Primavera Familienstifung v. Askin

Decision Date07 May 2001
Docket NumberNo. 97 CIV 1856 RWS.,No. 97 CIV 4335 RWS.,No. 95 CIV 8905 RWS.,No. 98 CIV 7494 RWS.,No. 98 CIV 6178.,No. 96 CIV 7874 RWS.,No. 96 CIV 2978 RWS.,95 CIV 8905 RWS.,97 CIV 1856 RWS.,98 CIV 7494 RWS.,96 CIV 2978 RWS.,97 CIV 4335 RWS.,96 CIV 7874 RWS.,98 CIV 6178.
Citation139 F.Supp.2d 567
PartiesPRIMAVERA FAMILIENSTIFUNG, Plaintiffs, v. David J. ASKIN, et al., Defendants. ABF Capital Management, et al., Plaintiffs, v. Askin Capital Management, L.P., et al., Defendants. Granite Partners, L.P., et al., Plaintiffs, v. Donaldson, Lufkin & Jenrette Securities Corporation, et al., Defendants. Montpellier Resources Limited, et al., Plaintiffs, v. Askin Capital Management, L.P., et al., Defendants. Richard Johnston, as Trustee for The Demeter Trust, et al., Plaintiffs, v. Askin Capital Management, L.P., et al., Defendants. Bambou Inc., et al., Plaintiffs, v. David J. Askin, et al., Defendants. AIG Managed Market Neutral Fund, et al., Plaintiffs, v. Askin Capital Management, L.P., et al., Defendants.
CourtU.S. District Court — Southern District of New York

Morgan, Lewis & Bockius by Catherine A. Ludden, New York City, for Donaldson, Lufkin & Jenrette Securities Corp.

Brown & Wood by A. Robert Pietrzak, Andrew W. Stern, Madeleine J. Dowling, Jonathan J. Brennan, Kimberly A. Johns, New York City, for Merrill Lynch, Pierce, Fenner & Smith Inc.

Gold Bennett Cera & Sidener by Solomon B. Cera, San Francisco, CA, Bernstein Litowitz Berger & Grossmann by Jeffrey A. Klafter, New York City, for Primavera Familienstiftung, Bambou, Inc., Loukoum Inc., Samta Investment Inc., and Hubert Looser.

Swidler Berlin Shereff Friedman by David S. Hoffner, New York City, for Askin Capital Management, L.P.

OPINION

SWEET, District Judge.

Defendant Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") has moved for an order certifying an interlocutory appeal to the Second Circuit in six related securities fraud actions entitled Primavera Familienstiftung v. Askin, No. 95 Div. 8905 (the "Primavera Action"), ABF Capital Mgmt. v. Askin Capital Mgmt., No. 96 Civ. 2978 (the "ABF Action"), Montpellier Resources Ltd. v. Askin Capital Mgmt., No. 97 Civ. 1856 (the "Montpellier Action"), Johnston v. Askin Capital Mgmt., 97 Civ. 4335 (the "Johnston Action"), Bambou Inc. v. Askin, No. 98 Civ. 6178 (the "Bambou Action"), and AIG Managed Market Neutral Fund v. Askin Capital Mgmt., No. 98 Civ. 7497 (the "AIG Action"), pursuant to 28 U.S.C. § 1292(b).1 For the reasons set forth below, the motion is denied.

The Parties

The parties to the ABF, Primavera, Montpellier, and AIG Actions are set forth in ABF Capital Mgmt. v. Askin Capital Mgmt., L.P., 957 F.Supp. 1308 (S.D.N.Y. 1997) ("ABF I"), Primavera Familienstiftung v. Askin, 178 F.R.D. 405 (S.D.N.Y. 1998), and AIG Managed Market Neutral Fund v. Askin Capital Mgmt., L.P., 197 F.R.D. 104 (S.D.N.Y.2000). The parties to the Johnston and Bambou Actions, while not separately set forth in this Court's previous opinions, were, like the plaintiffs in the other actions, shareholders and/or limited partners in the same hedge funds, as described in Primavera Familienstifung v. Askin, 130 F.Supp.2d 450 (S.D.N.Y.2001). Familiarity with these previous opinions is presumed.

Background

In an opinion dated February 5, 2001 (the "Summary Judgment Opinion"), this Court denied in part and granted in part several summary judgment motions in the instant actions, as well as in a seventh related action entitled Granite Partners, L.P. v. Bear Stearns & Co., Inc., No. 96 Civ. 7874 (the "Funds Action"). See Primavera, 130 F.Supp.2d 450.

On February 22, 2001, Kidder filed the instant motion, and on March 1, 2001, DLJ joined in that motion. The plaintiffs in the ABF Action (the "ABF Plaintiffs") opposed the motion, and subsequently the plaintiffs in the other five actions joined that opposition. The matter was marked fully submitted on March 21, 2001.

Discussion
I. The Standard For Certification Under § 1292(b)

Section 1292(b) provides that a district court may certify an interlocutory order for appeal if it is of the opinion that (1) the order "involves a controlling question of law"; (2) "as to which there is substantial ground for difference of opinion," and (3) an immediate appeal "may materially advance the ultimate termination of the litigation". 28 U.S.C. § 1292(b). In considering a request for certification, the district court must carefully assess whether each of the three conditions for certification is met. See German v. Federal Home Loan Mortgage Corp., 896 F.Supp. 1385, 1398 (S.D.N.Y. 1995); see also Gottesman v. General Motors Corp., 268 F.2d 194, 196 (2d Cir.1959) (certification to be "strictly limited to the precise conditions stated in the law"). The determination of whether Section 1292(b) certification is appropriate under the above standards is in the discretion of the district court. See Ferraro v. Secretary of U.S. Dept. of Health & Human Servs., 780 F.Supp. 978, 979 (E.D.N.Y.1992); 16 Charles A. Wright et al., Federal Practice and Procedure § 3929 (1977 & Supp.1996).

Interlocutory appeals under Section 1292(b) are an exception to the general policy against piecemeal appellate review embodied in the final judgment rule. Since the statute was enacted in 1958, the Second Circuit has repeatedly emphasized that a district court is to "exercise great care in making a § 1292(b) certification." Westwood Pharmaceuticals, Inc. v. National Fuel Gas Dist. Corp., 964 F.2d 85, 89 (2d Cir.1992); see also Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21, 25 (2d Cir.1990). Certification is only warranted in "exceptional cases," where early appellate review "might avoid protracted and expensive litigation." Telectronics Proprietary, Ltd. v. Medtronic, Inc., 690 F.Supp. 170, 172 (S.D.N.Y.1987); see also German, 896 F.Supp. at 1398. Section 1292(b) was not intended "to open the floodgates to a vast number of appeals from interlocutory orders in ordinary litigation" Telectronics, 690 F.Supp. at 172, or to be a "vehicle to provide early review of difficult rulings in hard cases." German, 896 F.Supp. at 1398; see also Abortion Rights Mobilization, Inc. v. Regan, 552 F.Supp. 364, 366 (S.D.N.Y.1982); McCann v. Communications Design Corp., 775 F.Supp. 1506, 1534 (D.Conn.1991).

The institutional efficiency of the federal court system is among the chief concerns underlying Section 1292(b). See Forsyth v. Kleindienst, 599 F.2d 1203 (3d Cir.1979). The efficiency of both the district court and the appellate court are to be considered, and the benefit to the district court of avoiding unnecessary trial must be weighed against the inefficiency of having the Court of Appeals hear multiple appeals in the same case. See Harriscom Svenska AB v. Harris Corp., 947 F.2d 627, 631 (2d Cir.1991); see generally 16 Charles A. Wright et al., 16 Federal Practice and Procedure § 3930 (2d ed.1996).

In determining whether a controlling question of law exists the district court should consider whether: reversal of the district court's opinion could result in dismissal of the action; reversal of the district court's opinion, even though not resulting in dismissal, could significantly affect the conduct of the action; or, the certified issue has precedential value for a large number of cases. See Klinghoffer, 921 F.2d at 24-25; In re Oxford Health Plans, Inc., 182 F.R.D. 51, 54-55 (S.D.N.Y. 1998).

Immediate appeal may be considered to advance the ultimate termination of the litigation if "`appeal promises to advance the time for trial or to shorten the time required for trial.'" In re Oxford, 182 F.R.D. at 53 (quoting 16 Charles A. Wright & Arthur Miller, Federal Practice and Procedure § 3930 at 432 (2d ed.1996)). However, the advancement must be "material[]," 28 U.S.C. § 1292(b); see In re Duplan, 591 F.2d at 148 n. 11 ("`The critical requirement is that [an interlocutory appeal] have the potential for substantially accelerating the disposition of the litigation.'") (quoting 9 James Wm. Moore et al., Moore's Federal Practice, ¶ 110.22[2] at 260 (1975)).

Although technically the question of whether there is a controlling issue of law is distinct from the question of whether certification would materially advance the ultimate termination of the litigation, in practice the two questions are closely connected. See The Duplan Corp. v. Slaner, 591 F.2d 139, 148 n. 11 (2d Cir.1978); Public Interest Research Group of New Jersey, Inc. v. Hercules, Inc., 830 F.Supp. 1549, 1557 (D.N.J.1993); 16 Charles A Wright et al., Federal Practice and Procedure § 3930 (2d ed.1996).

II. Certification Is Not Appropriate
A. The Matters As To Which Certification Is Sought

DLJ seeks certification to the Second Circuit Court of Appeals of two questions: (1) "whether New York law recognizes a non-derivative claim by equity security holders based on so-called fraudulent maintenance"; and (2) "whether such a tort, if it does exist, should extend to cover more attenuated aiding and abetting liability."

As a preliminary matter, it is noted that although certification is sought as to two questions of New York law, § 1292(b) authorizes the certification of orders, not questions. Isra Fruit Ltd. v. Agrexco Agricultural Export Co. Ltd., 804 F.2d 24, 25 (2d Cir.1986). If a district court certifies an order for interlocutory appeal, and if the circuit court accepts certification, see id. at 26 (declining to take interlocutory appeal of order certified by district court), then the circuit court may certify questions of state law to the New York Court of Appeals, see, e.g., Liriano v. Hobart Corp., 132 F.3d 124, 132-33 (2d Cir.1998) (formulating and certifying question of New York law...

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