Becherer v. Merrill Lynch
| Decision Date | 17 June 1998 |
| Docket Number | No. 96-1673,INTERVENORS-APPELLANTS,CAN-AMERICAN,96-1673 |
| Parties | (6th Cir. 1999) RICHARD C. BECHERER, ET AL., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS, J. DON ADAMS; KAY A. ARCENEAUX, AS EXECUTRIX FOR THE DONALD J. ARCENEAUX, SR. ESTATE; EDWARD R. BASSINE; ANNE T. BASSINE; THOMAS H. BLUNDELL; JAN L. BLUNDELL; JAMES A. CAMPBELL; DARRELL R. CAUDILL; WILLIAM A. CHERRY; CATHERINE CREBBS, AS GENERAL PARTNER OF CCT & CO. AS ADMINISTRATRIX OF ESTATE OF ROBERT W. CREBBS; MICHAEL S. DWYER; DICK DYKES; L. JOE EDMONSON; FRANCIS C. ELKIN; RICHARD G. FADAL; LEE FEINBERG; MADELINE FEINBERG; ALAN S. FOGG; JEAN M. FOGG; MARY LOU FRAZIER; RUDOLPH M. GAEDKE, INDEPENDENT ADMINISTRATOR FOR THE ESTATE OF MARY GAEDKE; FRANCISCO M. GONZALEZ; TERRY W. GRENAT; EDITH A. GRENAT; MR. & MRS. HEM C. GUPTA; PAUL D. HANSEN; JUDITH A. HANSEN; KEITH HARVIE; BETTY LEE HARVIE; ROBERT HAWLEY; ROBIN DALE HAWLEY; CHARLES L. HENRITZY; GEORGIANN HENRITZY; CURTIS B. HERBERT, JR.; WELDON HIDDLESTON; DOROTHY M. HIDDLESTON; HURRELBRING ADVERTISING, INC.; BOBBY G. LAMB; HAZELTINE LAMB; D. ROD; ANN H. LEE; LAW OFFICES OF PAT MALONEY, P.C.; DAN E. MARTENS; SUSAN J. MARTENS; PHILLIP W. MCCOLLUM; MARJORIE K. MCCOLLUM; EARL MCGAVRAN; EDITH E. MCGAVRAN; ALICE S. MCTURK; KYRIAKOS MICHAELIDES; MARGARET MICHAELIDES; DONALD R. MITCHELL; FRED MORGAN; CHRISTINE MOTLER, AS EXECUTRIX FOR THE ESTATE OF JAY MOTLER; HAROLD MUELLER; CLAUDE NABERS; LEON NEIMAN; JUDITH A. NEIMAN; DANIEL N. PAYTON, III; JANE H. PAYTON; JEAN A. PITTS; GARY L. PLATNER; ALVIN L. PRICHARD, JR.; MARILYN M. DAVID, FORMERLY KNOWN AS MARILYN M. PRICHARD; SURAJ P. SANCHETI; LEE MARIA; LULA SANTA MARIA; MABEL SCHENK, AS EXECUTRIX FOR THE ESTATE OF SAMUEL SCHENK; ARCH H. SCHROM; SHIRLEY A. SCHROM; THOMAS Q. SCHULTZ; RUTH R. SCHULTZ; ROBERT STERN; ROXANNE STERN; GORDON G. STILLWELL; THERRAL STORY; KATHY STORY; WELLINGTON K. STRETTON; MARY ANN KOZLOWSKI; JOSHUA M. THARP, JR.; MARY SUE THARP; RONALT T. ULLENBERG; SHEILA ANN ULLENBERG; ROBERT J. WILDER; BUTZ S. WILDER; PAUL A. WILLIAMS; STEPHEN F |
| Court | U.S. Court of Appeals — Sixth Circuit |
Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 89-72502--John Feikens, District Judge.
Bruce E. Gerstein, Garwin, Bronzaft, Gerstein & Fisher, New York, NY; Elwood S. Simon, John P. Zuccarini, Elwood S. Simon & Associates, Birmingham, MI, for Plaintiff.
Monique K. Cirelli, Barris, Sott, Denn & Driker, Detroit, MI; Thomas R. Grady (argued and briefed), Grady & Associates, Naples, FL, for Intervenors-Appellants.
David C. Andrew, Baker, Donelson, Bearman & Caldwell, Memphis, TN; Sheldon
H. Klein (briefed), Butzel Long, Detroit, MI; Barbara L. McQuade, Office of the U.S. Attorney, Detroit, MI; Dennis K. Egan (argued and briefed), Egan & Mazzara, Detroit, MI, for Defendants-Appellees Merrill Lynch, Fenner & Smith, Inc. and Martin Cicco.
Jon B. Gandelot, Grosse Pointe Woods, MI; Steve W. Gaskins, Cosgrove, Flynn, Minneapolis, MN, for Defendants-Appellees Can-American Corp., Can-American Realty Corp., Garrett G. Carlson, Graham C. Count and Arni Thorsteinson.
Stephen F. Wasinger, Wasinger, Kickham & Kohls, Royal Oak, MI, for Defendant-Appellee Laventhol & Horwath.
Lawrence G. Campbell, Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, MI; Robert P. Hurlbert, Dickinson, Wright, Moon, Van Dusen & Freeman, Chicago, IL, for Defendant-Appellee M.A. Mortenson Co.
James R. Case, Kerr, Russell & Weber, Detroit, MI; Melissa M. Horne, Winograd, Shine, Providence, RI, for Defendant-Appellee Winsor/Faricy Architects, Inc.
Jonathan T. Walton, Jr., Laura S. Stafford, Detroit, MI, for Defendant-Appellee Trustbank Mortgage Center, Inc.
Frank W. Brochert, Plunkett & Cooney, Detroit, MI; Lawrence G. Campbell, Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, MI, Timothy D. Wittlinger, Clark Hill, Detroit, MI, for Defendant-Appellee Midwest Title Guarantee Co. of Florida.
Sheldon H. Klein (briefed), Detroit, MI; Barbara L. McQuade, Office of the U.S. Attorney, Detroit, MI; Dennis K. Egan (argued and briefed), Egan & Mazzara, Detroit, MI, for Defendant-Appellee Frank Lavin.
Before: Martin, Chief Judge; Merritt, Kennedy, Nelson, Ryan, Boggs, Norris, Surheinrich, Siler, Batchelder, Daughtrey, Moore, Cole, Clay, and Gilman, Circuit Judges.
MOORE, J. (pp. 27-41), delivered a separate opinion Concurring in the judgment, in which DAUGHTREY, J., joined. KENNEDY, J. (pp. 42-53), delivered a separate Dissenting opinion in which MARTIN, C. J., and BOGGS, J., joined, with MARTIN, C. J., (pp. 54-58), also delivering a separate Dissenting opinion.
We granted en banc review in this case to decide whether the district court erred in holding that the doctrine of res judicata binds the intervenors-appellants, hereinafter the "Florida plaintiffs," to the district court's judgment on certain non-class claims in litigation filed by the above-named plaintiffs, hereinafter the "Becherer plaintiffs," thereby precluding the Florida plaintiffs from prosecuting an action against the defendants in this case in Florida state court. We hold that the Florida plaintiffs are bound by the district court's judgment only to the extent they were included in the Fed. R. Civ. P. 23(b)(3) class certified in the original action in March 1991, and then only to the extent of the issues that were adjudicated as to that certified class.
The Becherer plaintiffs and the Florida plaintiffs are investors in a Florida condominium/hotel development. The Becherer plaintiffs filed suit in August 1989 in the United States District Court for the Eastern District of Michigan alleging fraud, securities violations, breach of contract, and other claims against the hotel's developers, the securities broker, the escrow agent, and the financial institution involved in the financing of the project. See Becherer v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 799 F. Supp 755, 762 (E.D. Mich. 1992) ("Becherer I"). The Becherer plaintiffs requested class certification under Fed. R. Civ. P. 23(b)(3) in November 1989. The Florida plaintiffs were originally putative class members in the Becherer suit.
In March 1991, the district court certified a class consisting of both the Becherer plaintiffs and the Florida plaintiffs, but only as to two contract claims against the developer/construction company defendants, Shelter Seagate Corporation and its affiliates, or SSG. See Becherer I, 799 F. Supp. at 761-62, 784. The class prevailed in this action: The district court granted summary judgment in the class's favor and awarded $6.7 million in damages on one of the contract claims in May 1991. See id. at 761, 785. As to the other contract claim, after a bench trial, the district court found a breach by the relevant defendants, but no damages resulting therefrom. See id. at 767.
In February 1992, the district court certified another class, once again consisting of both groups of plaintiffs, for the purpose of ratifying a proposed settlement of all remaining claims of the investors against the remaining defendants. Becherer v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 809 F. Supp. 1259, 1263 (E.D. Mich. 1992) ("Becherer II"). Because this class was also certified under Fed. R. Civ. P. 23(b)(3), the court gave all putative class members until April 3, 1992, to object to the proposed settlement. See id. at 1278. On April 3, 1992, 44 plaintiffs, including many of the Florida plaintiffs, did object. Additionally, the law firm representing these objectors reserved the right to add to the list of plaintiffs who were objecting, as the court had extended the time for doing so until April 14. Under the terms of the proposed settlement, the number of investors electing to opt out "was sufficient to scuttle the agreement" and vitiate the class certification. Id. at 1264. Significantly, all of the Florida plaintiffs either opted out of the proposed settlement class, or reserved their right to object to the proposed settlement.
The Florida plaintiffs then filed fraud claims in a Florida state court practically identical to those filed in the federal district court by the Becherer plaintiffs; and it is this filing that gives rise to the issue before us today. None of the named Becherer plaintiffs participated in the Florida case.
In August 1992, after the collapse of the proposed settlement and settlement class, and after the filing in the state court by the Florida plaintiffs, the district court dismissed on summary judgment all of the Becherer plaintiffs' remaining claims against the other defendants. See id.; Becherer I, 799 F. Supp. at 767-75. Subsequently, the district court in Michigan enjoined the Florida plaintiffs from pursuing their claims in the Florida state court, pursuant to the relitigation exception found in the Anti-Injunction Act, 28 U.S.C. § 2283. See Becherer II, 809 F. Supp. at 1269, 1271, 1276. The district court held that because both groups' interests were identical and they had a "sufficiently close" relationship, the Florida plaintiffs were bound, under the principles of res judicata and collateral estoppel, by the summary judgment against the Becherer plaintiffs. Id. at 1267-68.
On appeal, we reversed in part, holding, in an opinion by Judge Cornelia Kennedy, that the theory of claim preclusion relied on by the district court was "impermissibly broad."...
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