W.R. Huff Asset Mgmt. v. Kohlberg, Kravis, Roberts & Co.

• Decision Date: 29 April 2009
• Docket Number: No. 07-13114.,07-13114.
• Citation: 566 F.3d 979
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: W.R. HUFF ASSET MANAGEMENT CO., L.L.C., as investment advisor and as attorney-in-fact on behalf of certain Beneficial Owners of 10-1/2% Senior Subordinated Notes, Plaintiff-Appellee, v. KOHLBERG, KRAVIS, ROBERTS & CO., L.P., A Delaware limited partnership, KKR Associates LP, a limited partnership, KKR Partners II LP, Crimson Associates LP, Ronald G. Bruno, an individual, Robinson Humphrey Company, L.L.C., A Delaware corporation, Murray Devine & Co., a corporation, Defendants-Appellants, William J. Bolton, an individual, et al., Defendants.

566 F.3d 979

W.R. HUFF ASSET MANAGEMENT CO., L.L.C., as investment advisor and as attorney-in-fact on behalf of certain Beneficial Owners of 10-1/2% Senior Subordinated Notes, Plaintiff-Appellee, v. KOHLBERG, KRAVIS, ROBERTS & CO., L.P., A Delaware limited partnership, KKR Associates LP, a limited partnership, KKR Partners II LP, Crimson Associates LP, Ronald G. Bruno, an individual, Robinson Humphrey Company, L.L.C., A Delaware corporation, Murray Devine & Co., a corporation, Defendants-Appellants, William J. Bolton, an individual, et al., Defendants.

No. 07-13114.

United States Court of Appeals, Eleventh Circuit.

April 29, 2009.

Mac M. Moorer, Lightfoot, Franklin & White, LLC, Jay M. Ezelle, Michael A. Florie, Starnes & Atchison, LLP, Stephen A. Rowe, Adams & Reese, LLP, Robert Howard Rutherford, Burr & Forman, Birmingham,

AL, Howard B. Levi, Levi, Lubarsky & Feigenbaum, LLP, Bruce D. Angiolillo, James G. Gamble, Simpson, Thacher & Bartlett, LLP, Bruce Birenboim, Farrah R. Berse, Paul, Weiss, Rifkind, Wharton & Garrison, LLP, New York City, Julia Leigh Tarver Mason, Paul, Weiss, Rifkind, Wharton & Garrison, LLP, Washington, DC, Earl M. Forte, III, Blank, Rome, Comisky & McCauley, LLP, Philadelphia, PA, for Defendants-Appellants.

Timothy J. Paris, Leo R. Beus, Quinton F. Seamons, Thomas T. Griffin, Beus & Gilbert, PLLC, Scottsdale, AZ, James Timothy Francis, James L. North, North & Associates, Birmingham, AL, for Plaintiff-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before MARCUS, ANDERSON and CUDAHY,^* Circuit Judges.

ANDERSON, Circuit Judge:

Defendant-Appellants Kohlberg Kravis Roberts & Co. ("KKR"), Robinson Humphrey Co. ("Robinson Humphrey") and Murray Devine & Company, Inc. ("Murray Devine") (collectively "Appellants") appeal the district court's order granting Plaintiff-Appellee W.R. Huff Asset Management Co. ("Huff") leave to file the Fourth Amended Complaint. For the reasons set forth below, we conclude that we lack appellate jurisdiction. Accordingly, we dismiss the appeal.

I. PROCEDURAL POSTURE

Huff is an investment management company. In 1995, Huff invested approximately $290,000,000 on behalf of its clients in subordinated notes ("Notes") issued in connection with the leveraged recapitalization of an Alabama grocery chain, Bruno's, Inc. ("Bruno's"). KKR engineered Bruno's recapitalization. Robinson Humphrey issued a fairness opinion related to the recapitalization and Murray Devine issued a solvency opinion in connection with the recapitalization. Roughly two-and-a-half years later, Bruno's filed for bankruptcy in Delaware. On August 6, 1999, Huff filed suit in Alabama state court for fraudulent transfer, breach of fiduciary duty, aiding and abetting, and conspiracy. KKR removed the case to the Bankruptcy Court for the Northern District of Alabama. In October of 1999, Bruno's bankruptcy examiner released a report, prepared for KKR in May of 1995, which cited numerous, material accounting flaws in financial statements approved by Bruno's accountants, Arthur Andersen. As a result, on May 25, 2000, Huff filed a second amended complaint ("Second Amended Complaint") asserting state law claims based on material misrepresentations and omissions in Bruno's public filings. Huff brought the action as an investment advisor and attorney-in-fact on behalf of certain beneficial owners of the Notes. Huff's federal securities fraud claims were already barred by a three year statute of repose. See 15 U.S.C. § 78r(c).

Thereafter, the Alabama bankruptcy court returned the action to Alabama state court. Appellants removed the case to federal court on the grounds that Huff's state law claims were precluded¹ by the Securities Litigation Uniform Standards Act of 1998 ("SLUSA").² Two weeks later, in an explicit attempt to avoid SLUSA preclusion, Huff filed a third amended complaint ("Third Amended Complaint") asserting only claims for misrepresentations made after Bruno's stock was de-listed from the NASDAQ. Huff also dropped defendants Murray Devine and Robinson Humphrey because they were involved only in misrepresentations made prior to de-listing. The district court did not rule on the Third Amended Complaint for three years and three months.

In the interim, in light of developments in a related proceeding, Huff moved for leave to file a fourth amended complaint ("Fourth Amended Complaint"). Again, Huff acknowledged that the Fourth Amended Complaint was an attempt to avoid SLUSA preclusion. SLUSA provides for the removal of "covered class actions." 15 U.S.C. § 77p(c). The term "covered class action" includes "any single lawsuit" involving "a covered security" in which "one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated." Id. §§ 77p(c), (f). However, SLUSA only governs actions filed by fifty or more individually named plaintiffs. 15 U.S.C. § 77p(f)(2)(A)(i)(I). Thus, Huff sought to substitute as plaintiffs forty-six individual Note holders. The Fourth Amended Complaint also re-listed Murray Devine and Robinson Humphrey as defendants.

On February 7, 2006, the district court denied leave to file the Fourth Amended Complaint and dismissed the case with prejudice. The district court stated that the proposed amendment: (1) violated a prior judicial order; (2) was untimely; (3) was unduly burdensome on KKR; and (4) was a waste of judicial resources. On appeal, a prior panel of this Court vacated and remanded. The panel rejected the reasoning of the district court but explicitly reserved judgment on whether there were alternate, legitimate reasons to deny leave to amend. On June 22, 2007, after remand, the district court issued an order granting leave to file the Fourth Amended Complaint under the liberal amendment provision in Federal Rule of Civil Procedure 15(a). Immediately thereafter, the district court observed that SLUSA was the only asserted basis for federal jurisdiction, and SLUSA being inapplicable to the Fourth Amended Complaint, the district court remanded to state court for lack of subject matter jurisdiction. Appellants filed the instant appeal.

In this appeal, Appellants challenge the district court's ruling granting leave to file the Fourth Amended Complaint. The amendment permitted a substitution of plaintiffs, eliminating Huff in his representative capacity and substituting therefor forty-six individual plaintiffs. The amendment also re-listed Murray Devine and Robinson Humphrey as defendants, thus abandoning the attempt in the Third Amended Complaint to drop these two defendants. Appellants raise several issues, including, inter alia: (1) whether Huff is the sole real party in interest; (2) whether Huff is an indispensable party; (3) whether the district court erred in allowing the addition of two defendants after Huff deliberately dropped them in the proposed Third Amended Complaint; (4) whether the statute of limitations prevents the re-listing of these defendants; and (5) whether the district court erred in allowing the amendment because it constituted a circumvention of SLUSA. The foregoing will be referred to in this opinion as the "merits issues." However, we must first determine whether we have appellate jurisdiction to entertain these merits issues.

II. APPELLATE JURISDICTION

"An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise." 28 U.S.C. § 1447(d).³ "The policy of Congress opposes interruption of the litigation of the merits of a removed cause by prolonged litigation of questions of jurisdiction of the district court to which the cause is removed." Kircher v. Putnam Funds Trust, 547 U.S. 633, 640, 126 S.Ct. 2145, 2152, 165 L.Ed.2d 92 (2006). "For over a century now, statutes have accordingly limited the power of federal appellate courts to review orders remanding cases removed by defendants from state to federal court." Id. The Supreme Court has "relentlessly repeated that any remand order issued on the grounds specified in § 1447(c) is immunized from all forms of appellate review, whether or not that order might be deemed erroneous by an appellate court." Kircher, 547 U.S. at 640, 126 S.Ct. at 2153.

Notwithstanding the force of the § 1447(d) bar, the case law has staked out limited exceptions. Thus, we may review orders "that lead to, but are separate from, orders of remand and have a conclusive effect upon the ensuing state court action." Aquamar, S.A. v. Del Monte Fresh Produce N.A., Inc., 179 F.3d 1279, 1286 (11th Cir.1999). This doctrine flows from the Supreme Court's decision in City of Waco v. United States Fidelity & Guaranty Co., 293 U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244 (1934). In Waco, the defendant impleaded a third-party and removed the case to district court on the basis of diversity jurisdiction. The district court concluded that the third-party was an unnecessary and improper party and dismissed the cross-complaint. Waco, 293 U.S. at 142, 55 S.Ct. at 7. After the dismissal, there was no diversity between the remaining parties and the district court remanded the case to state court for lack of jurisdiction. Id. The defendant appealed the dismissal of the cross-complaint. The Supreme Court recognized that no appeal lies from an order of remand. Waco, 293 U.S. at 143, 55 S.Ct. at 7. However, noting that "the cross-action will be no part of the case which is remanded to the state court," the Court concluded that "[i]ndisputably [the order of dismissal] is the subject of an appeal; and, if not reversed or set aside, is conclusive upon the petitioner."⁴ Id.

In this case, we can assume arguendo (but need not decide) that this appeal would satisfy Waco, because our case law also requires that the order appealed from be final under 28 U.S.C. § 1291, and because we hold that the district court's order in the instant case is not final. See Flohr v. Mackovjak, 84 F.3d 386,...