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Valley of Lakes RICO Class Action against PNCBANK, et al.
ripped edge: federal court


	  IN THE UNITED STATES DISTRICT COURT
        FOR THE MIDDLE DISTRICT OF PENNSYLVANIA



LEON R. DONGELEWICZ, et al., 	: 	3:CV-95-0457 

		Plaintiffs	: 	(Judge McCLURE) 

	vs.			: 
					
FIRST EASTERN BANK, et al., 	: 	

		Defendants	: 

		     M E M O R A N D U M
 

		      September 23, 1997 
BACKGROUND:
	Plaintiffs in this class action suit are the lot owners 
in a 3856-acre recreational housing development called the Valley 
of Lakes (the community or VOL) which is located in Schuykill and 
Luzerne Counties near Hazleton, Pennsylvania.  Plaintiffs allege 
numerous improprieties on the part of individuals and entities 
associated with or having an ownership interest in the community 
over the years.
	Claims are asserted under RICO1; section 1983;2 the 
Interstate Land Sales Full Disclosure Act;3 the New Jersey Real 
Estate Sales Full Disclosure Act;4 and under state law for fraud 
and deceit.  Plaintiffs allege numerous acts of fraud and 
deception on the part of those allegedly responsible for

marketing, developing and maintaining Valley of Lakes over the 
years.
	Defendant C.B.G., Inc. (C.B.G.), the most recent 
developer of the property, is currently in Chapter 11 bankruptcy 
proceedings before the Bankruptcy Court for the Middle District 
of Pennsylvania, In re: C.B.G. Limited, Bankruptcy No. 5-92-
000525.  Defendant PNC Bank, N.A. (PNC Bank) is the primary 
secured creditor on VOL property still titled with defendant 
C.B.G. Defendants Valley Utilities, Co., Inc. (Valley 
Utilities) and the Oneida Water Co. (Oneida) are also currently 
in Chapter 11 bankruptcy.
	The Bankruptcy Trustee proposed to sell all assets of 
C.B.G., including its remaining ownership interest in Valley of 
Lakes to Double Diamond, Inc., (Double Diamond) a Texas 
Corporation, and the Valley of Lakes Civic Association (VOLCA).  
VOLCA is an unincorporated association of property owners.
	On June 26, 1996, the class plaintiffs filed a motion 
before this court for injunctive relief in connection with the 
proposed sale of C.B.G. assets.  Plaintiffs came before this 
court seeking a temporary restraining order and\or a preliminary 
injunction barring, among other things, PNC Bank from going 
forward with efforts to consummate the proposed sale of C.B.G. 
assets to Double Diamond and VOLCA and from going forward with 
efforts to obtain bankruptcy court approval of the proposed
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sale.5  Plaintiffs also sought an order barring defendants from 
soliciting any exclusions or settlements from class members.
	In an order dated June 27, 1996,6 this court denied 
plaintiffs' motion for a temporary restraining order and 
scheduled an evidentiary hearing on their request for a 
preliminary injunction.  A hearing on plaintiffs' motion for a 
preliminary injunction was held on July 11, 1996.  The court 
subsequently denied the motion.
	Before the court are motions for reconsideration of the 
court's order certifying the class filed by defendants First 
Eastern Bank and First Eastern Corp. (record document no. 60) and 
by defendant MLA Management (record document no. 83).  Also 
before the court is a motion by plaintiffs for a protective order 
(record document no. 74).7
DISCUSSION

	Motion for reconsideration or to 
	vacate the order certifying the
	class
	Defendants move for reconsideration of the court's 
order certifying the class and ask that the order be vacated so 
that they have sufficient opportunity to file briefs opposing the 
motion.  Defendants had an opportunity to file briefs opposing
				3

the motion for certification, but chose instead to request a stay 
which the court denied.  We should perhaps have notified 
defendants of that decision in an intermediate step before 
deciding the motion.  Their reasons for opposing certification 
are, however, now before us in the briefs supporting their motion 
for reconsideration and we have considered them fully.8
	Therefore, rather than vacate class certification at 
this point, we will allow the prior order to stand through the 
remainder of the discovery period, subject, however, to one 
modification.  We will amend the prior order granting 
certification to provide, however, that defendants have the right 
to seek decertification upon the completion of discovery.
	We remain convinced for the reasons discussed in the 
memorandum which accompanied the certification order that 
certification is appropriate at least through the discovery 
stage.  With some exceptions,9 only after that stage that most of
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the serious concerns defendants raise about the alleged 
inappropriateness of certification come into play.10 See: 
Memorandum filed by First Eastern in support of its motion for 
reconsideration, record document no. 86 at pp. 14-27).
	Intertwined with defendants' request for
reconsideration was a request for leave to conduct discovery on 
class certification issues and contentions that defendants were 
under the impression such discovery had been stayed and after 
defendants learned otherwise and attempted to initiate discovery, 
plaintiffs have proved less than cooperative.
	Plaintiffs' attitude toward discovery is reflected in 
their pending motion for a protective order.  Plaintiffs seek a 
protective order striking notices of deposition on the ground 
that the court had previously denied a motion to compel such 
depositions, referencing the court's order no. 1 dated June 19,
				5

1996.  Defendants seek to depose certain plaintiffs on issues 
relating to certification of the class.
	Plaintiffs argue that the defendants' request to 
explore facts relating to the issue of certification should be 
ruled moot because the class has already been certified.  We 
disagree.  Plaintiffs are in the proverbial position of "wanting 
it both ways." They opposed discovery on certification issues 
prior to the court's ruling on the grounds that such discovery 
was inappropriate under the rules.  Now having attained their 
objective on certification, they again oppose inquiry by 
defendants into the appropriateness of this case proceeding as a 
class action.  They cannot have it both ways.
	Defendants will be permitted to conduct discovery into 
all matters relevant to the case, including, without limitation, 
matters relating to all aspects of the appropriateness of 
certification and to matters going to the merits of plaintiffs' 
multiple claims.
	Further, they will be permitted to rely upon the 
information so obtained to move for decertification of the class 
if the facts they unearth so merit.
				* * *
	An order will be entered consistent with this
memorandum.


					/s/
					James F. McClure, Jr.
					United States District Judge



				6


	  IN THE UNITED STATES DISTRICT COURT
        FOR THE MIDDLE DISTRICT OF PENNSYLVANIA



LEON R. DONGELEWICZ, et al., 	: 	3:CV-95-0457 

		Plaintiffs	: 	(Judge McCLURE) 

	vs.			: 
					
FIRST EASTERN BANK, et al., 	: 	

		Defendants	: 
			   O R D E R  #1
			September 23, 1997
	For the reasons stated in the memorandum which will 
follow, IT IS ORDERED THAT:
	1.   The motions for reconsideration filed by 
defendants First Eastern Bank and First Eastern Corp. (record 
document no. 60) and by defendant MLA Management (record document 
no. 83) are granted in part and denied in part.
	2.   The court has reconsideration certification of the 
class and modify the order granting certification to provide that 
certification will stand only through the conclusion of 
discovery.  At that time, defendants may move for
decertification, if the facts so warrant.
	3.   Plaintiffs' motion for a protective order (record 
document no. 74) is denied.

	4.   A separate scheduling order will issue.


					/s/
					James F. McClure, Jr.
					United States District Judge



				8

Footnotes
1  	18 U.S.C.  1962.
Back
2  	42 U.S.C.  1983.
Back
3  	15 U.S.C.  1701.
Back
4  	N.J.S.A.  45:15-16.47.
Back
5	Record document no. 53.
Back
6	Record document no. 59.
Back
7	Plaintiffs' pending motion for default judgment (record
document no. 97) will be disposed of by separate memorandum and
order.
Back
8	Because of the posture of the motions before us, i.e. a
possible, not unjustifiable misunderstanding on defendants, part
about the need to file opposing briefs, we do not impose on them
the normal, stringent requirements for establishing a right to
reconsideration, but rather will consider their motion in the
posture of, were this information before the court when the
original ruling was made, would it have made a difference?
Back
9	With respect to the ethical issues defendants raise
bearing on the conduct of plaintiffs' counsel and their fitness
to serve as such in light of possible ethical violations, these
are issues the court could not resolve without conducting an
evidentiary hearing into the alleged instances of impropriety.
We will not do so at this time, but will assume that a warning
that any conduct by counsel inconsistent with the ethical rules
will not be tolerated by the court.  If any further instances of
alleged misconduct surface, the court will at that time reassess
the situation, and if warranted, conduct an evidentiary hearing
into the matter.  Counsel will be removed as class counsel if
allegations of conduct inconsistent with the ethical rules are
proven.
Back
10 A number of the issues defendants raise related to the alleged
lack of commonality of issues stemming from the fact that
plaintiffs purchased their property at different times, from
different sellers,
and based on different information conveyed to them.  While it
may prove somewhat troublesome to explore these issues in
discovery with respect to multiple plaintiffs whose responses
will not be uniform, the difficulties which concern defendants
only come to a head at the time of trial.  Defendants would, in
fact, ostensibly have to conduct an inquiry into such facts to
support their contention that certification is inappropriate, so
we see no harm or prejudice in allowing the class to remain
certified through the conclusion of discovery.
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Valley of Lakes RICO Class Action against PNCBANK, et al.
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