Teague v. Bakker, CIV. 3:87CV514.

• Decision Date: 16 July 2002
• Docket Number: No. CIV. 3:87CV514.,CIV. 3:87CV514.
• Citation: 213 F.Supp.2d 571
• Court: U.S. District Court — Western District of North Carolina
• Parties: Joseph W. and Helen B. TEAGUE, et al., Plaintiffs, v. Jim BAKKER, et al., Defendants.

213 F.Supp.2d 571

Joseph W. and Helen B. TEAGUE, et al., Plaintiffs, v. Jim BAKKER, et al., Defendants.

No. CIV. 3:87CV514.

United States District Court, W.D. North Carolina, Charlotte Division.

July 16, 2002.

Jonathan Wallas, C. Margaret Errington, Ferguson, Stein, Wallas, Gresham & Sumter, P.A., Charlotte, NC, Fred H. Moody, Jr., McKeever, Edwards, Davis & Hays, P.A., Bryson City, NC, Wendell R. Bird, Law Offices of Wendell R. Bird, Atlanta, GA, Samuel F. Trussell, Thomas T. Anderson, Thomas T. Anderson & Associates, Indio, CA, Paul L. Whitfield, Charlotte, NC, William J. Chandler, Charlotte, NC, for plaintiffs.

James H. Toms, James H. Toms & Associates, P.A., Hendersonville, NC, Lamar Gudger, Gudger & Gudger, Asheville, NC, Nelson M. Casstevens, Jr., Casstevens, Hanner, Gunter & Gordon, P.A., Charlotte, NC, Melvin Belli, Belli, Belli, Brown, Monzione, Fabbro & Zakaria, San Francisco, CA, W. Ryan Hovis, Rock Hill, SC, Michael E. Quiat, Uscher, Quiat & Usher, Hackensack, NJ, Ben Cotten, Cotten Day & Selfon, Washington, DC, Angela S. Cerini, Uscher Quiat & Uscher, Paramus, NJ, James T. Williams, Jr., Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, Greensboro, NC, Van C. Stone, Wichita, KS, James E. Walker, Kennedy, Covington, Lobdell & Hickman, Charlotte, NC, Griffin B. Bell, King & Spalding, Atlanta, GA, for defendants.

MEMORANDUM AND ORDER

THORNBURG, District Judge.

THIS MATTER came before the Court on the motion of class counsel, filed December 20, 2001, for an additional award of costs, pre-judgment interest, post-judgment interest and attorneys' fees. By Orders entered on January 9, 2002, February 25, 2002, and March 18, 2002, the under-signed sought further clarification of the requests. In addition, a hearing was conducted on May 1, 2002. For reasons stated herein, the motion is denied.

I. PROCEDURAL HISTORY

In 1987, the law firms of Bird & Associates and Thomas T. Anderson & Associates brought this class action on behalf of "approximately 160,000 individuals who purchased `Lifetime Partnerships' from an entity known as `PTL' entitling them to a short stay annually in a hotel at a vacation retreat constructed by PTL." Teague v. Bakker, 35 F.3d 978, 981 (4th Cir.1994). As is now well known, instead of actually building the retreats, "Bakker used partnership funds to pay operating expenses of the PTL and to support a lavish lifestyle." Id., at 982. Ultimately, the entire PTL "empire" collapsed. In the class action, Plaintiffs asserted claims of federal and state Racketeer Influenced and Corrupt Organizations (RICO) violations, common law fraud, South Carolina Time Share Act (SCTSA) violations, and gross negligence.

Before trial, Defendants Roe Messner, Messner Enterprises, Commercial Builders of Kansas, Inc., and William J. Spears were dismissed from the case. In the fall of 1990, United States District Court Judge James B. McMillan presided at an eight week trial against Defendants James Bakker, David Taggart, Aimee Cortese, and two accounting firms, Deloitte, Haskins & Sells (DH & S) and Laventhol &amp Horwath. On November 21, 1990, after almost one month of trial, counsel for Laventhol & Horwath announced that the firm had filed for bankruptcy protection and received a stay of all proceedings against that firm. The trial continued against the remaining Defendants. On December 5, 1990, prior to submitting the case to the jury but after the evidence of all parties, the trial court granted the Defendants' motion for a directed verdict against the Plaintiffs on their securities fraud claims, finding that, as a matter of law, timeshares were not securities. The jury subsequently absolved DH & S, Taggart and Cortese of any liability, finding only Bakker liable for common law fraud and awarding compensatory damages of $129,618,000 and punitive damages in the same amount. The judgment against Bakker was uncollectible.

The Plaintiffs appealed the directed verdict in favor of the Defendants concerning securities fraud and the Fourth Circuit reversed, stating that whether or not the timeshares were securities was an issue of fact for the jury to determine. Id. The Circuit also ruled, however, that the trial court's grant of a directed verdict as to DH & S was proper.

Despite our conclusion that a jury question exists as to whether the LTPs [lifetime partnerships] constituted "securities," however, we must affirm the district court's dismissal of plaintiffs' claim that DH & S aided and abetted Bakker's alleged federal securities fraud violation. In its recent opinion in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119[] (1994), the Supreme Court held that Section 10(b) does not support claims for aiding and abetting. On this basis, then, we affirm the district court's judgment as to this count.

. . . . .

In summary, we reinstate plaintiffs' securities fraud claims under federal and state law against Bakker, but we affirm the dismissal of plaintiffs' federal and state securities fraud claims against DH & S.

Id., at 991-92.

On remand from the Circuit, the case was reassigned to the undersigned due to Judge McMillan's death. Despite the plain language of the Circuit's opinion, class counsel contended the securities fraud claims were remanded for a new trial against all Defendants, not just Bakker. On two separate occasions, the undersigned ruled that only Bakker remained in the case as a Defendant and certified the orders for interlocutory appeal. Orders, filed August 30, 1995 and March 22, 1996. On two separate occasions, the Fourth Circuit denied the Plaintiffs' petition for a certificate of interlocutory appeal. Orders, filed October 11, 1995 and April 15, 1996. At the second trial in 1996, the jury found that the timeshares were not securities, thus, finding against the Plaintiffs. That verdict, and the rulings of the undersigned in the case, were affirmed by the Fourth Circuit on appeal. Teague v. Bakker, 139 F.3d 892 (table), 1998 WL 168876 (4th Cir.1998).

II. THE PREVIOUS AWARD OF COSTS

While the appeal from the first trial was pending, Laventhol & Horwath entered into a settlement agreement with the Plaintiff Class to resolve the claims pending in its bankruptcy proceeding in the Southern District of New York. In January 1993, Judge McMillan conducted a hearing on the proposed settlement which he subsequently approved. Under the terms of the settlement, Laventhol & Horwath agreed that the PTL Class claim would be allowed in the amount of $45 million in return for which the Class withdrew its objections to the confirmation of the Chapter 11 Reorganization. Exhibit A, attached to Response to the Court's Order of February 25, 2002, filed March 8, 2002. Laventhol & Horwath also agreed to take all steps necessary to ensure that the Class would be able to participate in the "Insurance Trust," the firm's malpractice and excess liabilities insurance proceeds. Id. The settlement agreement provided a ten year period within which the payments would be made to the Class. Id. Although not clear, it appears that all such payments were to be made from the insurance proceeds.

At the same time that he approved the settlement, Judge McMillan also heard the motion of class counsel for an award of costs and expenses. Notice of both the proposed settlement and the request of counsel for an award of costs and expenses was provided to the Class by publication. Exhibit 2, attached to Brief in Support of Plaintiffs' Motion for Remaining Costs, Prejudgment Interest, and Attorney Fees [Plaintiffs' Brief], filed December 20, 2001. No objection was received from class members as to either the settlement or the proposed award of costs. By Memorandum and Order filed February 12, 1993, Judge McMillan made the following findings:

Plaintiffs' counsel itemize costs and expenses in excess of $2.7 million.

. . . . .

It is important to emphasize that plaintiffs seek no attorney fees at this [time] for the firms of Thomas T. Anderson and Associates or Wendell Bird's law firm.... What plaintiffs' lawyers seek is a return of the out-of-pocket expenses advanced by Mr. Anderson to finance the litigation.

. . . . .

[I]t is entirely appropriate that any monies recovered on behalf of the class through the efforts of plaintiffs' lawyers be first devoted to the reimbursement of reasonable costs and expenses.

. . . . .

[I]t was essential that plaintiffs retain bankruptcy counsel in New York and such representation led directly to the Laventhol settlement.

. . . . .

It is therefore ordered that plaintiffs' counsel, Thomas T. Anderson and Associates be awarded the sum of $2,715,212.40 as costs and expenses incurred in this case. Said sum should be paid directly to the Anderson firm out of the recoveries made from the Laventhol settlement previously approved by this Court. If and when the amount of the funds received by the plaintiffs from the Laventhol settlement exceeds $2,725[,]323.40, said sums are to be placed by plaintiffs' counsel in an interest bearing trust account and maintained in such account until further order of this Court. This Court will entertain at that time any further motions by plaintiffs' counsel for the award of additional costs and expenses, for an award of attorney's fees, or for distribution of the proceeds to the plaintiffs.

Exhibit 1, Memorandum and Order Approving Plaintiffs' Counsel's Request for Award of Litigation Costs and Expenses, filed February 12, 1993, attached to Plaintiffs' Brief, at 4-5, 6, 7, 10.

Judge McMillan's Memorandum and Order did not contain an award of pre-judgment or post-judgment interest. During the next ten years, yearly payments were received from the settlement except for the years 1995 and 1997. Those payments and their disbursements were as follows:

1. The sum of $61,033.31 received on December 22, 1992, was disbursed in two payments to Thomas T. Anderson and Gilardi & Co. (to pay for the class notice...