Presidential Life Insurance Company, Plaintiff-appellee,tlc Beatrice International Holdings, Inc., Movant-appellant, v. Michael R. Milken; Roy Abbott; Paul Abecassis; Jackackerman; Peter Ackerman; Joseph P. Adams; Stevenandreder; Joel Asen; Andrew Astrachan; Mark Attanasio;eileen Austen; Herbert Bachelor; Stanley Bailowitz;jeffrey Balash; Donald Balser; Dan Bathon; Jeffrey P.beck; Joseph Bencivenga; Richard A. Bergman; David W.bergmann; Martin L. Berman; Robert D. Beyer; Paulbiddelman; Arthur H. Bilger; Leon Black; Jay Bloom;frederick Borden; Thomas Boudakian; Gerald Brodsky;william Bron; Bruce Brown; Michael D. Brown; E. Alanbrumberger; Gerard M. Bucci; Jon E. Budish; Dort A.cameron, Iii; Thomas Cauchois; John Cavalier; Jeffreychanin; Mark Chasin; Franklin Chu; John Chulick; Thomasp. Clerkin; Craig M. Cogut; Thomas Connors; Richardcrowell; Lorraine D'ambrosio; James Dahl; Charles Dargan;robert Davidow; Marshall Davidson; Logan D. Delany, Jr.;carl Deremer; Dennis Dolan; Scott Douglas; Richarddunler; David Dupont; Maurits Edersheim; William Eng;donald Engel; Chris Evensen; Robert Fallon; Geoffrey L.faux; David Feinman; Michael Fields; Ralph Finerman;alan J. Fishbein; Steven Fisher; Patrick Flanagan; Allenflans; Richard S. Frary; Joshua Friedman; William Frymer;dennis K. Galgano; Peter R. Gardiner; Bruce Garver;richard L. Gelfond; Michael E. Gellert; Joel L. Gold;mark Goodman; Robert Goodwin; Nancy Cates Gordon; Kevinj. Gorman; Patrick L. Graham; Jeffrey Green; Richardhandler; John J. Hannan; Joseph Harch; Reed L. Harman;scott Harrison; David Hedley; Andrew Heyer; J. Ericsonheyke Iii; Paul Higbee; Richard H. Hochman; Harryhorowitz; John Humphreville; Susan Humphreville; Jayjablonow; Jon Jetmore; Paul Jetter; Roy J. Johnson; Lisajones; Roger Jospe; Mitchell R. Julis; Edwin Kantor;steven J. Kantor; David Kay; Dean Kehler; Donald Kendall;david Kiarsis; John Kissick; Barry F. Klein; Robertkline; Lynne Knox; Gerald Koenig; Gerald Koerner; Roberti. Kohl; John Krasznekewicz; John A. Ladyzinski; Gracielalagumen; Anthony Lamport; Jeffrey Lane; Jack Langer;douglas Lehrman; Paul Levy; Trevor Lewis; Robert Lloyd;bridgette S. Loden; Kevin J. Madigan; Joel Mael; J.o.maggard; Mary Lou Malanoski; Alison J. Mass; Cary J.maultasch; Frederick Mccarthy; Douglas Mcclure; Johnmcmahon; Leonard Meads; Lori Milken; Lowell Milken;michael Milken; Sandra Milken; David Mills; Kennethmoelis; James Moglia; Pamela Monzert; John Moriarty;frederick Moseley; Philip W. Moss; Donald Mullen; Allennadler; Jeffrey L. Neuman; Richard Nevins; Brucenewberg; Thomas Noonan; Terren S. Peizer; Arthurphillips; Lawrence A. Post; James D. Price; Haroldpurkey; Bruce Raben; Joseph J. Radecki; Michael Ranger;marc Rapaport; Paul Rapisarda; Jess M. Ravich; James L.rawlings; Langhorne Reid, Iii; Thomas E. Reinhart;anthony Ressler; Barry W. Ridings; Randy Rock; Richardrosee; Naomi Rosenfeld; Alan E. Rosenthal; Stephen Roth;peter Rothschild; Richard v. Sandler; Patrick Savin;sylvan Schefler; James Schiffner; Nicholas Schlumberger;james A. Schneider; Kevin W. Schultz; Janice L. Shapiro;allyson Shields; Ruben Shohet; Jonathan D. Sokoloff; Johnsorte; Lorraine Spurge; Linda Stedman; Stanley Stein;lee Stern; James G. Sullivan; David Sydorick; Cathryntaylor; John Taylor; Marla Thomas; Charles A. Thurnher;william R. Tobey, Jr.; Warren Trepp; Stanley Trotman;olivier Trouveroy; Marc A. Utay; Patsy Van Utt; Georgevarughese; Edward G. Victor; James E. Virtue; Leonwagner; Sven Wehrwein; Jeffrey R. Weinhuff; Stephen D.weinroth; John Wexler; Henry M. Wilf; Alexa D. Willson;gary Winnick; Stephen Winningham; Eugene Wong; Davidying; Ronald N. Yurcak; Afp Investments; Ahp Holdings,inc.; Ahp Investments; Alamo Associates; Alamoinvestments L.p.; All-fed Investment Associates; Altaassociates; Anchor Capital Holdings; Ara Partnership;arete Partners; Argonaut Ventures Group; Armacorincorporated; Arrowlake Investors; Arroyo Pacificinvestments, L.p.; Associated Capital; Associatedinvestors; Atlantic Financial Investors; Atlanticmanagement Group; Baltmar Investors, L.p.; Bandelierassociates; Barid Corpora, 94 F.3d 65 (2d Cir. 1996)Annotate this Case
Argued May 3, 1996.Decided Aug. 26, 1996
Thomas P. Puccio, New York City (William M. McErlean, Richard S. Huszagh, John F. Verhey, Julie A. Garvey, Rudnick & Wolfe, Chicago, Illinois, of counsel), for Movant-Appellant TLC Beatrice International Holdings, Inc.
Merrill G. Davidoff, Berger & Montague, Philadelphia, Pennsylvania (David Berger, Lawrence J. Lederer, Michael L. Block, of counsel; Stanley Nemser, Wolf Popper Ross Wolf & Jones, New York City, of counsel), for Plaintiff-Appellee Presidential Life Insurance Company and the Plaintiff Class.
JAMES L. STENGEL, Donovan Leisure Newton & Irvine, New York City (Steven J. Fink, Geoffrey W. Millsom, of counsel), for Defendant-Appellee Carlton Investments.
Before FEINBERG, OAKES, and WINTER, Circuit Judges.
WINTER, Circuit Judge:
This appeal arises out of a so-called "settlement class action." TLC Beatrice International Holdings, Inc. ("TLC Beatrice") appeals from Judge Pollack's denials of its motions seeking intervention as of right under Rule 24(a), Fed.R.Civ.P., and for relief under Rule 60(b) from the district court's July 1992 final judgment approving the settlement. The district court denied the motions as moot. Although the parties agree that the district court was in error with regard to mootness, they urge us to resolve this appeal on the merits. We believe, however, that we would benefit from the views of the district court and remand.
We briefly sketch the background of this appeal. It arises from the bankruptcy of Drexel Burnham Lambert Inc. ("Drexel") and from various activities of Michael Milken and others affiliated with Drexel that have generated a considerable volume of litigation arising under federal securities law. See In re Michael Milken and Associates Securities Litigation, 150 F.R.D. 57 (S.D.N.Y.1993). In February 1992, negotiations resulted in an agreed framework for the settlement of all such claims ("Milken Global Settlement") from a $1.3 billion settlement fund. As a condition of the Milken Global Settlement, Milken and the other defendants insisted on their release from all liability to anyone arising from their Drexel-related activities. The parties, with the participation of the district court, appear to have agreed that this condition could be met by bringing and settling a class action on behalf of all persons or firms who might have Drexel-related claims against the defendants and who were not then involved in the Drexel bankruptcy proceedings or in civil litigation against the defendants. The instant matter is that class action, appropriately described as "the Global Class Action."
The complaint was filed on February 18, 1992. A settlement agreement was reached three weeks later. After approving the settlement, the district court entered an injunction that provided:
All members of the Global Class ... are hereby permanently enjoined from commencing or prosecuting in any court (federal or state) or any other forum against any of the Identified Settling Parties any claim that has been or could have been asserted in the Global Class Action. Further, all members of the Global Class Action ... are hereby permanently enjoined from commencing or prosecuting in any court (federal or state) or any other forum other than this Court, any claim, action or proceeding that challenges or seeks review of or relief from any act, decision, order, judgment or any other ruling of this Court in connection with the Global Class Action.... Any violation of the foregoing injunctions may be punishable as contempt of court, in addition to all other available remedies.
Of the $1.3 billion in the Milken Global Settlement fund, $50 million was allocated for the settlement of the Global Class Action.
One of the Identified Settling Parties was Carlton Investments ("Carlton"), a partnership formed by Milken and his associates in Drexel's High Yield Bond Department to hold equity interests and other securities taken by them from Drexel clients, including a claimed interest in over 25 percent of the stock of TLC Beatrice. In May 1994, Carlton filed suit in New York state court against TLC Beatrice alleging breach of a shareholder agreement that grew out of Drexel's financing of the late Reginald Lewis's acquisition of Beatrice. TLC Beatrice asserted various affirmative defenses. These were based on conduct of some of the defendants that might have been the basis for, in the injunction's words, "[a] claim that ... could have been asserted in the Global Class Action." In March 1995, Carlton moved to dismiss the affirmative defenses on the ground that TLC Beatrice's assertion of them violated the injunction. TLC Beatrice responded, inter alia, that it was not bound by the judgment and injunction because it had not received notice of either the Global Class Action or the settlement and because the judgment was constitutionally deficient.
In July 1995, Carlton filed a contempt motion against TLC Beatrice in the present action. It claimed that the affirmative defenses were barred by the judgment and that TLC Beatrice's challenge to the validity of the Global Class Action settlement in the state court action violated the injunction. TLC Beatrice argued in response that the affirmative defenses were not "claims" covered by the final judgment in the Global Class Action. In addition, TLC Beatrice filed two motions that are the subject of the instant appeal. The first motion sought leave to intervene under Rule 24 and to assert counterclaims for money damages--in addition to the assertion of affirmative defenses--against Carlton in the state court action. The counterclaims were based on essentially the same conduct underlying the affirmative defenses. The second motion sought, under Rule 60(b), to void the judgment in the Global Class Action as against TLC Beatrice. It claimed that the district court lacked personal and subject matter jurisdiction and that the settlement violated TLC Beatrice's due process rights.
At the district court's request, TLC Beatrice filed an explication of its state court affirmative defenses, stating that "the only relief sought by the Affirmative Defenses is the denial of Carlton's requested monetary recovery against TLC Beatrice for its alleged breach of the Stockholders' Agreement. TLC Beatrice is not seeking any money damages, set off or declaratory relief by the Affirmative Defenses." The district court agreed with TLC Beatrice that the assertion of affirmative defenses did not violate the injunction and denied Carlton's contempt motion. Shortly thereafter, it also denied the Rule 24 and Rule 60(b) motions. The district court apparently read the language from TLC Beatrice's description of its affirmative defenses quoted above as relating to its Rule 24 and 60(b) motions as well as to the response to Carlton's contempt motion. The court then concluded that the denial of the contempt motion rendered TLC Beatrice's Rule 24 and 60(b) motions moot and denied them without further explanation.
We believe, and the parties agree, that the motions in question were not moot. TLC Beatrice had interposed affirmative defenses in the state court action in the belief that the purely defensive use of the underlying claims did not violate the injunction. Recognizing that counterclaims for monetary damages based on the same activities would violate the injunction, TLC Beatrice moved in the district court for leave to intervene and assert such counterclaims and to void the Global Class Action judgment. In denying the motion to hold TLC Beatrice in contempt, the district court agreed that the assertion of affirmative defenses in the state court action did not violate the injunction. However, that decision in no way addressed--much less mooted--TLC Beatrice's Rule 24 and 60(b) motions.
We have not had, therefore, the benefit of the district court's views on the merits of the motions that are the subject of this appeal. Although the parties agree that the issues underlying the motions in question are not moot, they urge us not to burden the district court by remanding. They argue that the merits have been fully briefed on this appeal and that a remand will not appreciably add to the materials before us. However, the parties dispute the timeliness of TLC Beatrice's motion to intervene and the adequacy of notice to it of the class action. These issues have a factual component that should be resolved in the first instance by the district court. We are also hesitant to address the important issue of the validity of this form of so-called settlement class action without knowing the views of the district court, which was deeply involved in both the Milken Global Settlement and the bringing and settlement of the Global Class Action. We therefore reject the urgings of the parties and remand to the district court for a decision on appellant's Rule 24 and 60(b) motions.
Any appeal after remand shall be on an expedited basis. To the extent practicable, the parties may rely on the briefs and appendices filed in this appeal supplemented by letter briefs. Also to the extent practicable, any subsequent appeal should be referred to this panel. Any party filing a post-remand notice of appeal shall communicate immediately with staff counsel of this court regarding these instructions.
We therefore remand. The mandate shall issue forthwith.