4 F.3d 614 (8th Cir. 1993), 93-1794, Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc.
|Citation:||4 F.3d 614|
|Party Name:||KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff-Appellant, v. REIMER & KOGER ASSOCIATES, INC., a Kansas Corporation; Ronald Reimer, an individual; Kenneth H. Koger, an individual; Clifford W. Shinski, an individual; Brent Messick, an individual; Robert Crew, an individual; Frank Morgan, an individual; Sherman Dreiseszun, an individual; Leland|
|Case Date:||September 02, 1993|
|Court:||United States Courts of Appeals, Court of Appeals for the Eighth Circuit|
Submitted June 14, 1993.
Rehearing and Suggestion for Rehearing En Banc Denied Oct. 12, 1993.
Thomas E. Deacy, Jr., Kansas City, MO and Leonard M. Ring, Chicago, IL, argued (Debra A. Thomas and Robin LaFollette, Chicago, IL, John Terry Moore and Brian McLeod, Wichita, KS, on the brief), for appellant.
Timothy P. Collins, Detroit, MI, argued (Richard C. Sanders and Elizabeth Joliffe Basten, Detroit, MI, David A. Vorbeck, Overland Park, KS, James W. Tippin and Carmen F. Moody, Kansas City, MO, on the brief), for Resolution Trust.
Charles W. German, Kansas City, MO, argued (Brant M. Laue, Robert J. Campbell and James E. Kelley, Jr., on the brief), for Morgan, Dreiseszun, Gerhart, Ozar, Gifford, Kiene, Nay, Salazar, and Pistilli.
Dan K. Webb, Chicago, IL, argued (Kurt L. Schultz, Jerome W. Pope and Thomas C. Cronin, on the brief), for Gage and Tucker.
Richard F. Adams and Rodney J. Hoffman, Kansas City, MO, argued, for Ronald Reimer.
Kathleen A. Hardee of Kansas City, MO, argued, for Kenneth Koger.
Gregory F. Maher and Alice G. Amick, Overland Park, KS, argued, for Reimer & Koger Associates, Inc., Clifford W. Shinski, Brent Messick and Robert Crew.
Before McMILLIAN, JOHN R. GIBSON, and HANSEN, Circuit Judges.
JOHN R. GIBSON, Circuit Judge.
The Kansas Public Employees Retirement System appeals from a district court 1 order denying its motion to remand this action to a Shawnee County, Kansas, district court. KPERS argues that because the state court severed the original claims from the third-party claims before the third-party defendant, the Resolution Trust Corporation, removed the case to federal court, only the third-party claims could be removed. KPERS also argues that the district court erred in holding that the third-party plaintiffs' claim for indemnification against the RTC was not frivolous under 12 C.F.R. Sec. 545.121 (1992). We affirm.
On June 5, 1991, KPERS filed suit in the District Court of Shawnee County, Kansas, to recover damages resulting from the purchase of Home Savings Association debentures for the Kansas Employees' Retirement Fund. KPERS named Michael K. Russell (its former board chairman), Reimer & Koger Associates (its former investment advisor), Peat, Marwick, & Mitchell Company (its former accounting firm), Gage & Tucker (its former law firm), and the Home Savings Association's officers and directors 2 as defendants. Along with various allegations of fraud, breach of fiduciary duty, professional negligence, and gross negligence, KPERS claimed that the Home Savings directors violated the Kansas Securities Act, Kan.Stat.Ann. Sec. 17-1268 (1983). In response, the Home Savings directors moved to dismiss KPERS' claims as derivative of claims that belonged solely to the RTC, and argued that the RTC was a necessary party.
Shortly thereafter, the RTC moved for leave to intervene in order to remove the action to federal court, where the RTC would attempt to have the case dismissed. On August 21, 1992, the Kansas district court denied the Home Savings directors' motion to dismiss and held that KPERS' claims were nonderivative. The Kansas court never ruled on the RTC's motion requesting leave to intervene.
On October 2, 1992, the Home Savings directors filed a third-party petition against the RTC, claiming negligent mismanagement of Home Savings, which caused a loss of funds that could have been used to repay part of the KPERS investments, and seeking indemnification under 12 C.F.R. Sec. 545.121. On October 8, 1992, at approximately 4:00 p.m., KPERS' counsel contacted the Shawnee County district court clerk to discuss the filing of a motion to strike the third-party claims or sever them from the original claims. The clerk advised the lawyers that the office would remain open after the normal 5:00 p.m. closing to permit the filing of pleadings. KPERS' counsel also contacted the chambers of the district judge handling the case, stating that KPERS "desired to present [a] severance motion to the ... court for ex parte consideration that day." Opposing counsel were not notified.
At 5:26 p.m., KPERS' counsel appeared ex parte before the Kansas district judge to present its motion to strike the third-party petition or, alternatively, sever the third-party claims from the original lawsuit. The Kansas district judge stated:
The Court is familiar with the history of this case, [and] feels that under the circumstances the addition of the Resolution Trust Corporation ... by the third-party petition would subject this case to removal under the federal statutes.... [T]he Court [does] not feel that ... to maintain [the third-party claims] in the same case [as the principal claims] and subjecting [the entire] case to removal would be in
the best interests of the advancement of the princip[al] case.... I ... sign ex parte the order to sever and direct ... that the third party claim be severed and filed ... as a separate case entirely from the previous [case].... [T]he Court considers this matter on an emergency basis.
The judge also provided that any aggrieved party could file a motion for reconsideration and the court would consider such motions along with KPERS' motion to dismiss the third-party claims.
None of the parties filed a motion for reconsideration. Instead, five days after the Kansas court entered the severance order, the RTC filed a notice of removal for the entire case--both the original and third-party claims. In response, KPERS asked the federal district court to remand the "original case" to the Kansas court because the RTC was no longer a party to that action. The district court held a hearing on KPERS' motion for remand, and asked KPERS' counsel about the motivation behind the severance and whether the defendants' counsel had been called before the ex parte proceeding occurred:
THE COURT: [T]here was time to call the clerk's office and make this arrangement, but there was not time to call any other lawyer and suggest, "Hey, you might want to get over here because we're going to present this to the judge."
MR. DEACY: That's so, as I understand it, Your Honor.
THE COURT: And there was an emergency.
MR. DEACY: It was an emergency.
THE COURT: What was the emergency?
MR. DEACY: The emergency was that so long as the cases were one case, the RTC could remove it all.
THE COURT: And they could--had that right under federal...
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