Date: 03-28-2007

Case Style: J. Michael Koehler v. Jules Brody

Case Number: Unknown

Judge: Unknown

Court: United States Court of Appeals for the Eighth Circuit on appeal from the Eastern District of Missouri (St. Louis County)

Plaintiff's Attorney: Unknown

Defendant's Attorney: Unknown

Description:

The case before the court arises out of the global settlement of a number of class action cases related to the merger of NationsBank and BankAmerica into Bank of America. Plaintiff J. Michael Koehler was a lead plaintiff and class representative in those cases. He brought this action against the attorneys who had represented his class and against several attorneys who represented two of the other lead plaintiffs. He alleges that the attorneys breached their fiduciary duties, violated the Private Securities Litigation Reform Act of 1995, and engaged in civil conspiracy by settling the class actions without his approval and by misleading the court into approving the settlement. The district court1 granted defendants' motions to dismiss his complaint, and he appeals from the judgment in No. 06-2357. In No. 06-2746 Koehler appeals from a post judgment order of the district court relating to document recovery. We affirm the judgment but dismiss the other appeal for lack of jurisdiction.

I

After NationsBank and BankAmerica merged in 1998, numerous state and federal actions were commenced. Plaintiffs alleged that the merger had been effected through fraud and that misrepresentations had been made to shareholders. The Judicial Panel on Multidistrict Litigation consolidated the actions in the Eastern District of Missouri before Judge John Nangle. He appointed seven lead plaintiffs to represent one of the classes who had owned NationsBank stock. Koehler was one of the lead plaintiffs, and the other six were Earl J. Gates, Joseph Hempen, Robert Hepworth, Kevin Kloster, David Oetting, and Pamela Wootton. Koehler also served as a class representative, along with Kloster and Oetting.

According to Koehler's complaint, the court appointed the law firm of Green, Schaaf & Jacobsen, P.C. as lead counsel and liaison for the NationsBank classes, and the firms of Chitwood & Harley and Stull, Stull & Brody were made co-lead counsel. The complaint alleges further that Clooney & Anderson also represented the NationsBank classes and that attorneys Entwistle and Cappucci were named to the executive committee.2

After three years of discovery, the parties entered into voluntary mediation in January 2002 in New York under the direction of a former federal district judge, the Honorable Nicholas Politan. Koehler and some of the other lead plaintiffs were present at the negotiations, but they left after two days. The mediation continued on the following day, and counsel representing all the parties reached an agreement. They executed a memorandum of understanding that the cases would settle for a cash payment by the defendants of $490 million, and that $333 million of that amount would be allocated to the two NationsBank classes.

In February, March, and May 2002, Judge Nangle held a series of hearings to determine the fairness of the proposed settlement. Koehler retained separate counsel to contest the settlement and filed objections to it. He and two others from his group of lead plaintiffs, David Oetting and Kevin Kloster, complained to the district court that the settlement amount was too low and that it was disproportionately distributed among the shareholder classes. They also challenged the settlement on the ground that the lead plaintiffs had not been present the final day of mediation because they had been led to believe that the mediation was over and that the case would only settle for an amount exceeding $600 million, payable in stock. Koehler alleged that his attorneys had misled him and made false representations to the court and that this conduct violated the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 (the Act), and other ethical duties. In support he submitted the declaration of Professor Geoffrey Hazard, a well recognized expert in the field of legal ethics, discussing possible ethical breaches related to the settlement.

Notice of the settlement terms was given to the hundreds of thousands of class members. The notice informed the class members that they should make the district court aware of any objections. Only ten objections were submitted; none was received from any of the institutional investors. The court explained that it was required to consider the merits of plaintiffs' case, the defendant's financial condition, the complexity involved in further litigation, and the amount of opposition to the settlement. In re BankAmerica Corp. Sec. Litig., 210 F.R.D. 694, 699-700 (E.D. Mo. 2002); see Van Horn v. Trickey, 840 F.2d 604, 606 (8th Cir. 1988). It considered the objections and the arguments at several hearings and finally approved the settlement as fair, adequate, and reasonable based on the court's experienced assessment. In re BankAmerica Corp. Sec. Litig., 210 F.R.D. at 700-06.

The district court observed that plaintiffs had faced "many hurdles" in the litigation and that a jury could have returned a defense verdict given the "formidable risks of trial." In re BankAmerica Corp. Sec. Litig., 210 F.R.D. at 701. The court concluded that class counsel had "reached a substantial settlement and fulfilled their obligations," that class representatives "do not have the unfettered ability to decide whether to settle and, if so, for how much," and that "class settlement agreements do not require the assent of named plaintiffs." Id. at 703-04. It issued its final approval of the settlement on September 30, 2002.

Following approval of the settlement, the court held hearings to determine the appropriate fee award for the attorneys. Lead counsel requested 25% of the total award, and Koehler did not object. The court explained that "even a small percentage of the class recoveries in this case is a very significant award of money," and awarded lead counsel 18% of the net recovery on October 15, 2002. The court noted that the "class members' response to the settlement has been overwhelmingly favorable," that the "experienced attorneys" had obtained a "significant recovery" for their clients, and that class counsel had "performed at exceptionally high levels."

Despite continued allegations about ethical breaches and misrepresentations by counsel, Koehler did not challenge the fee award on appeal, but he and Oetting did appeal the order approving the settlement. At the oral argument on appeal Koehler and Oetting conceded they were not contesting the district court's "fairness and adequacy" findings about the settlement, but were instead challenging whether the court had had the authority to approve the settlement over their objections. In re BankAmerica Corp. Sec. Litig., 350 F.3d 747, 751 (8th Cir. 2003).

We affirmed the judgment approving the settlement. We noted the district court's findings that Koehler and Oetting had had "unrealistic expectations" about the litigation that were "bordering on fantasy" and that the "global settlement amount far exceeded what had been previously offered to the separate classes." Id. at 750-752.

We also took note of the fact that lead plaintiffs Robert Hepworth and Kevin Kloster had ultimately approved the settlement. Id. at 749-51. We observed that one of the concerns Congress had in passing the Act was to protect the interests of class members in securities cases, that the statute did not "explicitly [grant] a veto power to lead plaintiffs," id. at 752, and that the district court found that the BankAmerica litigation and settlement had not been "lawyer-driven." Id. at 750. We concluded that the district court, which was "intimately familiar with this lengthy and complex matter," id., had not abused its discretion by approving the settlement over the objections of Koehler and Oetting.

* * *

Outcome: For these reasons, we affirm the judgment of the district court in No. 06-2357 and dismiss the appeal in No. 06-2746 for lack of jurisdiction.

Plaintiff's Experts: Unavailable

Defendant's Experts: Unavailable

Comments: None