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In re Jacobson

United States District Court, E.D. Missouri

June 21, 2017




         This matter is before the Court on the Motion of Appellee David A. Sosne, Trustee for the Bankruptcy Estate of Green Jacobson, P.C. (the “Debtor”), to Dismiss the Appeal, [Doc. No. 14]. Appellant opposes the Motion, and has filed a responsive memorandum thereto. For the reasons set forth below, the Motion is granted.

         Appellant Appeals from certain orders of the Bankruptcy Court in the above styled Bankruptcy Proceeding. Appellee urges dismissal for lack of standing of Appellant, David P. Oetting, in his capacity as Class Representative for the Nationsbank Class.

         Facts and Procedural Background

         Class Action

         The facts and procedural history giving rise to this matter are set out by the Eighth Circuit Court of Appeals in Oetting v. Norton, 795 F.3d 886 (8th Cir. 2015):

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 is pending in 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 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 litigation.
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.

Oetting v. Norton, 795 F.3d 886, 887-88 (8th Cir. 2015). (footnotes omitted).

         Bankruptcy Proceeding

         An involuntary petition under Chapter 7 of the Bankruptcy Code was filed against Green Jacobson, P.C. on March 3, 2015. The Order for Relief in this bankruptcy case was entered on April 26, 2015, and Appellee David A. Sosne was appointed as the Chapter 7 Trustee.

         On May 20, 2015, Appellant David P. Oetting, as “class representative” filed a general unsecured proof of claim in the amount of $10, 503, 914.70. This Claim was ...

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