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Judge Scheindlin

INVESTORS ALLEGED that defendants violated the Racketeer Influenced and Corrupt Organizations Act, among other things, arising out of tax and consulting services offered by professional law and accounting firms, and marketed to three groups of investors. Defendants moved to compel arbitration and plaintiffs contended that the arbitration clauses in the consulting agreements are inapplicable because their causes of action arise out of tax shelter service, and not out of the services identified in the consulting agreements. The court denied defendants’ motion, concluding that plaintiffs and certain defendants engaged in mutual fraud when they executed the consulting agreements based on the representations by counsel for plaintiffs and the certain defendants, as well as the extraordinarily vague language contained in the consulting agreements. The court ruled that the contracts cannot be enforced since the consulting agreements containing the arbitration clauses are mutually fraudulent.

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