DISTRICT COURT, CITY AND COUNTY OF DENVER,
COLORADO
1437 Bannock Street
Denver, Colorado 80202
. COURT USE ONLY .
Plaintiff(s):
X-CLEARING CORP., a Colorado corporation,
v.
Defendant(s):
CLX & ASSOCIATES, INC. a Florida corporation, and
MARINE EXPLORATION, INC., a Colorado Corporation.
________________________________________________
Applicant for Intervention:
NEWBRIDGE SECURITIES CORPORATION, a Florida
Corporation.
Case Number:
2008 CV 1278
Div.: Ctrm.: 3
Attorneys for Newbridge Securities Corporation:
Name: Michael J. Carrigan
Michael R. MacPhail
Address: Holland & Hart LLP
555 17th Street, Suite 3200
Telephone: (303) 295-8000
Facsimile: (303) 295-8261
E-mail: mcarrigan@hollandhart.com
mrmacphail@hollandhart.com
Atty.Reg.#: 24061, 26382
COMBINED MOTION TO INTERVENE AND TO VACATE COURT’S ORDER
BASED ON PLAINTIFF’S EX PARTE MOTION
FOR LEAVE TO DEPOSIT STOCK CERTIFICATE, WITH REQUEST FOR
EXPEDITED HEARING
Pursuant to C.R.C.P. 24, Newbridge Securities Corporation (“Newbridge), by and
through its attorneys, Michael Carrigan and Michael MacPhail of the law firm of Holland &
Hart, LLP, moves the Court to intervene in this matter, and to vacate the Court’s February 29,
2008 Order on Plaintiff’s Motion for Leave to Deposit Stock Certificate Into This Court’s
Registry, as follows:
C.R.C.P. 1-121 § 1-15(8) CERTIFICATION
Newbridge has attempted to confer with all represented parties regarding its motion to
intervene and vacate. Counsel for Defendant CLX & Associates (“Defendant CLX”) indicated
that he did not object to the relief sought herein.
Counsel for Newbridge spoke with counsel for Plaintiff X-Clearing Corporation
(“Plaintiff”) on Sunday, March 2, 2008. Said counsel indicated that he was out of town until
Tuesday, did not know his client’s position and would not discuss the matter further. Said
counsel then hung up.
As of the time of this filing, Defendant Marine Exploration, Inc. (“Defendant Marine”)
has not entered on the case. Counsel for Plaintiff indicated that Defendant Marine would be
represented by an attorney named Michael Bohn. The undersigned contacted Mr. Bohn who
indicated that he was “pretty sure” he would be retained by Defendant Marine, but did not know
Defendant Marine’s position on Newbridge’s request. Mr. Bohn requested he be given courtesy
copies of Newbridge’s pleading, and the undersigned will comply with that request.
I. INTRODUCTION
Last week, the Court agreed to enter an order based on ex parte filings and
representations by Plaintiff—who claimed to be an independent transfer agent. In fact, as
demonstrated below, this entire lawsuit appears to be the product of collusion between Plaintiff
and Defendant Marine, who are under common control, in an effort to illegally inflate the share
price of Defendant Marine. Further this case was filed by an attorney who, at a minimum, is an
essential witness to the dispute as he drafted an opinion letter concluding the disputed shares
may be sold.
Intervener Applicant Newbridge is a registered broker-dealer incorporated in the State of
Florida and maintains an office in Denver, Colorado. One of Newbridge’s Florida clients is
Defendant CLX and, on behalf of CLX, Newbridge executed orders to sell approximately 1
million shares of stock of Defendant Marine (“Disputed Shares”). Prior to executing such sales,
Newbridge received written confirmation from Plaintiff that, consistent with a legal opinion
issued by Defendant Marine’s counsel (who also represents Plaintiff in this case), such sales
were valid and authorized. Now, by this lawsuit, Plaintiff and Defendant Marine are illegally
conspiring to prevent Defendant CLX from fulfilling its obligation to deliver these shares,
causing Defendant CLX to have a large uncovered “short” position that, if unremedied, will
cause Defendant CLX, Newbridge, or both, to incur substantial damages.
As described in this Motion and the supporting affidavit, there is significant evidence of
collusion between Plaintiff and Defendant Marine, which are under common control. Because
Plaintiff can have no legitimate fear of multiple claims, it is ineligible to bring this interpleader
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action. Further, there is substantial evidence that Plaintiff and Defendant Marine are attempting
to manipulate the share price of Defendant Marine, a publicly traded Colorado shell company
with no revenues or operations. Both Defendant Marine and one of its two controlling
shareholders, Paul Enright (“Enright”), have publicized Defendant CLX’s short position, and
Enright has portrayed the events at issue in this lawsuit as a reason to buy Defendant Marine
shares in anticipation of a price increase. Moreover, the underlying securities registration claims
articulated by Plaintiff on behalf of Defendant Marine are frivolous.
Newbridge is an interested party because it may be obligated to assist Defendant CLX is
purchasing shares at excessive prices to cover the short position that Plaintiff and Defendant
Marine have created. Newbridge’s interests are not adequately safeguarded and no party is
adequately protecting its interests. Therefore, the Court should allow Newbridge to intervene in
this matter and vacate the Court’s prior Order. To prevent imminent and irreparable harm to
Newbridge, the Court should further direct Plaintiff to approve the sale of shares by Defendant
CLX.
II. FACTUAL BACKGROUND
Defendant Marine is a publicly traded Colorado corporation. Its filings with the
Securities and Exchange Commission (“SEC”) indicate that it has no significant assets, revenues
or operations. See Affidavit of Gregg Breitbart ¶ 14, attached hereto as Exhibit A (“Breitbart
Aff.”). Notwithstanding its location in Denver, Defendant Marine states that, through a joint
venture partner, it intends to search for valuable artifacts contained in unidentified shipwrecks in
the Carribean. Defendant Marine further discloses that Robert Stevens (“Stevens”), a Denver
resident, and Enright, either individually or through entities they control, collectively own 99%
of its outstanding common stock. See Breitbart Aff. ¶ 12(a). Plaintiff is the transfer agent for
this company. Public records indicate that Plaintiff is controlled by the same Robert Stevens,
who is its president, and his wife, Jodie Stevens, who is its resident agent. Breitbart Aff. ¶ 12(b)(
e), Exhs. 6-9. Both Plaintiff and Defendant Marine have the same address. See id. ¶ 12(f).
Defendant CLX is a client of Newbridge that owns 5 million shares of Defendant Marine
stock. These shares were received by Defendant CLX from Enright. Breitbart Aff. ¶ 9.
Defendant CLX’s ownership of these shares is reflected by Certificate No. 1408 dated January
15, 2008. Breitbart Aff. ¶ 8(d), Exh. 4. Defendant CLX first sought permission to approve the
shares for sale in January 2008 through a different brokerage firm at which it then maintained an
account (“Prior Brokerage Firm”). Defendant CLX submitted the paper work to Plaintiff to
authorize the sale of shares. In a January 15, 2008 letter to the clearing firm for the Prior
Brokerage Firm, Plaintiff’s attorney Brad Lam, in his capacity as securities counsel for
Defendant Marine, opined that in light of an effective registration statement on Form SB-2, the 5
million shares “may be sold without violation of the Securities Act of 1933.” See Breitbart Aff.
¶ 8(a) and (b), Exhs. 1 and 2.
On about January 16, 2008, Scott Prather, Plaintiff’s Director of Transfer Operations,
spoke with a compliance officer at the Prior Brokerage Firm and told him there were “no stops”
regarding Defendant CLX’s ability to sell the shares. See Breitbart Aff. ¶ 8(d), Exh. 4. Further,
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on January 30, 2008, Prather sent an e-mail to the Prior Brokerage Firm’s clearing firm that it
was “correct” to state that the 5 million shares held by Defendant CLX “could be cleared”
pursuant to Defendant Marine’s prospectus, which related to its prior registration statement. See
Breitbart Aff. ¶ 8(e); Exh. 5.
After Defendant CLX became a client of Newbridge, on February 12, 2008, Plaintiff
again reiterated its approval of the sale of these shares. Sean McQuown, a Newbridge employee,
received an e-mail confirmation from Plaintiff that sale of the 5 million shares could “be cleared
under the prospectus” previously filed by Defendant Marine. See Breitbart Aff. ¶ 8(e), Exh. 5.
In reliance on this confirmation, Newbridge sold approximately 1 million shares (the
“Disputed Shares”) for Defendant CLX in February 2008. See Breitbart Aff. ¶ 6. After these
shares were sold, but before they could be delivered by CLX, Defendant Marine allegedly
“instructed” Plaintiff to “deny the request for transfer” by Defendant CLX, based on Defendant
CLX’s purported failure to comply with the conditions of a restrictive legend affixed to the share
certificate. Documents filed by Plaintiff indicate that this action was taken “on the advice of
counsle [sic]” (presumably Mr. Lam). 1 See Complaint, ¶ 5; Breitbart Aff. ¶ 10. This document
does not explain the reason for the decision to deny transfer of the shares, which is inconsistent
with Mr. Lam’s prior legal opinion and Plaintiff’s prior communications with Newbridge and the
Prior Brokerage Firm. Because the shares that had already been sold could not be delivered,
Defendant CLX now maintains a “short” position regarding the Disputed Shares. Defendant
CLX has covered approximately 25,000 shares of this position by buying this quantity of shares
on the open market, albeit at prices substantially higher than those at which the shares were sold.
Defendant CLX is currently “short” approximately 955,000 shares. Breitbart Aff. ¶ 6.
Generally, a short position of this nature would be “covered” by buying an equivalent
number of shares on the open market to deliver to the buyers of the shares. In this case,
however, this can not be done without paying a substantial premium. A premium must be paid
because the issuer has disclosed, in an obvious attempt to drive up its stock price, that Defendant
Marine’s stock has a very small public “float” of only 278,245 shares. The “float” is the number
of unrestricted shares held by members of the public. Breitbart Aff. ¶¶ 14(b) and (c), Exh. 10.
Therefore, if Newbridge and CLX attempt to cover the existing short position created by Plaintiff
and Defendant Marine by buying the nearly 1 million necessary shares on the open market, such
shares would likely be available for purchase, if at all, only at prices dramatically higher than the
$.10 per share price received by CLX, thereby exposing Defendant CLX and Newbridge to
substantial, ever-increasing losses. See Breitbart Aff . ¶¶ 15-17. Further, buying this quantity of
shares would almost certainly cause the reported price of Defendant Marine’s stock to increase
dramatically, which would be entirely unjustified by its publicly reported lack of financial
resources and current operations. See Breitbart Aff. ¶ 15. Plaintiff and Defendant Marine appear
1 Counsel for Defendant Marine has not yet entered an appearance in this matter. However, as set forth
in Exhibit A, on January 15, 2008, attorney Bradford Lam issued an opinion letter on behalf of
Defendant Marine representing that the shares could be transferred. This same attorney convinced this
Court to grant his ex parte motion to effectively present delivery of the disputed shares.
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to be motivated by a desire to artificially increase Defendant Marine’s stock price. See Breitbart
Aff. ¶ 14(a)-(e).
Defendant CLX is ultimately responsible for covering the sale of these shares and for
paying any resulting debit in its account. However, if Defendant CLX cannot fulfill its
obligations, any resulting debit will be unsecured and could adversely affect Newbridge’s net
capital, which federal law requires it to maintain at certain levels. A substantial unsecured debit
relating to Defendant CLX’s account could cause Newbridge to suffer serious financial harm to
an extent unknown at this time. See Breitbart Aff. ¶ 17. Therefore, Newbridge is an interested
party and has interests independent of Defendant CLX.
On February 26, 2008, Plaintiff filed its Complaint in Interpleader and on February 29,
2008, the Court granted its motion to deposit the Disputed Shares into its registry. Newbridge
moves this Court to intervene in this lawsuit and to vacate this order. Also, based on Defendant
Marine’s prior opinion letter authorizing the sale and transfer and stock, and Plaintiff’s later
written confirmation that shares may be transferred, Newbridge seeks an order directing Plaintiff
to issue unrestricted share certificates allowing Defendant CLX to deliver the Disputed Shares.
III. ARGUMENT
A.
NEWBRIDGE SATISFIES THE STANDARDS FOR
INTERVENTION.
A person not a party to a pending action may be allowed to enter the action pursuant to
C.R.C.P. 24. The rules for intervention are to be liberally construed so that all related
controversies can be efficiently determined in one action. Great Neck Plaza, L.P. v. Le Peep
Restaurants, LLC, 37 P.3d 485, 488 (Colo. App. 2001); O’Hara Group Denver, Ltd. v. Marcor
Housing, 595 P.2d 679, 687 (Colo. 1979). Rule 24(a)(2) permits intervention of right when
(i) the applicant has an interest, (ii) the applicant’s ability to safeguard that interest will be
impaired if not permitted to intervene, and (3) the applicant’s interest is not adequately
represented by existing parties. See also Dillon Companies v. City of Boulder, 515 P.2d 627, 629
(Colo. 1973). Newbridge satisfies all three considerations. First, Newbridge has an interest in
the matter because it has responsibility to assist its client in covering this short and may suffer
serious harm if the client (Defendant CLX) fails to meet its obligations. Second, Newbridge’s
inability to safeguard its interest will be impaired if it is not permitted to intervene because it
otherwise will be unable to seek relief from the Court to remedy the impending harm caused by
Plaintiff and Defendant Marine. Third, the existing parties do not adequately represent
Newbridge’s interests. Two of the three parties, Plaintiff and Marine, are under common control
and have taken actions adverse to Newbridge. Further, the interests of Defendant CLX and
Newbridge are potentially adverse because Newbridge may seek indemnification from
Defendant CLX for any resulting harm to Newbridge. Moreover, granting this Motion will not
prejudice any party or delay this matter. Therefore, the Court should grant Newbridge’s motion
to intervene.
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B.
PLAINTIFF DOES NOT QUALIFY TO BRING AN INTERPLEADER
ACTION.
1. Plaintiff Has No Legitimate Fear of Multiple Claims.
Plaintiff filed this interpleader action under C.R.C.P. 22, which allows plaintiffs to join
“as defendant” “[p]ersons having claims against the plaintiffs.” The Rule contemplates that such
an action will be brought when “the plaintiff is or may be exposed to double or multiple
liability.” C.R.C.P. 22 is similar to Fed. R. Civ. P. 22. When a Colorado Rule is similar to a
Federal Rule of Civil Procedure, Colorado courts may look to federal authority for guidance in
construing the Colorado rule. See Benton v. Adams, 56 P.3d 81, 86 (Colo. 2002). Interpleader
actions are appropriate only where “the stakeholder legitimately fears multiple vexation directed
against a single fund.” Indianapolis Colts v. Mayor and City Council of Baltimore, 733 F.2d 484
(7th Cir. 1984) (discussing Interpleader Act of 1936, 28 U.S.C.§ 1335, and quoting 7 Wright &
Miller, Federal Practice and Procedure § 1704).
Plaintiff’s Complaint filed in this action portrays it as an impartial, innocent stakeholder.
Plaintiff alleges that “[t]he dispute in this instance is between the defendants solely, but any
action that [Plaintiff] may take will allegedly harm one of them and potentially create liability for
itself.” See Complaint, ¶ 6 (emphasis supplied). Plaintiff should know this statement to be
inaccurate as, prior to assisting in the sales in question, Newbridge sought and received from
Plaintiff confirmation that such sales were authorized. Breitbart Aff. ¶ 8(e) Exh. 5.
Similarly, Plaintiff’s Motion for Leave to Deposit Stock Certificate states that “[t]his
action is not brought by collusion with any of the defendants.” Contrary to these statements,
however, Plaintiff helped cause the dispute, is a party in fact to the dispute, and is under common
control with Defendant Marine, with which Plaintiff has colluded. Breitbart Aff. ¶ 11.
A similar situation confronted the Third Circuit in Bierman v. Marcus, 246 F.2d 200 (3rd
Cir. 1957) (attached as Exhibit B). There, two individuals asked the court to decide whether a
third individual or a New Jersey corporation was entitled to certain money that plaintiffs
admittedly owed. The court found that “the plaintiffs did not believe or assert in good faith that
there was any danger of” the corporation asserting a claim because “[a]t the time [plaintiffs] filed
their complaint expressing fear” of such a claim, “they were the sole stockholders” and “in
complete control” of, the corporation. Plaintiffs therefore “knew that corporation . . . could not
even assert a fictitious claim without their consent.” See id. at 201 and 203. The court described
the suit as a “misuse [of] interpleader, based on mere pretense of adverse claims to a fund . . . .”
The Court remanded the action to the district court “with instructions to dismiss the complaint as
not being predicated upon any bona fide fear of vexatious conflicting claims.” Id. at 204.
Since Stevens, a controlling shareholder of Defendant Marine, is also the president of
Plaintiff (and married to Plaintiff’s current registered agent Jodie Stevens), Plaintiff knows that
Defendant Marine cannot assert any claims without the consent of Stevens, Plaintiff’s president.
Since Plaintiff has no legitimate fear of a claim by Defendant Marine or resulting liability, it has
6
misused the interpleader process. Accordingly, there is no genuine dispute to serve as the basis
of an interpleader action.
2.
Plaintiff Contributed To The Development Of The Adverse
Claims.
As discussed above, Plaintiff approved sales of the Disputed Shares on numerous
occasions, a position consistent with the opinion letter drafted by the attorney for both Plaintiff
and Defendant Marine. Then, presumably responding to a directive from Stevens, who is both a
controlling shareholder of Defendant Marine and Plaintiff’s president, Plaintiff arbitrarily
reversed course, purporting to have acted at the behest of its affiliate, Defendant Marine.
Breitbart Aff. ¶ 10. Therefore, Plaintiff contributed to development of a potential adverse claim
by Defendant CLX. Plaintiff’s culpability precludes it from bringing an interpleader action. See
Farmers Irrigating Ditch & Reservoir Co. v. Kane, 845 F.2d 229 (10th Cir. 1988) (tortfeasor
who caused damages cannot file interpleader action); Network Solutions v. Clue Computing, 946
F. Supp. 858, 861 (D. Colo. 1996) (party seeking interpleader must be free from blame in
causing the controversy).
C.
PLAINTIFF AND DEFENDANT MARINE’S IMPROPER MOTIVE.
Defendant Marine (and by implication Plaintiff) apparently are motivated by a desire to
manipulate Defendant Marine’s stock price in violation of federal law. On February 28, 2008,
Defendant Marine filed a Form 8-K disclosure with the SEC inaccurately stating that through
Defendant CLX’s principal Robert Weidenbaum, Defendant CLX has sold “in excess of
1,000,000 restricted shares in the open market.” The filing further stated that the number of
shares sold “exceeds the public float which is estimated at 278,425 shares.” See Breitbart Aff. ¶
14(d), Exh. 10. On February 28, 2008, Enright, a controlling shareholder of Defendant Marine,
sent a text message to a prospective investor, Danny Garber, containing a link to Defendant
Marine’s Form 8-K, describing its stock as a “strong buy” and stating there would be a “forced
cover soon.” See id. ¶ 14(d), Exh. 11. This text message supports Newbridge’s belief that
Plaintiff and Defendant Marine are conspiring to affect a “short squeeze” in Defendant Marine’s
stock. See Breitbart Aff. ¶ 15.
The SEC has noted that “[t]he term “short squeeze refers to the pressure on short sellers
to cover their positions as a result of sharp price increases or difficulty in borrowing the security
the sellers are short. The rush by short sellers to cover produces additional upward pressure on
the price of the stock, which then can cause an even greater squeeze.” 2 The SEC has noted that
“[a]lthough some short squeezes may occur naturally in the market, a scheme to manipulate the
price or availability of stock in order to cause a short squeeze is illegal.” See Amendments to
Regulation SHO, Rel. No. 34-56212 (Oct. 15, 2007) (emphasis added). There is nothing
“natural” about Plaintiff’s and Defendant Marine’s actions. Rather, such actions were taken in a
2 It should be noted that Defendant CLX did not intentionally “short sell” these shares, and therefore
cannot be accused of attempting to depress the price of the stock. Rather, Defendant CLX’s 1 million
share position became “short” only due to the actions of Plaintiff and Defendant Marine.
7
deliberate attempt to artificially inflate Defendant Marine’s stock price. Such conduct is in
violation of the federal securities laws, specifically Section 10(b) of the Securities Exchange Act
of 1934 [15 U.S.C. § 78j] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. See SEC v.
Wexler, Fed. Sec. L. Rep. (CCH) 97,758 (S.D.N.Y. 1993) (declining to dismiss market
manipulation charges against trader accused of participating in “short squeeze”).
Defendant Marine’s efforts to drive up the price of its stock apparently have succeeded.
On February 28, 2008, the date of the Form 8-K, Defendant Marine stock closed at $.25 per
share, representing an increase of approximately 178% from the closing price of $.085 per share
on February 27, 2008. Reported volume was 563,000, representing a large increase from the
prior day’s volume of 38,300 shares. Further, on February 29, 2008, Defendant Marine stock
closed at $.37 per share, a price 48% higher than the February 28 price and 411% higher than the
February 27 price. Reported volume on February 29, 2008 was 286,800 shares, an amount
slightly in excess of the entire public float recently disclosed by Defendant Marine. See Breitbart
Aff. ¶ 14(e).
D.
DEFENDANT MARINE’S UNDERLYING SECURITIES
REGISTRATION CLAIM IS FRIVOLOUS.
Plaintiff alleges that its decision to reverse its earlier approval of share sales by
Defendant CLX is justified because Defendant Marine “has informed” Plaintiff that Defendant
CLX has failed to satisfy “conditions precedent” contained in the restrictive legend affixed to the
5 million share certificate in Defendant CLX’s name. See Complaint ¶¶ 4-5. Plaintiff alleges in
its First [and only] Claim for Relief that, according to Defendant Marine, the stock is considered
“control stock” because it came from “Affiliates” of Defendant Marine and is therefore
considered restricted as to sale.
Although the Complaint recognizes that the shares are subject to a registration statement,
it alleges that because they were registered “on behalf of certain specifically named Selling
Shareholders (“the Affiliates”) the shares are transferable, or saleable, by the Affiliates only, into
the open market in limited circumstances only, and any different transfer must be accomplished
pursuant to applicable legal restrictions.” Id. ¶ 16 (emphasis in original). Accordingly, Plaintiff
contends that according to Defendant Marine, the shares held by Defendant CLX are neither
validly registered nor subject to an applicable exemption from such registration, in noncompliance
with Sections 5(a) and 5(c) of the Securities Act of 1933 [15 U.S.C. § 77a and 77c].
Id. ¶ 18. Section 5 prohibits the offer or sale of a security in interstate commerce “nless a
registration statement is in effect as to [the] security . . . .” Accordingly, the statute “forbids the
offer or sale of unregistered securities in interstate commerce.” SEC v. Johnston, 972 F.2d 357
(10th Cir. 1992); SEC v. Murphy, 626 F.2d 633, 640 (9th Cir. 1980) (quoting 3 L. Loss,
Securities Regulation 1693 (2d ed. 1961).
Plaintiff’s allegations are disingenuous because they do not disclose that Defendant
Marine’s allegations are also its own, since both entities are under common control. Further, its
securities registration allegations are frivolous. Defendant CLX obtained the Disputed Shares
8
from Enright, whose family trust is named as a selling shareholder in Defendant Marine’s Form
SB-2.
The allegation that Defendant Marine’s shares can be sold under its Form SB-2 only by
the named selling shareholders is contradicted by its own related prospectus pursuant to Rule
424(b)(3) filed with the SEC on September 14, 2007, which states: “The Shares are being
registered to permit the selling shareholders and certain of their respective pledgees, donees,
transferees, or other successors in interest to offer the shares from time to time” (emphasis
supplied). Breitbart Aff. ¶ 8(c), Exh. 3. This language clearly contemplates that, in
contradiction of Plaintiff’s allegations, shares transferred by a selling shareholder to a third party
may be sold pursuant to the registration statement. There can be no violation of Section 5, since
the Disputed Shares were subject to an effective registration statement. In apparent recognition
of this fact, both Plaintiff and Defendant Marine have previously opined or instructed that
Defendant CLX may sell the Disputed Shares. Plaintiff should be estopped from reneging on its
prior approval of such sales, since it has presumably been aware of all relevant facts since
Defendant CLX first sought such approval in January 2008. Since the Disputed Shares are
validly registered, the securities registration arguments jointly made by Plaintiff and Defendant
Marine are bogus and Plaintiff’s position is without a good faith basis in fact or law.
To the extent Plaintiff and/or Defendant Marine allege that the conditions of the
restrictive legend on the relevant share certificate were not satisfied prior to sale of the Disputed
Shares, the legend affixed to the share certificate filed with the Court (and to opposing parties) is
incomplete and illegible. See Second Declaration of Bradford J. Lam in Support of Motion for
Leave to Deposit Stock Certificate. Accordingly, Plaintiff did not satisfy its burden needed to
justify depositing the certificate into the Court’s registry.
E.
THE COURT SHOULD VACATE IS PRIOR ORDER AND INSTEAD
DIRECT PLAINTIFF TO HONOR ITS PRIOR APPROVAL OF THE
SALE OF THE DISPUTED SHARES.
It appears that Plaintiff’s ex parte order was obtained from this Court through selective
disclosure of facts, if not outright fraud. Not only did Plaintiff fail to disclose its common
ownership with one of the interpleader defendants, Defendant Marine, it neglected to mention
that it previously authorized the sale. Plaintiff also did not advise the Court that Defendant
Marine had previously provided a legal opinion confirming that the Disputed Shares could be
transferred and sold by Defendant CLX. Plaintiff necessarily knew of this fact because of its
common ownership with Defendant Marine and its counsel of record authored the very letter in
question.
In light of this situation, Newbridge requests that the Court immediately vacate its order
accepting the Disputed Shares in the registry of the Court and enjoining transfer. The Court
should instead enter an order requiring Plaintiff to issue unrestricted certificates for the Disputed
Shares and honor its prior approval of Defendant CLX’s past sales of such shares to allow
Defendant CLX to fulfill its delivery obligations.
9
CONCLUSION
Newbridge satisfies the standards for intervention as of right. As an interested party that
did not face legitimate multiple claims, Plaintiff was ineligible to bring this interpleader action.
Plaintiff’s ex parte application for an order directing receipt of the Disputed Shares into the
Court’s registry was motivated by an improper manipulative motive. Further, the underlying
challenge to Defendant CLX’s ability to sell the Disputed Shares is entirely frivolous and,
indeed, contradicted by Defendant Marine’s own SEC filings.
WHEREFORE, Intervention Applicant Newbridge respectfully request that:
(1) The Court grant Newbridge’s intervention motion;
(2) Vacate the Court’s prior Order directing receipt of the Disputed Shares into its
registry;
(3) Require Plaintiff to issue unrestricted certificates for the Disputed Shares and approve
Defendant CLX’s past sales of such shares;
(4) Due to the exigent circumstances of this case, and imminent harm faced by
Newbridge, the Court set an expedited status hearing on this matter; and,
(5) Any other relieve the Court deems just and proper.
A proposed order is attached.
Dated: March 3, 2008.
Respectfully submitted,
s/ Michael R. MacPhail
Michael J. Carrigan
Michael R. MacPhail
Holland & Hart LLP
555 17th Street, Suite 3200
Telephone: (303) 295-8000
Fax: (303) 295-8261
ATTORNEYS FOR NEWBRIDGE SECURITIES
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CERTIFICATE OF SERVICE
I certify that on March 3, 2008, I served a copy of the foregoing document to the
following by
U.S. Mail, postage prepaid
Electronic Mail (if available)
Fax
Electronic Service by LexisNexis File & Serve
Bradford J. Lam, Esq.
Law Offices of Bradford J. Lam, PLLC
1901 W. Littleton Blvd.
Littleton, CO 80120
(also served by LexisNexis File & Serve)
Russell C. Weigel, III, PA
5775 Blue Lagoon Drive, Suite 100
Miami, FL 33126
Patrick J. Russell, Esq.
Allen & Vellone, PC
1600 Stout St., Suite 1100
Denver, CO 80202
Michael Bohn, Esq.
Oster & Martin, LLC
370 17th St., Suite 4400
Denver, CO 80202
s/ Brooke Nicholson
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