Oetting v. Sosne (In re BankAmerica Corp.), 100821 FED8, 19-3672

Docket Nº19-3672
Party NameIn re: BankAmerica Corporation v. David A. Sosne, Trustee, et al. Appellees David P. Oetting, Class Representative Plaintiff - Appellant
Judge PanelBefore LOKEN, KELLY, and ERICKSON, Circuit Judges.
Case DateOctober 08, 2021
CourtUnited States Courts of Appeals, United States Court of Appeals (8th Circuit)

In re: BankAmerica Corporation

David P. Oetting, Class Representative Plaintiff - Appellant


David A. Sosne, Trustee, et al. Appellees

No. 19-3672

United States Court of Appeals, Eighth Circuit

October 8, 2021

Submitted: June 16, 2021

Appeal from United States District Court for the Eastern District of Missouri - St. Louis

Before LOKEN, KELLY, and ERICKSON, Circuit Judges.


In 1999, shareholders of NationsBank and BankAmerica filed securities law class actions after the publicly held companies merged to form Bank of America Corporation. The cases were transferred to the Eastern District of Missouri and captioned In re BankAmerica Corp. Securities Litigation, No. 4:99-MD-1264. A global settlement was approved by the court in 2002. It included an award of approximately $58 million in fees to the attorneys appointed to represent the NationsBank Class. Almost two decades later, attorney David Oetting, one of the lead plaintiffs for the class, filed a motion to reconsider the fee award and to order disgorgement of some $38 million in fees previously paid to NationsBank Class Counsel based on their poor performance, mismanagement of the settlement fund, and abandonment of the class. The district court[1] denied Oetting's motion, concluding it was barred by the equitable doctrine of laches. Oetting appeals. The appellees are David Sosne, the Chapter 7 bankruptcy trustee for Green Jacobson, P.C., former Lead Counsel for the NationsBank Class, four law firms appointed by the district court in April 1999 to serve as co-lead counsel or executive committee members, and two individual former members of the Green Jacobson firm. We affirm.

I. Background

The long history of the class action settlement and settlement fund distribution are well documented in past opinions of the district court and this court. For recent opinions that provide additional procedural background for this appeal, see In re Green Jacobson, P.C., 911 F.3d 924, 926-929 (8th Cir. 2018); Oetting v. Norton, 795 F.3d 886, 887-89 (8th Cir. 2015); and In re BankAmerica Corp. Sec. Litig., 775 F.3d 1060, 1062 (8th Cir. 2015) ("The Cy Pres Order").

After three years of litigation followed by mediation on the eve of trial, class counsel and defendants proposed a $490 million "global settlement" that included $333 million for the NationsBank Class. The district court approved the settlement over the objection of two lead plaintiffs, Oetting and John Koehler, In re BankAmerica Corp. Sec. Litig., 227 F.Supp.2d 1103, 1108 (E.D. Mo. 2002), rejecting their contention the settlement inadequately compensated the NationsBank Class without their approval, In re BankAmerica Corp. Sec. Litig., 210 F.R.D. 694, 704-06 (E.D. Mo. 2002). Oetting and Koehler appealed. We affirmed, noting their "estimations of the settlement value of the case were so high as to be 'bordering on fantasy.'" In re BankAmerica Corp. Sec. Litig., 350 F.3d 747, 750 (8th Cir. 2003).

The district court appointed Green Jacobson administrator of the settlement fund. At Green Jacobson's urging, Heffler, Radetich & Saitta, LLP ("Heffler"), was appointed claims administrator. As part of the settlement approval process, the district court approved attorneys' fees to be paid to NationsBank Class Counsel out of the settlement fund. Counsel requested an award equal to 25% of the Class's net recovery, more than four times the fee that would be awarded under an alternative "lodestar" approach. The district court agreed that a "percentage-of-the-recovery" approach was equitable and appropriate but reduced the award to 18% of the net recovery to the NationsBank Class, approximately $58, 831, 000 plus interest. In re BankAmerica Corp. Sec. Litig., 228 F.Supp.2d 1061, 1066 (E.D. Mo. 2002). Oetting and Koehler did not object to this award. They sought fees for objecting to the settlement, which the district court denied because their efforts "enhanced neither the value of the settlement fund nor the adversarial process." Id. at 1067-68.

Oetting and Koehler did not appeal the fee award. Two years later Koehler, represented by Oetting, filed an action against class counsel in the Southern District of New York, alleging counsel breached their fiduciary duties in negotiating an inadequate settlement. Koehler sought relief that included compensatory and punitive damages and "disgorgement of attorney fees." Koehler v. Brody, 483 F.3d 590, 594-95 (8th Cir. 2007). The New York court transferred the case to the Eastern District of Missouri where it was assigned to Judge Nangle, presiding over the consolidated class action cases. The district court dismissed the action. Koehler v. Green, No. CV 405-367, 2006 WL 5605002 (E.D. Mo. Apr. 20, 2006). We affirmed: Koehler cannot renew his attacks on the quality of the representation or the settlement amount in this collateral action. Nor can he now attempt to divest the attorneys of their court awarded fees.

Koehler, 483 F.3d at 599.

The first distribution to the NationsBank Class from the settlement fund began in 2004. Oetting did not cash his check. In 2008, before a second distribution, it was discovered that an employee of Heffler helped defraud the settlement fund of some $5.8 million in what came to be called the "Penta fraud." In 2010, Green Jacobson filed a supplemental complaint against Heffler on behalf of the class; the district court concluded it would be more appropriate to file a separate action against Heffler. In re BankAmerica Corp. Sec. Litig., No. 4:99-MD-1264, 2010 WL 4622530, at *1 (E.D. Mo. Nov. 5, 2010). Oetting then filed a class action against Heffler, which was transferred to the Eastern District of Pennsylvania and later dismissed as time-barred. Oetting v. Heffler, Radetich & Saitta, LLP, No. 11-4757, 2017 WL 6450557, at *11 (E.D. Pa. Dec. 18, 2017).

The second distribution in 2009 left some $2.5 million remaining in the fund. In 2012, Green Jacobson moved to distribute the remaining amount cy pres and to terminate the case with an award of $98, 114.34 in supplemental attorneys' fees for work done after the first distribution. Oetting opposed the cy pres distribution and the award of supplemental fees, arguing Green Jacobson should disgorge $2.129 million in fees already paid, representing 18 percent of the fund's current balance plus the amount lost to the Penta fraud. The district court granted Green Jacobson's motion, rejecting Oetting's call for disgorgement. Oetting appealed. We reversed, concluding a cy pres distribution would be contrary to the interests of the NationsBank Class. We vacated the award of supplemental attorneys' fees as premature. The Cy Pres Order, 775 F.3d at 1063-68.

In 2013, Oetting, represented by his attorney in this case, Frank H. Tomlinson, filed a separate class action against Green Jacobson on behalf of the NationsBank Class alleging legal malpractice by negligently hiring and supervising Heffler, and breach of fiduciary duty by actions constituting abandonment of the class. The complaint sought damages for causing $5.87 million in fraud loss to the settlement fund and disgorgement of the entire $58 million in attorneys' fees awarded in 2002. The district court dismissed the complaint, concluding Oetting lacked standing to represent the Class because he did not cash his settlement check, and the disgorgement and abandonment claims were barred by the collateral estoppel effects of the court's cy pres order then pending on appeal. On appeal, we affirmed the dismissal for lack of jurisdiction because Oetting was not a member of the Class (he had not cashed his distribution check), and the Class could not assert these claims as an independent legal entity. Norton, 795 F.3d at 890-91.

After The Cy Pres Order in 2015, an unrelated malpractice judgment pushed Green Jacobson into Chapter 7 bankruptcy, and Sosne was appointed Trustee for the bankruptcy estate. The district court removed Green Jacobson as Lead Counsel for the NationsBank Class and, at Oetting's urging, appointed Tomlinson as Lead Counsel. Oetting filed a bankruptcy claim for approximately $10.5 million, including disgorgement of 18% of Green Jacobson attorneys' fees for the alleged losses caused by its negligent...

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