In re: BankAmerica Corporation

Case Type:
Business
Case Status:
Affirmed
Citation:
19-3672 (8th Circuit, Oct 08,2021) Published
Tag(s):
Ruling:
More than two decades after the shareholders of NationsBank and BankAmerica first filed securities law class actions after these two merged to form Bank of America Corp. (1999) and nearly two decades after court approval of a global settlement (2002), the U.S. Court of Appeals for the Eighth Circuit (Circuit) affirmed the district court's denial of a motion to reconsider the fee award and disgorge roughly $58 million in fees paid to past class counsel for sundry purported misdeeds filed by David Oetting (Oetting), one of the lead plaintiffs for the class, per the equitable doctrine of laches.
Procedural context:
Long after the U.S. District Court for the Eastern District of Missouri (DC) had approved a settlement of a bevy of transferred shareholder-directed class actions, captioned In re BankAmerica Corp. Securities Litigation, Case No. 4:99-MD-1264, Oetting, both an attorney and a lead plaintiff, filed a motion to reconsider the fee award and to order disgorgement of some $38 million in fees previously paid to NationsBank Class Counsel based on their alleged poor performance, mismanagement of the settlement fund, and abandonment of the class. Arrayed against him, both below and on appeal, were David Sosne, the Chapter 7 bankruptcy trustee for Green Jacobson, P.C., former Lead Counsel for the NationsBank Class; four law firms appointed by the DC in April 1999 to serve as co-lead counsel or executive committee members; and two individual former members of the Green Jacobson firm. The DC rebuffed Oetting's request, concluding that the doctrine of laches barred his way. Oetting, naturally, appealed.
Facts:
After three years of litigation followed by mediation on the eve of trial, class counsel and defendants proposed a $490 million “global settlement” that included $333 million for the NationsBank Class. The DS approved the settlement over the objection of two lead plaintiffs, Oetting and John Koehler (Koehler), who attacked the settlement for inadequately compensating the class without their approval. This duo appealed, and another Circuit panel affirmed in a 2003 opinion, characterizing their "estimations of the settlement value of the case .... [as] so high as to be 'bordering on fantasy.'" Thereafter, the DC appointed Green Jacobson as administrator of the settlement fund and, at its urging, Heffler, Radetich & Saitta, LLP (Heffler) as claims administrator. As part of the settlement approval process, it approved attorneys’ fees to be paid to NationsBank Class Counsel out of the settlement fund. While counsel requested an award equal to 25% of the Class’s net recovery, more than four times the fee that would be awarded under an alternative “lodestar” approach, the DC agreed with this “percentage-of-the-recovery” approach but reduced the award to 18% of the net recovery to the NationsBank Class, approximately $58,831,000 plus interest. Even though neither Oetting nor Koehler objected to this award, both sought fees for objecting. The DC denied this request, reasoning that their efforts “enhanced neither the value of the settlement fund nor the adversarial process." No appeal followed. Two years later, however, Koehler, now represented by Oetting, launched an action against class counsel in the U.S. District Court for the Southern District of New York (NYDC). This time, the duo damned counsel for breaching their fiduciary duties in negotiating an inadequate settlement. The NYDC ultimately transferred the case to the judge in DC presiding over the consolidated class action. The DC dismissed this action, and another Circuit panel affirmed in 2007. More cases followed. After the first distribution, during which Oetting netted a check he did not cash, Green Jacobson filed a supplemental complaint against Heffler due to the fact that one of its employees had defrauded the settlement fund. Sometime after the DC concluded it would be more appropriate to file a separate action against Heffler, Oetting filed a class against Heffler, which was transferred to Pennsylvania and dismissed as time barred in 2017. Once the second distribution had concluded, leaving some $2.5 million in the fund, Green Jacobson moved to distribute the remaining amount cy pres and to terminate the case with an award of $98,114.34 in supplemental attorneys' fees. Oetting opposed this distribution, the DC rebuffed him again, but another panel reversed, vacating the award of supplemental attorneys' fees as premature. In 2013, Oetting, now represented by the attorney who would prosecute the underlying suit, Frank H. Tomlinson (Tomlinson), launched a new class action against Green Jacobson on behalf of the NationsBank Class. The DC dismissed this latest salvo, finding Oetting to lack standing to represent the class due to his failure to cash his check and his other claims to be barred by the cy pres order then on appeal. This decision was affirmed. As the above machinations raged, Green Jacobson's fortunes plummeted. Indeed, after the cy pres order in 2015, an unrelated malpractice judgment pushed it into chapter 7 bankruptcy; Sosse was appointed the trustee for its bankruptcy estate. The DC subsequently removed Green Jacobson as Lead Counsel for the NationsBank Class and, at Oetting’s urging, appointed Tomlinson as Lead Counsel. Oetting filed a bankruptcy claim for approximately $10.5 million, which was dismissed by the BC in another affirmed order. Meanwhile, still before the DC, Oetting continued to argue that the 2002 fee award should be reduced. On August 20, 2019, consistent with the briefing schedule that he had urged, Oetting filed the motion whose adjudication spawned this latest appeal. In this filing, entitled "Motion for Redetermination of Attorneys’ Fees Pursuant to the PSLRA, Forfeiture, and Disgorgement," Oetting asked, for the very first time, that all NationsBank Class Counsel, not just Green Jacobson, forfeit and disgorge all fees received above what they would have received had the DC originally used the lodestar approach in 2002. As support, he pointed to a slew of alleged malefactions.
Judge(s):
James B. Loken; Jane L. Kelly; and Ralph P. Erickson

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