Stutsman

MEMORANDUM ORDER

The original class action complaint alleges a violation of the federal securities laws and common law misrepresentation arising out of a scheme to market certain “distributorships” of coin-operated blood pressure testing machines. Several defendants are named, including Blood Pressure Monitors, a Corporation [hereinafter “BPM”], Fiscal Concepts Incorporated [hereinafter “FCI”], and the Bank of Newport, a California Banking Corporation.

In the original complaint the Bank of Newport is sued only in the third cause of action which concerns letters of credit purportedly assigned to the Bank of Newport by FCI. Plaintiffs seek a declaration that the Bank of Newport is not a holder in due course of these letters of credit and thus is not entitled to draw upon them. Plaintiffs contend that the Bank of Newport “knew or should have known” that the letters of credit were received by FCI in violation of the Securities Act of 1933 and the Securities and Exchange Act of 1934.

The Bank of Newport filed a “CounterClaim” (more properly considered a Third-Party Complaint) against, among others, the First National Bank and Trust Company of Bismarck [hereinafter “First National”],…