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RIGGS INV. MGMT. CORP. v. COLUMBIA INV. PTNRS.

August 11, 1997

RIGGS INVESTMENT MANAGEMENT CORPORATION, et al., Plaintiffs,
v.
COLUMBIA INVESTMENT PARTNERS, L.L.C. et al., Defendants.



The opinion of the court was delivered by: LAMBERTH

 This matter comes before the court on defendant Columbia Investment Partners', L.L.C. ("Columbia Partners") petition for clarification of injunction and to revise its guidelines for presentations. Upon consideration of this motion, the opposition thereto, and the reply, defendant's motion will be granted in part and denied in part, in accordance with the opinion below.

 BACKGROUND

 In January of this year, this court conducted a bench trial in which the Riggs Investment Management Corporation ("RIMCO") accused Columbia Partners, another investment management firm, of various forms of false or misleading advertising under the Lanham Act. The court found the defendant corporation liable under the Act, noting that in some instances, Columbia Partners had "operated willfully and in bad faith with respect to its advertising." (Op. at 41). The court, in addition to granting monetary damages to plaintiffs, entered an injunction against Columbia Partners in an effort to control defendant's misstatements about its business and the business of RIMCO. The court enjoined Columbia Partners to both refrain from making certain representations and to affirmatively make others. The court determined, as well, that "Revised Guidelines" which Columbia Partners both drafted on its own and agreed to abide by, were sufficient to rectify the legal breaches Columbia Partners was found to have made. The court therefore enjoined defendant to follow these "Revised Guidelines," in addition to other injunctive relief required by the court. As a final measure, the court dictated that Columbia Partners must apply to the court for the next three years if defendant desired to depart from these guidelines.

 Now, defendant seeks both to clarify the injunction and re-revise its revised guidelines for presentation.

 I. Clarification of Injunction

 The court's injunction presently requires that Columbia Partners not portray, either orally, in writing, or on a computer database, its performance record in a manner which links its record to RIMCO's, as outlined this court's May 12, 1997 memorandum opinion. Defendant asks whether this provision applies in a situation where a consultant, for its own purposes, chooses to link Columbia Partners' record with RIMCO's in the consultant's own internal database. Columbia Partners argues that there is a distinction between "external databases" like Mobius and PSN which consultants screen when developing lists of money managers as possible firms for client use -- where the information is raw and comes directly from Columbia Partners, and "internal databases," which consultants develop on their own to represent pictures of an investment management firm's performance that will be helpful to the consultants in advising their clients. See, Def.'s Pet. for Clar., July 10, 1997 at 2-5. Defendant argues that the injunction does not require it to actively request that consultants withdraw RIMCO's record from any representations they may have personally created which "link" the two firms' performance records, creating a seamless record, dating back to 1989, despite Columbia Partners' formation in 1995. Defendant argues that it does not "portray" any linked record when it submits accurate information. If a consultant chooses to do so, the consultant is the one "portraying" the information, and the guidelines should not require Columbia Partners to make that consultant change the way in which he or she has desired to record the investment information.

 RIMCO objects. RIMCO believes the distinction between "external" and "internal" databases is a false one, especially because the information consultants have relied upon in creating "internal" databases was due to inaccuracies created by Columbia Partners. RIMCO argues that "equity and fairness dictate that the Court's injunction be recognized to require Columbia Partners to do with respect to consultants what it has already done with respect to Mobius and PSN -- ask them to delete from their databases the improperly linked performance numbers Columbia Partners gave them."

 Columbia Partners suggests that its "Statement of Correction and Retraction," which includes all disclosures required by its Revised Guidelines for Presentation, is sufficient to notify consultants that records should not be linked together.

 After careful consideration, the court agrees with Columbia Partners' position. As RIMCO notes, this court's most serious problem with Columbia Partners with regard to its habit of "linking" its record with RIMCO's on databases was not simply that it misrepresented actual performance, but that the defendant outright lied in stating that it complied with AIMR standards when it in fact knew linking was prohibited by AIMR. While the court continues to forbid this practice of linking by Columbia Partners, it cannot say that a private consultant, after reviewing Columbia Partners' two-year-old record, and after reviewing RIMCO's record, and after reviewing the disclosures given by Columbia Partners in accordance with its Revised Guidelines, decides that for his or her purposes the numbers are worthy of putting together in a linked fashion, that such a decision would be improper and attributable to defendant. As this court has already indicated, all references to RIMCO's record need not be removed from any Columbia Partners' presentation, because, after all, people at Columbia Partners -- most significantly Robert von Pentz, helped develop that record and are entitled to indicate this fact. Thus, a consultant who chooses to piece together all information presented is free to do so in any manner which will be helpful to the consultant's selection of an investment manager for his or her client.

 There is a significant caveat, however, which RIMCO has brought to this court's attention. RIMCO argues that to the extent consultants forward to Columbia Partners printouts of questionnaires or databases for verification or correction which reflect linked performance data previously provided by Columbia Partners, Columbia Partners must actively correct any previously supplied false or misleading information. Pl.'s Opp. at 6. Columbia Partners has stated that it understands the injunction merely to require it to state that Columbia Partners does not link its record with that of RIMCO's and "to tell the consultant it cannot verify the performance information as presented because of the linked records." Pl.'s Pet. for Clar. at 7.

 This presents quite a different situation than merely allowing consultants to arrange data in their own fashion -- even if that includes linking. In that case, Columbia Partners may have no knowledge or control over who is doing what with the information provided. But where a consultant has actively sought out the defendant for verification of numbers, Columbia Partners' interpretation of the injunction would allow it to knowingly sit by while false information is returned to the consultant. But this misses completely the point of the injunction. The point is to get at the truth of who is responsible for the successes of each company and to what degree. It does not facilitate the goal of establishing truth for Columbia Partners to simply decline to verify numbers it knows are wrong, false, or misleading. The court does not wish to make Columbia Partners treat investment consultants like children or force defendant to micro-manage consultant's personal information systems. But, when confronted with a request to verify linked information, Columbia Partners may not sit idle. It must report back to the consultant that Columbia Partners' record dates back to 1995 only, and that any prior performance was achieved by RIMCO. Columbia Partners is free to refer to von Pentz's role, etc. in creating RIMCO's record, in accordance with its Revised Guidelines, but it may not turn a blind eye to a request by a consultant for verification of linked numbers.

 II. Columbia Partners' Petition to Revise its Guidelines for Presentation

 Defendant now seeks to modify its guidelines to cover a situation not previously addressed. That is, its current "Revised Guidelines" mandate that any time a Columbia Partners representative discusses the Columbia Partners' computer model, he must also state that Philip Tasho and Clifford Dyhouse (who were both at RIMCO with von Pentz) contributed to that model as well as von Pentz. Defendant argues that the rationale for this disclosure does not apply "if Columbia Partners is merely discussing the model in the context of how it is used to select stocks by Columbia Partners, and there is no discussion of Mr. von Pentz's role in creating it, or its use in connection with the RIMCO record." Pl.'s Pet. for Clar. at 10. Defendant argues that Tasho's and Dyhouse's roles are simply irrelevant in such a circumstance, injecting a discussion of the model's creation and its use at another firm when such issues are not germane.

 While this seems innocuous enough, RIMCO has pointed out the cunning with which Columbia Partners has suggested language to implement this. Paragraph 4 of the "Revised Guidelines" presently reads:

 
Any time you discuss the analytical strategy which Columbia Partners uses to screen stocks you must state the following:
 
The analytical strategy Columbia Partners uses is similar to the one developed and used by Mr. von Pentz at Maryland National Bank, ASB Capital and at RIMCO
 
Messrs. Tasho and Dyhouse contributed certain refinements to the strategy.
 
This strategy presents possible stocks for investment and Mr. von Pentz then selects particular stocks from those presented.
 
Again, because the analytical strategy has played a part in the investment philosophy and process used successfully by Mr. von Pentz in the past is no indication that any past performance will continue.

 Columbia Partners would revise paragraph 4 to read:

 
Any time you discuss the computer model which Columbia Partners uses to screen stocks with someone who has not already received the required disclosures you must disclose the following:
 
The model presents possible stocks for investment and Mr. von Pentz then selects particular stocks from those presented.
 
Although the model has played a part in the investment philosophy and process used successfully by Mr. von Pentz at Columbia Partners, that is no indication ...

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