USXP Memo of Law in Support of Motion Reconsideration March 8th, 2007

Below is the text of the 13 page filed memorandum of law of defendants Universal Express, INC., Richard A. Altomare and Chris G. Gunderson in support of their motion for reconsideration.

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BARRY SCHAEVITZ, ESQ. (BS-3405)
JACOB MEDINGER & FINNEGAN, LLP
Local Counsel for Defendants Universal
Express, Inc., Richard A. Altomare and
Chris G. Gunderson
1270 Avenue of the Americas, 31st Floor
New York, NY 10020


(212) 332-7773 (telephone)
(212) 332-7239 (facsimile)

and

ARTHUR W. TIFFORD, ESQ.
TIFFORD AND TIFFORD, P.A.
Lead Counsel for Defendant Universal
Express, Inc., Richard A. Altomare and
Chris G. Gunderson
1385 N.W. 15th Street
Miami, FL 33125

(305) 545-7822 (telephone)
(305) 325-1825 (facsimile)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

CASE NO. 04-CV-02322-GEL

U.S. SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

UNIVERSAL EXPRESS, INC., etc., et al.,

Defendants.
_______________________________________________/


MEMORANDUM OF LAW OF DEFENDANTS UNIVERSAL EXPRESS, INC.,
RICHARD A. ALTOMARE AND CHRIS G. GUNDERSON IN
SUPPORT OF THEIR MOTION FOR RECONSIDERATION
(ELECTRONICALLY FILED)

I INTRODUCTION

Plaintiff United States Securities and Exchange Commission
(“the SEC”) motion for summary judgment against Defendants
Universal Express, Inc. (“USXP”), Richard A. Altomare
(“Altomare”) and Chris G. Gunderson (“Gunderson”) should have
been denied, and USXP, Altomare and Gunderson’s motion for
summary judgment granted. Reconsideration of the Court’s 21
February 2007 Opinion and Order is well supported because (i) the
shares of Universal’s common stock referred to in the Complaint
in this civil action were issued in accordance with and pursuant
to Exhibit “I” of the confirmed Chapter 11 Plan, under §§ 1125(e)
and 1145(a) of the Bankruptcy Code, supra, (ii) these Defendants’
actions with respect to shares issued pursuant to the Plan were
in good faith reliance of the Bankruptcy Court’s confirmation of
the Plan; (iii) the number of shares of the Plan were subject to
the Plan’s expander clause; (iv) the number of shares sold to
consultants by Universal as it did was due to the scandalous
“naked shorting” tolerated and even fostered by the SEC and (v)
these Defendants good faith actions are immune from suit pursuant
to the Bankruptcy Code, §1125, they were exempt from the
registration requirements of §§ 5(a) and 5(c) of the Securities
Act of 1933, 15 U.S.C. §§ 77e(a) and 77e(c), supra. Therefore,
Universal, Altomare and Gunderson are entitled to a partial
summary judgment dismissing the Complaint’s First Claim For
Relief, and the Plaintiff’s summary judgment moton must be
denied. This case should proceed to the jury trial which USXP, Altomare and Gunderson have demanded.

II THE QUESTIONS PRESENTED

A. Does there exist a genuine issue of material fact,
precluding the entry of summary judgment in favor of the SEC with
respect to its claim under §5(a) and § 5(c) of the Securities Act
of 1933, concerning the applicability of the Bankruptcy Code’s
“safe harbor” exemption, 11 U.S.C. 1125(e)?

B. Does there exist a genuine issue of material fact,
precluding the entry of summary judgment in favor of the SEC,
concerning the alleged violations on the parts of USXP, Altomare
and Gunderson of the anti-fraud provisions of the Federal
Securities Acts?

C. Does USXP, Altomare and Gunderson’s unrefutted and
uncontradicted good faith reliance on and adherence to the
Bankruptcy Code approved plan and the Bankruptcy Code entitle
them to summary judgment?

As established in this memorandum of law, because each of
the foregoing questions should be answered in the affirmative,
the SEC’s motion for summary judgment against USXP, Altomare and
Gunderson should be denied and their motion granted.

III DISCUSSION

A.
There Exists A Genuine Issue Of Material Fact (Good
Faith), Precluding The Entry Of Summary Judgment In
Favor Of The SEC With Respect To Its Claim Under § 5(a)
And § 5(c) Of The Securities Act Of 1933, Concerning
The Applicability Of The Bankruptcy Code’s “Safe
Harbor” Exemption, 11 U.S.C. § 1125(e).

(1)The Applicable Statutes

Section 5(a) of the Securities Act of 1933, 15 U.S.C. §

77e(a), is entitled “Sale or delivery after sale of unregistered

securities” and provides:

Unless a registration statement is in effect as to a
security, it shall be unlawful for any person, directly
or indirectly–

(1) to make use of any means or instruments
of transportation or communication in
interstate commerce or of the mails to sell
such security through the use or medium of
any prospectus or otherwise; or

(2) to carry or cause to be carried through
the mails or in interstate commerce, by any
means or instruments of transportation, any
such security for the purpose of sale or for
delivery after sale.

Section 5(c) of the Securities Act of 1933, 15 U.S.C. §


77e(c), is entitled “Necessity of filing registration statement”

and provides:

It shall be unlawful for any person, directly or
indirectly, to make use of any means or instruments of
transportation or communication in interstate commerce
or of the mails to offer to sell or offer to buy
through the use of medium of any prospectus or other
wise any security, unless a registration statement has
been filed as to such security, or while the
registration statement is the subject of a refusal
order or stop order or (prior to the effective date of
the registration statement) any public proceeding or
examination under section 77h of this title.

Section 1123, Bankruptcy Code, 11 U.S.C. § 1123, in
pertinent part provides:

(a) Notwithstanding any otherwise applicable non-
bankruptcy law, a plan shall
* * * * * * *

(5) provide adequate means for the plan’s
implementation such as
* * * * * * *

(j) issuance of securities of the
debtor... for cash, for property,
for existing securities, or in
exchange for claims or interests,
or for any other appropriate
purpose;...

Section 1125, Bankruptcy Code, 11 U.S.C. § 1125, is entitled

“Post petition disclosure and solicitation” and in pertinent part

provides:

(e) A person that solicits acceptance or rejection of a
plan, in good faith and in compliance with the
applicable provisions of this title, or that
participates, in good faith and in compliance with the
applicable provisions of this title, in the offer,
issuance, sale or purchase of a security, offered or
sold under the plan, of the debtor, or an affiliate
participating in a joint plan with the debtor, or of a
newly organized successor to the debtor under the plan,
is not liable, on account of such solicitation or
participation, for violation of any applicable law,
rule, or regulation governing solicitation of
acceptance or rejection of a plan or the offer,
issuance, sale or purchase of securities. (Emphasis
supplied)

(2) The Scope Of 11 U.S.C. § 1125(e)

There exists a difference of Federal Appellate Court opinion
concerning the scope of 11 U.S.C. § 1125(e), supra.
In Yell Forestry Products, Inc. v. The First State Bank Of
Plainview, 853 F. 2d 582 (8th Cir. 1988), the Court of Appeals
held that 11 U.S.C. § 1125(e) protected the proponent of
confirmed plan of reorganization under Chapter 11, Bankruptcy
Code, from liability in common law fraud damages to a purchaser
of securities issued pursuant to that plan.


The First Circuit, in In Re Public Service Company of New
Hampshire (Kaufman v. Public Service Company of New Hampshire),
43 F. 3d 763 (1st Cir.), cert. denied sub nom Rochman v. Public
Service Company of New Hampshire, 514 U.S. 1108, 115 S. Ct. 1959,
131 L. Ed. 2d 850 (1995), ruled that 11 U.S.C. § 1125(e) barred a
common law fraud-based collateral attack upon a confirmed
reorganization plan.

Finally, in Jacobson v. AEG Capital Corp., 50 F. 3d 1493,
1496 (9th Cir. 1995), the Ninth Circuit expressed the view that 11
U.S.C. § 1125(e) “only provides a safe harbor for the disclosure
and solicitation process of a bankruptcy”.1

(3) The History Of USXP

USXP was organized in the State of Delaware on January 19,
1986. It merged into Packaging Plus Services, Inc. (“PPS”), a
Nevada corporation, pursuant to a merger agreement entered into
on April 2, 1986, and filed in the State of Nevada on June 2,
2986. The Nevada corporation, which survived the merger and
changed its domicile to the State of Delaware, was a dormant
public company organized on April 8, 1983, by Mr. Jerry Beagelman
as Silver-Gold Reclamation, Ltd.

On December 19, 1991, PPS filed for reorganization under
Chapter 11, Bankruptcy Code, in the U.S. Bankruptcy Court,
Eastern District of New York (“the Bankruptcy Court”). In re:
__________________
1 This Court, Lynch, D.J., in Astor Holdings, Inc. v. Roski,
325 F. Supp. 2d 251, 263 (S.D.N.Y. 2003), limited theapplicability of the Ninth Circuit’s decision in Jacobson v. AEG
Capital Corp., supra,by noting that “the issue there was thecollateral estoppel effect, on a subsequent federal securitiesfraud claim, of a finding that a plan was proposed in goodfaith.”

Packaging Plus Services, Inc., Debtor, Case No. 191-18486-260
(Hon. Conrad B. Duberstein, U.S. Bankruptcy Judge). Thereafter,
pursuant to an order of the Bankruptcy Court, Mr. Beagelman and
members of his family were removed from all offices and
directorships of PPS and Altomare was installed as its President
and Chief Executive Officer, which positions he continues to
hold.


The Bankruptcy Court, on February 18, 1994, in Case No. 191
18486-260, confirmed PPS’s Plan of Reorganization (“the PPS
Chapter 11 Plan”). Thereafter, PPS changed its name to Universal
Express, Inc., and Gunderson was appointed as its General
Counsel, which position he has held to this date.


(4) The Plan’s Exhibit “I”

Exhibit “I” to the PPS Chapter 11 Plan was a document
entitled “1994 Stock Option Plan”, also regularly referred to by
USXP as the “Stock Incentive Plan”, which in pertinent part

provided:

This Plan shall be known as the “1994 Stock Option
Plan”, (the “Plan”). The purpose of this Plan is to
provide a method to give incentive to those persons or
entities who, in the sole and absolute discretion of
the Board of Directors of Packaging Plus Services,
Inc., a Delaware corporation (“the Company”), are
responsible for the management, growth, and/or
protection of the Company’s business and who are making
and can continue to make substantial contributions to
the success of the Company’s business including, but
not limited to, present and future officers, directors,
employees, consultants, franchisees and professional
advisors of the Company or any future Parent or
Subsidiary.

It is anticipated that the Plan will encourage them to
acquire capital stock ownership in the Company, thus
giving them a, or increasing their, proprietary
interest in the Company, providing them with greater

incentive and encouraging their continuance in the
service, and promoting the interests, of the Company
and all of its stockholders...

* * * * * * * * *

The shares to be issued upon exercise of options which
are granted pursuant to this Plan shall be made
available, at the discretion of the Board of Directors,
either from the authorized but unissued shares of
Common Stock or from shares of Common Stock which are
reacquired by the Company, including shares which are
purchased in the open market.

There will be reserved for use upon the exercise of
options which may be granted pursuant to this Plan an
aggregate of 1,250,000 shares of Common Stock.

* * * * * * * * *

If the number of outstanding shares of Common Stock of
the Company shall be changed by reason of any
recapitalization, stock split, or stock dividend, the
aggregate number and kind of shares for which options
may thereafter be granted under this Plan and the
number of shares subject to options theretofore granted
under and the price per share payable upon exercise of
such options shall be adjusted as determined by the
Plan Administrators, in their sole and absolute
discretion, so as to reflect such change; provided,
however, that no such adjustment shall be made by
reason of the issuance of additional shares of the
Company for services, property or money regardless of
whether the Company received adequate consideration.

* * * * * * * * *

Unless sooner terminated, this Plan shall terminate on
the tenth (10th) anniversary date of the earlier of the
date upon which this Plan is adopted or the date upon
which this Plan is approved by the stockholders of the
Company; provided, however, that all options which are
granted under this plan shall continue in full force
and effect until terminated in accordance with the
terms and conditions of the options and this Plan.
This Plan will be submitted to the stockholders of the
Company for approval by the holders of a majority of
the outstanding shares of Common Stock of the Company.

(5) The Confirmed PPS Chapter 11 Plan

Paragraph VI.F of the confirmed PPS Chapter 11 Plan
provided:

The protection afforded by Bankruptcy Code section 1125
with regard to the solicitation of acceptances or
rejections of the Plan and with regard to the offer,
issuance, sale, or purchase of the Postpetition Senior
Secured Notes and the New Common Stock and New Warrants
issued and distributed to the holders of Claims and
Administrative Claims or in connection with the Plan
and the Confirmation Order, shall apply to the full
extent provided by law. The entry of the Confirmation
Order shall constitute the determination by the
Bankruptcy Court that Reorganized PPS, PPS, and each of
their respective officers, directors, partners,
employees, members or agents, and each Professional
Person, attorney, accountant, or other professional
employed by any of them, shall have acted in good faith
and in compliance with the applicable provisions of the
Bankruptcy Code pursuant to Bankruptcy Code section
1125 and the federal securities laws. In addition, the
exemption from the requirements of section 5 of the
Securities Act and any state or local law requiring
registration for the offer or sale of a security
provided for in Bankruptcy Code section 1145 shall
apply to the New Common Stock, the New Warrants, and
the Warrants Shares to be issued under the Plan in
exchange for any Claim against or interest in PPS.
Entry of the Confirmation Order shall also constitute
an order of the Bankruptcy Court that the Debtor has,
by virtue of its public filings, complied with the
reporting requirements of the Securities Act of 1934
through the Effective Date. Upon Confirmation,
however, as a publicly held corporation the Debtor
remains subject to Securities and Exchange Commission
reporting requirements and subsequent to Confirmation
of the Plan and the Reorganized PPS intends to comply
with all periodic reporting requirements including
Section 12(g) of the Securities Exchange Act of 1934.


(6) The Gunderson Declaration and Testimony.

Gunderson’s declaration, which has been filed in support of
the motion of USXP, Altomare and Gunderson for partial summary
judgment [D.E. 129], in pertinent part states:

4. The factual matters set forth in the Universal
partial summary judgment motion are true and correct.
Specifically, the shares of Universal’s common stock
referred to in the Complaint in this civil action were

issued in accordance with and pursuant to Exhibit “I”
of the confirmed Chapter 11 Plan for Universal.

* * * * * * * *

14. The 1994 Stock Option Plan was part of the
Reorganization Plan for the company [Exhibit 8],
approved and confirmed by the United States Bankruptcy
Court, Eastern District of New York, pursuant to
section 1125 of the Bankruptcy Code. [Exhibit 9]. The
filing of the Stock Option Plan was and is a
registration statement or its functional equivalent.
It was filed with the SEC as part of the Reorganization
Plan [Exhibit 8] and as a separate exhibit on Form 8-K
as a part of the Company’s transition Report 10-KSB for
the period ending June 30, 1994. Subsequently, and on
an annual basis, it has been filed with the SEC as an
exhibit to the company’s annual 10-KSB reports.
Pursuant to law it is an S-8 registration covering
advisors and consultants whose future need by Universal
has been determined by the Bankruptcy Court for the
long-term development of the company (10 years).

15. At all times I, as General Counsel for Universal,
acted in good faith reliance on the following language
in Section 1123 of the Bankruptcy Code, 11 U.S.C. §
1123, among others...

16. Once the Bankruptcy Court determined that
Universal’s Reorganization Plan (the First Amended Plan
of Reorganization and Disclosure Statement), including
the 1994 Stock Option Plan, contained “adequate
information”, I acted in good faith reliance on Section
1125 of the Bankruptcy Code, which states that once
such a finding is made by the bankruptcy court, no
other law or rule governed Universal’s conduct...2

Mr. Gunderson’s Supplemental Declaration was filed
contemporaneously with the memorandum in support of this motion.
It and his deposition testimony specifically reinforce the good
faith basis underlying his actions as general counsel for USXP
_______________
2 Gunderson and Altomare have appeared for and undergonedeposition examination in connection with this civil action.

and those of the company’s CEO, Mr. Altomare. Both are
unrefutted and uncontradicted by the SEC.

(7) “Good Faith” And “Genuine Issue Of Material Fact”
This Court (Cote, J.), in Securities and Exchange Commission
v. KPMG LLP, 412 F. Supp. 2d 349 (S.D.N.Y. 349, 2006), held that
genuine issues of material fact as to whether an auditing firm’s
engagement partner had acted with scienter precluded summary
judgment in an enforcement action by the SEC alleging securities
fraud in the audit opinion. Judge Cote observed that, although
the auditor’s engagement partner had presented arguments and
evidence to support a finding that he had acted in good faith,
the SEC had presented sufficient evidence to support a jury
finding that the engagement partner had been well aware of the
danger that the disseminated financial statements had materially
misstated Xerox Corporation’s financial condition, yet had
authorized the auditor to issue a clean audit opinion. See also,
SEC v. Funinella, 949 F.Supp. 722 (SDNY 1996); JWP, Inc.
Securities Litigation v. Dwyer, 928 F.Supp. 1239 (SDNY) 1996);
Press v. Chemical Investment Services Corp., 166 F. 3d 529 (SDNY
1999); In re: Blech Securities Litigation, 2002 W.L. 31356498,
(SDNY 2002); In re: WorldCom, Inc. Securities Litigation, 2005 WL
639268 (SDNY 2005).

Similarly, in this case, Gunderson has declared that he,
USPX (and, by inference, Altomare) acted in good faith, thereby
entitling them to the protection afforded by 11 U.S.C. § 1125(e),
supra, with respect to the stock which forms the subject-matter
of this civil action. By disputing the good faith of Gunderson,
Altomare and USPX, the SEC has confirmed the existence of a
genuine issue of material fact, precluding the entry of summary
judgment in the SEC’s favor, with respect to its claims under
§5(a) and § 5(c) of the Securities Act of 1933 in the event the
Court does not grant their motion for partial summary judgment.

The same disputed facts preclude the SEC from obtaining a
summary judgment with respect to the press-release claims and
Sections 10(b) and 17(a) of the Act.

Respectfully submitted,
TIFFORD & TIFFORD, P.A.
Lead counsel for Universal,
Altomare and Gunderson
1385 N.W. 15th Street
Miami, FL 33125
(305) 545-7822
FAX: (305) 325-1825

BY /S/
ARTHUR W. TIFFORD
(NY ID- 011481)

CERTIFICATE OF SERVICE

I hereby certify that on March 8, 2007, I electronically
filed the foregoing with the Clerk of the Court by using the
CM/ECF System, which will send notice of electronic filing to the
following:

Julie K. Lutz, Esq.
Attorney for Plaintiff
U.S. Securities and Exchange Commission
Central Regional Office
1801 California Street, Suite 4800
Denver, CO 80202-2648

Robert B. Blackburn, Esq.
Attorney for Plaintiff
U.S. Securities and Exchange Commission
233 Broadway, 11th Floor
New York, NY 10279

Marvin Pickholz, Esq.
Jason Pickholz, Esq.
Akerman Senterfitt LLP
335 Madison Avenue
Suite 2600
New York, NY 10017

John B. Harris, Esq.
Stillman & Friedman
425 Park Avenue
New York, NY 10022

Harry H. Wise, III, Esq.
770 Lexington Avenue, 6th Floor
New York, NY 10021

John A. Hutchings, Esq.
Dill Dill Carr Stonebraker & Hutchings, P.C.
455 Sherman Street, Suite 300
Denver, CO 80203

/S/
ARTHUR W. TIFFORD


Click Links Below For Easy Navigation:

1. Supreme Court Case
2. 150 Articles: SEC finally admits Naked Short Selling is a HUGE problem and a cause for financial crisis (July 15th, 2008 et. seq-September 15th, 2008 et. seq)
3. Richard Altomare's "Prison Inc." Book Excerpts
4. Universal Express Statement
5. Universal Express Recitation of Facts by General Counsel
6. Brief in Support of USXP Entitlement to Trial by Jury
7. Universal Express Complaint filed against SEC- March 3, 2004
8. USXP Full Page Ad in New York Times
9. Office of Inspector General Semi Annual Report to Congress- March 31, 2008
10. Richard Altomare's Speech on Naked Short Selling
11. USXP Quarterly and Annual Reports
12. Exhibit A and B: Universal Express Press Releases and Published Articles on Naked Short Selling 1998-2007
13. Universal Express Motion for Partial Summary Judgment
14. Supplemental Declaration of Chris G. Gunderson- Nov 13, 2006
15. Universal Express et al Motion for Reconsideration- March 8th, 2007
16. USXP Memo of Law in Support of Motion for Reconsideration
17. Universal's Declaration of General Counsel in Response to SEC's Request for a Receiver