U.S. Financial Securities Litigation, In re
| Citation | 729 F.2d 628 |
| Decision Date | 29 March 1984 |
| Docket Number | Nos. 83-5813,83-5959,s. 83-5813 |
| Parties | Fed. Sec. L. Rep. P 91,479 In re U.S. FINANCIAL SECURITIES LITIGATION. SOCIETE GENERALE DE BANQUE, Rentinvest, North American Fund A and ITF Fund, Ltd., Plaintiffs-Appellants, v. TOUCHE ROSS & CO., Defendant-Appellee. SOCIETE GENERALE DE BANQUE, Rentinvest, North American Fund A and ITF Fund, Ltd., Plaintiffs-Appellants, v. BROWN, WOOD, FULLER, CALDWELL & IVEY and Brown, Wood, Ivey, Mitchell & Petty, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Edward C. Cerny, Lane & Mittendorf, New York City, for plaintiffs-appellants.
James W. Colbert, III, Los Angeles, Cal., for defendants-appellees.
Appeal from the United States District Court for the Southern District of California.
Before GOODWIN and TANG, Circuit Judges, and JAMESON, * District Judge.
Appellants challenge the district court's order requiring payment of part of a settlement fund to the defendants. Appellants contend that the district court incorrectly interpreted the settlement agreement's payback provision and should not have adopted the magistrate's recommendation that the defendants receive part of the fund. We affirm.
This case arises out of the settlement of three related class actions against U.S. Financial, now defunct, for securities fraud. The class consists of debenture holders who purchased the securities between April 8, 1970 and July 23, 1973.
Negotiations for settlement of the actions were ordered by the district court judge and referred to a magistrate in 1979. The primary problems in the negotiations involved determination of the size of the plaintiff class and the corresponding size of the settlement fund. The defendants expressed concern that the size of the settlement fund might provide a windfall to the filing plaintiffs in the event prospective plaintiffs with large claims failed to file. In addition, the defendants were concerned with the potential liability from future suits filed by claimants who did not join in the settlement class. During the negotiations, several proposals were advanced unsuccessfully in response to these concerns, including a reversion provision for unclaimed funds and an indemnification provision as protection against future suits filed by nonclass plaintiffs.
In May, 1980, plaintiffs proposed a payback provision for claims not filed by holders of $200,000 or more of the debentures. The size of the claims was to be gauged according to the size of claims filed by such holders in bankruptcy proceedings. Defendants obtained a list of $200,000 holders from Citibank, the indenture trustee of the debentures. After plaintiffs deleted one claimant on the list, whose claim was apparently The settlement agreement was entered on June 8, 1981, and the fund was set at $2.6 million. Paragraph 8 of the agreement became the payback provision. It provided for pro rata payment of the fund to plaintiffs
below $200,000, the list was incorporated into the resulting settlement agreement as Exhibit I.
provided, however, that in the event a claim is not timely asserted by, or in behalf of Debentures in which a beneficial interest is held by, any of the persons or organizations listed in Exhibit I hereto, or by any other person or organization which the Settling Defendants can establish is a member of the Class and is entitled as such to file a claim with regard to Debentures with a face amount of $200,000 or more, or in the event any such claim is asserted but is disallowed in its entirety by the Court for failure to include a Consent Form pursuant to Section 9(a) of this Agreement or for any other reason (other than a finding that such claim is not held by the claimant), the pro rata portion of the Settlement Fund that would have been paid to such person or organization if it had timely asserted a valid claim shall be paid directly to the Settling Defendants at the same time it would have been paid to such person or organization.
Six of the ten claimants listed on Exhibit I either filed no claims or filed claims below the amounts listed on the Exhibit I schedule. These claimants were Credit Suisse, Merrill Lynch, Sirak Baloyan, Union Bank of Switzerland, Finagest and Societe Generale de Banque.
As no distribution to claimants other than the named plaintiffs had occurred by August, 1982, the district court ordered the parties to appear and explain the delay. At that time, the dispute arose regarding the interpretation of Paragraph 8 and the matter was referred to the same magistrate who had participated in the settlement negotiations. He recommended to the District Court that payback be made to the defendants in the amount of unsubmitted claims according to Paragraph 8.
Plaintiffs moved to modify the magistrate's order regarding the defendants' entitlement to part of the settlement fund. On March 14, 1983, a hearing on the motion was held before the district court judge after which he confirmed the preliminary order adopting the magistrate's recommendation and ordered payback to the defendants. The plaintiffs appeal the order.
Initially, the appellants claim that the district court failed to provide factual findings with sufficient precision to meet the requirements of Fed.R.Civ.P. 52(a). They argue that this oversight leaves the appellate court with an inadequate basis to review the trial court and justifies vacating the order of the district court.
When a trial court's findings of fact do not support the judgment, the appellate court may vacate and remand for further findings. Richmond Elks Hall Assn. v. Richmond, 609 F.2d 383, 385 (9th Cir.1979). However, South-Western Publ. Co. v. Simons, 651 F.2d 653, 656 n. 2 (9th Cir.1981) (quoting Swanson v. Levy, 509 F.2d 859, 861 (9th Cir.1975)).
Here, the district court made it clear that it accepted the defendants' interpretation of Paragraph 8 of the settlement agreement based on affidavits, oral argument regarding extrinsic evidence, and the recommendation of the magistrate who had been involved in the settlement negotiations. The basis for the court's decision provides a sufficient understanding of the issues without a remand for further findings. In addition, the district judge's oral decision at the conclusion of the hearing held on March 14, 1983, clearly sets out the court's understanding of the settlement negotiations relevant to the adoption of Paragraph 8 as part of the settlement agreement.
We conclude that a remand pursuant to Rule 52(a) is unnecessary.
The primary issue on appeal is the appellants' contention that the district court incorrectly interpreted Paragraph 8 of the settlement agreement when it concluded that the defendants could participate in the distribution of the settlement fund.
First, the appellants argue that the language and intent of Paragraph 8 preclude the return to the defendants of any part of the settlement fund representing claims not filed by prospective plaintiffs but instead submitted in their behalf by other plaintiffs. Pointing to the language of Paragraph 8 stating that defendants cannot share in the fund if a claim is asserted by an Exhibit I holder or in behalf of an Exhibit I holder, the appellants argue that defendants cannot recover any portion of the Finagest or Merrill Lynch claims because parts of both claims were submitted in their behalf by other plaintiffs. The defendants counter by arguing that the appellants' interpretation defeats the purpose of Paragraph 8...
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