Opinion ID: 553337
Heading Depth: 2
Heading Rank: 2

Heading: The Pretrial Discovery and Settlements in Cresswell I

Text: 14 By the time of the NYSE settlement and decision, most of the plaintiffs in Cresswell I had settled their suit. Prior to settlement, they had sought discovery concerning, inter alia, any stock exchange inquiries or investigations into the Bache Spreads. 15 Promptly after filing the Cresswell I complaint in March 1983, Swan made a request to Bache for the production of documents. In response, Bache produced more than 2,600 pages of documents in November 1983, including documents indicating that the Chicago Board of Trade (CBOT) and the London Department of Trade (LDOT) were investigating Bache's marketing of the Spreads. In December 1983, Swan served on S & C a second request for Bache documents demanding, inter alia, 16 [a]ny and all documents relating to any investigation or inquiry by any exchange, regulatory agency, or governmental body (whether in the United States or abroad) relating to defendant's marketing of the GNMA/T-Bond Spread which is the subject of this action. 17 This request was forwarded by Hardiman to Goldenblum at Bache, and though additional documents were produced, including some related to the CBOT and LDOT investigations, no documents relating to NYSE inquiries were produced. 18 On December 7, 1983, Gregory wrote to Swan, seeking to join the plaintiffs in Cresswell I. Gregory informed Swan in her letter that she had lodged a complaint with NYSE with regard to Bache's promotion of the Spreads. Gregory promptly became a plaintiff in Cresswell I and gave Swan some of the correspondence relating to her complaint to NYSE. 19 In June 1984, S & C's Burnett conducted Gregory's deposition; Gregory was represented at the deposition by Swan. Burnett marked as exhibits four documents relating to Gregory's complaint to NYSE, and identified some of them as having come not from Gregory, but from the files of Bache. Swan did not comment on the fact that these Bache documents had not been produced in response to plaintiffs' document demands, and he did not make any follow-up inquiry of S & C. Nor did he contact NYSE to ascertain whether it had undertaken any investigation as a result of Gregory's complaint. 20 At the deposition, Swan asked Gregory to provide him with her copies of the Bache documents and of any other correspondence she had had with NYSE, and S & C requested copies. No such copies were produced until September 1984, after S & C moved to compel their production. 21 The parties in Cresswell I began settlement negotiations in the summer of 1984. In November 1984, Swan and Schwartz agreed on a figure of approximately $3 million, which would have allowed each plaintiff to recoup 46% of the losses suffered. Swan met with most of the plaintiffs to discuss the proposal and thereafter sent all plaintiffs a 10-page letter recommending the settlement. By February 1985, all but two of the plaintiffs had agreed to accept the settlement, and a judgment was entered pursuant to Fed.R.Civ.P. 54(b), dismissing the complaint as to the settling plaintiffs with prejudice. One of the two remaining plaintiffs went to trial on his claims in November 1987; the other, Merana, Ltd. (Merana), as discussed below, entered into a separate settlement in July 1986. 22 The Wall Street Journal article reporting the NYSE's settlement with and finding of Bache appeared in February 1986. An attorney for Merana promptly informed S & C's Hardiman of the article, and Hardiman asked Bache in-house attorney Salmanson whether the article referred to the Spreads that had been at issue in Cresswell I. Salmanson confirmed that it did and apologized for perhaps not having kept S & C informed of Enforcement's action. She immediately sent Hardiman copies of all of the documents relating to the matter described in the article, again apologizing, and copies of the documents were then forwarded to Swan and to Merana's attorney. In July 1986, Merana settled with Bache for $300,000 plus legal fees, which represented 93.99% of its claimed losses. In January 1987, the plaintiffs in another action arising out of the Spreads also settled with Bache; they recovered 71% of their losses.