Phar-Mor, Inc. Securities Litigation, In re, PHAR-MO

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Citation172 F.3d 270
Docket NumberNo. 2,No. 98-3206,INC,PHAR-MO,2,98-3206
PartiesIn reSECURITIES LITIGATION. Ivan Bowen, II; Robert J. Carr; Vernon L. Carson; Merle T. Carson; Robert M. Chase; Stephen M. Ehrlichman; Robert J. Frisby; Ronald Goldberg; Cecile Guthman; Howard D. Hirsh Revocable Trust; Walter Jacobson; Diane Dybsky Jacobson; Robert A. Judelson; Edward L. Lembitz Profit Sharing Plan; Marc Levenstein; Angela Levenstein; Maurice Sporting Goods, Inc.; Protective Insurance Company; Robert A. Riesman, Jr.; Phillip E. Rollhaus, Jr.; Jeanette M. Shea Trust; Spiegel, Inc.; Supplemental Employee Retirement Plan For The Benefit of John J. Shea; Jack Shire; Helen Shire; Bernard M. Sussman Revocable Trust; Glen R. Traylor; Union League Boys & Girls Clubs; Richard E. Weiss; John B. Whitted, Jr.; Stein Roe Investment Trust; Olympus Private Placement Fund, L.P.; Vencap Holdings (1987) PTE Ltd.; Odyssey Partners, L.P.; Kemper Total Return Fund; Kemper Growth Fund; Kemper Small Capitalization Equity Fund; Kemper Investment Portfoliosgrowth Portfolio; Kemper Investment Portfoliostotal Return Portfolio; Kemper Investors Fundequity Portfolio; Kemper Investors Fundtotal Return Portfolio; Lumbermens Mutual Casualty Company; Kemper Financial Services, Inc.; New Economy Fund; Anchor Pathway Fund Growth Series; American Variable Insurance Series Growth Fund; Albert H. Bitzer, Jr. Revocable Trust; The Bowen Family Partnership; Kemper Retirement Fundseries I; Kemper Retirement Fundseries II; Select Equity Fund Of The Collective Trust Funds of the Northern Trust Company; Stein Roe Prime Equities; Andrew K. Block Trust; Growth Equity Fund-A of the Common Trust Funds of the Northern Trust Company; David A. Breskin; Burton B. Kaplan; Arthur Charles Neilsen, Jr.; Ralph M. Segall Trust; Mitchell Goldsmith; Allan C. Lichtenberg Trust; Eva F. Lichtenberg; James D. Winship; M S Block 1985 Family Trust; Pagtip, Appellants, v. Michael I. Monus; David S. Shapira; Patrick B. Finn; Jeffrey C. Walley; Stanley Cherelstein; A. Joel Arnold; Charity J. Imbrie; Irwin Porter; Gera
Decision Date30 March 1999

Arthur T. Susman, Robert E. Williams (argued), Susman & Watkins, Chicago, IL, for Appellants.

Bernard D. Marcus, John M. Burkoff (argued), Marcus & Shapira, LLP, Pittsburgh, PA, for Appellees.

Before: GREENBERG, ROTH, and LOURIE, * Circuit Judges

OPINION OF THE COURT

LOURIE, Circuit Judge.

Bowen et al. (collectively the "Bowen plaintiffs") appeal from a January 13, 1998 order of the United States District Court for the Western District of Pennsylvania granting a motion by Giant Eagle, Inc. for a declaration that Giant Eagle and Shapira et al. (collectively the "Giant Eagle defendants") had not violated a settlement agreement with the Bowen plaintiffs and for enforcement of that agreement. See In re Phar-Mor, Inc. Sec. Litig., Civ. Action No. 92-1938 (W.D.Pa. Jan. 13, 1998), mot. for recons. denied, (W.D.Pa. Mar. 3, 1998). Because the district court lacked subject matter jurisdiction to rule on the motion, we vacate and remand.

BACKGROUND

In the summer of 1992, Phar-Mor, Inc. announced that it would take a $350 million accounting charge to cover losses that had resulted from alleged fraud committed by certain Phar-Mor employees. See In Re Phar-Mor, Inc. Sec. Litig., Docket No. 959 (Judicial Panel on Multidistrict Litigation, Feb. 17, 1993) (transfer order). Phar-Mor filed for bankruptcy shortly thereafter, and a number of lawsuits were filed by dissatisfied investors. The dissatisfied investors at issue here, collectively known as the "Rule 144A purchasers," bought $110 million of Phar-Mor stock in a $112 million private placement offering in October of 1991. The Rule 144A purchasers, each of which filed its own complaint in the Phar-Mor multidistrict litigation, are actually four separate groups of plaintiffs: the T. Rowe Price plaintiffs, the MFS plaintiffs, the Bowen plaintiffs, and Allstate Insurance Company ("Allstate"). The Bowen plaintiffs, who had invested approximately $83 million in the private placement offering, filed a securities fraud action against numerous parties, including Phar-Mor and the Giant Eagle defendants, 1 in the Northern District of Illinois. Pursuant to a February 17, 1993 order by the Judicial Panel on Multidistrict Litigation, the case was transferred to the Western District of Pennsylvania under 28 U.S.C. § 1407 and consolidated with related cases. In 1995, the Rule 144A purchasers settled individually with the Giant Eagle defendants. 2 On August 4, 1995 Giant Eagle entered into a settlement agreement (the "Settlement Agreement") with the Bowen plaintiffs in which Giant Eagle agreed to pay the Bowen Plaintiffs 9.09/dollar invested, an amount which totaled greater than $7.5 million. The Settlement Agreement contained a "most favored nations" provision which stated that if the Giant Eagle defendants settled with any other Rule 144A purchaser on more favorable terms, i.e., greater than 9.09/dollar, Giant Eagle would pay the Bowen plaintiffs based on those more favorable terms. On August 4, 1995, the Pennsylvania AND NOW, this 4th day of August, 1995, upon the Motion of Plaintiffs Ivan Bowen, et al. (the "settling Plaintiffs") and Defendants David S. Shapira, Irwin W. Porter, Gerald E. Chait, Stanley Moravitz, Norman Wiezenbaum, Donald M. Robinson, Farrell Rubenstein and Jonathan Kagan (the "Director Defendants"), it is hereby ORDERED that (1) the settlement documented in the August 4, 1995 Settlement and Release executed on behalf of the Settling Plaintiffs in favor of the Director Defendants and others (the "Settlement") is hereby approved; (2) the Director Defendants, Charity Imbrie, Giant Eagle, Inc., Giant Eagle of Deleware, Inc., Corporate Partners, L.P., Corporate Offshore Partners, L.P., and Lazard Freres & Co. are hereby dismissed with prejudice from this lawsuit pursuant to the terms of the Settlement, each party to pay its own costs....

district court approved the Settlement Agreement and dismissed the action against the Giant Eagle defendants. The brief order by the district court read in relevant part:

In re Phar-Mor, Inc. Sec. Litig., Civ. Action No. 92-1938 (W.D.Pa. Aug. 4, 1995) (emphasis added).

Following the dismissal of the Bowen plaintiffs' action, Giant Eagle paid the Bowen plaintiffs the agreed 9.09/dollar. After the Giant Eagle defendants had settled with all of the other Rule 144A purchasers, the Bowen plaintiffs requested information concerning the settlement agreements to determine whether or not they should receive additional funds under the most favored nations clause of the Settlement Agreement. Alleging that the Giant Eagle defendants refused to provide sufficient information for them to determine whether the most favored nations clause had been violated and alleging breach of this clause, eighteen of the seventy original Bowen plaintiffs sued the Giant Eagle defendants in Illinois state court on September 26, 1997. This action was removed to the Northern District of Illinois where it is currently pending.

In response to the Illinois action, on October 6, 1997 Giant Eagle alone filed a motion in the Pennsylvania district court that had initially approved the Settlement Agreement. This motion (the "motion to enforce") sought a declaration that the Giant Eagle defendants had satisfied their obligations under the Settlement Agreement and requested that the district court "enforce" its dismissal order of August 4, 1995. The Bowen plaintiffs responded by arguing, inter alia, that the district court lacked subject matter jurisdiction to consider the motion. In a January 13, 1998 order, the district court granted Giant Eagle's motion, holding that the Giant Eagle defendants had not breached the most favored nations clause and by "enforcing" its dismissal order of August 4, 1995. See In re Phar-Mor, Inc. Sec. Litig., Civ. Action No. 92-1938 (W.D.Pa. Jan. 13, 1998). The court did not address the Bowen plaintiffs' arguments regarding subject matter jurisdiction. In a one-sentence March 3, 1998 order, the court denied the Bowen plaintiffs' motion for reconsideration. See In re Phar-Mor, Inc. Sec. Litig., Civ. Action No. 92-1938 (W.D.Pa. March 3, 1998). The Bowen plaintiffs appealed to this court. We have jurisdiction pursuant to 28 U.S.C. § 1291 (1994).

DISCUSSION

Whether the district court possessed subject matter jurisdiction is an issue of law which this court reviews de novo. Cf. Scelsa v. City Univ. of N.Y., 76 F.3d 37, 40 (2d Cir.1996); Hagestad v. Tragesser, 49 F.3d 1430, 1432 (9th Cir.1995).

The Bowen plaintiffs argue that the district court improperly exercised jurisdiction over Giant Eagle's motion to enforce under Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). The Bowen plaintiffs contend that under We agree with the Bowen plaintiffs that the district court lacked subject matter jurisdiction to rule on Giant Eagle's motion to enforce. In Kokkonen, the Supreme Court held that when a federal district court dismisses an action pursuant to a settlement agreement, that court lacks jurisdiction...

To continue reading

Request your trial
75 cases
  • E.O.H.C. v. Sec'y U.S. Dep't of Homeland Sec.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • February 13, 2020
    ...376–77, 114 S.Ct. 1673 ; Shaffer v. GTE N., Inc. , 284 F.3d 500, 501 (3d Cir. 2002) ; Bowen v. Monus (In re Phar-Mor, Inc. Sec. Litig. ), 172 F.3d 270, 272–73 (3d Cir. 1999). And the ones in which the United States was a party involved damages claims against the United States. In these case......
  • Pontarelli v. U.S. Dept. of the Treasury
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • March 29, 2002
    ...judgment in Pontarelli's favor. We consider de novo whether the District Court had subject matter jurisdiction. In re Phar-Mor, Inc. Sec. Litig., 172 F.3d 270, 273 (3d Cir.1999). III. Rice In Rice, a convicted felon applied to ATF for the restoration of his firearms privileges. After ATF in......
  • Umland v. Planco Financial Services, Inc.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • September 9, 2008
    ...the appropriate procedural rule. We have plenary review over district courts' jurisdictional determinations. In re Phar-Mor, Inc. Sec. Litig., 172 F.3d 270, 273 (3d Cir.1999). In her complaint, Umland alleged that PLANCO is a citizen of Pennsylvania and that she is a citizen of Washington S......
  • Smyth ex rel. Smyth v. Rivero, 00-2453.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • February 21, 2002
    ...agreement to serve as a basis of jurisdiction to enforce the agreement is "adhered [to] strictly...." In re Phar-Mor, Inc. Securities Litigation, 172 F.3d 270, 274 (3d Cir.1999). This rule is interpreted to require that the district court give a clear indication that it is incorporating the......
  • Request a trial to view additional results
1 firm's commentaries

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT