Levitt v. Bear Stearns & Co, (2nd Cir. 2007)
Linked as:
Text
06-5298-cv(L), 07-0173-cv(X A P)
Levitt v. B ear Stearns & C o
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUM M ARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
SUM M ARY ORDERS FILED AFTER JANUARY 1, 2007, IS PERM ITTED AND IS GOVERNED BY THIS
COURT'S LOCAL RULE 32.1 AND FEDERAL RULE OF APPELLATE PROCEDURE 32.1. IN A BRIEF
OR OTHER PAPER IN W HICH A LITIGANT CITES A SUM M ARY ORDER, IN EACH PARAGRAPH IN
W HICH A CITATION APPEARS, AT LEAST ONE CITATION MUST EITHER BE TO THE FEDERAL
APPENDIX OR BE ACCOM PANIED BY THE NOTATION: "(SUM M ARY ORDER)." A PARTY CITING
A SUMM ARY ORDER M UST SERVE A COPY OF THAT SUMM ARY ORDER TOGETHER W ITH THE
PAPER IN W HICH THE SUM M ARY ORDER IS CITED ON ANY PARTY NOT REPRESENTED BY
COUNSEL UNLESS THE SUM M ARY ORDER IS AVAILABLE IN AN ELECTRONIC DATABASE
W HICH IS PUBLICLY ACCESSIBLE W ITHOUT PAYMENT OF FEE (SUCH AS THE DATABASE
AVAILABLE AT HTTP://W W W .CA2.USCOURTS.GOV/). IF NO COPY IS SERVED BY REASON OF
THE AVAILABILITY OF THE ORDER ON SUCH A DATABASE, THE CITATION MUST INCLUDE
REFERENCE TO THAT DATABASE AND THE DOCKET NUMBER OF THE CASE IN W HICH THE
ORDER W AS ENTERED.
At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
on the 18th day of December two thousand and seven.
Present: ROGER J. MINER,
ROSEMARY S. POOLER.
Circuit Judges.1
ROBERT LEVITT, ET AL., Plaintiffs-Appellants,
-v-
06-5298-cv
THOMAS ROGERS, ET AL. Plaintiffs-Appellees,
BEAR STEARNS & CO., INC. and
BEAR STEARNS SECURITIES CORP. Defendants-Appellees.
Appearing for Plaintiffs-Appellants: Leslie Trager, New York, NY.
Appearing for Plaintiffs-Appellees: David J. Goldsmith, (Jonathan M. Plasse, on the brief), Labaton Sucharow & Rudoff LLP, New York, NY.
Appearing for Defendants-Appellees: Kerry Dziubek, (Michael D. Schissel, on the brief), Arnold & Porter, LLP, New York, NY.
Appeal from the United States District Court for the Eastern District of New York (Spatt, J. ).
ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the September 30, 2004 decision of the district court denying plaintiffs appellants' fourth motion to be appointed as lead plaintiffs, and the October 31, 2006 judgment of the district court accepting the settlement and plan of allocation, and awarding attorney's fees are hereby VACATED and REMANDED to the district court.
There are three issues before us on appeal. First, whether the district court abused its discretion by denying the plaintiffs-appellants' (the "Levitt Group") motion to be appointed lead plaintiffs for the ML Direct class, a subclass of the larger class action. Second, whether the district court abused its discretion by approving the settlement. Third, whether the district court abused its discretion by failing to award legal fees to Leslie Trager, counsel for the Levitt Group, on the same basis as it awarded legal fees to the class counsel.
We review a district court's appointment of lead plaintiffs for abuse of discretion. Cf.
Hevesi v. Citigroup, Inc.,
This case presents a unique situation. The Levitt Group did not, initially, have the largest financial interest in the outcome of the case. However, after all claims against Bear Stearns, by plaintiffs other than the ML Direct class and the Applewoods class, were dismissed as time barred, the Levitt Group became the group with the largest financial interest in the outcome of the case. At that point in the litigation, plaintiffs-appellants made a motion to be appointed lead plaintiffs based upon the changed circumstances. While we defer to the district court on determinations regarding the adequacy of lead plaintiffs, we also must be mindful of the statutory language of the PSLRA, which makes clear that there is a rebuttable presumption in favor of the plaintiff with the largest financial interest in the relief sought by the class -- in this case, the Levitt Group. Pursuant to the PSLRA, there is no reason to believe that the Levitt Group would not fairly or adequately protect the interests of the class in regards to the litigation against Bear Stearns, since the members of the Levitt Group had the largest financial interest in the outcome of that litigation. Indeed, it is difficult to believe that plaintiffs-appellees, the Rogers Group, were in a position to adequately represent the class, since the majority of the shareholders that the Rogers Group represented did not have any valid claims against Bear Stearns. Moreover, the Rogers Group showed little vigor in pursuing recovery from Bear Stearns, even after the Levitt Group successfully appealed from the district court's order dismissing the claims against Bear Stearns on statute of limitations grounds. See Levitt v. Bear Stearns, 340 F.3d 94 (2d Cir. 2003). While we sympathize with the district court's sentiment that it was late in the Sterling Foster litigation to appoint a new lead plaintiff, it was actually relatively early in the litigation against Bear Stearns; thus it was an appropriate time to appoint a new lead plaintiff for those remaining actions against Bear Stearns.
Federal Rule of Civil Procedure 23(e) requires court approval of any settlement that effects the dismissal of a class action. Before such a settlement may be approved, the district court must determine that a class action settlement is fair, reasonable, adequate and not a product of collusion. See, e.g., Grant v. Bethlehem Steel Corp., 823 F.2d 20, 22-23 (2d Cir. 1987). A court determines a settlement's fairness by looking at both the settlement's terms and negotiating process leading to settlement. D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001). We review a district court's decision to approve a proposed settlement of a class action for abuse of discretion. See In re Ivan F. Boesky Secs. Litig., 948 F.2d 1358, 1368 (2d Cir. 1991).
We find that the settlement here was not fair because of an insufficient inquiry regarding evidence of Bear Stearns wrongdoing. To evaluate whether a settlement is substantively fair and reasonable, we apply the Grinnell factors. These factors are 1) the complexity, expense and likely duration of the litigation; 2) the reaction of the class to the settlement; 3) the stage of proceedings and amount of discovery completed; 4) the risks of establishing liability; 5) the risks of establishing damages; 6) the risks of maintaining the class action through trial; 7) the ability of the defendants to withstand greater judgment; 8) the range of reasonableness of the settlement in light of the best possible recovery; and 9) the range or reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974). Specifically, we find that the district court failed to give adequate consideration to the arguments pertaining to the ML Direct subclass' likelihood of success on the merits against Bear Stearns. In this case, some form of formal discovery is likely necessary to provide the parties and the court with information sufficient to make a determination regarding whether the proposed settlement is fair and reasonable. In particular, we make note of plaintiffs-appellants' argument that certain representatives from Sterling Foster, who having now been convicted of crimes, may be able to provide additional substantive information regarding the allegations against Bear Stearns.
Because we remand this case to the district court on the matter of the appropriate lead plaintiff -- after Bear Stearns was reinstated as an appropriate defendant for two subclasses, and thus the ML Direct subclass became the holder of the largest financial interest in the outcome of the litigation, -- and on the matter of the substantive unfairness of the settlement, it is our view that a discussion of attorney's fees is premature.
For the reasons stated above, the judgment of the district court denying the plaintiffs appellants' motion to be appointed lead plaintiff, and the judgment accepting the proposed settlement and awarding attorneys fees are VACATED and REMANDED for further proceedings. From whatever final decision the district court makes, the jurisdiction of this Court to consider a subsequent appeal may be invoked by any party by notification to the clerk of this Court within ten days of the district court's decision, in which event the renewed appeal will be assigned to this panel. See United States v. Jacobson, 15 F.3d 19 (2d Cir. 1994).
FOR THE COURT: Catherine O'Hagan Wolfe, Clerk By:
1 The Honorable Thomas J. Meskill, who was originally assigned to the panel, died before oral argument. The remaining two members of the panel, who are in agreement, decide this case in accordance with Second Circuit Local Rule 0.14(b).
Sponsored links
This document cites
- U.S. Court of Appeals for the Second Circuit - United States of America, Appellee, v. Stanley Jacobson, Nora Jacobson, Maureen Conlan, Richard Fromme, Gerhard Plaut, Osvaldo Stejmberg, Alan Jacobson, Lawrence Galina, Kenneth Cohen, Steven Goldfarb, Charles Berliner, Paul Berger, Nicholas Lobasso, Michael Bouer, John Mahon, Lawrence Nemeroff, Richard Lippman, Steven Rodman, James Bozzi, Defendants, and Andrew Kogut, Defendant-Appellant., 15 F.3d 19 (2nd Cir. 1994)
- U.S. Court of Appeals for the Second Circuit - Robert Levitt, for Himself and as Custodian for Richard Levitt and Monica Levitt, Robert Rice, Stephen G. Siben, Stephen Strobehan, Stanley Veltkamp, Philip C. Vitanza, for Himself and Elizabeth Vitanza and Luke Vitanza, John T. White, as Trustee, Guy v. Wood, as Trustee, Carl Zander, Jr., as Trustee, Ted. M. Jones, as Trustee, and Kathryn N. Jones, as Trustee, Plaintiffs-Appellants. v. Bear Stearns & Co., Inc. and Bear Stearns Securities Corporation, Defendants-Appellees., 340 F.3d 94 (2nd Cir. 2003)
- U.S. Court of Appeals for the Second Circuit - Roysworth D. Grant, Willie Ellis, on Behalf of Themselves and all Similarly Situated, Plaintiffs-Appellants, Louis Martinez, Plaintiff Intervenor-Appellant, v. Bethlehem Steel Corporation, E. Richard Driggers, James Deavers & Thomas Connelly, Individually and as Agents of Bethlehem Steel Corp., the International Association of Bridge Structural & Ornamental Iron Workers, Afl- Cio; Local 40, Bridge Structural & Ornamental Iron Workers, Afl-Cio; Ray Corbett, Ray Mullett, Jerry Place, Individually and as Officers of Local 40, Bridge Structural & Ornamental Iron Workers, Afl-Cio, Defendants-Appellees, the Class of Iron Workers, Plaintiff-Appellee., 823 F.2d 20 (2nd Cir. 1987)
- U.S. Court of Appeals for the Second Circuit - Fed. Sec. L. Rep. P 96,400 in Re Ivan F. Boesky Securities Litigation, William Fries, Ii, John Lippitt, Jacquelyn Tribolet and William Nelson Harris, Trustee Under the William Nelson Harris and Myrtle Whitsett Harris Trust, Plaintiffs-Appellants., 948 F.2d 1358 (2nd Cir. 1991)
- U.S. Court of Appeals for the Second Circuit - City of Detroit Et Al., Plaintiffs-Appellees, v. Grinnell Corporation Et Al., Defendants-Appellees. Manhattan-Ward, Incorporated, Et Al., Plaintiffs-Appellees, v. Grinnell Corporation Et Al., Defendants-Appellees. 1225 Vine Street Building, Inc., Et Al., Plaintiffs-Appellees, v. Grinnell Corporation Et Al., Defendants-Appellees., 495 F.2d 448 (2nd Cir. 1974)
See other documents that cite the same legislation
