doug and mary ballinger, et al. v. morgan keegan & co., inc., et al

Exhibit 1

Case 3:10-cv-00006 Document 1-1 Filed 01/04/2010 of 66

CIRCUIT COURT OF TENNESSEETWENTIETH JUDICIAL DISTRICTNASHVILLE, DAVIDSON COUNTY

'.,~

DOUGLAS and MARY BALLINGER,SWAN BURRUS III,JAMES L. GREGORY,CLAIR HENDERSON,JOSEPH B. LEDBETTER,CHARLES MITCHELL, Individuallyand as Executor of the Estate ofMary Mitchell, KAY MITCHELL,Individually and as PersonalRepresentative and Next Friendof Wingate Spivey,CHARLES S. MITCHELL, JR.,KATHLEEN E. MITCHELL,SVITLANA MORGAN, Attorney-In-Factfor Claude D. Jones,VADIS L. PIERCE,RICHARD B. RAY,ARDEN and RUTHIE SEXTON,MARION M. STOWERS,JACK and PAMELA TOWNES,VICKI P. TURNER,VADIS L.P. TURNER,GREGG C. UNDERWOOD, VENTURESERVICES OF KENTUCKY, INC.TIMOTHY W. WILLIAMS,

Plaintiffs,

v.

MORGAN KEEGAN & CO., INC.,MORGAN ASSET MANAGEMENT,INC., JAMES C. KELSOE, JR.,DAVID H. TANNEHILL,CARTER E. ANTHONY,ALLEN B. MORGAN, JR.,JOSEPH C. WELLER,JAMES STILLMAN R. MCFADDEN,ARCHIE W. WILLIS, III,MARY S. STONE,W. RANDALL PITTMAN,

)))))))))))))))))))))))))))))))))))))))))

No.

JURY DEMAND


J. KENNETH ALDERMAN,J. THOMPSON WELLER,CHARLES D. MAXWELL,WILLIAM JEFFRIES MANN,JAMES D. WITHERINGTON,R. PATRICK KRUCZEK,JACK R. BLAIR,ALBERT C. JOHNSON,MICHELE F. WOOD,BRIAN B. SULLIVAN,

Defendants.

))))))))))))

COMPLAINT

PRELIMINARY STATEMENT

1. Each of the plaintiffs in this action lost money in investments

made in one or more of the following income funds operated, managed,

directed, underwritten, and/or sold by defendants: th.e Regions Morgan

Keegan Select High Income Fund, the Regions Morgan Keegan Select

Intermediate Bond Fund, the RMK Strategic Income Fund, the RMK

Advantage Income Fund, the RMK High Income Fund, and the RMK Multi-

Sector High Income Fund (collectively, the "Funds"). Defendants engaged

in unlawful, deceptive, and unfair conduct in connection with these Funds.

I. PARTIES

2. Plaintiffs Douglas and Mary Ballinger are residents of Florida.

3. Plaintiff Swan Burrus III is a resident of Davidson County,

Tennessee.

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4. Plaintiff James 1. Gregory is a resident of Alabama.

5. Plaintiff Clair Henderson is a resident of Davidson County,

Tennessee.

6. Plaintiff Joseph B. Ledbetter isa resident of Davidson County,

Tennessee.

7. Plaintiffs Charles Mitchell, Individually and as Executor of the

Estate of Mary Mitchell, Kay Mitchell, Individually and as Personal

Representative and Next Friend of Wingate Spivey, Charles S. Mitchell, Jr.

and Kathleen E. Mitchell are residents of Rutherford County, Tennessee.

8. Plaintiff SvitIana Morgan is a resident of Florida. Ms. Morgan

is the stepdaughter of Claude D. Jones and holds a power of attorney

conferred by Mr. Jones, who is elderly and in very poor health.

9. Plaintiff Vams L. Pierce is a resident of Sumner County,

Tennessee.

10. Plaintiff Richard B. Ray is a resident of Tennessee.

11. Plaintiffs Arden and Ruthie Sexton are residents of Alabama.

12. Plaintiff Marion Stowers is a resident of Arkansas.

13. Plaintiffs Jack and Pamela ToWnes are residents of Tennessee.

14. Plaintiff Vicki P. Turner is a resident of Davidson County,

Tennessee.

15. PlaintiffVadis L.P. Turner is a resident of New York.

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16. Plaintiffs Gregg C. Underwood and Venture Services of

Kentucky, Inc. reside and have its principal place of business in Hamilton

County, Tennessee.

17. Plaintiff Timothy W. Williams is a resident of Tennessee.

18. Defendant Morgan Asset Management, Inc. ("MAM"), is a

registered investment adviser that managed and advised the Funds at alI

times relevant herein. MAM is headquartered in Birmingham, Alabama,

with a principal office in Memphis, Tennessee. MAM charged the Funds

management fees based on the average daily net assets of the Funds.

19. Defendant Morgan Keegan & Company, Inc. ("Morgan Keegan")

is a full service broker/dealer that purports to provide personalized

investment services to its clients from over 400 offices in 19 states, and is

headquartered in Memphis, Tennessee. Morgan Keegan has, and at all

times material to this case, had offices in and did business in Davidson

County, Tennessee. Morgan Keegan acted as underwriter and/or

distribution agent with respect to the Funds' shares sold during the time

period relevant to plaintiffs' claims.· Morgan Keegan sold and received

commissions on the sale of shares of the Funds. Morgan Keegan also

provided an employee to serve as the Funds' Chief Compliance Officer

and, pursuant to a Fund Accounting Service Agreement, provided portfolio

accounting services to the Funds for an annual fee based on the average daily

net assets of the Funds. Morgan Keegan also served as the Transfer and

Dividend Disbursing Agent for the Funds. Pursuant to the Transfer

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Agency and Service Agreement, each Fund pays Morgan Keegan an aimual

base fee per share class.

20. Defendant Allen B. Morgan, Jr. ("Morgan"), was during the time

period relevant-to plaintiffs' claims a director of one or more of the Funds.

During the time period relevant to plaintiffs' claims, he also served as a

Director of MAM, and Chairman and Executive Managing Director of

Morgan Keegan. Defendant Morgan signed one or more of the Funds'

registration statements, prospectuses, and/or amendments thereto effective

during the time period relevant to plaintiffs' claims and/or with respect to

which plaintiffs can trace their purchases in the Funds.

21. Defendant Carter E. Anthony ("Anthony") was, during times

relevant to plaintiffs' claims, a director and officer of one or more of the

Funds. Additionally, Anthony was President and Chief Investment Officer

of MAM. Mr. Anthony signed one or more of the registration statements,

prospectuses, and/or amendments theretoeffective during the time period

relevant to this case and/ or with respect to which plaintiffs can trace their

purchases in the Funds.

22. Defendant Joseph C. Weller ("Weller") co-founded Morgan

Keegan. Weller was Vice Chairman of Morgan Keegan and Treasurer of the

Funds until November 2006. Weller also served as Chief Financial Officer

("CFO") of Morgan Keegan and was during the time period relevant to

plaintiffs' claims an officer of one or more of the Funds. Defendant Joseph

Weller signed one or more of the Funds' registration statements,

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prospectuses, and/or amendments thereto effective during the time period

relevant to plaintiffs' claims and/or with respect to which plaintiffs can

trace their purchases in the Funds.

23. Defendant James Stillman R. McFadden ("McFadden") was

during the time period relevant to plaintiffs' claims a director of one or more

of the Funds. Defendant McFadden signed one or more of the Funds'




24. Defendant Archie W. Willis, III ("Willis") was during the time

period relevant to plaintiffs' claims a director of one or more of the Funds.

Defendant Willis signed one or more of the Funds' registration statements,




25. Defendant Mary S. Stone ("Stone") was during the time period

relevant to plaintiffs' claims a director of one or more of the Funds.

Defendant Stone signed one or more of the Funds' registration statements,



trace their .purchases in the Funds.

26. Defendant W. Randall Pittman ("Pittman") was during the time


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Defendant Pittman signed one or more of the Funds' registration

statements, prospectuses, and/or amendments thereto effective during the

time period relevant to plaintiffs' claims and/or with respect to which

plaintiffs can trace their purchases in the Funds.

27. Defendant J. Kenneth Alderman ("Alderman") was during the

time period relevant to plaintiffs' claims a director of one or more of the

Funds. Mr. Alderman has been CEO of MAM since 2002. Defendant

Alderman signed one or more of the Funds' registration statements,




28. Defendant J. Thompson Weller ("JT Weller") is, and at all

relevant times was, Managing Director and Controller of Morgan Keegan.

Defendant JT Weller signed one or more of the Funds' registration




29. Defendant Brian B. Sullivan ("Sullivan") has served as

President and Chief Investment Officer of MAM since 2006.

30. Defendant Charles D. Maxwell ("Maxwell") has served as

Executive Managing Director, CFO, Treasurer and Secretary of Morgan

Keegan since 2006. Defendant Maxwell signed one or more of the Funds'


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31. Defendant James C. Kelsoe, Jr. ("Kelsoe") is, and at all relevant

times Senior Portfolio Manger of the Funds and of MAM.

32. Defendant David H. Tannehill ("Tannehill") is and was during

the time period relevant to plaintiffs' claims the Portfolio Manager of the

Funds and of MAM.

33. Defendant Michele F. Wood ("Wood") is, and at all relevant

times was, Chief Compliance Officer and Senior Vice President of MAM.

34. Defendant Jack R. Blair ("Blair") was during the time period

relevant to plaintiffs' claims .a director of one or more of the Funds.

Defendant Blair signed one or more of the Funds' registration statements,




35. Defendant Albert C. Johnson ("Johnson") was during the time


Defendant Johnson signed one or more' of the Funds' registration




36. Defendant William Jeffries Mann ("Mann") was during the time


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Defendant Mann signed one or more of the Funds' registration statements,




37. Defendant James D. Witherington, Jr. ("Witherington") was

during the time period relevant to plaintiffs' claims a director of one or more

of the Funds. Defendant Witherington signed one or more of the Funds'




38. Defendant R. Patrick Kruczek ("Kruczek") was during the time


Defendant Kruczek signed one or more of the Funds' registration




39. The defendants referred to in ~~ 20-38 above are referred to

herein as the "Individual Defendants."

40. Defendants either participated, directly or indirectly, in the

wrongful conduct alleged herein; combined to engage in the wrongful

transactions and dealings alleged herein; knew, or in the exercise of

reasonable care, should have known, of the misrepresentations and

omissions of material facts, or recklessly caused such misrepresentations or

9


omissions of material facts to be made; or benefited from the wrongful

conduct alleged.

II. FACTS GIVING RISE TO PLAINTIFFS' CLAIMS

The Funds' Catastrophic Crash

41. During all times relevant to this case, the Funds were operated,

managed, directed, underwritten, and/or sold by the defendants.

42. During 2007-2008, the Funds experienced a meltdown of

unprecedented proportions, suffering losses of 90% or more of their values.

43. These tremendous losses were not caused primarily by an

economic downturn, the subprime crisis, or other general market forces.

This assertion is easily confirmed by the performance of the investment

indices by which the Funds measured themselves and by the performance

of other funds in the high income bond category. For example, for the year

2007, the Lehman Brothers U.S. High Yield Index, the benchmark by which

the Funds measured themselves, gained 1.87% while the Funds lost close

to 60% of their value.

44. Similarly, the performance of other high income and

intermediate bond funds in 2007 and 2008 was dramatically different from

the catastrophic performance ofthe Funds at issue in this case. The Funds

were by far the worst performing funds in their categories. And in 2009,

most high yield bond funds have experienced a significant rebound, while

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those RMK Funds have not (the RMK Select High and Select Intermediate

Funds were actually closed in May 2009).

45. In July of 2008, the management of the Funds was taken away

from MAM and turned over to an investment advisor called Hyperion

Brookfield. This new firm attempted to chart a new course for the Funds

and to move its holdings out of structured securities. The Select High and

Select Income Funds were unsalvageable and were closed in May 2009.

The four closed end funds continue to trade at less than 10% of their

offering prices and have no prospects for a significant recovery..

46. The astonishing meltdown of the Funds was caused primarily

by their extreme overconcentration in the riskiest tranches of structured,

asset-backed securities - an investment strategy and risk not properly

disclosed to potential investors, by the Funds' failure to value their assets

at reasonable fair value, and by the failure of the Funds to disclose properly

all material risks and the true facts.

47. Although subprime and credit concerns in 2007 had some

effect on the Funds, the magnitude of the Funds' losses was completely

outside the range of the losses, if any, experienced by other high income

and intermediate income funds to which the Funds compared themselves.

48. The disproportionate, adverse effect of economic events on

the Funds could not reasonably have been foreseen or anticipated by

persons investing in the Funds, in view of the Funds' misleading and

incomplete disclosures. The disproportionate effect of economic events on

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the Funds, however, could and should reasonably have been foreseen and

anticipated by defendants, given the Funds' high concentration in a narrow

sector of securities that were likely to plummet in unison in the event of a

credit crunch or real estate downturn.

49. The majority of the Funds' collapse occurred during and

after a period of time in which defendants' made the following disclosures

concerning problems with the Funds:

• At a shareholders meeting on July 13, 2007, defendant Kelsoedisclosed that the Funds' subprime and collateralized debt holdings wereunder pressure and experiencing substantial volatility.

• On August 10, 2007, defendant Kelsoe disclosed in an open letter theFunds' increasing volatility, negative price movement in the Funds' assets,and "unprecedented" problems.

• In mid-August, 2007, the Funds made several SEC filings disclosingasset illiquidity and difficulties in obtaining realistic values for some of theFunds' securities. These SEC filings also stated that the Funds were unableto file certified shareholder reports on a timely basis and had retained avaluation consultant to assist in determining the fair value of the Funds'securities.

• On October 4, 2007, Regions Morgan Keegan Select Funds, Inc., fJledits annual report with the SEC. The following day, the Wall Street Journalreported that the Regions_ Morgan Keegan Select High Income andIntermediate Funds had had to value 60% and 50% of their assets,respectively, at fair value since market values were not readily available. Inconnection with that article, defendant Kelsoe told the Journal that "Whatwas an ocean of liquidity has quickly become a desert."

• On November 7,2007, defendant Kelsoe published a letter in which hestated that "we have always invested a large portion of our portfolios in"structured finance" fixed income securities .... and the weakness in theportfolios relates to this area of investment."

• On March 6, 2008, Regions Morgan Keegan Select High Income andIntermediate Funds disclosed for the first time in an SEC filing that theFunds losses were caused primarily because of the leveraged risk in theFunds' structured securities.

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50. Thus, the extraordinary decline in the Funds' asset values and

share prices during 2007-2008 was caused by actions and omissions of the

defendants and their failure to make timely and accurate disclosures to the

investing public.

Misrepresentations And Omissions In The Funds' SEC Filings

51. The Securities and Exchange Commission ("SEC")

promulgates, through its Forms N-IA and N-2, directives that open-end

and closed-end management companies, respectively, must follow in the

prospectuses they file with the SEC. 1 Form N-I states that prospectuses

filed by open-end management companies must:

• "clearly disclose the fundamental characteristics and investmentrisks of the Fund, using concise, straightforward, and easy tounderstand language" (emphasis supplied)

• "identiJY the Funds' principal investment strategies (including thetype or types of securities in which the Fund invests or will investprincipally)" (emphasis supplied)

• "summarize the principle risks of investing in the Fund." (emphasissupplied)

• not "disproportionately emphasize investments or activities of theFund that are not a significant part of the Funds' investmentoperations"

1 Regions Morgan Keegan Select High Income Fund, Inc., which owned and operated the

Regions Morgan Keegan Select High Income Fu.nd and the Regions Morgan Keegan Select

Intermediate Bond Fund, is an open-end management company. The RMK Strategic

Income Fund, the RMK Advantage Income Fund, the RMK High Income Fund, and the

RMK Multi-Sector High Income Fund were owned and operated by closed-end

managern,ent companies.

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•. "be designed to assist an investor in comparing and contrasting theFund with other funds"

52. Similarly, Form N-2 states that prospectuses filed by closed- end

management companies must:

• use "clear, concise, and understandable" language and include "onlyinformation needed to understand the fundamental characteristics"of the fund (emphasis supplied)

• "concisely describe the investment objectives and policies of theRegistrant that will constitute its principal portfolio emphasis,including . . . the types of securities in which the registrant willinvest principally" and must "briefly describe the significantinvestment practices" the fund intends to employ. (emphasissupplied)

• "concisely describe the risks associated with an investment in theRegistrant" and "discuss the principal risk factors" (emphasissupplied)

53. At all times relevant to this case, the principal, fundamental

strategy of the Funds was an unusual concentration in structured, asset-

backed securities, particularly the lowest, riskiest tranches of such

structured securities. The Select High Income and Select Intermediate

Bond Funds utilized this strategy from the outset. And when the four,

closed~end RMK Funds were offered in 2003, 2004, and '2006, Morgan

Keegan, MAM and their affiliates and officers and directors understood that

these funds would simply continue the existing strategy.

54. Concomitantly, the principal risk posed by an investment in

the Funds was the usual risk associated with the lower tranches of

structured securities. The income flow produced by the pool of assets

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backing a $tructured investment typically flows to the tranches in order of

priority from top to bottom. For example, an eighth tier tranche receives

income only if all other tranches are fully paid. Thus, the lower tranches,

which earn more interest if things go well, have highly leveraged risks that,

in bad times, may result in complete losses.

55. In violation of SEC rules, the prospectuses and registration

statements filed by the Funds failed to disclose either their principal

investment strategy or the unusual, leveraged risk associated with that

strategy - facts that were highly material. The Funds' SEC filings

misleadingly numbed investors with an extensive laundry list of possible

investments and risks, but gave them no fair notice of what the Funds

actually were doing and intended to do.

56. No other intermediate term or high-yield bond fund invested

as heavily in structured financial instruments as did the Funds in this

case. On July 19, 2007, Bloomberg News quoted defendant James Kelsoe,

senior portfolio manager of the Funds, as having an "intoxication" with

such securities. Bloomberg further reported that an analyst at Morningstar,

Inc., the mutual fund research firm, noted that "[a] lot of mutual funds

didn't own much of this stuff" and that Kelsoe was "the one real big

exception."

57. But the Funds' SEC filings never gave investors the requisite

information to assist them "in comparing and contrasting the Fund with

other funds," as the SEC requires. To the contrary, the Funds misled

15


inv.estors about the true nature of the Funds by comparing themselv.es, in

SEC filings, to a bond fund benchmark that did not include any component

of structured securities.

58. In other litigation, defendants hav.e noted that the Statement of

Additional Information filed by one of the Funds included a discussion of

the fact that the Funds "may" inv.est in "subordinated classes of senior

subordinated securities" that "are subordinated in some manner" as to

payments. This disclosure clearly failed to satisJY the Funds' legal

obligations. This v.ague, uncertaln language did not fairly explain the

nature and risks of the tranched inv.estments, nor was there any

explanation that this type of inv.estment was in fact the principal strategy

and concentration of the Funds. Moreov.er, the SEC requires that principal

strategies and risks must be disclosed in the prospectus. Disclosure of

principal strategies and risks only in a Statement of Additional Information,

which is not routinely prov.ided to inv.estors, is not permissible, nor is it fair

to inv.estors.

59. It was not until an SEC filing in early March of 2008 that the

Funds first made any meaningful disclosure of their principal risk - a risk

that by that time had destroyed the Funds. In a semi-annual report filed

by the Select Funds, management's discussion of the brutal losses

sustalned by the Funds included a brief statement that "the structured

fmance category has taken the hardest hit so far due to the implicit (i.e.,

built into the structures) and explicit (i.e., financed, or bought on margin)

16


leverage employed for this asset category...."2

60. But the Funds prospectuses and registration statements had

never disclosed or explained the leveraged risk created by the Funds'

concentration in structured, asset-backed securities. To the contrary, the

Select Funds' prospectuses stated that they could not employ margin

leverage, and the four RMK Fund prospectuses stated that leverage would

be limited to margin debt equal to no more than one-third of the Funds'

total asset value. These statements significantly misled investors about the

principal risk in the Funds - the implicit leverage in the lower tranches of

structured securities, which was dramatically higher than one-third of the

total investment in these securities.

61. Thus, as set forth in the preceding paragraphs, each of the

prospectuses and registration statements pursuant to which the Funds

were sold to the public during the time period relevant to this case

contained material misrepresentations and/or failed to disclose material

facts concerning the Funds' principal investment strategy and risk. In

addition, the Funds' prospectuses and registration statements also failed to

disclose a number of other material facts, including the follOWing:

(a) The structured investments in which the Funds were concentrating

their investments were not actively traded and were less liquid that many

other types of securities;

(b) The substantial illiquidity of the Funds meant that in the event of

2 This statement was presumably confused in its reference to margin debt, which the SelectFunds were not allowed to use.

17


a forced sale assets would quite likely bring far less than the prices at

which they were valued by the Funds;

(c) The substantial illiquidity of the Funds also meant that if it

became necessary for the Funds to sell assets, either because of

shareholder liquidations or margin calls, the manager would likely have to

sell first the few lower-risk, liquid assets held by the Funds, thus penalizing

those who remained in the Funds;

(d) The Funds were all pursuing the same investment strategy and

investing in the same or similar securities. This greatly exacerbated the

difficulty of selling assets at reasonable prices in the event of a forced

liquidation; and

(e) Investors in the Funds were not told that in the event that one of

the Funds were forced (because of redemptions or margin calls) to sell

assets at prices below value at which they were carried by that Fund, then

the other Funds would have to mark down the value of the same of similar

assets they held.

62. In addition, the Funds were presented to the investing

public as different funds that employed different investment strategies. In

truth, however, they were managed almost identically, with highly similar

asset allocations and individual securities holdings. This reality was not

disclosed in the registration statements and prospectuses filed by the

Funds.

63. Because of their highly correlated portfolios, investors who

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purchased more than one of the Funds assumed they were thereby

diversifying and reducing overall risk, were in fact not doing so. This fact

was not disclosed in the registration statements and prospectuses filed by

the Funds.

64. Also, the registration statements and prospectuses filed by

the Funds represented that they would invest in a wide range of securities,

which would contribute to a more stable net asset value, would not invest

more than 25% of its total assets in the securities of companies in the same

industry, and would pursue a value investing strategy. These statements

were misleading in view of the fact that the Funds were concentrated and

intended to concentrate far beyond 25% in securities that in the event of a

liquidity crunch would collapse as a single sector because they were

purchased primarily by financial industry firms that relied on credit.

65. In addition, the prospectuses and registration statements

filed with respect to the Morgan Keegan Select High Income and

Intermediate Funds stated that these Funds would not invest more than

15% of their assets in illiquid securities. In 2006 and 2007, these Funds

substantially violated this investment restriction. This fact was not

disclosed in the Funds' prospectuses.

66. Furthermore, during significant portions of 2007 and 2008,

the Funds were paying dividends to investors that included an undisclosed

return of principal. The Funds never advised shareholders that they were

receiving their own money back. The fraudulently inflated dividends misled

19


investors into believing that the Funds were doing reasonably well and

therefore induced investors, including plaintiffs, to hold onto their

investments.

67. In addition, the annual and semi-annual reports filed by the

Funds during 2006-2007 contained inflated valuations of the Fuhds'

securities and mischaracterized certain holdings in structured securities as

other types of assets.

Plaintiffs' Investments In The Funds

68. In 2007, Douglas and Mary Ballinger invested more than

$1,000,000 in the RMK Strategic Income Fund and the RMK Advantage

Income Fund.

69. Between 2000 and 2007, Morgan Keegan recommended that

Swan Burrus (and his now deceased father whose investments Mr. Burrus

inherited) invested close to $2 million in the Select High Fund and the

Select Intermediate Bond Fund.

70. In 2005, James Gregory invested more than $40,000 in the

Advantage Income Fund and the Strategic Income Fund.

71. During 2004-2007, Joe Ledbetter invested more than $4.3

million in the RMK High Income Fund, the RMK Strategic Income Fund, the

RMK Advantage Income Fund, and the RMK Multi-Sector High Income

Fund.

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72. During 2005-2007, Charles Mitchell, Kathleen Mitchell, and

Charles Mitchell, Jr. invested more than $500,000 in the Advantage Income

Fund.

73. During 2005-2007, Arden and Ruthie Sexton invested more

than $390,000 in the RMK Strategic Income Fund, the RMK Advantage

Income Fund, and the Regions Morgan Keegan Select High Income Fund.

74. Jack and Pamela Townes and their daughter Clair Henderson

invested more than $500,000 in the RMK High Income Fund, the RMK

Strategic Income Fund, the RMK Advantage Income Fund, and the RMK

Multi-Sector High Income Fund.

75. During 2007, Marion Stowers invested more than $560,000 in

the RMK Strategic Income Fund, the RMK Advantage Income Fund, and the

RMK Multi-Sector High Income Fund.

76. During 2004-2007, Timothy Williams invested more than $3.5

million in the Regions Morgan Keegan Select Intermediate Fund, the RMK

High Income Fund, the RMK Strategic Income Fund, the RMK Advantage

Income Fund, and the RMK Multi-Sector High Income Fund.

77. During 2004-2007, Richard Ray invested approximately $1.2

million in the RMK High Income Fund, the RMK Strategic Income Fund, the

RMK Advantage Income Fund, and the RMK Multi-Sector High Income

Fund.

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78. In 2006-2007, Claude Jones invested more than $600,000 in

the RMK High Income Fund, the RMK Strategic Income Fund, the RMK

Advantage Income Fund, and the RMK Multi-Sector High Income Fund.

79. During 2003-2008, Vicki Turner, Vadis Turner, and Vadis

Pierce purchased and/ or held millions of dollars worth of the Select High

Income Fund, the Strategic Income Fund, and the Multi-Sector High

Income Fund.

80. During 2004-2005, Gregg Underwood and Venture Services of

Kentucky, Inc. invested several million dollars in the Select High Fund, the

Advantage Income Fund, and the Multi-Sector High Income Fund.

81. All plaintiffs suffered significant losses on the investments

described above.

III. LEGAL CLAIMS

COUNT ONE - VIOLATION OF SECTION 11 OF SECURITIES ACT

82. Plaintiffs incorporate n 1-81 by reference.

83. This Count is brought by plaintiffs pursuant to § 11 of the

Securities Act, 15 U.S.C. § 77k, against all defendants.3

84. The registration statements by which the Funds were offered to

plaintiffs, or to those investors from whom plaintiffs acquired their shares,

were inaccurate and misleading, contained untrue statements of material

3 Only the following plaintiffs assert claims against Morgan Keegan in this Count: Marion

Stowers, Douglas and Mary Ballinger, Jack and Pamela Townes, Clair Henderson, and

Joseph Ledbetter.

22


fact, omitted to state facts necessary to make the statements therein not

misleading, and omitted to state material facts required to be stated

therein.

85. The defendants were persons who signed the Funds'

registration statements, were directors or persons or entities performing

similar functions for the issuers, or underwriters of the Funds.

86. None of the defendants named herein made a reasonable

investigation or possessed reasonable grounds to believe that the

statements contained in the Funds' registration statements were true and

without omissions of material facts and not misleading. Defendants could

have, with the exercise of reasonable care, become aware of the misleading

nature of the registration statements.

87. Through the conduct alleged above, each defendant violated, is

liable under, or controlled a party who is liable under §ll of the Securities

Act.

88. Plaintiffs acquired shares of the Funds during the period in

which defendants' misleading registration statements were in effect. The

shares purchased by plaintiffs were bought pursuant to defendants'

registration statements or are traceable to such registration statements.

89. Plaintiffs have been damaged and are entitled to all relief from

defendants permitted by § 11 of the Securities Act.

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90. At the times plaintiffs purchased their shares in the Funds,

they did not know and could not reasonably have known of the misleading

statements, omissions, and misconduct set forth above.

COUNT TWO - VIOLATION OF SECTION 12 OF SECURITIES ACT

91. Plaintiffs incorporate ~~ 1-90 by reference.

92. This Count is brought by plaintiffs pursuant to § 12a(2) of the

Securities Act, 15 U.S.C. § 771, against all defendants.4

93. Defendants were sellers, offerors, and/or solicitors with respect

to the investments in the Funds made by plaintiffs.

94. The Individual Defendants participated in the preparation of

the prospectuses filed with respect to the Funds.

95. The prospectuses by which the Funds were offered to plaintiffs

and others were inaccurate and misleading, contained untrue statements of

material fact, omitted to state facts necessary to make the statements

therein not misleading, and omitted to state material facts required to be

stated therein.

96. Defendants could have, with the exercise of reasonable care,

become aware of the misleading nature of the Funds' prospectuses.



Joseph Ledbetter.

24


97. Through the conduct alleged above, defendants violated, are

liable under, or controlled a party who is liable under §12a(2) of the

Securities Act.

98. For the same reasons, the fund companies that issued and sold

shares in the Funds,s violated §12a(2) of the Securities Act. These

companies are not defendants herein, however, and plaintiffs seek no relief

against them.

99. Plaintiffs acquired shares of the Funds from the issuers during

the time when defendants' misleading prospectuses were in effect.

100. Plaintiffs have been damaged and are entitled to all relief from

defendants permitted by § 12a(2) of the Securities Act.

COUNT THREE - VIOLATION OF SECTION 15 OF SECURITIES ACT

101. Plaintiffs incorporate n 1-100 by reference.

102. This Count is brought by plaintiffs pursuant to § 15 of the

Securities Act, 15 U.S.C. § 770, against all defendants.6

103. Defendants were control persons of the Funds and/or Fund

companies by virtue of their positions as directors or senior officers of the

Funds and/or by virtue of their relationships with the Funds. These

5 RMK Advantage Income Fund, Inc., RMK High Income Fund, Inc., RMK Strategic Income

Fund, Inc., RMK Multi-Sector High Income Fund, Inc., and Morgan Keegan Select Fund,

Inc.



Joseph Ledbetter.

25


defendants exercised control over the general affairs of the Funds and/ or

Fund company and had the power to control the conduct giving rise to

plaintiffs' claims.

104. Defendants are therefore liable for the Securities Act violations

alleged in Counts One and Two above.

COUNT FOUR - AIDING AND ABETTING THE FRAUD OF THE FUNDS

105. Paragraphs 1-104 are incorporated herein by reference.

106. This Count is brought against defendants MAM, Morgan

Keegan,7 Kelsoe, Tannehill, Morgan, Alderman, and Anthony (hereinafter

"Defendants In Counts Four and Five").

107. RMK Advantage Income Fund, Inc., RMK High Income Fund,

Inc., RMK Strategic Income Fund, Inc., RMK Multi-Sector High Income

Fund, Inc., and Morgan Keegan Select Fund, Inc. (the "Fund Companies")

intentionally or recklessly made material misrepresentations and/or failed

to disclose material facts concerning the Funds to the investing public,

including plaintiffs.

108. These misrepresentations and material omissions worked a

fraud on the market and on plaintiffs and artificially increased the market

value of the Funds' shares.

7 Only the following plaintiff~ assert claims against Morgan Keegan in this Count: Marion

Stowers, Douglas and Mary Bailinger, Jack and Pamela Townes, Clair Henderson, and

Joseph Ledbetter.

26


109. Defendants In Counts Four and Five were aware of the fact that

the SEC filings made by the Funds contained material misrepresentations

and/or omissions.

110. Defendants In Counts Four and Five were aware that the Fund

Companies were not fully and fairly disclosing the risks in the Funds.

1I 1. Nevertheless, for their own financial gain, Defendants In

Counts Four and Five materially assisted in the promotion, sale, and

management of the Funds. These defendants therefore aided and abetted

the fraud of the Fund Companies.

112. Plaintiffs are therefore entitled to recover rescissionary

damages and/or all losses they incurred with respect to their investments

in the Funds, plus prejudgment interest, from Defendants In Counts Four

and Five.

113. Defendants In Counts Four and Five acted recklessly and in

conscious indifference to the rights and interests of plaintiffs. Plaintiffs are

therefore entitled to recover punitive damages from Defendants In Counts

Four, Five, and Six.

COUNT FIVE - VIOLATION OF CONSUMER PROTECTION ACT


27


115. This Count is brought against Defendants In Counts Four and

Five.8

116. Defendants In Counts Four and Five engaged in trade,

commerce, and/or consumer transactions, as defmed in T.C.A. § 47-18-

103(1), in connection with the management, marketing, and sale of the

Funds.

117. Defendants In Counts Four and Five engaged in unfair and/or

deceptive acts and practices affecting the conduct of trade and commerce in

violation of § 47-18-104 in connection with plaintiffs' investments, thereby

causing damage to plaintiffs.

118. Plaintiffs are entitled, pursuant to § 47-18-109, to recover from

these defendants their actual damages, plus treble damages, pre-judgment

interest, and attorney's fees pursuant to § 47-18-109.

COUNT SIX - COMMON LAW FRAUD


120. This Count is asserted by all plaintiffs against defendant MAM

and Kelsoe.

121. MAM assisted in the marketing of the Funds, managed the

Funds, and received a portion of the money plaintiffs' invested in the

Funds.


Stowers, Douglas and Mary Ballinger, .Jack and Pamela 'Townes, Clair Henderson, and

Joseph Ledbetter.

28


122. In the course of their work as investment advisor and portfolio

manager to the Funds, MAM and Kelsoe were aware of and participated in

the Funds' misleading statements and their failure to disclose material

information to investors, including plaintiffs.

123. Acting intentionally and/or recklessly, MAM and Kelsoe

engaged in acts, practices, and a course of business that acted as a fraud of

deceit on plaintiffs.

124. Plaintiffs are therefore entitled to recover all losses they have

incurred with respect to their investments in the Funds, plus prejudgment

interest.

125. Because of the recklessness and conscious indifference of MAM

and Kelsoe to the rights and interests of the plaintiffs, plaintiffs are entitled

to recover punitive damages.

COUNT SEVEN - AIDING AND ABETTING THE FRAUD OF MAM


127. This Count is brought against defendants Morgan Keegan,9

Kelsoe, Tannehill, Morgan, Alderman, and Anthony (hereinafter

"Defendants In Count Seven").

128. As set forth above, MAM engaged in fraud in connection with

the management of the Funds and the sale of its shares.

9 Only the following plaintiffs assert claims against Morgan Keegan in this Count: Marlon


Joseph Ledbetter.

29


129. Defendants In Count Seven were aware of and provided

material assistance to MAM's fraudulent conduct. These defendants

therefore aided and abetted the fraud of MAM.

130. Plaintiffs are therefore entitled to recover rescissionary

damages and!or all losses they incurred with respect to their investments

in the Funds, plus prejudgment interest, from Defendants In Count Seven.

131. Defendants In Count Seven acted recklessly and in conscious

indifference to the rights and interests of plaintiffs. Plaintiffs are therefore

entitled to recover punitive damages from Defendants In Count Seven.

COUNT EIGHT - VIOLATION OF TENNESSEE SECURITIES ACT


133. This Count is brought against defendant MAM and Kelsoe by

all plaintiffs.

134. MAM and Kelsoe promoted and assisted in the marketing of the

Funds and the sale of its shares to investors, including plaintiffs. MAM and

Kelsoe engaged in these acts to create revenue for themselves.

135. MAM received a portion of the money invested by each plaintiff

in the Funds.

136. In connection with the sale of shares in the Funds to plaintiffs,

MAM and Kelsoe failed to disclose facts necessary to make the facts given

plaintiffs not misleading and engaged in acts, practices, and a course of

conduct that constituted a fraud or deceit on plaintiffs, all in violation of

T.e.A. § 48-2-121.

30


137. In addition, MAM and Kelsoe were controlling persons of the

Funds pursuant to T.C.A. § 48-2-122(g). The Funds violated T.C.A. § 48-2

121 because they failed to disclose facts necessary to make the facts given

plaintiffs not misleading and engaged in acts, practices, and a course of

conduct that constituted a fraud or deceit on plaintiffs.

138. Plaintiffs are therefore entitled to recover from MAM and Kelsoe

all remedies afforded by T.C.A. § "48-2-122, including rescissionary

damages, interest, and attorneys fees.

THEREFORE, plaintiffs respectfully request that the Court:

1. Grant judgment in favor of plaintiffs and against defendants,

jointly and severally, for rescissionary damages or other appropriate

compensatory damages, including prejudgment interest.

2. Order the disgorgement by defendants of all fees earned with

respect to the investments improperly sold to plaintiffs.

3. Award to plaintiffs punitive damages or treble damages.

4. Award to plaintiffs reasonable attorney's fees.

5. Afford plaintiffs a trial by jury.

6. Provide such further legal or equitable relief as the Court

deems to be just.

31


Respectfully submitted,

/ft1fFI!~787John B. Veach III, BPR #8994FALLS & VEACH1143 Sewanee Rd.Nashville, TN 37220615/242-1800

Attorneys for Plaintiffs

I M0rlill:ly certify that this is a true copyof origirr.allnstrument f~~ in my officethis ~ day of ..Qg c.. 20ft

RICHARD R. K R ClerkBy_~~~__

32


IN THE CIRCUIT COURT OF TENNESSEEFOR THE TWENTIETH JUDICIAL DISTRICT AT NASHVILLE

DOUGLAS AND MARY BALLINGER, )et a!., )

Plaintiffs, ))

v. ))

MORGAN KEEGAN & CO., INC., )et a!., )

Defendants. ))

No. 09-C-4280

NOTICE OF REMOVAL

PLEASE TAKE NOTICE that, pursuant to 28 U.S.C. § 1446, Defendants Morgan

Keegan & Company, Inc., Morgan Asset Management, Inc., James C. Kelsoe, Jr., David H.

Tannehill, Carter E. Anthony, Allen B. Morgan, Jr., Joseph C. Weller, James Stillman R.

McFadden, Archie W. Willis, III, Mary S. Stone, W. Randall Pittman, J. Kenneth Alderman, J.

Thompson Weller, Charles D. Maxwell, William Jeffries Mann, James D. Witherington, R.

Patrick Kruczek, Jack R. Blair, Albert C. Johnson, Michele F. Wood and Brian B. Sullivan have

timely and properly removed the above-captioned matter from this Court to the United States

District Court for the Middle District of Tennessee.

A copy of the Notice of Removal (without exhibits) filed in the federal court is attached.

DATED this 4th day ofJanuary, 2010.



BASS, BERRY & SIMS PLC

BY:~~Michael L. DagleyMatthew M. CurleyW. Brantley Phillips, Jr.150 Third Avenue South, Suite 2800Nashville, TN 37201(615)[email protected]@[email protected]

Attorneys for Morgan Keegan & Co., Inc.,Morgan Asset Management, Inc.

2Case 3:10-cv-00006 Document 1-1 Filed 01/04/2010 of 66

CERTIFICATE OF SERVICE

I hereby certify that on January 4,2010, a copy of the foregoing document was served viaU.S. Mail on the following:

Harold Naill Falls, Jr.FALLS & VEACH1143 Sewanee RoadNashville, TN 37220

L. Webb Campbell IIJohn L. Farringer IVSHERRARD & ROE, PLC424 Church Street, Suite 2000Nashville, TN 37219

K&L GATES LLPJeffrey B. MalettaNicole A. Baker1601 K Street NWWashington, DC 20006

SUTHERLAND, ASBILL & BRENNAN LLPS. Lawrence Polk999 Peachtree Street, NEAtlanta, GA 30309


UNITED STATES DISTRICT COURTMIDDLE DISTRICT OF TENNESSEE

AT NASHVILLE

DOUGLAS AND MARY BALLINGER, )SWAN BURRUS III, JAMES L. )GREGORY, CLAIR HENDERSON, JOSEPH )B. LEDBETTER, CHARLES MITCHELL, )Individually and as Executor ofthe Estate of )Mary Mitchell, KAY MITCHELL, Individually )and as Personal Representative and Next )Friend of Wingate Spivey, CHARLES S. )MITCHELL, JR., KATHLEEN E. MITCHELL, )SVITLANA MORGAN, Attorney-In-Fact for )Claude D. Jones, VADIS L. PIERCE, )RICHARD B. RAY, ARDEN AND RUTHIE )SEXTON, MARION M. STOWERS, JACK )AND PAMELA TOWNES, VICKIP. )TURNER, VADIS L.P. TURNER, GREGG )C. UNDERWOOD, VENTURE SERVICES )OF KENTUCKY, INC., TIMOTHY W. )WILLIAMS, )

)Plaintiffs, )

)v. ) No. _

)MORGAN KEEGAN & CO., INC., )MORGAN ASSET MANAGEMENT, INC., )JAMES C. KELSOE, JR., DAVID H. )TANNEHILL, CARTER E. ANTHONY, )ALLEN B. MORGAN, JR., JOSEPH C. WELLER, )JAMES STILLMAN R. MCFADDEN, )ARCHIE W. WILLIS, III, MARY S. STONE, )W. RANDALL PITTMAN, J. KENNETH )ALDERMAN, J. THOMPSON WELLER, )CHARLES D. MAXWELL, WILLIAM JEFFRIES)MANN, JAMES D. WITHERINGTON,· )R. PATRICK KRUCZEK, JACK R. BLAIR, )ALBERT C. JOHNSON, MICHELE F. WOOD, )and BRIAN B. SULLIVAN, )

)Defendants. )


NOTICE OF REMOVAL

Defendants Morgan Keegan & Company, Inc., Morgan Asset Management, Inc., James

C. Kelsoe, Jr., David H. TaJmehill, Carter E. Anthony, Allen B. Morgan, Jr., Joseph C. Weller,

James Stillman R. McFadden, Archie W. Willis, III, Mary S. Stone, W. Randall Pittman, J.

Kenneth Alderman, J. Thompson Weller, Charles D. Maxwell, William Jeffries Mann, James D.

Witherington, R. Patrick Kruczek, Jack R. Blair, Albert C. Johnson, Michele F. Wood and Brian

B. Sullivan (collectively "Defendants") by and through their respective attorneys, hereby file this

Notice of Removal pursuant to 28 U.S.C. §§ 1441 and 1446 for the purpose of removing this

case from the Circuit Court for the State of Tennessee, Twentieth Judicial District, at Nashville,

to the United States District Court for the Middle District of Tennessee.

Pursuant to 28 U.S.C. § 1446(a), Defendants set forth below the following grounds for

removal:

I. On or about December 3, 2009, Plaintiffs filed a Summons and Complaint in the

action Douglas & Mary Ballinger, et al. v. Morgan Keegan & Co., Inc., et aI., No. 09-C-4280,

pending in the Circuit Court for the State of Tennessee, Twentieth Judicial District, at Nashville

(the "Action"). In accordance with 28 U.S.C. § I446(a), a true and correct copy of the state

court file, including all process and pleadings as served upon Defendants, is attached as Exhibit I

and is incorporated by reference.

2. Defendants have timely filed this Notice of Removal because Defendants filed

this Notice within thirty days of the date on which Defendants received notice of the initial

pleading, in accordance with 28 U.S.C. § 1446(b).

3. This Court has jurisdiction pursuant to 28 U.S.C. §§ 1331, 1367, and 1441, as this

action arises under the laws of the United States.


4. The Action alleges violations of federal and state law relating to the management

of the Morgan Keegan Select High Income Fund, the Morgan Keegan Select Intermediate Bond

Fund, the RMK High Income Fund, the RMK Strategic Income Fund, the RMK Advantage

Income Fund and the RMK Multi-Sector Income Fund (the "Funds"). (Compi. ~ 1.)

5. Plaintiffs' Complaint includes eight counts: violations of the Securities Act of

1933 (the "1933 Act"), aiding and abetting fraud, violation of the Tennessee Consumer

Protection Act, fraud and violation of the Tennessee Securities Act. (Id. ~~ 82-138.) While not

set out as a separate count, Plaintiffs also allege that Defendants violated the Investment

Company Act of 1940 ("ICA"), 15 U.S.C. 80a-19(a), by fraudulently inflating dividends paid by

the Funds and by distributing dividends not consisting of net income of the Funds. (Id. ~ 66.) In

connection with these claims, Plaintiffs seek compensatory damages, rescission, disgorgement,

punitive or treble damages, pre-judgment interest and attorneys' fees. (Id. at 31.)

6. This Court has original subject matter jurisdiction over this Action pursuant to 28

U.S.C. § 1331, supported by 28 U.S.C. § 1367. This Action arises under the laws of the United

States, including, among others, §§ 13 and 19 of the ICA, §§ 11, 12 and 15 of the 1933 Act and

rules and regulations promulgated pursuant to those statutes. l Additionally, pursuant to 28

U.S.C. § 1367, this Court has supplemental jurisdiction over any claims alleged under state law.

7. This Court has jurisdiction over the Action because resolution of Plaintiffs'

claims necessarily "requires resolution of a substantial question of federal law." City of Chicago

v. Int'l Coli. of Surgeons, 522 U.s. 156, 164 (1997); see also Gramble & Sons Metal Prods. Inc.

v. Dame Eng. & Mfg., 545 U.S. 308, 312 (2005) (determining federal question jurisdiction

Defendants acknowledge that Plaintiffs' claims under §§ II, 12(a)(2) and IS of the 1933 Act,standing alone, do not give rise to the exercise of federal jurisdiction. See 15 U.S.C. § 77v(a).Nonetheless, and as set forth herein, because Plaintiffs' claims - including their claims under the 1933Act - require resolution of substantial questions of federal law, this Court's exercise of federaljurisdiction over this Action is appropriate.


Plaintiffs also allege that Defendants fraudulently inflated dividends paid to

existed where resolution of claims arising under state law depended on interpretation of disputed

federal statute); Landers v. Morgan Asset Mgmt., Inc., 2009 U.S. Dist. LEXIS 30891 (W.D.

Tenn. Mar. 31, 2009).

8. Plaintiffs' claims arIse from Defendants' alleged violation of federal law

regarding the calculation of the Funds' net asset value (the price at which a mutual fund share is

sold to the public, or "NAV"), and the concentration and liquidity of securities held in each of

the Funds' respective portfolios. (See id. ~ 51-67.) Indeed, in significant part, each claim is

premised on an intentional violation offederallaw. (See id. 'U'U 82-138.)

9. Whether the Funds violated concentration and liquidity restrictions relating to

their assets or failed to value their assets properly, as Plaintiffs allege, are matters that are

governed exclusively by federal law. SEC regnlations govern pricing of shares of investment

companies and the valuation of the Funds' portfolios per § 2(a)(41) of the ICA. See 15 U.S.C. §

80a-2(a)(41). Rules promulgated by the SEC that govern pricing include SEC Rule 270.2a-4

(method of calculation of net asset value) and SEC Rule 270.22c-1 (pricing of redeemable

securities). See 17 C.F.R. §§ 270.2a-4, 270.22c-1. Concentration of securities is regnlated by §

13 of the ICA. See 15 U.S.C. § 80a-13. Similarly, the liquidity requirements with respect to

assets held by the Funds are a matter of federal law, including SEC Rule I 44A, 17 C.F.R. §

230.l44A.

10.

investors by paying dividends to investors that included an undisclosed return of principal.

(Compl. 'U 66.) The Funds' distribution of dividends likewise is governed exclusively by federal

law. Section 19(a) of the ICA makes it unlawful for "any registered investment company to pay

any dividend ... from any source other than ... such company's accumulated undistributed net


income." 15 U.S.C. § 80a-19(a). SEC Rules also regulate distribution of dividends. See SEC

Rule 19a-1.

II. In light of the foregoing, Plaintiffs cannot establish that Defendants made

misrepresentations and/or omissions concerning the valuation of the Funds' assets, violated the

Funds' liquidity and concentration restrictions or that the Funds fraudulently inflated dividends

and paid dividends that improperly included an undisclosed return of principle without also

demonstrating an underlying violation of federal law. Under such circumstances, the exercise of

federal jurisdiction is appropriate. See Gobble v. Hellman, 2002 U.S. Dist. LEXIS 26833, at *9

II (N.D. Ohio Mar. 26, 2002) (holding that because "several counts of [p]laintiff's breach of

fiduciary duty claims depend upon whether [d]efendants violated their duties under the Federal

Exchange Act and SEC rules and regulations ... the resolution of [the] claims requires

construction and adjudication of substantial questions of federal law"); D'Alessio v. New York

Stock Exch., Inc. 258 F.3d 93, 101-102 (2d Cir. 2001) (noting that the plaintiffs "suit [was]

rooted in violations of federal law, which favors a finding that federal question jurisdiction

exists" and holding that a substantial federal question exists where "resolution of [the plaintiff's]

claims requires a court to construe federal securities laws and evaluate the scope of the

[defendant's] duties"); Landers, 2009 U.S. Dist. LEXIS 30891, at *24-27.

12. Because the disputed issues of federal law implicated by Plaintiffs' Complaint are

substantial, this case presents no risk of interference with the balance of federal and state judicial

responsibilities.

13. Accordingly, this Court has jurisdiction over Plaintiffs' claims against Defendants

pursuant to 28 U.S.C. § 1331 because the Action arises under the laws of the United States in

that federal law is central to the allegations in Plaintiffs' Complaint.


14. A copy of this Notice of Removal is being filed with the Clerk of the Circuit

Court of Davidson County, Tennessee, as provided by law, and written notice is being sent to

Plaintiffs' counsel.

IS. Defendants have not attempted to remove this Action previously.

16. The prerequisites for removal under 28 U.S.C. § 1441 have been met.

17. The allegations of this Notice are true and correct and within the jurisdiction of

the United States District Court for the Middle District of Tennessee, and this Action is

removable to the United States District Court for the Middle District of Tennessee.

18. This Notice of Removal is signed pursuant to Rule II of the Federal Rules of

Civil Procedure.

19. All Defendants join this Notice of Removal of this Action.

20. An appropriate Form JS-44 civil cover sheet is attached as Exhibit 2.

21. For all of the foregoing reasons, removal of this Action to this Court is proper

pursuant to 28 U.S.C. § 1441(b) and (c).

Based on the foregoing, Defendants hereby remove this Action from the Circuit Court of

the State of Tennessee, Twentieth Judicial District, at Nashville, to the United States District

Court for the Middle District of Tennessee.

DATED this 4th day ofJanuary 2010.


7


BASS, BERRY & SIMS PLC

By: ~C~Michael L. DagleyMatthew M. CurleyW. Brantley Phillips, Jr.150 Third Avenue South, Suite 2800Nashville, TN 37201(615)[email protected]@[email protected]

Attorneys for Morgan Keegan & Co., Inc.,Morgan Asset Management, Inc., Allen B.Morgan, Jr., J. Kenneth Alderman, Brian B.Sullivan, Joseph C. Weller, J. ThompsonWeller, Charles D. Maxwell, Michele F.Wood, James C. Kelsoe, Jr., David H.Tannehill, Carter E. Anthony and R. PatrickKruczek

SUTHERLAND, ASBILL & BRENNANLLPS. Lawrence Polk999 Peachtree Street, NEAtlanta, GA 30309(404)853-8000

Attorneys for Allen B. Morgan, Jr., J.Kenneth Alderman, Brian B. Sullivan,Joseph C. Weller, J. Thompson Weller,Charles D. Maxwell, Michele F. Wood,James C. Kelsoe, Jr., David H. Tannehill,Carter E. Anthony and R. Patrick Kruczek


8

SHERRARD & ROE, PLC t...., A

/ I 111/ 'f~IW~By: lvd,f; {.uA..{ MI'kC

L. Webb Campbe IIJohn L. Farringer IV424 Church Street, Suite 2000Nashville, TN 37219(615) [email protected]@sherrardroe.com

K&L GATES LLPJeffrey B. MalettaNicole A. Baker1601 K Street NWWashington, DC [email protected]@klgates.com

Attorneys for Jack R. Blair, Albert C.Johnson, James Stillman R. McFadden, W.Randall Pittmqn, Mary S. Stone, Archie W.Willis, III, William Jeffries Mann, andJames D. Witherington


CERTIFICATE OF SERVICE

I hereby certify that on January 4,2010, a copy of the foregoing document was served viaU.S. Mail on the following:

Harold Naill Falls, JI.FALLS & VEACH1143 Sewanee RoadNashville,1N [email protected]


doug and mary ballinger, et al. v. morgan keegan & co., inc., et al

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