In re: Green Jacobson, P.C. Debtor
David A. Sosne; SKMDV Holdings, Inc. Appellees David P. Oetting Appellant
Submitted: September 26, 2018
from United States District Court for the Eastern District of
Missouri - St. Louis
LOKEN, BENTON, and SHEPHERD, Circuit Judges.
1999, class action suits filed in many districts under the
federal securities laws were transferred to the Eastern
District of Missouri and captioned In re BankAmerica
Corp. Sec. Litig., No. 4:99-MD-1264 (the "MDL
Action"). This is the fifth appeal of district court
orders arising out of the MDL Action, despite a
"global" settlement approved by the district court
in 2002 and affirmed by this court in In re BankAmerica
Corp. Sec. Litig., 350 F.3d 747 (8th Cir. 2003).
appeal, class representative David Oetting appeals the
dismissal of the unsecured creditor claim and amended claim
he filed in the pending Chapter 7 bankruptcy proceeding of
lead class counsel, Green Jacobson, P.C. In re Green
Jacobson, P.C., No. 4:15-BK-41404 (Bankr. E.D. Mo.). The
bankruptcy court dismissed the claims as either "no
longer in issue" or barred by the Missouri statute of
limitations. Oetting appealed to the district court. Relying
on our decision in Oetting v. Norton, 795 F.3d 886,
891 (8th Cir. 2015), the district court dismissed the appeal,
concluding that Oetting as class representative lacked
standing because the claims he filed in the bankruptcy court
were not ancillary to the MDL Action but were
"independent, separate and distinct actions."
Oetting appeals. Reviewing de novo, we affirm in
part, reverse in part, and remand for further proceedings.
In re SuperValu, Inc., 870 F.3d 763, 768 (8th Cir.
2017) (standard of review).
Many facts and much of the procedural history relevant to
this appeal were summarized in our Norton decision:
After the merger of NationsBank Corporation and BankAmerica
Corporation, shareholders of both companies filed class
action lawsuits alleging violations of the federal securities
laws. The cases were transferred to the Eastern District of
Missouri, where the district court appointed David Oetting as
one lead plaintiff of the NationsBank class and the St. Louis
law firm of Green Jacobson as lead counsel for the class. The
litigation settled, resulting in a $333 million settlement
fund for the NationsBank class. We affirmed the district
court's approval of the settlement over Oetting's
objection that it was inadequate. In re BankAmerica Corp.
Sec. Litig., 350 F.3d 747 (8th Cir. 2003); see
Koehler v. Brody, 483 F.3d 590, 598-99 (8th Cir. 2007).
On the recommendation of Green Jacobson, the district court
appointed Heffler, Radetich & Saitta, LLP (Heffler), as
claims administrator to distribute the settlement fund to
class member claimants. During the claims process, an
employee of Heffler conspired to submit fifteen false claims
against the fund, resulting in the payment of $5.87 million
that otherwise would have been paid to members of the class.
In 2010, the district court denied Green Jacobson's
motion for leave to file a supplemental complaint against
Heffler to recover this loss. Oetting subsequently filed a
separate action against Heffler on behalf of the NationsBank
class that was transferred to and [dismissed by] the Eastern
District of Pennsylvania.
After two distributions to the NationsBank class in December
2004 and April 2009, some $2.4 million remained in the
settlement fund. Green Jacobson moved to have the remaining
$2.4 million distributed cy pres and requested an
additional award of $98, 114.34 in attorney's fees for
post-settlement work. Oetting opposed the cy pres
distribution as contrary to the class members' interests,
opposed the award of additional attorney's fees, and
argued that Green Jacobson should disgorge $2 million in fees
for abandoning the class. Oetting also filed this separate
class action, alleging in four counts that class counsel
Green Jacobson and three members of the firm (collectively,
"Green Jacobson") (i) committed legal malpractice
by negligently hiring and failing to supervise claims
administrator Heffler, and (ii) breached its fiduciary duty
by taking various actions that constituted abandonment of the
NationsBank class. The complaint sought damages for causing
the $5.87 million fraud loss to the settlement fund and
disgorgement of the entire $60 million in attorneys fees
awarded Green Jacobson in the BankAmerica
In the main action, the district court granted Green
Jacobson's motion for a cy pres distribution and
for a supplemental fee award and denied Oetting's request
for disgorgement. In re BankAmerica Corp. Sec.
Litig., No. 4:99-MD-1264, 2013 WL 3212514, at *1, *6
(E.D. Mo. June 24, 2013). Oetting appealed. We reversed the
cy pres award, ordering the district court to allow
an additional distribution to the class and then to consider
whether a cy pres award of any remaining funds would
be appropriate. In re BankAmerica Corp. Sec. Litig.,
775 F.3d 1060, 1064-67 (8th Cir. 2015). We vacated the
supplemental fee award as premature prior to completion of
additional distributions that would be made after remand.
Id. at 1067-68.
795 F.3d at 887-88 (one footnote omitted). In
Norton, answering "unusual questions of
standing," we held that Oetting lacked personal standing
as well as standing to commence the "separate class
action" on behalf of the NationsBank class. Id.
at 889-91. We concluded that the class's
"independent status" in the MDL Action "did
not make it an independent legal entity that may file claims
against other parties in a new action, even if the claims
arise out of or relate to the main action." Id.
our 2015 decision in In re BankAmerica Corp. Sec.
Litig., 775 F.3d at 1060 (the "Cy Pres
Case"), Green Jacobson's Chapter 7 proceeding
commenced, triggered by an unrelated state court malpractice
judgment. An Order for Relief was entered on April 16, 2015,
and appellee David A. Sosne was appointed Chapter 7 Trustee.
Oetting as representative of the NationsBank Class then
timely filed Claim 1-1, an unsecured claim for $10, 503,
914.70. Trustee Sosne objected to the claim. Wanting his
claims resolved as part of the MDL Action, rather than by the
bankruptcy court, Oetting filed a motion to withdraw
reference in the district court, see 28 U.S.C.
§ 157(d), and a motion to abstain or suspend proceedings
in the bankruptcy court. The district court denied the motion
to withdraw reference, noting that "allowance or
disallowance of a claim is a core proceeding," 28 U.S.C.
§ 157(b)(2)(B). That ruling is not at issue. On November
29, 2016, the bankruptcy court denied the motion to abstain
or suspend proceedings, and sustained the Trustee's