In the Matter of Navigant Consulting Inc.

• Decision Date: 26 December 2001
• Docket Number: No. 01-2311,01-2311
• Citation: 275 F.3d 616
• Parties: (7th Cir. 2001) In the Matter of: Navigant Consulting, Inc., Securities Litigation. Appeal of Charles L. Grimes and Gordon W. Chaplin, as Trustees under the Will of Louise C. Chaplin, et al
• Court: U.S. Court of Appeals — Seventh Circuit

Page 616

275 F.3d 616 (7th Cir. 2001)

In the Matter of: Navigant Consulting, Inc., Securities Litigation.

Appeal of Charles L. Grimes and Gordon W. Chaplin, as Trustees under the Will of Louise C. Chaplin, et al.

No. 01-2311

In the United States Court of Appeals For the Seventh Circuit

Argued December 6, 2001

Decided December 26, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 7617--Ruben Castillo, Judge.

Fay Clayton (argued), Robinson, Curley & Clayton, Chicago, IL, Daniel L. Berger, Bernstein, Litowitz, Berger & Grossmann, New York City, for Peter C. Stearns.

David F. Graham, Rhonda Rene Pengra, Sidley Austin Brown & Wood, Chicago, IL, for Navigant Consulting Inc.

David A. Jenkins (argued), Smith, Katenstein & Furlow, Wilminton, DE, B. Franco Laterza, Laterza & Lofgren, Chicago, IL, for Charles L. Grimes and Gordon Chaplin.

Before Cudahy, Easterbrook, and Evans, Circuit Judges.

Easterbrook, Circuit Judge.

Only parties may appeal from judgments entered in federal litigation. See Fed. R. App. P. 3; Marino v. Ortiz, 484 U.S. 301 (1988). Because members of a class (other than the named representatives) are not automatically parties, they must intervene and acquire party status if they wish to appeal. See Felzen v. Andreas, 134 F.3d 873 (7th Cir. 1998), affirmed by an equally divided Court under the name California Public Employees' Retirement System v. Felzen, 525 U.S. 315 (1999). In this case class members who objected to approval of the settlement in a class action ignored that rule and attempted to appeal without becoming parties. After receiving a notice from our staff that there appeared to be a jurisdictional problem, the objectors returned to the district court with a motion to intervene. That motion was denied as untimely, precipitating this appeal from the denial of the motion to intervene--with a conditional appeal from the order approving the settlement. See In re Synthroid Marketing Litigation, 264 F.3d 712, 715-16 (7th Cir. 2001).

Intervention is possible only on "timely application". Fed. R. Civ. P. 24(a), (b). Like the district court, we find it hard to see how a post-judgment motion could be timely. "Hard" differs from "impossible"; United Airlines, Inc. v. McDonald, 432 U.S. 385 (1977), holds that class members are entitled to intervene even after judgment, in order to pursue an appeal, if they do not learn until after judgment of the circumstance (the representative's abandonment of the class) that calls for intervention. Everything depends on the gap between the need for action and the taking of action. Thus, we held in Crawford v. Equifax Payment Services, Inc., 201 F.3d 877, 880 (7th Cir. 2000), that "delay must be measured from the time the would-be intervenors learned (or should have known) of the representative's shortcomings." Crawford added, as did Synthroid, that intervention should be freely allowed, if limited to the purpose of taking an appeal. But this attitude cannot abolish the requirement in Rule 24 that intervention be timely.

The objectors' appellate brief in this case gives no reason for their delay in moving to intervene. Pressed at oral argument, counsel supplied one: His ignorance of Felzen and its predecessors. This may be the explanation but is not a justification. Many deadlines confront counsel, from the statute of limitations to the 30-day period for taking an appeal, and failure to inform oneself of the procedural requirements is no excuse for ignoring them. Although the district judge might have deemed the explanation sufficient, cf. Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380 (1993), the judge was not required to do this, and deferential appellate review of this discretionary decision can have only one outcome.

Indeed, these objectors probably should have intervened before the settlement was negotiated. The class representatives in these 21 consolidated actions alleged that Navigant Consulting violated the federal securities laws by making false statements, injuring investors in aftermarket trading. Like other actions of this sort, identifying injured traders required specifying the date when the price first was affected by the deceit and the date when the truth reached the market and the price adjusted to that news. The asserted fraud in this case was the use of pooling to account for four of Navigant's acquisitions, although generally accepted accounting principles prohibited the use of that method under the circumstances. (Pooling has since been abolished by the accounting profession for all transactions after June 29, 2001. See Financial Accounting Standards Board, Statements 141 and 142.) Navigant first released earnings using pooling early in 1999, and before the opening of the markets on November 22 of that year it announced that its accountants had questioned this treatment, that earnings might have to be restated, and that its senior officers had resigned or been discharged. The price of Navigant's stock dropped 45% (from $26.00 to $14.25 per share) that day. The class representatives sought recovery for investors who bought stock during 1999 before this disclosure and the precipitous decline. The objectors believe, however, that purchasers through January 24, 2000, when Navigant released its restated earnings, should be included in the class--even though the market rose when the restated earnings were announced. (The announcement on November 22 did not reveal the extent of the loss, and traders may well have assumed that if there were any good news this would have been stated. See Sanford J. Grossman, The Informational Role of Warranties and Private Disclosure About Product Quality, 24 J. L. & Econ. 461 (1981); Paul Milgrom & John Roberts, Relying on the Information of Interested Parties, 17 Rand J. Econ. 18 (1986). Not until January 2000 was the loss quantified, and because the worst had not come to pass the price rose.)

By August 2000 the objectors knew that the damages period proposed by the class representatives would close in November 1999,...