TBG, Inc. v. Bendis, s. 93-3130

• Decision Date: 19 September 1994
• Docket Number: Nos. 93-3130,s. 93-3130
• Citation: 36 F.3d 916
• Parties: , Fed. Sec. L. Rep. P 98,476, 30 Fed.R.Serv.3d 806 TBG, INC., Plaintiff, v. Richard A. BENDIS, W. Terrance Schreier, Defendants, and John G. Pappajohn, Robert H. Mann, Jr., Shook, Hardy & Bacon, Defendants-Appellees. ERNST & WHINNEY, Defendant-Appellant, v. Richard S. MASINTON, Continental Healthcare Systems, Inc., TBG Information Systems, Inc., Third-Party Defendants-Appellees, and Paul R. Billington, George A. Bridgmon, Third-Party Defendants. TBG, INC., Plaintiff, v. Richard A. BENDIS, Ernst & Whinney, Defendants, and W. Terrance Schreier, Defendant-Appellant. John G. PAPPAJOHN, Robert H. Mann, Jr., Shook, Hardy & Bacon, Defendants-Appellees, v. Richard S. MASINTON, Continental Healthcare Systems, Inc., TBG Information Systems, Inc., Third-Party Defendants-Appellees, and Paul R. Billington, George A. Bridgmon, Third-Party Defendants. TBG, INC., Plaintiff, v. Richard A. BENDIS, Defendant-Appellant, and John G. Pappajohn, Robert H. Mann, Jr., Shook, Hardy & Bacon, Defendants-Appellees. W. Terrance SCHREIER, Ernst & Whinney, Defendants, v. Richard S. MASINTON, Continental Healthcare Systems, Inc., TBG Information Systems, Inc., Third-Party Defendants-Appellees, and Paul R. Billington, George A. Bridgmon, Third-Party Defendants. to 93-3132 and 93-3173.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 916

36 F.3d 916

63 USLW 2212, Fed. Sec. L. Rep. P 98,476,

30 Fed.R.Serv.3d 806

TBG, INC., Plaintiff, v.Richard A. BENDIS, W. Terrance Schreier, Defendants, andJohn G. Pappajohn, Robert H. Mann, Jr., Shook, Hardy &

Bacon, Defendants-Appellees.

ERNST & WHINNEY, Defendant-Appellant, v.Richard S. MASINTON, Continental Healthcare Systems, Inc.,

TBG Information Systems, Inc., Third-Party

Defendants-Appellees,

and

Paul R. Billington, George A. Bridgmon, Third-Party Defendants.

TBG, INC., Plaintiff, v.Richard A. BENDIS, Ernst & Whinney, Defendants, andW. Terrance Schreier, Defendant-Appellant.

John G. PAPPAJOHN, Robert H. Mann, Jr., Shook, Hardy &

Bacon, Defendants-Appellees, v.Richard S. MASINTON, Continental Healthcare Systems, Inc.,

TBG Information Systems, Inc., Third-Party

Defendants-Appellees,

and

Paul R. Billington, George A. Bridgmon, Third-Party Defendants.

TBG, INC., Plaintiff, v.Richard A. BENDIS, Defendant-Appellant, andJohn G. Pappajohn, Robert H. Mann, Jr., Shook, Hardy &

Bacon, Defendants-Appellees.

W. Terrance SCHREIER, Ernst & Whinney, Defendants, v.Richard S. MASINTON, Continental Healthcare Systems, Inc.,

TBG Information Systems, Inc., Third-Party

Defendants-Appellees,

and

Paul R. Billington, George A. Bridgmon, Third-Party Defendants.

Nos. 93-3130 to 93-3132 and 93-3173.

United States Court of Appeals Tenth Circuit.

Sept. 19, 1994.

Michael G. Norris(Bruce Keplinger, with him on the briefs), Payne & Jones, Chartered, Overland Park, KS, for appellant Bendis.

Melanie T. Morris, Ernst & Young, Washington, DC (Kathryn A. Oberly, Ernst & Young, Washington, DC, with her on the briefs, for appellantErnst & Whinney; John R. Cleary, Husch & Eppenberger, Kansas City, MO, with her on the briefs, for appellant Schreier).

John H. Calvert, Lathrop & Norquist, Kansas City, MO (Daniel M. Dibble, with him on the briefs), for defendants-appellees Mann and Pappajohn.

Herbert E. Milstein(Lisa M. Mezzetti and Daniel S. Sommers, with him on the briefs), Cohen, Milstein, Hausfeld & Toll, Washington, DC, for appellee TBG.

John G. Koeltl, DeBevoise & Plimpton, New York City(Andrew C. Hartzell, Jr., Lorna G. Schofield and Daniel J. Goldstein, DeBevoise & Plimpton, New York City; John J. Jurcyk, Jr., McAnany, Van Cleave & Phillips, P.A., Kansas City, KS, with him on the briefs), for appelleeShook, Hardy & Bacon.

Before WHITE, Associate Justice (Ret.), ¹ANDERSON and BALDOCK, Circuit Judges.

STEPHEN H. ANDERSON, Circuit Judge.

The appellants, defendants who have not agreed to settle with TBG, Inc., challenge the district court's order approving TBG's settlements with three other defendants.We do not have jurisdiction to review the court's order approving TBG's settlement with Robert Mann and John Pappajohn, but we do review the order approving TBG's settlement with Shook, Hardy & Bacon ("Shook").We vacate that order because the court impermissibly barred the nonsettling defendants' contribution claims against the settling defendants, as well as independent claims by Bendis against Shook.

BACKGROUND

TBG acquired Continental Healthcare Systems, Inc. in 1986.In 1988, TBG sued Richard Bendis, the former president of Continental, Terrance Schreier, the former executive vice president, Robert Mann and John Pappajohn, former outside directors, Shook, Hardy & Bacon, Continental's outside counsel, and Ernst & Whinney, Continental's outside auditor.TBG claimed that these defendants had misrepresented Continental's financial status when TBG acquired it, and sought relief under sections 10(b)and20(a) of the Securities Exchange Act of 1934,15 U.S.C. Secs. 78j(b),78t(a), andRule 10b-5,17 C.F.R. Sec. 240.10b-5.

In January 1992, Mann and Pappajohn agreed to settle with TBG for $200,000 and the release of their claims for payment of their legal expenses.In September 1992, Shook also agreed to settle with TBG for a confidential sum.Bendis, Schreier, and Ernst & Whinney have not agreed to settle.

Both the Shook and the Mann and Pappajohn settlements were contingent on the district court entering an order barring all related claims against them by the nonsettling defendants and ordering that the judgment at trial be reduced by the settlement amounts.The district court approved these agreements in a memorandum opinion dated December 30, 1992.811 F.Supp. 596.On January 4, 1993, the court signed separate orders approving each settlement, making the required orders, and certifying each as final and appealable under Fed.R.Civ.P. 54(b).The court entered judgment on the Shook settlement on January 5, then entered the Mann and Pappajohn judgment on January 6.

On January 11, Bendis filed a motion to reconsiderthe court's "Memorandum and Order dated December 30, 1992, and its Order and Judgment dated January 4, 1993."Appellant's App.at 355.The court denied this motion on February 18.

The appellants did not receive a copy of the court's order denying the motion to reconsider, and did not learn of it until April 14.On April 15, they filed a joint motion for an extension of time to file notices of appeal.The next day the court gave the appellants fourteen days to appeal, and all three nonsettling defendants appealed both of the settlement approvals within that time.

On April 23, however, Mann and Pappajohn moved to reconsider the court's order extending the time for appeal of the order approving their settlement with TBG.On May 4, the court granted their motion because they had already completed their settlement in reliance on the passage of time for appeal.The court subsequently denied for lack of jurisdiction Bendis's motion for leave to amend his notice of appeal to include an appeal of the court's withdrawal of this extension.Besides appealing the original orders approving the settlements, Bendis also appeals the court's order rescinding the extension of time to appeal and the court's order denying leave to file an amended notice of appeal.The other appellants did not appeal the court's refusal to extend the time for appealing the approval of the Mann and Pappajohn settlement.

DISCUSSION

I.Jurisdiction

Bendis did not appeal the district court's approval of the Mann and Pappajohn settlement within the thirty days permitted by Fed.R.App.P. 4(a)(1).Therefore we do not have jurisdiction over his appeal unless the court validly extended the time for appeal.SeeOda v. Transcon Lines, 650 F.2d 231, 233(10th Cir.1981)(per curiam).Bendis argues on appeal that his notice of appeal was effective because the court abused its discretion when it withdrew the extension of time to appeal the approval of the Mann and Pappajohn settlement.SeeJones v. W.J. Servs., Inc.(In re Jones), 970 F.2d 36, 39(5th Cir.1992)(noting that appellate court must affirm district court's decision whether to extend time under Rule 4(a)(6) unless the court abused its discretion).

Because Bendis and the other nonsettling defendants did not receive notice of the court's judgment denying the motion to reconsider, Rule 4(a)(6) allowed the court to extend the time for them to appeal if doing so would not prejudice any party.The district court rescinded the extension of time to appeal because it would prejudice Mann and Pappajohn.We must accept this finding of prejudice because it is not clearly wrong.SeeIn re Marchiando, 13 F.3d 1111, 1114(7th Cir.1994)(treating prejudice under Rule 4(a)(6) as a factual finding).

Mann and Pappajohn had already completed their settlement with TBG before Bendis asked for an extension of time to appeal.They told the district court that they had made their settlement payment relying on the passage of time for anyone to appeal the court's approval of their settlement.Extending the time for appeal would prejudice Mann and Pappajohn if they did settle in reliance on the finality of the court's approval.SeeFed.R.App.P. 4 advisory committee's note to 1991amendment("Prejudice might arise, for example, if the appellee had taken some action in reliance on the expiration of the normal time period for filing a notice of appeal.").Even though they could get their settlement payment back if the settlement was reversed on appeal, they still would lose the settlement itself as well as some of their money's value.

Bendis argues that Mann and Pappajohn could not have relied on the passage of time for appeal because they actually completed their settlement before the time for appeal had passed.Bendis claims that his motion to reconsider extended the time for appeal to March 20, thirty days after the court denied the motion on February 18.Since Mann and Pappajohn completed their settlement on March 18, Bendis reasons, they could not have relied on the finality of the settlement approval.

However, Bendis's motion to reconsider did not extend the time for appealing the court's approval of the Mann and Pappajohn settlement.The court separately approved the two settlements in two different judgments, both of which it certified as final and appealable under Rule 54(b).As the district court later found, Bendis moved to reconsider only the approval of the Shook settlement.His motion only referred to a single "Order and Judgment dated January 4, 1993."Appellant's App.at 355.The motion itself indicates that this refers to the Shook order, not the Mann and Pappajohn order, because it specifically challenges the court's "Order barring Bendis from pursuing any potential state law negligence action against the defendant Shook, Hardy & Bacon."Id.The motion also referred to the court's December 30 memorandum, which discussed both settlements, but clearly did so only because that memorandum discussed the Shook settlement, not because Bendis intended to imply a challenge to both judgments of January 4.Furthermore, Bendis's supporting memorandum challenges only the Shook approval, and the district court's opinion rejecting the motion discusses only the Shook settlement.

Since Bendis moved to...