Zucker v. Maxicare Health Plans Inc.
| Decision Date | 26 January 1994 |
| Docket Number | 92-55614,Nos. 92-55360,s. 92-55360 |
| Citation | 14 F.3d 477 |
| Parties | Fed. Sec. L. Rep. P 98,084 Murray ZUCKER, Plaintiff, and Salomon Brothers Inc.; Montgomery Securities, Plaintiffs-Appellants, v. MAXICARE HEALTH PLANS INC.; Fred W. Wasserman; Pamela K. Anderson aka Pamela Wasserman, Defendants-Appellees. Murray ZUCKER; on behalf of himself and all others similarly situated, Plaintiffs-Appellees, and Maxicare Health Plans Inc.; Fred Wasserman; Pamela K. Anderson aka Pamela K. Wasserman; David M. Hallis; Samuel L. Westover; Gerald Zaid; Charles W. Smith, III; Randall Anderson; Howard Freedland; James A. McIntyre; Alan Bloom; Charles E. Lewis; Peter J. Ratican, Defendants-Appellees, v. ERNST & YOUNG, Successor-In-Interest to Ernst & Whinney, Objector-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Donald J. Schmid and Melanie T. Morris, Gibson, Dunn & Crutcher, Los Angeles, CA for appellants.
Michael D. Dempsey and Robert D. Donaldson, Cooper & Dempsey, and Michael S. Glassman, Clemens, Glassman and Clemens, Los Angeles, CA for appellees.
Appeal from the United States District Court for the Central District of California.
Before: NORRIS, WIGGINS, and O'SCANNLAIN, Circuit Judges.
FACTS
Plaintiffs in May 1988 filed this class action in the district court against Maxicare Health Plans, Inc. ("Maxicare") and others. The complaint alleged violations of federal securities laws in connection with the sale of Maxicare securities, for which Salomon Brothers Inc., Montgomery Securities, and Ernst & Young (or its predecessor in interest, Ernst & Whinney) (collectively "Appellants") had served as underwriters and accountants. No Appellant was named as a defendant in the district court.
On or about July 15, 1988, plaintiffs filed three similar cases in L.A. County Superior Court (the "State Court Actions"). Appellants were named as defendants in these State Court Actions. The State Court Actions were premised on a theory of fraud not yet accepted by the California courts. The state trial court rejected this theory, and therefore sustained demurrers to plaintiffs' state court complaints. The California Court of Appeal affirmed the state trial court. On June 5, 1991, the California Supreme Court accepted the California Court of Appeal's decision for review.
In the meantime, plaintiffs had in federal court obtained without opposition the certification of a class including all those entities which had bought certain Maxicare securities during a certain period. Only those entities which were in privity with any defendant in the federal action (including the defendant Maxicare) during that period were excluded from the plaintiff class. Appellants were nonparties in the federal action and thus took no part in the class certification. However, Appellants were excluded from the plaintiff class because of their privity with Maxicare during the relevant time.
When the parties neared settlement in federal court, the plaintiffs amended their complaint On November 12, 1991, the settling defendants moved for an order (1) declaring that the Settlement was made in good faith and (2) barring Appellants from making claims against the settling defendants and the insurer for contribution, subrogation, or indemnification. Counsel for the parties sent a copy of this motion to Appellants, the very entities named in the bar order, as "a courtesy." CR 80 at 5. Soon after receipt of this motion, Appellants specially appeared in the district court to object. Appellants also moved the court to declare that they had become members of the plaintiff class. Appellants argued that they were no longer in privity with any defendant, Maxicare being no longer a defendant, and so qualified for the plaintiff class.
to add additional defendants and drop Maxicare, which had been discharged in bankruptcy. The complaint did not add Appellants as defendants, however. After lengthy negotiations, a "Stipulation of Settlement" (the "Settlement") was filed with the federal district court. The Settlement provided that the parties would seek an order from the district court extinguishing all claims for contribution, subrogation, or indemnification against the settling defendants and the participating Maxicare-affiliated insurer. The district court granted preliminary approval of the Settlement on October 31, 1991.
The district court was not persuaded by Appellants' arguments. Rather, the district court made the following order in a document entitled "Final Judgment and Order of Dismissal with Prejudice as to Settling Defendants" (the "Judgment"):
17. Non-settling Defendants [including Appellants], and any persons who are or are alleged to be joint tortfeasors, co-tortfeasors or co-obligors with the Maxicare Parties and/or the Settling Defendants respecting the Released Claims, are hereby barred and permanently enjoined from asserting or prosecuting any and all claims, actions or proceedings against the Maxicare Parties and/or the Settling Defendants for equitable, partial, comparative, or complete contribution, subrogation or indemnity, however, denominated, arising out of or relating in any way to the Released Claims, either as cross-claims or counterclaims in the Litigation, as claims, cross-claims, counterclaims or third-party claims in any other action in any other court, arbitration, administrative agency, claim or forum, or in any other manner. All such claims are hereby extinguished, discharged, satisfied and made unenforceable.
Judgment p 17. In effect, paragraph 17 bars Appellants from seeking contribution, subrogation, or indemnity against any of the settling defendants or against Maxicare's insurer. In a separate order, the district court ruled that Appellants were not members of the plaintiff class (the "Exclusion Order") and that Appellants would not be allowed extra time to file a claim of loss as a member of the plaintiff class.
Appellants appealed, claiming this court had jurisdiction under 28 U.S.C. Sec. 1291. This court noted, however, the following provision in the Judgment:
In addition to any other requirement of law, this Judgment shall not become Final and Effective unless one of the following conditions occurs: (a) The California Supreme Court affirms the decision of the California Court of Appeal upholding the dismissal of the State Court Action, and such judgment becomes Final, ... or (b) The Los Angeles Superior Court has entered the State Court Order substantially in the form of Exhibit H to the Stipulation, and such Order has become Final....
Judgment p 12 (emphasis added). Doubting the finality of the Judgment and our jurisdiction under Sec. 1291, we ordered oral argument and supplemental briefing regarding jurisdiction.
Thereafter, the California Supreme Court on September 9, 1993 affirmed the decision of the California Court of Appeal upholding the decision of the state trial court in the State Court Actions. Counsel for the plaintiff class claimed in a letter to us that the California court's decision resolved our jurisdictional concerns. However, the Judgment contains the following, additional provision:
Within five (5) business days of the date upon which the conditions set forth in pp 12(a) or 12(b) above are satisfied in Judgment p 14(a). Paragraph 12 of the Judgment provided that the Judgment would "not become Final and Effective unless" one of the conditions occurred. However, nothing in paragraph 12 establishes when the Judgment becomes final and effective once one of the conditions has occurred; only paragraph 14 explains that. As of the date of this decision, the district court has no record of the filing of any notice that the conditions have been met, as is required by paragraph 14.
accordance with the terms of the Stipulation, counsel for the Settling Defendants and Plaintiffs' Settlement Counsel shall file with this District Court a joint notice that such conditions have been met. This Judgment shall automatically become Final, and the Settlement shall become Effective, five (5) days after the filing of such joint notice.
The Judgment by its own terms is not final or effective until the conditions requisite for finality occur. A final decision "generally is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 634, 89 L.Ed. 911 (1945) (emphasis added). In this case, the parties to the settlement had five days within which to notify the district court that the California Supreme Court had affirmed the state trial court. The Judgment was to become final automatically within five days of such notification. No such notification occurred. Therefore, the Judgment by its own terms is neither final nor enforceable absent some modification of the Judgment or other action by the district court indicating that the Judgment is final notwithstanding the non-fulfillment of its terms. In short, the contingent nature of this Judgment means that the district court must still take action; the district court has more to do than simply execute the Judgment. See Jones's Adm'r v. Craig, 127 U.S. 213, 8 S.Ct. 1175, 32 L.Ed. 147 (1888) (); Peters v. Welsh Dev. Agency, 920 F.2d 438 (7th Cir.1990) (same); Navarro v. INS, 539 F.2d 611 (7th Cir.1976) (); see also In re Pacific Far East Line, Inc., 654 F.2d 664, 666 n. 2 (9th Cir.1981) (); Taitt v. Chemical Bank, 810 F.2d 29, 30 (2d Cir.1987) (...
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