Osterneck v. E.T. Barwick Industries, Inc.
| Decision Date | 31 August 1987 |
| Docket Number | 85-8523 and 85-8593,Nos. 85-8165,s. 85-8165 |
| Citation | 825 F.2d 1521 |
| Court | U.S. Court of Appeals — Eleventh Circuit |
| Parties | Fed. Sec. L. Rep. P 93,403, 8 Fed.R.Serv.3d 840 Myles OSTERNECK, et al., Plaintiffs-Appellants, Cross-Appellees, v. E.T. BARWICK INDUSTRIES, INC., Defendant. E.T. Barwick, Defendant, M.E. Kellar, Defendant-Appellant, Cross-Appellee, Buford Talley, Defendant-Appellant, Cross- Appellee, Ernst & Whinney, Defendant-Appellee, Cross-Appellant. Myles OSTERNECK, et al., Plaintiffs-Appellees, v. E.T. BARWICK INDUSTRIES, INC., et al., Defendants, Ernest & Whinney, Defendant-Appellant, Myles OSTERNECK, et al., Plaintiffs-Appellees, Cross-Appellants, v. E.T. BARWICK INDUSTRIES, INC., Defendants Melvin E. Kellar and Buford A. Talley, Defendants-Appellants, Cross-Appellees, |
Harold T. Daniel, John G. Parker, Paul Webb, Jr., Atlanta, Ga., for Osterneck et al.
Susan Hoy, Atlanta, Ga., for Kellar.
R. Hal Meeks, Jr., Peter J. Anderson, S. Lawrence Polk, Atlanta, Ga., for Talley.
Richard M. Kirby, Atlanta, Ga., for Ernst & Whinney.
Appeals from the United States District Court for the Northern District of Georgia.
Before HATCHETT and ANDERSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.
Over seventeen years ago, in September 1969, Cavalier Bag Company, Inc. merged into E.T. Barwick Industries, a subsidiary of the Barwick Corporation. Various members of the Osterneck family, plaintiffs in this action, were, at that time, owners of Cavalier. Pursuant to the merger, the Osternecks exchanged their stock in Cavalier for Barwick Industries stock.
Sometime later the Osternecks became aware of allegedly fraudulent misrepresentations made to them in order to secure their approval of the merger. Specifically, they came to believe that Barwick Industries' financial statements for the two years preceding the merger misrepresented the company's financial condition. Consequently, on September 4, 1975, the Osternecks began this action alleging violations of Secs. 10(b) and 20 of the Securities Act of 1934 (15 U.S.C. Secs. 78j(b), 78t), Rule 10(b)(5) thereunder (17 C.F.R. Sec. 240.10b-5) and the common law of Georgia.
Besides Barwick Industries, the Osternecks named as defendants several other individuals and organizations. Of these only four remain parties to this appeal: E.T. Barwick, B.A. Talley, and M.E. Kellar who were directors and officers of Barwick Industries prior to or during the merger and Ernst & Whinney ("E & W"), the accountants responsible for preparing the allegedly fraudulent statements misrepresenting the financial condition of Barwick Industries. 1
Following almost ten years of discovery, this case finally went to trial in October, 1984. After three and a half months of testimony, the jury returned a verdict against defendants Barwick Industries, M.E. Kellar, and B.A. Talley in the amount of $2,632,234 as compensatory damages for violations of federal securities law and Georgia state common law. Judgment was entered in favor of E & W and E.T. Barwick, individually. Subsequently, the district court awarded the Osternecks prejudgment interest on their federal securities claim in the amount of $945,512.85. These consolidated appeals ensued.
Tangled procedural maneuvering has created three separate appellate cases. For clarity's sake we briefly characterize them here: Case No. 85-8165 involves the Osternecks' appeal from all judgments rendered against them and includes the cross-appeals of most of the defendants. Case No. 85-8593 involves only the appeal by Barwick Industries, E.T. Barwick, Talley and Kellar and the Osternecks' cross-appeal against those parties. Case No. 85-8523 is an appeal by E & W from the district court's denial of expert fees in E & W's bill of costs.
As an initial matter, we confront several difficult jurisdictional questions. These difficulties arise out of the complicated procedural maneuvering which occurred following the initial entry of judgment against defendants Barwick Industries, Kellar and Talley. This first judgment for over two and a half million dollars was entered on January 30, 1985. At that time the Osternecks moved orally for the award of prejudgment interest. On February 11, 1985, the Osternecks filed a written motion for prejudgment interest. During March 1985, the various parties filed notices of appeal and cross-appeal challenging the January 30, 1985 judgment, including the Osternecks' March 1, 1985 notice of appeal. 2 It was not, however, until July 1 that the district court entered an order ruling upon the Osternecks' February 11 motion and awarding the Osternecks over $945,000 in prejudgment interest. A separate judgment, captioned as an "amended judgment," was entered on July 9. Following this amended judgment various notices of appeal and cross-appeal were filed. The Osternecks' filed only a single notice of appeal on July 31, 1985, which was captioned as a cross-appeal against Kellar, Talley, E.T. Barwick and Barwick Industries. The notice did not designate E & W as a party to the appeal. 3
These cases raise two interrelated jurisdictional issues. First, we must examine the effect and validity of the Osternecks' March 1, 1985 notice of appeal, and the other appeals and cross-appeals filed by the defendants during March 1985. The parties agree that if these notices were effective they would be sufficient to raise all issues the Osternecks seek to litigate on appeal. However, defendants Talley, Kellar, and E & W contend that these notices were ineffective because they were filed while a Rule 59(e) motion was pending before the district court. If the Osternecks' March 1, 1985 notice of appeal, and the other appeals and crossappeals filed in March 1985 are deemed ineffective, we must next decide whether the Osternecks' second notice of appeal filed on July 31, 1985, effectively preserved all issues for appeal. 4 Defendants Talley, Kellar, and E & W argue that this second notice of appeal did not preserve all the issues which the Osternecks now seek to litigate. 5
It is settled law that a notice of appeal filed while a motion to alter or amend the judgment under Rule 59(e) is pending can have no effect. See Fed.R.App.P. 4(a)(4); 6 see also Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982); Robinson v. Tanner, 798 F.2d 1378, 1385 (11th Cir.1986). Thus, the jurisdictional question posed by this case is a clear one: should the Osternecks' February 11 motion for prejudgment interest be characterized as a motion, pursuant to Fed.R.Civ.P. 59(e), to alter or amend the district court's judgment. Because we conclude that this motion for discretionary prejudgment interest is properly characterized as a motion to alter or amend a final judgment of the district court, all notices filed in this case prior to the ruling on that motion, i.e., July 9, 1985, have no effect.
Our conclusion that a motion for prejudgment interest is a Rule 59(e) motion is influenced by several factors. First and foremost amongst these is the settled treatment of such motions by the other circuit courts of appeal. They have uniformly concluded that a motion for discretionary prejudgment interest must be filed pursuant to Rule 59(e). See Stern v. Shouldice, 706 F.2d 742, 746-47 (6th Cir.), cert. denied, 464 U.S. 993, 104 S.Ct. 487, 78 L.Ed.2d 683 (1983); Goodman v. Heublein, Inc., 682 F.2d 44, 45-47 (2d Cir.1982); Scola v. Boat Frances, R., Inc., 618 F.2d 147, 152-54 (1st Cir.1980).
This result may be easily explained. The discretionary award of prejudgment interest requires the district court to substantively reconsider its original judgment. This is precisely the sort of alteration or amendment contemplated by Rule 59(e). Such substantive modifications must be sought within ten days of the entry of judgment 7 and any decision rendered prior to disposition of the motion is not final for purposes of appeal. The rules of appellate procedure are designed to prevent precisely what has occurred in this case--the piecemeal appeal of nonfinal substantive judgments rendered by the district court. 8
The Osternecks argue, however, that their motion is not within the scope of Rule 59(e) because it addresses an issue collateral to the main cause of action. As support for this proposition, they cite White v. New Hampshire Dep't of Employment Security, 455 U.S. 445, 102 S.Ct. 1162, 71 L.Ed.2d 325 (1982), in which the Supreme Court held that a post-judgment motion for an award of attorney's fees under 42 U.S.C. Sec. 1988 was not governed by Rule 59(e).
Reliance upon White is misplaced. In White, the Court noted that an award of attorney's fees under Sec. 1988 is "uniquely separable" from the main cause of action and, " 'does not imply a change in the judgment.' " Id. at 452, 102 S.Ct. at 1166 (quoting Knighton v. Watkins, 616 F.2d 795, 797 (5th Cir.1980)). Our circuit has interpreted this to mean that Rule 59(e) applies only when a motion seeks reconsideration of substantive issues resolved in the judgment and not when a motion raises exclusively collateral questions regarding what is due because of the judgment. See Lucas v. Florida Power & Light Co., 729 F.2d 1300, 1301 (11th Cir.1984). Thus, we have even concluded that the issue of attorney's fees is not always collateral to the action. When the liability for the award arises from a substantive contractual obligation and is "an integral part of the merits of the case" and therefore " 'compensation for the injury giving rise to an action,' " a motion for the inclusion of attorney's fees is a Rule 59(e) motion and tolls the time period for appeal. C.I.T. Corp. v. Nelson, 743 F.2d 774, 775 (11th Cir.1984) (quoting White, 455 U.S. at 452, 102 S.Ct. at 1166-67); accord Beckwith Machinery Co. v. Travelers Indemnity Co., 815 F.2d 286 (3d Cir.1987). But see Exchange Nat'l Bank v. Daniels, 763 F.2d 286, 292-94 (7th Cir....
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