Berckeley Investment Group Ltd. v. Colkitt, 00-3433

• Citation: 259 F.3d 135
• Decision Date: 26 July 2001
• Docket Number: No. 00-3433,00-3433
• Parties: (3rd Cir. 2001) BERCKELEY INVESTMENT GROUP, LTD. v. DOUGLAS COLKITT; SHORELINE PACIFIC INSTITUTIONAL FINANCE, THE INSTITUTIONAL DIVISION OF FINANCE WEST GROUP; NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION DOUGLAS COLKITT, APPELLANT
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 135

259 F.3d 135 (3rd Cir. 2001)

BERCKELEY INVESTMENT GROUP, LTD. v. DOUGLAS COLKITT; SHORELINE PACIFIC INSTITUTIONAL FINANCE, THE INSTITUTIONAL DIVISION OF FINANCE WEST GROUP; NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION DOUGLAS COLKITT, APPELLANT

No. 00-3433

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued December 12, 2000

July 26, 2001

On Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. No. 97-CV-1242) District Judge: Honorable James F. McClure, Jr.

James P. Kimmel, Jr., Esq. (Argued) Peter Konolige, Esq. Marcy L. Colkitt & Associates 983 Old Eagle School Road The Woods, Suite 618 Wayne, PA 19087 Counsel for Appellant

Mitchell R. Katz, Esq. (Argued) Jay Starkman, Esq. Joel Magolnick, Esq. Moscowitz, Starkman & Magolnick Bank of America Tower, 37th Floor 100 Southeast 2nd Street Miami, FL 33131 Luis E. Delgado, Esq. Homer, Bonner & Delgado Bank of America Tower, Suite 3400 100 Southeast 2nd Street Miami, FL 33131 Counsel for Appellee Berckeley Investment Group, Ltd.

Michael J. Lawson, Esq. (Argued) Lisa M. Carvalho, Esq. Steefel, Levitt & Weiss, P.C. One Embarcadero Center, 30th Floor San Francisco, CA 94111 James J. Kutz, Esq. Duane, Morris & Heckscher 305 North Front Street P.O. Box 1003, 5th Floor Harrisburg, PA 17108-1003 Counsel for Appellee Shoreline Pacific Institutional Finance, The Institutional Division of the Financial West Group

Before: Scirica, Ambro, Circuit Judges, and Pollak, District Judge.^*

OPINION OF THE COURT

Ambro, Circuit Judge

Defendant-Appellant Douglas Colkitt appeals from the District Court's award of summary judgment in favor of the Plaintiff-Appellee Berckeley Investment Group, Ltd. ("Berckeley"), and the denial of his own cross-motion for summary judgment. Berckeley's claims against Colkitt are for breach of contract -- more particularly, Colkitt's refusal to convert debentures held by Berckeley into unregistered shares of National Medical Financial Services Corp. ("National Medical"), as required by the Offshore Convertible Securities Purchase Agreement (the "Agreement") the two entered into in 1996. Colkitt has interposed various defenses, including the allegation that Berckeley violated several registration provisions of the securities laws of the United States, thereby voiding his obligations to convert the debentures under the Agreement.

Berckeley's complaint makes additional claims against the broker of the transaction -- Shoreline Pacific Institutional Finance, the Institutional Division of the Financial West Group ("Shoreline") -- claiming breaches of contract and fiduciary duty. Shoreline, in turn, has made cross-claims against Colkitt for breach of contract and contractual indemnification. The claims by and against Shoreline remain unresolved.

While we recognize the benefits of the expeditious resolution of the parties' conflict, we nevertheless find that this Court, in the absence of the District Court's certification of its order as a partial final judgment pursuant to Federal Rule of Civil Procedure 54(b), does not have jurisdiction to entertain this appeal in light of the pending claims against Shoreline. We therefore refuse jurisdiction under 28 U.S.C. S 1291 and remand to the District Court for consideration of those factors relevant to such certification and, if it deems necessary, compliance with Rule 54(b).

I. FACTS AND PROCEDURAL HISTORY

On May 30, 1996, Colkitt and Berckeley entered into an Agreement by which Berckeley purchased forty convertible debentures issued by Colkitt at a price of $50,000 each, for a total of $2,000,000. The debentures had a term of one year and paid interest of 6%, due quarterly. The debentures further provided that Berckeley had the unilateral option to demand that Colkitt convert each debenture into unregistered shares of National Medical, a company led by Colkitt as the Chairman of its Board of Directors and which traded on the Nasdaq Stock Exchange. The number of shares converted depended on the price of National Medical stock and included a 17% discount from the market price. The discount was, in part, because the National Medical shares held by Colkitt for the transaction were not registered with the Securities and Exchange Commission, as would be required for sales of those shares within the United States by Section 5 of the Securities Act of 1933. 15 U.S.C. S 77(e). The Agreement between Colkitt and Berckeley was brokered by Shoreline and it was through Shoreline that the $2,000,000 eventually passed to Colkitt on May 31, 1996.

Berckeley made its first demands for conversion of the debentures in September 1996, after the expiration of a 100-day waiting period required by the Agreement. Colkitt initially refused to convert the debentures, but eventually acceded to the conversion of 18,320 shares, a small fraction of the requested share conversions, in November of 1996. No other shares were converted despite Berckeley's demands. Colkitt also refused to make interest payments on the debentures.

The battle of claims then began. Berckeley filed suit against Colkitt, National Medical and Shoreline in the United States District Court for the Middle District of Pennsylvania on August 13, 1997.¹ The complaint alleged breaches of contract by both Colkitt and National Medical and breaches of both fiduciary duty and contract by Shoreline. National Medical was eventually dismissed from the action and the claims against it are immaterial to this appeal. Colkitt filed his answer, affirmative defenses and counterclaims on October 17. Shoreline filed a cross-claim against Colkitt on December 10. The District Court dismissed all of Colkitt's counterclaims on April 1, 1998, but Colkitt reasserted those counterclaims not dismissed with prejudice in an amended counterclaim complaint, filed April 21, 1998. Berckeley filed an answer and affirmative defenses to Colkitt's claims on May 13, 1998 and presented the first of its motions for summary judgment in October of that year.

As discovery progressed, Colkitt filed another set of counterclaims and affirmative defenses, together with a motion for summary judgment, in April 1999. In response, Berckeley filed a second motion for summary judgment in July 1999.

On December 7, 1999, the District Court granted Berckeley's motion for summary judgment and denied Colkitt's, but left open the question of damages. In its December 7 Order, the Court noted that "the following claims/issues remain for trial: (1) the amount of Berckeley's claim for damages due to the breach of contract by Colkitt (Count I of the complaint); (2) Berckeley's claims against Shoreline Pacific for breach of contract and breach of fiduciary duty (Counts II and III of the complaint); and (3) Shoreline Pacific's cross-claims against Colkitt for breach of contract and contractual indemnity." Recognizing the pendency of these claims, the Court sought submissions from the parties about how to proceed with trial and expressly stated that the "entry of final judgment is deferred pending disposition of the remaining claims."

Colkitt's response to the District Court represented that he "will shortly file a motion under Rule 54(b) and/or 28 U.S.C. S 1292(b) to immediately appeal the Court's decision regarding the grant of summary judgment on the lack of scienter." Berckeley filed a response outlining its recommended procedure, including either dispositive motions or a trial on damages, the entry of final judgment and a one-year stay of the proceedings involving Shoreline. The stay was recommended to permit Berckeley the opportunity to collect its damages from Colkitt, thereby mitigating its claims against Shoreline and possibly limiting Shoreline's indemnification claims against Colkitt. In response to these submissions, the District Court entered its January 12, 2000 Order, which accepted Berckeley's proposed procedures. As to Colkitt's submission, the Court stated: "Colkitt indicates that he intends to file a motion for leave to take an interlocutory appeal. While we do not prejudge any such motion, we do not believe that the record reflects the need for an interlocutory appeal."

Following the receipt of motions for final judgment and a stay, the District Court entered its March 30, 2000 Order, awarding damages to Berckeley in the amount of $2,611,075.52. With respect to Colkitt's threatened interlocutory appeal, the Court stated the following: "Colkitt indicated that he intends to file a motion for leave to take an interlocutory appeal. No such motion was filed. Instead, Colkitt has filed a motion `for revision of and/or relief from' our orders of December 7, 1999 and January 12, 2000. The motion in effect is a motion for reconsideration." In fact, Colkitt's motion for reconsideration did cite Rule 54(b), but neither the text of the motion nor its supporting memorandum contained any discussion of Rule 54(b) or partial final judgment.

The Court denied the motion for reconsideration and granted a one-year stay of the proceedings involving Shoreline, the stated purpose of which was "to allow Berckeley to obtain a final judgment against Colkitt and begin collection efforts, which would reduce or eliminate Shoreline's potential liability to Berckeley." The Order went on to grant Berckeley's motion for "the entry of final judgment" and "directed" the clerk "to enter final judgment in favor of Berckeley and against Colkitt . . . ." The Court also directed the clerk "to close the file administratively during the period of the stay" and stated that"[i]f no motion to lift the stay is filed before it expires, the matter will be deemed resolved and the case shall be closed."

Colkitt filed a notice of appeal on April 25, 2000. His appeal was taken from "the Order and Final Judgment entered by the district court on March 30, 2000 and from the underlying orders of December 7, 1999 and January 12, 2000." In a surreal (though presumably strategic) change of course, Colkitt...