IN RE AMERICAN CONTINENTAL/LINCOLN S & L SEC. LIT.
782 F.Supp. 1382 (1991)
In re AMERICAN CONTINENTAL CORPORATION/LINCOLN SAVINGS AND LOAN SECURITIES LITIGATION.
Sarah B. SHIELDS, et al., Plaintiffs,
v.
Charles H. KEATING, Jr., et al., Defendants.
Charles ROBLE, et al., Plaintiffs,
v.
ARTHUR YOUNG & CO., et al., Defendants.
MDL Docket No. 834, Nos. CIV 90-566 PHX-RMB to CIV 90-570 PHX-RMB, CIV 90-574 PHX-RMB and CIV 90-1270 PHX-RMB.
United States District Court, D. Arizona.
December 12, 1991.
Leonard B. Simon, Kevin P. Roddy, Milberg Weiss Bershad Specthrie & Lerach, San Diego, Cal., for Shields.
Joseph W. Cotchett, Susan Illston, Allan Steyer, Cotchett, Illston & Pitre, Burlingame, Cal., and Ronald Rus, Alvarado, Rus & Worcester, Orange, Cal., for First Baptist.
Clayton R. Janssen, Janssen, Malloy, Marchi, Needham & Morrison, Eureka, Cal., for Ralph H. Rankin and Dorothy L. Rankin.
William B. Hirsch, Lieff, Cabraser & Heimann, San Francisco, Cal., for Judith Sims.
P. John Owen, Kristin L. Farnen, Nancy L. Shelledy, J. Emmett Logan, Morrison & Hecker, Phoenix, Ariz., for plaintiff Resolution Trust Corp. and defendant Lincoln Sav. and Loan Ass'n.
Stuart L. Kadison, George W. McBurney, Sidley & Austin, Los Angeles, Cal., for Arthur Andersen & Co.
Miles N. Ruthberg, Meryl Macklin, Laurence Popfsky, Heller, Ehrman, White & McAuliffe, Los Angeles, Cal., for Arthur Young & Co., Ernst & Young and Jack Atchison.
Wayne W. Smith, Gail E. Lees, James Behrendt, Byron Wilder, Gibson, Dunn & Crutcher, Los Angeles, Cal., for Touche Ross & Co.
Dan K. Webb, Thomas J. Frederick, Winston & Strawn, Chicago, Ill., for Lexecon, Inc.
Laura B. Hoguet, Joan Morgan McGiver, White & Case, New York City, and C. Randolph Fishburn, Katherine T. Haracz, White & Case, Los Angeles, Cal., for Bankers Trust.
Richard Sander, Popham, Haik, Schnobrich & Kaufman, Ltd., Minneapolis, Minn., for Offerman & Co., Joseph Offerman and Scott Offerman.
Max Gillam, Brian Ropelle, Latham & Watkins, Los Angeles, Cal., for Jones, Day, Reavis & Pogue, William J. Schilling and Ronald Fein.
David J. Brown, Brobeck, Phleger & Harrison, San Francisco, Cal., for Indus. Indem. Corp.
Vincent E. Nowak, McKool Smith, Dallas, Tex., for Gene E. Phillips.
Henry C. Kasson, Taft, Stettinius & Hollister, Cincinnati, Ohio, for Star Bank, N.A., Cincinnati.
Steven M. Pincus, Lindquist & Vennum, Minneapolis, Minn., for First Bank Nat. Ass'n (formerly First Bank of Minneapolis).
Lisa Coulter, Snell & Wilmer, Phoenix, Ariz., for Troutman, Sanders, Lockerman & Ashmore.
Marvin G. Pickholz, Stroock & Stroock & Lavan, Washington, D.C., for Jack Atchison.
MEMORANDUM OPINION AND ORDERBILBY, District Judge.
Under consideration are motions by Bankers Trust Company ("Bankers Trust") for summary judgment in two parallel consolidated class actions alleging securities fraud and racketeering under federal and state law. Class plaintiffs purchased securities issued by American Continental Corporation ("ACC"), parent company to Lincoln Savings and Loan Association ("Lincoln"). The ACC/Lincoln enterprise, headed by Charles H. Keating, Jr., has precipitated litigation against Keating, other ACC/Lincoln directors and officers, their lawyers, accountants, and business associates.
I.Bankers Trust performed a variety of traditional and investment banking services for ACC/Lincoln. Plaintiffs allege that through its business dealings Bankers Trust knew that ACC/Lincoln was in "precarious financial condition," "was operating
in an imprudent and fraudulent manner," and "was placing unsuspecting subordinated bondholders at ever-increasing risk." Yet despite this knowledge, Bankers Trust "provided ACC/Lincoln with financial assistance and non-routine banking services which enabled ACC/Lincoln to continue its operations and sell additional subordinated debentures." Class Plaintiffs' Memorandum in Opposition to Motion at p. 1. Plaintiffs complain that by propping the ACC empire up in this manner, Bankers Trust aided and abetted the primary fraud committed by ACC/Lincoln principals, who allegedly induced plaintiffs to purchase ACC's unsecured subordinated debt through an extensive scheme of misrepresentation about the soundness of both ACC/Lincoln and the investment bonds. Plaintiffs contend that Bankers Trust violated Section 10(b) of the Securities Exchange Act of 1934; Sections 1962(c) and (d) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"); the Arizona Racketeering Act, A.R.S. § 13-2301 et seq.; and California Corporations Code §§ 1507 and 25401. In addition, plaintiffs allege that Bankers Trust has aided and abetted and/or conspired in violations of the common law of fraud, negligent misrepresentation, and breach of fiduciary duty.
Plaintiffs assert that the evidence supports the following findings, precluding summary judgment:
1. A short sale is a standard market practice in which brokers, in contemplation of negative developments, "sell" borrowed shares, with the hope they will profit by repurchasing the shares at lower prices.