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McPhail v. First Command Financial Planning

September 19, 2007

MICHAEL MCPHAIL; ROBERT BARR KIMNACH III; SCOTT AND KRYSTIN WAGNER; CANDACE AND NEIL HURLEY; ON BEHALF OF THEMSELVES AND OTHER SIMILARLY SITUATED, PLAINTIFFS,
v.
FIRST COMMAND FINANCIAL PLANNING, INC., A TEXAS CORPORATION; FIRST COMMAND FINANCIAL SERVICES, INC., A TEXAS CORPORATION; LAMAR C. SMITH AND HOWARD M. CRUMP, DEFENDANTS.



The opinion of the court was delivered by: Judge: Hon. Irma E. Gonzalez

CLASS CERTIFICATION ORDER All DEPT: 1, 4TH Floor

CLASS CERTIFICATION ORDER

It is hereby ORDERED that:

1. Plaintiffs' motion for class certification is GRANTED. This matter shall proceed as a class action, under Federal Rule of Civil Procedure 23(b)(3), on behalf of the following Class:

All persons who, during the period from January 31, 2000 through December 31, 2004, made a Systematic Investment Plan (SIP) payment so as to be charged a 50% sales charge on the money placed at that time into the SIP through First Command and still owned the SIP on December 15, 2004, and who did not terminate within forty-five (45) days of purchasing the SIP so as to receive a full refund of the sales charge.

2. This Class is certified for the resolution of all issues regarding the injury suffered by the Plaintiffs as a result of the Defendants' conduct, alleged in the complaint, including:

(a) Making false statements and material omissions about the effectiveness, benefits and opportunity costs in the 50% first year sales load in connection with the sale of Systematic Investment Plans.

(b) Making false statements and material omissions with respect to other mutual fund investments in connection with the sale of Systematic Investment Plans.

(c) Making false statements and material omissions in First Command's "Holding Period Chart" and the "Stable Cash Flow Chart," used in the sale of Systematic Investment Plans.

(d) Engaging in the fraudulent sales practice of making the Systematic Investment Plan appear to be the only suitable investment vehicle for each individual.

3. The Class is CERTIFIED for the resolution of all claims contained in the Consolidated Third Amended Complaint, filed in accordance with the Court's Order, and defenses alleged in the Defendants' Answer to the Consolidated Third Amended Complaint, dated August 22, 2007, including:

(a) Claims:

* That the Defendants First Command Financial Services, Inc., First Command Financial Planning Inc., Lamar Smith ("Smith") and Howard Crump ("Crump") jointly and severally violated section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by making false and misleading statements, omitting materially adverse facts necessary to prevent statements from being misleading, employing devices, schemes and artifices designed to defraud, and engaging in business practices that operated as fraud or deceit, in connection with the sale and marketing of First Command Systematic Investment Plans; and

* That First Command Financial Services, Inc., the parent corporation of First Command Financial Planning, Inc., and the individual Defendants, Smith and Crump, and each of them, jointly and severally violated section 20(a) of the Securities Exchange Act of 1934 as culpable participants in the scheme to defraud Class Members. By means of their actual power, influence, ability to control and control over First Command Financial Planning, Inc., First Command Financial Services, Inc., Smith and Crump induced a violation of the securities laws through their participation in and influence over the operations of First Command Financial Planning, Inc. that led to the omission of materially adverse facts necessary to prevent statements from being misleading, employment of devices, schemes and artifices designed to defraud, and participation in business practices that operated as fraud or deceit, in connection with the sale and marketing of the Systematic Investment Plans ("SIPs") with the full knowledge of the existence of the facts for which liability of First Command Financial Planning, Inc. is being sought. As a result of the above, First Command Financial Planning, Inc. was a mere agency and instrumentality of First Command Financial Services, Inc., Smith and Crump, and each of them, pursuant to which the single business enterprise of SIP sales was being conducted. As a result of the above, First Command Financial Planning, Inc., First Command Financial Services, Inc., Smith and Crump functioned as a single business enterprise with regard to SIP sales. (b) Defenses:*fn1

* That the Defendants were justified in all conduct alleged in the Consolidated Third Amended Complaint;

* That the Plaintiffs are barred from recovery based on the truth of the Defendants' statements;

* That the statements were not false because they were based on projections;

* That the Defendants made the alleged misstatements in good faith and with a reasonable belief in their factual basis;

* That the Defendants did not employ any devices, schemes or artifices to defraud, engage in any acts or practices which operated as fraud upon the Plaintiffs;

* That members of the Plaintiffs' Class are barred from recovery because the allegedly excessive sales ...


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