collectively, "Plaintiffs") respectfully submit this memorandum of law in opposition to the motions to dismiss the Complain t ("Compl ."), pursuant to Federal Rule of Civil Procedure 12(b)(6), by defendant Mayer, Brown, Rowe & Maw LLP ("Mayer Brown") . ' PRELIMINARY STATEMEN T In its motion to dismiss, Mayer Brown argues that it has been sued for rendering legal services indistinguishable from those rendered every day by law firms across the United States - that "the work done by Mayer Brown was typical of the work done by corporate lawyers on routine transactions," and that Mayer Brown was just a scrivener, "[m]erely draftin g

1 Mayer Brown's second motion to dismiss is devoted exclusively to asking this Court to draw a distinction - that Mayer Brown nowhere else draws - between the firm's United States and UK branches . The Complaint tracks the description of Mayer Brown that was on the firm's website at the time, which held the firm out as the "combination of two limited liability partnerships, each named Mayer, Brown, Rowe and Maw LLP, one established in the State of Illinois and one in England ." Compl .1 16 . The firm (which has since changed its name) continues to hold itself out - on its single website - as a single entity that is a "combination" of two partnerships and "among the largest law practices in the world ." See http .// w ww .mayerbrown .com/overview/index .asp (visited on November 9, 2007) . If the Court determines that the Complaint's allegations in this respect are insufficient, Plaintiffs respectfully request leave to replead additional facts regarding Mayer Brown . The paragraphs that Plaintiffs would add by amendment are attached hereto as Exhibit A to the Declaration of Seth Goodchild, Esq ., submitted herewith . These additional facts more completely establish that Mayer Brown has held itself out as a single (global) partnership . See, e .g . , Sterling v . Sterling, 800 N .Y .S .2d 463, 465 (App . Div . 2005) (partnership formed when parties "exercise joint control and management of the business and . . . share its profits and losses" and combine their skills and knowledge) ; Fenton v . Bryan , 604 N .E .2d 56, 58 (Mass . App . Ct. 1992) (partnership exists when parties share profits and losses, jointly participate in the control or management of an enterprise and have agreement manifesting intention to associate in a partnership) ; Landers-Scelfo v . Corp . Office Sys ., Inc . , 827 N .E .2d 1051, 1057 (Ill . App . Ct. 2005 (a "`partnership arises . . . when the parties . . . join together to carry on a venture for their common benefit, each contributing property or services and having a community of interest in the profits of the venture"') (quoting Kennedy v . Miller, 582 N .E .2d 200 (Ill . App . Ct. 1991)) .

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loan documents ." Inveighing against the Complaint, Mayer Brown protests that it is being unfairly called to account for its clients' alleged misdeeds . But even a cursory examination of the Complaint's well-pleaded and particularized allegations shatters Mayer Brown's story line . The Complaint explicitly alleges that Mayer Brown crossed well over the divide between rendering legal services and actively participating in illegal conduct . As described in more detail below, starting in February 2000, Mayer Brown was involved in devising, effectuating, and concealing a financial shell game, conceived by Phillip Bennett (`Bennett"), Refco's then CEO, and others, to hide Refco's huge losses and related-party transactions, whose disclosure would have had disastrous consequences on any effort to sell the company . The shell game involved converting Refco's losses into (uncollectible) receivables owed to Refco by related parties (most notably, by Bennett's company RGHI), and then using transactions negotiated, coordinated, and documented by Mayer Brown to move the receivables off Refco's books for a very short time just before the end of every financial reporting period . This was achieved by Refco "lending" funds to a customer that then immediately "lent" the same funds to RGHI that in turn used the funds to "eliminate" its debt to Refco. Just after the end of every financial reporting period, the transactions were unwound : Refco returned the funds to RGHI that paid off the customer loan so the customer could pay off the Refco loan, with the net result that the related-party receivables reappeared on Refco's books . Bennett stood on both sides of each transaction in this shell game, signing documents on behalf of (a) Refco that not only indemnified the customer but also, in a classic related-party transaction, had Refco guaranteeing RGHI's repayment of the "loan," and (b) RGHI that undertook to repay the loan .

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The customers bore no risk at all in these transactions, and no money actually changed hands except for interest payments to the customers for participating in the shell game . To effectuate the scheme, Bennett turned to Joseph Collins, a senior partner at Mayer Brown . Refco was Collins's key client and a large client for Mayer Brown . As the Complaint pleads with particularity, Mayer Brown helped effectuate 17 of the sham transactions described above between 2000 and 2005 . Mayer Brown's bald assertions to the contrary notwithstanding, these sham transactions - which had no valid business purpose, which were timed to straddle Refco's financial reporting periods, and which doled out risk-free returns to the Refco customers willing to participate in the shell game - bore no resemblance to "routine transactions," and Mayer Brown's pivotal role in drafting and negotiating the sham transactions was by no means "typical of the work done by corporate lawyers on routine transactions . " But the Complaint alleges much more . The same team at Mayer Brown - led by senior partner Collins - responsible for helping Bennett and others effectuate their scheme was also in charge of responding to Plaintiffs' due diligence requests in connection with their 2004 purchase of a majority interest in Refco (the "2004 Purchase"), and negotiating that transaction . In that role, Mayer Brown actively participated in concealing the existence of the scheme . In responding to Plaintiffs' due diligence requests and in negotiating the 2004 Purchase, Mayer Brown worked to hide the existence of the scheme by repeatedly and materially lying to Plaintiffs and their representatives . The sham transactions in which Mayer Brown played such a key role were related-party transactions . Discovering and eliminating relatedparty transactions was - as Collins and Mayer Brown well knew - so important that Plaintiffs insisted on making it a closing condition to their obligation to invest in Refco . Yet Collins and his Mayer Brown colleagues repeatedly, and with knowledge that they were speaking falsely ,

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assured Plaintiffs there were no such transactions - while simultaneously playing a key role in effecting those transactions . For example, literally the day after Mayer Brown's Paul Koury helped effect the second largest sham loan transaction - for $700 million - which involved a related-party transaction between Refco and RGHI, Koury sent Plaintiffs a draft disclosure schedule representing that no such related-party transaction existed, and during the period that the sham loan remained in place, Koury prepared and sent several more disclosure schedules with the same denial, a denial Mayer Brown knew was false . The Complaint pleads clai s for violations of Section 10(b) of the Securitie s

Exchange Act ; Rules lOb-5(a), (b), and (c) ; and state law . Alternatively, if the Court concludes that Plaintiffs may not pursue federal securities fraud claims because, for example, the interests that Plaintiffs purchased are not securities (an issue that Plaintiffs respectfully submit cannot be decided on this motion to dismiss), the Complaint pleads that Mayer Brown violated 18 U .S .C . § 1962(d) by conspiring with Bennett and others to violate 18 U .S .C . § 1962(e) . Mayer Brown unfurls a litany of arguments in its motion to dismiss and often resorts to rewriting the Complaint in an effort to conjure up a basis for dismissal when none exists : · The Complaint's securities fraud claims do not seek to hold Mayer Brown responsible for its clients' alleged fraud . Rather, those claims seek to hold Mayer Brown responsible for its own oral and written material misstatements and omissions to Plaintiffs, and for its direct involvement in its clients' scheme to defraud Plaintiffs . See pages 12 to 13, below . ) · The Complaint's lOb-5(b) claim is not barred by Lattanzio v . Deloitte & Touche L .L .P. , 476 F .3d 147 (2d Cir. 2007) ; Wright v . Ernst & Young, L .L .P . , 152 F .3d 169 (2d Cir . 1998) ; and Shapiro v . Cantor , 124 F .3d 717 (2d Cir . 1997) . In all those cases, investors sought to hold auditors liable for the issuers' false financial statements, arguing that the falsehoods should be attributed to the auditors . Here, Mayer

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Brown is being called to account for its own misstatements and omissions - no one else's . See pages 13 to 14, below . ) Mayer Brown cannot escape liability because Collins was careful enough to say that he was basing his statements on information from Refco or Bennett . Mayer Brown's position reduces to the argument that it could lie with impunity so long as it disclaimed being the originator of the lie . Having chosen to speak, Mayer Brown was obligated to speak truthfully and completely . See pages 15 to 20, below . ) · The Complaint does not attempt to impose on Mayer Brown a duty to correct its clients' misstatements . Again, Mayer Brown is being called to account for its own misstatements and omissions - no one else's . See pages 15 to 16, below . ) · Plaintiffs' scheme claims, for violations of l0b-5(a) and (c), are not dressed-up 10b-5(b) misrepresentation claims . Indeed, Mayer Brown's conduct is precisely the type of conduct that this Court found supported a scheme liability claim in In re Global Crossing Ltd . Sec . Liti ., 322 F. Supp. 2d 319 (S .D .N .Y . 2004) . See pages 20 to 22, below . ) · Mayer Brown cannot escape scheme liability here because it was not the scheme's alleged "mastermind ." In SEC v . U.S . Environmental Inc ., 155 F.3d 107, 112 (2d Cir. 1998), the court found an account executive liable, holding that "[l]ike lawyers . . . who engage in fraudulent or deceptive practices at their clients' direction, [the account executive] is a primary violator despite the fact that someone else directed the market manipulation scheme ." (See pages 22 to 23, below . ) · The Complaint more than adequately pleads scienter. The Complaint overflows with facts sufficient to support the conclusion that Mayer Brown consciously or recklessly lied to Plaintiffs . This Court has already concluded that for someone aware of the sham transactions as Mayer Brown indisputably was - those transactions are "glaringly suggestive of fraud" . See pages 25 to 31, below . ) · The Complaint more than adequately pleads that Plaintiffs relied on Mayer Brown . Furthermore, Mayer Brown cannot itself rely on the "no-reliance" and "integration" clauses in the 2004 Purchas e Agreement because it was not a party to that agreement . See pages 31 to 36, below . ) · The PSLRA's RICO amendment does not bar Plaintiffs' RICO claim, which is pleaded in the alternative . Mayer Brown has the burden ,

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which it has not met, of showing that the interests Plaintiffs acquired are securities . In any event, if the Court concludes that the securities raud claims against Mayer Brown cannot proceed, then the RICO claim should . (See pages 36 to 43, below . ) · The Complaint has properly pleaded a conspiracy under 18 U .S .C . § 1962(d), even accepting Mayer Brown's erroneous contention that Rule 9(b) applies to allegations of a conspiratorial agreement under that section . (See pages 44 to 47, below . ) · The Complaint pleads a predicate violation of 18 U .S .C . § 1962(c) and pleads with particularity the predicate acts outside the negotiation period of the Purchase Agreement . The Complaint adequately pleads a pattern of racketeering activity with both open-ended and closedended continuity. (See pages 48 to 53, below . ) Mayer Brown's motion to dismiss should be denied in its entirety . STATEMENT OF FACT S The Parties Plaintiffs purchased a majority interest in Refco on August 5, 2004 for $452 million (the "2004 Purchase") . Compl .1 1 . Defendant Mayer Brown is among the largest law firms in the world and had long served as Refco's primary outside counsel . Id. 111, 16, 17 . For many years prior, Mayer Brown had handled most of Refco's significant legal matters, including regulatory and compliance issues and important corporate work . Id.1 17. In fact, Refco was the ost significant client of Mayer Brown senior partner Joseph Collins, and Mayer Brown's total Refco billings between 2000 and 2005 exceeded $23 million . Id. Fraudulent Scheme Of Bennett And His Co - Conspirators According to the latest superseding indictment filed by the United States Attorneys' Office, starting in the 1990s, Refco's then-Chief Executive Officer Phillip Bennett and his co-conspirators (including Refco's then-Chief Financial Officer Robert Trosten and, as alleged in the Complaint, its then-Senior Vice President Santo Maggio), engaged in a fraudulent scheme designed to hide Refco's true financial position from investors, lenders, regulators, an d

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the public . Id. 1119, 85 . Refco had incurred a series of substantial losses in the 1990s, due both to its own unsuccessful proprietary trading and to uncollectible receivables (from customers to which Refco had extended loans that they could not repay) . Id . 1 20 . Rather than allowing Refco to write off these losses, as was required, Bennett and others embarked on a fraudulent scheme to hide them and thereby mask Refco's true financial condition . Id. The scheme involved Refco "selling" these uncollectible losses on credit to Refco-related parties, most notably Refco Group Holdings, Inc . ("RGHI"), a company controlled by Bennett . Id. 112, 21 . This transferred the losses off Refco's books and created a large receivable that the Refco-related parties owed to Refco . Id . 1 21 . At times, the receivable totaled more than $1 billion (the "RGHI Receivable") . Id . Then, in order to make the RGHI Receivable appear to be a valuable receivable from an unaffiliated third-party customer on Refco's financial statements, Bennett, Mayer Brown and others carried out, with one or more naffiliated customers, a series of sham short-term loan transactions straddling Refco's financial reporting periods that temporarily caused substantially all of the RGHI Receivable to be replaced by a like-sized receivable from the customers . Id . 1 22 . The "round-trip loan" transactions began as early as February 1998 and continued through at least August 2005 . Id . 1 22, 31 . The round-trip loans followed the same general pattern : (1) just before the close of the financial reporting period, a Refco entity, generally Refco Capital Markets, Ltd . ("RCM"), would make a "loan" to a third-party customer ; (ii) simultaneously, the customer would make a "loan," which was unconditionally and absolutely guaranteed by Refco, in the exact sam e amount to RGHI ; and (iii) RGHI would use these funds to pay down the RGHI Receivable . Id. 1126, 31 . As a result, Refco's books at the close of the reporting period would show a "loan" to the third-party customer, and the RGHI Receivable would be gone . Id . 126 . These transactions

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were then unwound just a few days later, after the close of the financial reporting period : (1) Refco would "lend" money back to RGHI in the amount of the RGHI Receivable ; (ii) RGHI would pay off the full amount of its loan, plus interest, to the unrelated customer, and (iii) the customer would pay off the full amount of its loan, plus a lesser amount of interest, to Refco . Id. 128 . Once this was completed, the RGHI Receivable would reappear on Refco's books and the customer "loan" would be gone . Id. 1128, 32 . The third-party customers were guaranteed a profit from the round-trip loans because the interest rate that RGHI paid them was between 15 and 100 basis points higher than the interest rate that the customers paid Refco . Id . 127 . The customers, however, were never at risk : Refco unconditionally and absolutely guaranteed all of RGHI's obligations to the customers and indemnified them against all loss . Id. 129 . Bennett stood on both sides of the transactions, signing the documentation for the loan on behalf of RGHI and, on all but one occasion, the guarantees and indemnities on behalf of Refco . Id. These arrangements and their individual components (including the guarantees and indemnities provided by Refco) were related-party transactions, material contracts, and indemnification obligations of Refco and were required to be disclosed and described as such, but were not, in connection with the 2004 Purchase . Id. 1123, 41 . Mayer Brown's Direct And Continuous Involvement In The Fraudulent Scheme Between 2000 and 2005 - which included the period during which Plaintiffs conducted due diligence and completed the 2004 Purchase - Refco engaged in 18 sham roundtrip loans, and Mayer Brown was involved in virtually every facet of 17 such loans for Refco . Id. 1125, 30, 31 . Specifically, Mayer Brown lawyers participated in these sham round-trip loans on 17 separate occasions, negotiating the terms of the loan documents with the loan participants or their counsel, drafting and revising the loan documents, transmitting the documents to Refco and the loan participants through interstate wires, and, on at least two separate occasions ,

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sending confirmations to loan participants that the loans had been unwound within days of having been made, endorsing the promissory notes as "paid in full ." Id . 1130, 31 . Mayer Brown senior partner Collins was directly involved in the early sham round-trip loans, and while he handed off the direct work to Mayer Brown associate Paul Koury for later loans, Collins remained informed of Koury's work on the later sham round-trip loans . Id .131 . Mayer Brown understood that the sham round-trip loans - many of which this ourt has already concluded were "glaringly suggestive of fraud," In re Refco, Inc . Sec. Litig, 503 F . Supp . 2d 611, 648-49 (S .D .N .Y . 2007) - affected Refco's financial statements, lacked any proper business purpose and were undisclosed related-party transactions . Id . 132 . Indeed, Mayer Brown understood, inter alia, that "these round-trip loans, with one exception, were undertaken only at times that straddled Refco's financial reporting periods," "each [round-trip loan] entailed the short-term risk-free lending of hundreds of millions of dollars," and "these transactions caused the RGHI related-party receivable to be removed from Refco's books and records at the time that financial statements were being prepared and then to reappear immediately thereafter, only to disappear yet again at the time of the next annual audit or quarterly statement ." Id. Mayer Brown's Central Role In Plaintiffs' Due Diligence Before entering into the 2004 Purchase, Plaintiffs conducted due diligence for nine months with the assistance of a team of professional advisors . Id. 118, 33, 34 . Mayer Brown represented not only Refco but also RGHI and Bennett in connection with this transaction . Id . 135 . The very same Mayer Brown lawyers who had drafted the sham round-trip loans played a central role in the 2004 Purchase, both in responding to Plaintiffs' due diligence requests and in drafting and negotiating the transactional documents . See, e .g ., id . 1146-48 (Collins) & 154 (Koury) .

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t the direction of, and in coordination with, Bennett and his co-conspirators, Mayer Brown lawyers - primarily Collins and Koury - communicated frequently with Plaintiffs and their counsel regarding the due diligence process . Id . 135 . Mayer Brown coordinated Plaintiffs' access to the documents and information being provided by Refco, its affiliates and Bennett . Id . In this regard, the parties knew that Mayer Brown would provide information directly to Plaintiffs and their representatives and that Plaintiffs were entitled to rely on the information Mayer Brown provided in deciding whether to go forward with the 2004 Purchase . Id . 136 . Mayer Brown "would not be serving merely as a conduit for information from Refco management and Bennett, but would be drawing from its own extensive knowledge and information built up over the many years that Collins and his Mayer Brown colleagues had been working with Refco ." Id . Consistently with these understandings, Mayer Brown attorneys had extensive direct contact with Plaintiffs and their representatives, attending meetings and regularly participating in conference calls and e-mail communications with Plaintiffs and their counsel . Id . 137 ; see, x,1145-48 . "Of critical importance to [Plaintiffs] during the [due] diligence process was to identify and eliminate any related-party transactions and arrangements, in particular dealings between [Refco] and its senior management (and their affiliates) . . . ." Id . 138 . As a result, Plaintiffs repeatedly requested information on any related-party transactions as well as any material contracts of Refco and any agreements in which Refco had incurred indemnification obligations to third persons . Id . 1 41 . "Mayer Brown and Collins at all times knew the importance that [Plaintiffs] placed on identifying and eliminating related-party transactions ." Id. 1 40 . Nonetheless, neither Mayer Brown nor anyone else on Refco's side of the transaction ever disclosed or provided Plaintiffs with the sham round-trip loan information and relate d

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ocumentation even though the sham loans constituted related-party transactions and material contracts and contained Refco indemnification obligations, id . 141 ; to the contrary, Mayer Brown actively participated in hiding their existence by expressly representing that such transactions, contracts, and obligations did not exist . Id . 1146-49, 51, 54-55 . Mayer Brown's Misstatements And Omissions Of Material Facts To Plaintiff s Mayer Brown made direct repeated misrepresentations, and omitted material facts, during face-to-face meetings and telephonic communications with Plaintiffs and their counsel and in written communications, including draft disclosure schedules, concerning Refco's related-party transactions, material contracts and indemnification obligations . See id . 1146-48, 53-55 . For example, during a March 2004 telephone conference, Collins represented to Plaintiffs' counsel Jay Tabor that "he had confirmed with Bennett that, other than Bennett's compensation arrangements, no other undisclosed contracts or arrangements existed between Refco and Bennett, RGPII, or other affiliates ." Id . 9[46 (emphasis added) . Also, in two separate e-mails on May 6, 2004 addressed to Plaintiffs' counsel and responding to Plaintiffs' requests for information, Collins informed Plaintiffs' counsel that all material contracts and indemnification obligations had been disclosed to Plaintiffs . Id. 9[9[ 47-48 . Collins knew that these statements were false because no information regarding the sham round-trip loans - which, in themselves, were related-party transactions and material contracts and involved indemnification obligations had been provided to Plaintiffs . Id. 1147-48 . And Mayer Brown knew this because they prepared disclosure schedules that said "none" in answer to the question whether any relatedparty transactions existed . Id. 154 . Additionally, Mayer Brown negotiated and prepared the quity Purchase Agreement, dated June 8, 2004, which contained a series of material contractual representations that no such transactions existed . Id. 1150-51 . Mayer Brown prepared and delivered to Plaintiffs a disclosure schedule to the Equity Purchase Agreement stating that there

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were no related-party transactions at the very same time that Mayer Brown was working on a related party sham round-trip loan for Refco that put the lie to this representation . Id. T 31(1). The Fraud Is Reveale d In early October 2005, Refco's Board of Directors, which included designees of Plaintiffs, learned for the first time of the fraudulent activities by Bennett and his coconspirators . Id. T 9 . On October 10, 2005, Refco issued a press release disclosing the discovery of an approximately $430 million receivable owed to Refco by RGHI . Id. As a result of the fraud, the interests acquired by Plaintiffs became worthless, causing them losses of at least $245 million . Id. 1173, 82, 92, 98, 108 . ARGUMENT THE COMPLAINT STATES A FEDERAL SECURITIES LAW CLAIM A. ayer Brown Is Liable As A Primary Violator Of Section 10(b) And Rule 10b-5(b) For Its Material Misstatements And Omissions To Plaintiff s Mayer Brown spills much ink arguing that the Complaint impermissibly attempts to hold it liable under Rule lOb-5(b) for its clients' alleged fraud . Br. at 8-27 . But that is not Plaintiffs' Rule lOb-5(b) claim . Mayer Brown is being sued for its own fraudulent conduct . The Complaint alleges that Mayer Brown made a number of knowingly false oral statements directly to Plaintiffs and their counsel, such as informing Plaintiffs that "other than Bennett's compensation arrangements, no other undisclosed contracts or arrangements existed between Refco and Bennett, RGHI or other affiliates ." Compl .146 ; see also id . 1147-48 . This was a lie because there were numerous related-party contracts and arrangements (including 17 sham round-trip loans) - in which Mayer Brown played a material role - that were never disclosed to Plaintiffs or their counsel . See, e .g . , Compl .1142, 46-48, 53-55 . The Complaint also alleges that Mayer Brown drafted and delivered to Plaintiffs and their counsel disclosure schedules an d

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other written statements confirming there were no related-party transactions . In fact, when Mayer Brown communicated the initial disclosure schedules to Plaintiffs' counsel, it expressly represented that it was delivering "our initial draft of the Schedules," which Mayer Brown was also "deliver[ing] simultaneously to our clients ." Compl . 155(a) (emphasis added) . See also id . 1151-55 and pages 10 to 11, above . These written statements also were lies because they misrepresented that there were no related-party contracts or arrangements . Thus, Plaintiffs are not seeking to hold Mayer Brown liable under Rule lOb-5(b) for the false statements of others that are merely attributed to Mayer Brown, but for material lies told by Mayer Brown . Mayer Brown's conduct falls squarely within the reach of primary Rule lOb-5 liability for attorneys articulated by the Supreme Court in Central Bank of Denver N .A . v . First Interstate Bank of Denver N .A . , 5 11 U .S . 164, 191 (1994) (emphasis added) : The absence of § 10(b) aiding and abetting liability does not mean that secondary actors in the securities markets are always free from liability nder the securities Acts . Any person or entity, including a lawyer , accountant, or bank who employs a manipulative device or makes a material misstatement (or omission) on which a purchaser or seller of securities relies may be liable as a primary violator under l Ob-5 . . . . These allegations also render inapposite Mayer Brown's heavy reliance (Br . at 912) on Lattanzio v . Deloitte & Touche L .L .P . , 476 F .3d 147 (2d Cir . 2007) ; Wright v . Ernst & Young, L .L .P . , 152 F .3d 169 (2d Cir . 1998) ; and Shapiro v . Cantor, 123 F .3d 717 (2d Cir . 1997) . In these cases, investors sought to hold auditors liable for falsehoods communicated to investors by companies in their financial statements, under the theory that the falsehoods, though spoken by the companies, should also be attributed to their auditors . Plaintiffs do not seek to hold Mayer Brown liable for someone else's words attributed to Mayer Brown, but to hold Mayer Brown liable for its own words - i .e ., for false representations Mayer Brown made directly, and often face-to-face, to Plaintiffs and their counsel while