In re Bankamerica Securities Litigation
| Decision Date | 02 December 2003 |
| Docket Number | No. 02-3780.,02-3780. |
| Citation | 350 F.3d 747 |
| Parties | In re: BANKAMERICA CORPORATION SECURITIES LITIGATION Kevin Kloster, Joseph Hempen, Plaintiffs-Appellees, John M. Koehler, David P. Oetting, Plaintiffs-Appellants, Selma Kaiser, Brian Markee, Walter E. Ryan, Jr., Plaintiffs-Appellees, Ernesto Gumapas, Sydney Sorkin, Herman Shyken, Carol Mackay, Executrix of the estate of Joseph I. Sir, Intervenors Below-Appellees, Robert A. Hepworth, Plaintiff-Appellee, v. Hugh L. McColl, Jr., James H. Hance, Jr., David A. Coulter, Michael E. O'Neill, John J. Higgins, Marc D. Oken, Bank of America, Defendants-Appellees, Allison Desmond, Objector, JAS Securities, LLC, Milberg, Weiss, Bershad, Hynes & Lerach, LLP, Wachovia Bank National Association, Movants Below. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Counsel who presented argument on behalf of appellees Bank of America, Marc D. Oken, John J. Higgins, Michael E. O'Neill, David A. Coulter, James H. Hance and Hugh L. McColl was Warren R. Stern, New York, NY. Additional attorneys appearing on the brief were Robert B. Mazur, Andrew J. Cheung, Jonathan M. Moses, Thomas C. Walsh, John Michael Clear and Jeffrey S. Russell.
Before MELLOY, HANSEN, and SMITH, Circuit Judges.
In this class action under the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 (the "Act"), the district court1 determined that it possessed the authority to approve a global settlement involving all plaintiff classes notwithstanding the fact that some members of a lead plaintiff group for one of four certified plaintiff classes objected to the settlement. We affirm.
The plaintiffs in this class action alleged losses caused by misrepresentations and omissions surrounding the 1998 merger of NationsBank and BankAmerica to form Bank of America. After consolidating numerous state and federal actions from multiple jurisdictions, the district court certified four plaintiff classes: the NationsBank and BankAmerica, Holder and Purchaser classes. Membership in the classes depended on whether plaintiffs held or purchased NationsBank or BankAmerica shares during designated periods of time. As required under the Act, the district court appointed lead plaintiffs or lead plaintiff groups who in turn selected class counsel. See 15 U.S.C. § 78u-4(a)(3)(B)(i) and (v). The district court also designated some of these lead plaintiffs as class representatives under Fed. R.Civ.P. 23.
The district court appointed a seven-member lead plaintiff group to represent the NationsBank classes. Members of this group included Earl J. Gates, Robert Hepworth, Pamela Wootton, Appellees Joseph Hempen and Kevin Kloster, and Appellants John M. Koehler and David P. Oetting. The district court appointed a six-member lead plaintiff group to represent the BankAmerica classes. Members of this group included David Fike, Elizabeth Menkes, Patricia A. Thomas, and Appellees Selma Kaiser, Brian Markee, and Walter E. Ryan, Jr. No members of the lead plaintiff groups were large institutional investors nor did they have relationships with one another prior to this litigation. The lead plaintiffs for the NationsBank classes owned, collectively, less than one tenth of one percent of the outstanding shares in NationsBank. Institutional investors owned more than forty percent of NationsBank, but no institutional investor came forward to serve as a lead plaintiff.
Shortly before trial, class counsel, defendants, and some members of the lead plaintiff groups participated in a mediation that led to the signing of a memorandum of understanding with the defendants regarding a $490 million global settlement of all claims. Under the global settlement, Bank of America was to pay the NationsBank classes approximately $333 million and the BankAmerica classes approximately $157 million. While many of the circumstances and statements surrounding the mediation are disputed, it is undisputed that class counsel signed the memorandum of understanding with the defendants after members of the lead plaintiff group for the NationsBank class left the mediation.
In response to a motion for the district court's approval of the global settlement, three members of the NationsBank lead plaintiff group, Appellants Oetting and Koehler and Appellee Kloster, filed objections. They alleged that class counsel instructed them to leave the mediation because it was futile, but that class counsel remained and reached the proposed global settlement for an amount far below that which they had authorized. Based on these allegations, they argued that the district court should not approve the global settlement because: class counsel negotiated the settlement without their approval as lead plaintiffs; the settlement provided inadequate compensation to the NationsBank classes; and the settlement improperly structured compensation to be paid in cash rather than stock thus resulting in adverse tax consequences and a depletion of the cash reserves of the new, merged bank (in which most plaintiffs owned shares).
After sending notice to, and soliciting objections from, the hundreds of thousands of eligible class members, the district court received a total of ten objections. No institutional investors objected. The joint objection from Appellants Oetting and Koehler and Appellee Kloster was the only objection filed by any members of the NationsBank lead plaintiff group. Regarding the other NationsBank lead plaintiffs, Appellee Hepworth supported the global settlement; Gates died prior to the mediation; Hempen was not available for comment; and Wootton stated that she would defer to the decision of the group.
Faced with the fractured positions of the NationsBank lead plaintiff group, the lack of a singular voice to advocate a position for the group, and the lack of clear guidance in the Act regarding the power of a fraction of one lead plaintiff group to disapprove settlement, the district court looked to cases under Fed.R.Civ.P. 23 to determine the proper weight to place on the objections from Oetting, Koehler, and Kloster. The district court held a fairness hearing and issued an order in which it determined, inter alia, that it had the authority to approve the settlement even over the objections raised by the three members of the NationsBank lead plaintiff group.
In determining that it had the authority to conduct a fairness/adequacy review and approve the settlement over Appellants' objections, the district court emphasized its duty to act in the best interest of class members. It noted that Appellants' estimations of the settlement value of the case were so high as to be "bordering on fantasy." It expressed concern that, because the global settlement amount far exceeded what had been previously offered to the separate classes, the Appellants potentially were jeopardizing a favorable settlement. The district court was intimately familiar with the case, having spent over three years with the case prior to ruling on the settlement. In light of this familiarity, the district court clearly expressed its opinion that, based on working with the attorneys in the case, this was not the kind of lawyer-driven, lawyer-initiated lawsuit that fails to protect class interest and that Congress targeted with the Act.
Ultimately, the district court approved the settlement as fair and adequate by applying those factors we have listed as relevant in the context of Rule 23 fairness determinations. See Van Horn v. Trickey, 840 F.2d 604, 607 (8th Cir.1988). In particular, the district court noted the adequacy of the settlement in light of the apparent merits of the plaintiffs' cases and in light of the risks and the high level of uncertainty that the litigation would entail if allowed to proceed to trial. The district court further noted the absence of objections from institutional investors and the relatively slight number of shares owned by the objecting lead plaintiffs.
On appeal, Appellants Koehler and Oetting argue that we should reverse the district court's decision and hold that the district court erred as a matter of law in approving the global settlement over their objections. They interpret the Act as prohibiting the district court from approving a settlement unless the district court either receives approval from the lead plaintiff, or lead plaintiff group, or disqualifies the lead plaintiff for acting in a manner inimical to class interests. All parties concede that the Act does not expressly provide for such a requirement, and Appellees argue that we should not read such a requirement...
To continue reading
Request your trial
- Tussey v. ABB, Inc., Case No. 06-04305-CV-C-NKL
-
In re Xcel Energy, Inc., Securities, Derivative
...F.Supp.2d 1061, 1064 (E.D.Mo.2002) (citing Rawlings v. Prudential-Bache Props., Inc., 9 F.3d 513, 516 (6th Cir.1993)), aff'd, 350 F.3d 747, 751 (8th Cir.2003). The court takes this responsibility The Eighth Circuit has not established factors that a district court should consider when calcu......
- Oetting v. Green Jacobson, P.C. (In re BankAmerica Corp. Sec. Litig.)
- Sved v. Chadwick
-
THE UNDEMOCRATIC CLASS ACTION.
...23(a)(2), (b)(3), and adequacy of representation). (94.) Amchem, 521 U.S. at 622-25 (95.) See, e.g., In re BankAmerica Corp. Sec. Litig., 350 F.3d 747, 751-52 (8th Cir. (96.) "The commonality and typicality requirements of Rule 23(a) tend to merge.... Those requirements therefore also tend ......
-
CHAPTER 8 CURRENT TRENDS IN CLASS ACTION ROYALTY SETTLEMENTS
...acts as a fiduciary who must serve as guardian of the rights of absent class members." — In re BankAmerica Corp. Securities Litigation, 350 F.3d 747 (8th Cir. 2003) Fairness and Adequacy under Federal Rule 23(e) • Strong presumption in favor of finding the settlement agreement fair — Dehoyo......