Wolff v. Cash 4 Titles, 01-16973.

• Decision Date: 05 December 2003
• Docket Number: No. 01-16973.,01-16973.
• Citation: 351 F.3d 1348
• Parties: Robert S. WOLFF, Edward Turner, Edward E. Waller, Grey Wolf Holdings, John G. Coughlin, Plaintiffs-Appellees, v. CASH 4 TITLES, d.b.a. Charles Richard Homa, et al., Defendants, Phillip S. Stenger, G. James Cleaver, Cayman Islands Liquidations Creditors' Committee, Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

351 F.3d 1348

Robert S. WOLFF, Edward Turner, Edward E. Waller, Grey Wolf Holdings, John G. Coughlin, Plaintiffs-Appellees, v. CASH 4 TITLES, d.b.a. Charles Richard Homa, et al., Defendants, Phillip S. Stenger, G. James Cleaver, Cayman Islands Liquidations Creditors' Committee, Appellants.

No. 01-16973.

United States Court of Appeals, Eleventh Circuit.

Filed December 5, 2003.

Mitchell E. Herr, Holland & Knight, LLP, Miami, FL, John H. Pelzer, Ruden, McClosky, Smith, Schuster & Russell PA, Fort Lauderdale, FL, Kenneth B. Winer, Foley & Lardner, Stephen J. Crimmins, Pepper & Hamilton, LLP, Washington, DC, Jeff A. Moyer, Stenger & Stenger, P.C., Grand Rapids, MI, for Appellants.

Rhett Traband, Thomas Tew, Lawrence Allan Kellogg, Tew, Cardenas, Rebak, Kellogg, Lehman, Demaria & Tague LLP, Barton S. Sacher, Stanley A. Beiley, Sacher, Zelman, Vansant, Paul, Beiley, Hartman & Waldman, David Scott Mandel, Mandel & McAuley, LLP, Nancy J. Van Sant, Hornsby, Sacher, Zelman & Stanton PA, Mitchell E. Herr, Miami, FL, Nicolas Marsh, Sullivan & Cromwell, New York City, W. Gordon Dobie, Bruce R. Braun, John E. Mooney, Winston & Strawn, Chicago, IL, for Plaintiffs-Appellees.

Luis de la Torre, Karen J. Shimp, Eric Summergrad, S.E.C., Washington, DC, for S.E.C., Amicus Curiae.

Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT and BARKETT, Circuit Judges, and WEINER^*, District Judge.

TJOFLAT, Circuit Judge:

I.

This appeal involves the fairness of the attorneys' fees the district court awarded the plaintiffs' attorneys in a class action brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964,¹ by the victims of a Ponzi scheme.² The Ponzi scheme involved the sale of securities of corporations formed for the purpose of making high-interest loans to members of the public, who would pledge their automobile titles as collateral. The named plaintiffs and the members of their class are the purchasers of these securities; the defendants are the issuer corporations and those entities and individuals who devised or facilitated the scheme.

The plaintiffs' complaint, which was filed in the Southern District of Florida on February 8, 2000, alleged that the defendants fraudulently misrepresented that the proceeds of the securities the plaintiffs purchased would be used to fund the loans that were to be collateralized with the automobile titles, because the defendants' intent was, instead, to divert most of the proceeds to their own uses. Such fraud and the defendants' misappropriation of investment proceeds, the plaintiffs alleged, violated the federal mail fraud,³ wire fraud,⁴ and money laundering statutes,⁵ constituted "racketeering activity" under RICO,⁶ and rendered the defendants liable in treble damages.

During their investigation of the matter, the plaintiffs' attorneys concluded that some of the funds obtained from the plaintiffs had passed through various bank accounts in the United States and the Bank of Bermuda (Cayman) Limited ("Bank"). Counsel concluded that the Bank had aided and abetted the defendants in their perpetration of the alleged fraudulent scheme and, thus, was answerable with the defendants in RICO damages. Counsel therefore amended the plaintiffs' complaint to add the Bank as a party defendant.

Several months later, on June 16, 2001, plaintiffs' counsel and the Bank arrived at a settlement and entered into an agreement which called for the Bank to pay the members of the plaintiff class $67.5 million in exchange for releases of liability and the dismissal of the plaintiffs' claims.⁷ Under the agreement, the Bank would deposit this amount with Phillip S. Stenger, who, acting as the administrator of the settlement ("Settlement Administrator"), would pay the class plaintiffs' claims. After the parties submitted the Settlement Agreement to the district court for approval, the court held a fairness hearing. No one objected to the settlement, and the court therefore approved it. Four days later, on October 16, 2001, the court entered an order dismissing the plaintiffs' claims against the Bank with prejudice in a final judgment entered pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

The Settlement Agreement provided that the fees for the plaintiffs' attorneys would be paid out of the $67.5 million settlement fund. The court entered the final judgment (dismissing the claims against the Bank) without fixing counsel's fees; apparently with the consent of the parties, the court deferred ruling on counsel's fee application.⁸ The court ruled on counsel's fee application at the conclusion of a four-day hearing in which it heard from the plaintiffs' attorneys; members of the plaintiff class; counsel for the Securities and Exchange Commission ("SEC"), which, as indicated below, was prosecuting a suit against the defendants other than the Bank in the Northern District of Illinois;⁹ and the appellants. After considering what they had to say, the court, on November 9, 2001, awarded plaintiffs' counsel fees in the sum of $11.475 million, which amounted to seventeen percent of the settlement fund.

Phillip S. Stenger, as "Receiver," two "Joint Official Liquidators" ("JOLs") of Cayman Islands companies,¹⁰ and the Cayman Islands Liquidations Creditors' Committee ("Creditors' Committee")¹¹ now appeal the district court's attorneys' fee decision.¹² In a joint brief, they ask us to vacate the district court's fee award as excessive and to remand the case for further proceedings. The plaintiffs' attorneys, as appellees, ask us to dismiss this appeal on the ground that none of the appellants has standing to prosecute it.

We conclude that the appellants lack standing to appeal and therefore dismiss the appeal without reaching the question of whether the district court abused its discretion in awarding the attorneys' fees at issue. Before setting forth the reasons for our conclusion, we think it appropriate to explain the various hats Phillip S. Stenger wears in this case, as "Receiver," as "Settlement Administrator," and as "JOL."

On October 21, 1999, the SEC brought a lawsuit in the United States District Court for the Northern District of Illinois against the defendants (with the exception of the Bank) named in the instant action; its complaint described the same Ponzi scheme described in the complaint in the instant case and sought relief under Section 17(a) of Securities Act of 1933,¹³ Sections 10(b), 15(a)(1) and 15(c)(1) of the Securities Exchange Act of 1934,¹⁴ and Rule 10b-5 of the SEC's regulations.¹⁵ Securities and Exchange Commission v. Homa, No. 99-CV-6895. On November 2 and December 10, 1999, the district court, with the consent of the defendants' attorneys, entered orders granting the SEC's application for the appointment of a "receiver of the Receivership Property" of each of the defendants "for the benefit of investors to marshal, conserve, protect, hold funds, operate and, with the approval of the Court, dispose of any assets constituting the Receivership Property." The Receivership Property included all of the defendants' assets. The two orders appointed Phillip S. Stenger as the receiver and gave him the authority to "bring such legal actions based on law or equity in any state, federal or foreign court as he deems necessary or appropriate in discharging his duties as receiver on behalf of the estate [of the defendants] or on behalf of investors whose interests he is protecting."¹⁶ The orders also authorized him to employ his law firm, Stenger & Stenger, P.C., of Grand Rapids, Michigan, to represent him.¹⁷ In March 2000, the Grand Court of the Cayman Islands appointed Stenger and G. James Cleaver of the Ernst & Young accounting firm as the JOLs of the Cayman Islands companies involved in the Ponzi scheme. On September 19, 2000, Stenger, acting as Receiver of Cash 4 Titles (a defendant in the instant case), sued the Bank in the United States District Court for the Northern District of Illinois, Stenger v. Bank of Bermuda, No. 00-CV-5740. Pending the Bank's motion to dismiss the action, the proceedings, including discovery, were stayed. Stenger settled the case, releasing the Bank from the receivership's claims, as part of the settlement agreement the Bank made with the class plaintiffs on June 16, 2001. With this history in mind, we address the plaintiffs' attorneys' motion to dismiss this appeal.

II.

A.

"Article III of the Constitution confines the reach of federal jurisdiction to `Cases' and `Controversies.'" Alabama-Tombigbee Rivers Coalition v. Norton, 338 F.3d 1244, 1252 (11th Cir.2003) (quoting U.S. Const. art. III, § 2).

The irreducible constitutional minimum of standing contains three requirements. First and foremost, there must be alleged (and ultimately proved) an injury in fact — a harm suffered by the plaintiff that is concrete and actual or imminent, not conjectural or hypothetical. Second, there must be causation — a fairly traceable connection between the plaintiff's injury and the complained-of conduct of the defendant. And third, there must be redressability — a likelihood that the requested relief will redress the alleged injury. This triad of injury in fact, causation, and redressability constitutes the core of Article III's case-or-controversy requirement, and the party invoking federal jurisdiction bears the burden of establishing its existence.

Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 102-04, 118 S.Ct. 1003, 1016-17, 140 L.Ed.2d 210 (1998) (citations and marks omitted). In addition to these three constitutional requirements, the Supreme Court has held that prudential requirements pose additional limitations on standing. For example, "even when the plaintiff has alleged injury sufficient to meet the `case or controversy' requirement... the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or...