Opinion
02 Civ. 3288 (DLC) MASTER FILE
December 16, 2003
William S. Lerach, Darren J. Robbins, Spencer Burkholz, Michael J. Dowd, Randall J. Baron, Thomas E. Egler, Milberg Weiss Bershad Hynes, Lerach LLP, San Diego, CA, for Forty-One Pension Fund Plaintiffs
Melvyn I. Weiss, Steven G. Schulman, Sol Schreiber, Milberg Weiss Bershad Hynes Lerach LLP, New York, NY, for Forty-One Pension Fund Plaintiffs
Patrick J. Coughlin, Milberg Weiss Bershad Hynes Lerach LLP, San Francisco, CA, for Forty-One Pension Fund Plaintiffs
David Wertheimer, Lyndon Tretter, Hogan Hartson, New York, NY, for Defendant Bernard J. Ebbers
Paul Curnin Simpson Thacher Bartlett LLP, New York, NY, for Director Defendants
Jay B. Kasner, Susan L. Saltzstein, Steven J. Kolleeny, Skadden Arps Slate Meagher Flom LLP, New York, NY, for Underwriter Defendants
Martin London, Richard A. Rosen, Brad S. Karp, Eric S. Goldstein, Walter Rieman, Marc Falcone, Joyce S. Huang, Paul Weiss Rifkind Wharton Garrison LLP, New York, NY, for Defendants Citigroup Global Markets, Inc. f/k/a Salomon Smith Barney, Inc., Citigroup Inc., and Jack Grubman
Robert McCaw, Peter K. Vigeland, Wilmer Cutler Pickering, New York, NY, for Defendants Citigroup Global Markets, Inc. f/k/a Salomon Smith Barney, Inc., Citigroup Inc., and Jack Grubman
Eliot Lauer, Curtis Mallot Prevost Colt Mosley LLP, New York, NY, for Defendant Arthur Andersen LLP
OPINION ORDER
This Opinion addresses a motion for certification of interlocutory appeal arising from two Orders issued in the extensive litigation over the alleged accounting fraud at WorldCom, Inc. ("WorldCom") that is now consolidated under the caption In re WorldCom, Inc. Securities Litigation ("Securities Litigation"). The consolidatedSecurities Litigation includes both class and individual actions, and is brought on behalf of some of the largest pension funds in the country, as well as on behalf of individual investors.
The form of the consolidation and the reasons for it are described in In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21219037 (S.D.N.Y. May 22, 2003). See also In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21242882 (S.D.N.Y. May 28, 2003) (consolidation order); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 31867720 (S.D.N.Y. Dec. 23, 2002) (addressing consolidation of the individual actions with the class actions); Albert Fadem Trust v. WorldCom, Inc., No. 02 Civ. 3288 (DLC), 2002 WL 1880530 (S.D.N.Y. Aug. 15, 2002) (consolidation of the class actions and appointment of lead plaintiff).
One of the issues decided in this complex securities action has been the jurisdiction of this Court to preside over actions alleging claims that arise solely under the Securities Act of 1933 ("Securities Act") that were initially filed in state courts and were removed to federal court on the ground that they are "related to" WorldCom's bankruptcy. Although the Court found that removal was appropriate and that it had subject matter jurisdiction over the removed actions, certain plaintiffs continue to contest that ruling. This Opinion addresses the motion brought by Milberg Weiss Bershad Hynes Lerach LLP ("Milberg Weiss") on behalf of forty-one public and private pension funds to certify an appeal from two of this Court's Orders finding that their actions were properly removed as "related to" the WorldCom bankruptcy.
California Public Employees Retirement System, California State Teachers Retirement System, Los Angeles County Employees Retirement System, State Universities Retirement System of Illinois, Board of Trustees of the Teachers Retirement System of the State of Illinois, Illinois State Board of Investment, West Virginia Investment Management Board, Washington State Investment Board, Alameda County Employees' Retirement Association, Alameda-Contra Costa Transit Employees' Retirement Plan, City of South San Francisco, Contra Costa County Employees' Retirement Board, Imperial County Board of Retirement, Mendocino County Employees' Retirement Association, Oakland Fire and Police Retirement System, Sacramento County Employees' Retirement System, Sacramento Regional Transit District Contract Employees' Retirement Plan, Sacramento Regional Transit District Salaried Employees' Retirement Plan, San Bernardino County Employees' Retirement Association, San Diego County Employees' Retirement Association, San Diego City Employees' Retirement System, San Francisco City and County Employees' Retirement System, Sonoma County Employees' Retirement Association, Tulare County Employees' Retirement Association, Ventura County Employees' Retirement Association, Screen Actors Guild-Producers Pension and Health Plans, Directors Guild of America-Producers Pension and Health Plans, Motion Picture Industry Pension Health Plans, Motion Picture Industry Individual Account Plan, Producers-Writers' Guild of America Pension Plan, Writers' Guild-Industry Health Fund, JATSE Local #33 Pension Trust, Air Conditioning Refrigeration Industry Retirement Trust Funds, Sheetmetal Workers Pension Plan of Southern California, Arizona and Nevada, Montana Board of Investments, State of Wisconsin Investment Board, City of Milwaukee Employees Retirement System, United Food and Commercial Workers Union Local 880-Retail Food Employers Joint Pension Fund, United Food and Commercial Workers Union Local 880-Mercantile Employers Joint Pension Fund, United Food and Commercial Workers Union-Employer Pension Fund, and United Food and Commercial Workers Union-Employer Health and Welfare Fund.
Background
A brief description of the larger context of this complex litigation and, in particular, of the genesis of the two Orders that are the subject of this motion for interlocutory certification, is appropriate at the outset. WorldCom filed for bankruptcy on July 21, 2002, and is not a party to the litigation before this Court. Instead, the defendants consist of those associated with WorldCom, including WorldCom officers, executives, and directors, its outside auditor, its most prominent outside research analyst and his investment firm, and a score of investment banks that underwrote WorldCom bond offerings.
Since the pending motion and this Opinion are addressed to the issue of removal and remand of a particular set of actions, this description will not discuss the scope and progress of the consolidated WorldCom Securities Litigation as a whole. Two recent Opinions, however, addressed issues of particular importance to the plaintiffs bringing this motion. On November 17, the Court found that, among other things, Milberg Weiss's communications to its clients or potential clients had not presented a forthright description of the advantages and disadvantages of both the class and individual actions, and that as a result a curative notice should be distributed to plaintiffs who have filed individual actions. See In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22701241 (S.D.N.Y. Nov. 17, 2003). Milberg Weiss made no objection to these findings at the time of oral argument and endorsed the solution of sending a curative notice. The separate Individual Action Notice and the Class Notice were approved by the Court on December 11. On November 21, the Court granted in part defendants' motions to dismiss with prejudice claims in one Milberg Weiss action on statute of limitations and other grounds. See In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22738546 (S.D.N.Y. Nov. 21, 2003).
For descriptions of the background of the Securities Litigation more generally, and recent rulings, see In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21219037 (S.D.N.Y. Dec. 1, 2003) (granting Lead Plaintiff's motion to file a corrected amended complaint); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22831008 (S.D.N.Y. Nov. 25, 2003) (denying motion to dismiss claims in an individual action filed by certain Ohio plaintiffs); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22420467 (S.D.N.Y. Oct. 24, 2003) (granting motion for class certification); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21219049 (S.D.N.Y. May 19, 2003) (denying, with limited exceptions, defendants' motions to dismiss the consolidated class action complaint).
The lawsuits now consolidated before this Court originally were filed in federal and state courts across the country. The majority of the state court actions were filed by Milberg Weiss on behalf of public and private pension funds ("Milberg Weiss Actions"). The Milberg Weiss Actions allege claims arising solely under the Securities Act. Between July 5, 2002 and October 3, 2003, at least forty-seven Milberg Weiss Acctions were filed on behalf of over 120 plaintiffs. By pleading solely Securities Act claims, the Milberg Weiss Actions sought to avoid removal to federal court. The Securities Act gives concurrent jurisdiction over Securities Act claims to state and federal court and bars removal of such actions.See 15 U.S.C. § 77v(a).
In addition to the Milberg Weiss Actions, over a dozen other individual actions, many on behalf of pension funds or institutions, have been filed by several other law firms. Approximately twenty-six joinder actions were filed in Mississippi state courts, each brought on behalf of fewer than fifty individuals.
The Milberg Weiss Actions were removed to federal district courts around the country on the ground that they were "related to" WorldCom's bankruptcy and thus subject to federal jurisdiction as provided by the Bankruptcy Code. After the Judicial Panel on Multi-District Litigation ("MDL Panel") designated this Court as the transferee court for the WorldCom securities litigation on October 8, 2002, the removed actions were designated for transfer here. Milberg Weiss contested that transfer on behalf of its clients, but agreed to withdraw the objections of forty-one plaintiffs ("Intervenors") to the MDL Panel's conditional transfer order on the condition that they be allowed to intervene in the motion to remand that had been filed by the New York City Employees' Retirement System and its eight co-plaintiffs ("NYCERS" and "NYCERS Action"). The motion to intervene was granted and on March 3, 2003, the Court issued its first Opinion addressing its jurisdiction over the removed actions.See In re WorldCom, Inc. Securities Litig., 293 B.R. 308 (S.D.N.Y. 2003) ("March 3 Opinion").
The March 3 Opinion denied NYCERS's motion to remand, and addressed the additional arguments raised by the Intervenors. The March 3 Opinion determined that the NYCERS Action was sufficiently related to the WorldCom bankruptcy to fall within this Court's federal subject matter jurisdiction pursuant to 28 U.S.C. § 1334(b). Id. at 324. The March 3 Opinion examined in particular the interaction of three statutory provisions: Section 1334, Section 1452, and Section 22(a).
Section 1334(b) of Title 28, United States Code ("Section 1334") grants "comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate." Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995) (citation omitted). Section 1334 provides original jurisdiction over "all" civil proceedings "related to cases under title 11," the bankruptcy statute. Section 1452(a), 28 U.S.C. § 1452(a), permits the removal to federal court of any claim over which there is federal subject matter jurisdiction pursuant to Section 1334. The key jurisdictional provision of the Securities Act, on the other hand, is Section 22(a), which provides that state and federal courts have concurrent jurisdiction over certain Securities Act claims. See 15 U.S.C. § 77v(a). In addition, Section 22(a) bars the removal of certain Securities Act claims from state to federal court. See id.
The March 3 Opinion rejected the argument made by NYCERS and the Intervenors that Section 22(a) barred removal of actions pleading Securities Act claims to federal court when jurisdiction existed over those claims on the ground that they were "related to" WorldCom's bankruptcy. In re WorldCom, Inc. Sec. Litig., 293 B.R. at 324. The March 3 Opinion examined in detail Section 22(a), the jurisdictional concerns of the Securities Act and the Securities Exchange Act of 1934, the 1995 and 1998 amendments to the securities laws, and the interaction of Section 22(a) and Section 1452(a), and found that Section 22(a) was not an exception to the bankruptcy removal provision of Section 1452.See id. at 324-30.
An Order issued concurrently with the March 3 Opinion permitted any plaintiff, other than the plaintiffs in the NYCERS action, to show cause by March 21 why the March 3 Opinion did not require the denial of any timely motion to remand that they had filed. On March 20, Milberg Weiss filed a response on behalf of the Intervenors. Each of its arguments had already been fully addressed in the March 3 Opinion. Since the response did not include any grounds for reconsideration of the analysis in the March 3 Opinion, Milberg Weiss's renewed motion for remand on behalf of the Intervenors was denied by Order dated May 5. In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21031974, at *2 (S.D.N.Y. May 5, 2003) ("May 5 Order"). The May 5 Order is the first of the two Orders that the Intervenors now seek to certify for appeal.
On April 25, Milberg Weiss submitted an untimely supplement to its March 20 submission. In that supplement, it argued that remand was now appropriate in light of the April 4 filing of WorldCom's draft Plan of Reorganization with the bankruptcy court. Milberg Weiss argued that federal subject matter jurisdiction would be extinguished in August, the tentative date for confirmation of the plan. An Opinion of May 20 denied the motion, ruling that federal jurisdiction under Section 1334(b) is determined, like federal jurisdiction generally, on the basis of the facts at the time of removal. In re WorldCom, Inc. Sec. Litig., 294 B.R. 553, 556 (S.D.N.Y. 2003) ("May 20 Order"). This is the second Order for which Milberg Weiss seeks certification of an appeal.
On May 29, the Intervenors filed a motion seeking interlocutory certification of the May 5 and May 20 Orders. An Order dated May 30 set a briefing schedule for the motion consonant with the schedule standard in the Southern District: any opposition to the May 29 motion was due by June 13, and the motion was to be fully submitted and ready for a decision by June 20. On June 25, the Underwriter Defendants submitted a sur-reply memorandum; on July 23, the Intervenors filed a notice of recent authority; and on July 28 the Underwriter Defendants submitted a response to Milberg Weiss's July 23 submission.
On August 8, nine days after the Court received the last submission on the Intervenors' motion for interlocutory certification, the Intervenors filed a petition for a writ of mandamus to the Court of Appeals for the Second Circuit. By Order of August 11, the application for certification of an interlocutory appeal was deemed withdrawn without prejudice to its renewal following the completion of the litigation on the petition for a writ of mandamus. On August 14, the Intervenors moved for reconsideration of the August 11 Order. That motion for reconsideration was denied on September 3.
On October 31, the Second Circuit denied the Intervenors' petition for a writ of mandamus, and on November 5, the Intervenors renewed their motion for interlocutory certification. An Order dated November 12 confirmed that the Southern District's standard briefing schedule would apply to the motion: any opposition was due November 18, and the motion was to be fully submitted on November 25. Milberg Weiss filed its reply on November 21. This Opinion considers the arguments raised in both the original and the renewed motions for certification.
Legal Standard
Section 1292 is "a rare exception to the final judgment rule that generally prohibits piecemeal appeals." Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d Cir. 1996). Section 1292(b) provides that
When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order.28 U.S.C. § 1292(b) (emphasis supplied).
Section 1292(b) certification should be "strictly limited because only exceptional circumstances will justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment." Flor v. BOT Fin. Corp., 79 F.3d 281, 284 (2d Cir. 1996) (citation omitted). Section 1292 is to be "reserved for those cases where an intermediate appeal may avoid protracted litigation."Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865-66 (2d Cir. 1996). Among the types of cases the House Committee on the Judiciary thought appropriate for interlocutory appeal was "litigation relating to the transfer of an action where it is claimed that the law does not authorize the transfer." Id. at 866. The Second Circuit has recited one scholar's observation that Section 1292(b)'s requirement that appeal materially advance the termination of the litigation is "aimed to vindicate the final [goal] of saving trial court time by avoiding fruitless litigation." Id. On the other hand, while a question of law is clearly controlling if a reversal of the district court's order would terminate the action, an issue can be "controlling" even if it would not necessarily result in the termination of the action.Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21, 24 (2d Cir. 1990). A court may consider issues of docket congestion and "system-wide costs and benefits of allowing the appeal." Id.
Section 1292(b) is to be narrowly construed, however, and "must be strictly limited to the precise conditions stated in the law."Id. at 25 (citation omitted). The Second Circuit has "urge[d] the district courts to exercise great care in making a § 1292(b) certification." Westwood Pharm., Inc. v. National Fuel Gas Distrib. Corp., 964 F.2d 85, 89 (2d Cir. 1992). For example, an issue of "first impression, standing alone, is insufficient to demonstrate a substantial ground for difference of opinion."Flor, 79 F.3d at 284. A district court must analyze the strength of the arguments before deciding that there is a substantial ground for dispute. Id. At the same time, one of the chief concerns of Section 1292 is the efficiency of the federal court system, and efficiency is of particular concern in large complex cases. See In re Lloyd's American Trust Fund Litig., No. 96 Civ. 1262 (RWS), 1997 WL 458739, at *4 (S.D.N.Y. Aug. 12, 1997). In "so-called `big' cases," courts may grant certification more freely, while remaining attuned to the inefficiency of having the Court of Appeals hear numerous appeals in the same case. Id. Controlling Question of Law
Forty-one plaintiffs in Milberg Weiss Actions seek certification of the following two questions of law:
In its memorandum of law in support of the motion, Milberg Weiss notes that the motion is brought on behalf of the State of Wisconsin Investment Board and the City of Milwaukee Employees' Retirement System only to the extent those plaintiffs are deemed to be covered by the May 5 and May 20 Orders. As noted in the May 5 Order, the State of Wisconsin Investment Board and the City of Milwaukee Employees' Retirement System were among the forty-one pension funds on whose behalf Milberg Weiss filed its motion to intervene in the NYCERS remand motion and on whose behalf Milberg Weiss submitted the March 20 response that was addressed in the May 5 Order. See In re WorldCom, Inc. Sec. Litig., 293 B.R. 308, 315 n. 11 12 (S.D.N.Y. 2003); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21031974, at *2, n. 1 3 (S.D.N.Y. May 5, 2003). The two Wisconsin funds were also among the forty-one plaintiffs whose motions to remand were denied by the May 20 Order. See In re WorldCom, Inc. Sec. Litig., 294 B.R. 553, 555 n. 1 (S.D.N.Y. 2003). Although at least one Milberg Weiss submission to the Western District of Wisconsin indicates that the two Wisconsin plaintiffs did not seek remand of their actions before this Court, as noted in the May 5 Order, that is flatly contradicted by Milberg Weiss's December 6 and March 20 submissions in the Securities Litigation. See In re WorldCom, Inc. Sec. Litig., 2003 WL 21031974, at *2, n. 1.
1. Whether Securities Act claims can be removed under Section 1452 despite the prohibition against removal contained in Section 22(a); and
2. Whether there is federal subject matter jurisdiction over the Securities Act claims in their actions "under the `related to' provision of 28 U.S.C. § 1334 and 1452(a)" where the defendants' indemnification and contribution claims "could not create liability for WorldCom" without the filing of a separate action against WorldCom in the bankruptcy court and where those claims are likely "to be subordinated" in pending bankruptcy proceedings.
Milberg Weiss contends that each of these questions is a controlling question of law because either one could divest this Court of jurisdiction and because each has precedential value for a large number of cases. The defendants agree that these are controlling questions of law.
The Second Circuit has identified an order involving subject matter jurisdiction as an example of an order raising a "controlling" question of law. See Klincrhoffer, 921 F.2d at 24. Moreover, a question can be controlling without necessarily ending the litigation. Although a question of law need not affect a wide range of pending cases to be considered "controlling," the "system-wide costs and benefits" may be considered in determining whether an interlocutory appeal is appropriate. Id.
The first question of law presented by the Intervenors is controlling. It involves a question of federal subject matter jurisdiction that affects a large number of plaintiffs in this consolidated Securities Litigation. The answer will determine whether scores of lawsuits are properly before this Court.
It is less clear that the second question is a controlling question of law. The second question concerns the nature of the connection between this litigation and the WorldCom bankruptcy and asks whether that connection is sufficient to establish federal jurisdiction over the action. While there are important legal issues embedded in the question, as it is posed, it also requires analysis of facts that the March 3 Opinion explored only to the extent necessary to find a basis for jurisdiction. For example, the March 3 Opinion found that the contribution claims supported jurisdiction and did not reach the issue of the indemnification claims, a second ground for jurisdiction pressed by the defendants. The defendants in opposing this certification motion continue to argue that the indemnification claims, and the continuing payment by WorldCom of the attorneys for the directors, supports "related to" jurisdiction. Depending on the nature of any reversal of that portion of the March 3 Opinion that found jurisdiction based on the contribution claims, it may be necessary for this Court to examine whether the indemnification claims provided a basis for jurisdiction. Because the second question is framed in a way that entails findings of fact, and because there are alternative analyses to that of the March 3 Opinion that may support jurisdiction, the plaintiffs have not shown that the second question is a controlling question of law.
If the Court were required to explore whether "related to" jurisdiction existed because of defendants' indemnification claims against the WorldCom bankruptcy estate, it may be appropriate to consider, among other things, rulings by the bankruptcy court on these issues. For example, by Order dated August 1, 2003, the Honorable Arthur J. Gonzalez of the United States Bankruptcy Court noted that WorldCom's right to excess directors and officers and blended liability insurance policies and their proceeds is a core proceeding in the In re WorldCom, Inc. bankruptcy action and held that the automatic stay provision of the Bankruptcy Code extends to declaratory judgment actions filed by the DO insurers. He rejected the insurers' argument that they were only seeking relief against the directors and officers of WorldCom.
Substantial Grounds for a Difference of Opinion
There is a similar division between the two questions posed by the Intervenors when analyzing whether they provide substantial grounds for a difference of opinion. The issue presented by the first question is one of first impression, since no Circuit Court of Appeals has directly examined the interaction of the Securities Act bar to removal in Section 22(a) and the bankruptcy jurisdiction and removal provisions of Sections 1334 and 1452. The existence of substantial grounds for a difference of opinion may also be reflected in the Second Circuit's mandate, which notes that the Honorable James L. Oakes believed the Intervenors would be entitled to a writ of mandamus "if" it was error to hold that Section 22(a) is not an exception to bankruptcy jurisdiction. See In re California Public, 79 Fed. Appx. 478 (2d Cir. Oct. 31, 2003).
On the other hand, there is no difference of opinion on the first issue among the district courts of the Second Circuit. The other district court in this Circuit that has had occasion to address the interplay of Sections 1452 and 22(a), has agreed that Securities Act claims may be removed as related to a bankruptcy proceeding. See In re Global Crossing, Ltd. Sec. Litig., No. 02 Civ. 910 (GEL), 2003 WL 21659360, at *3 (July 15, 2003).
District courts in other circuits have split regarding the analysis in the March 3 Opinion, however. The March 3 Opinion has been followed inCarpenters Pension Trust for S. Cal. v. Ebbers, 299 B.R. 610, 615 (C.D.Cal. 2003), and Pacific Life Ins. Co. v. J.P. Morgan Chase Co., No. SA-CV-03-813-GLT (ANX), 2003 WL 22025158, at *2 (C.D.Cal. June 30, 2003). The leading case to disagree with this analysis isTennessee Consol. Ret. Sys. v. Citigroup, Inc., No. 3:03-0128, 2003 WL 22190841, at *3 (M.D. Tenn. May 9, 2003). Expressing uncertainty about its analysis, the court stayed its ruling pending appeal, which was eventually dismissed by the Sixth Circuit. See Tennessee Consol. Ret. Sys. v. Citigroup, Inc. (6th Cir. 2003). At least two other district courts have followed Tennessee Consolidated and have held that Securities Act claims may not be removed as related to a bankruptcy proceeding. See Illinois Mun. Ret. Fund v. Citigroup, Inc., No. 03-465-GPM, 2003 U.S. Dist. Lexis 16255, at *6 (S.D. Ill. Sept. 9, 2003); City of Birmingham Ret. Relief Fund v. Citigroup, Inc., No. CV-03-BE-0994-S, 2003 WL 22697225, at *3 (N.D. Ala. Aug. 12, 2003).
In addition, the parties report that two cases were remanded through summary orders without waiting for the defendants to respond to the remand motions. Iron Workers of W. Pa. v. Ebbers, No. 03 Civ. 1316 (W.D. Pa. Sept. 30, 2003); W. Pa. Teamsters Employers Pension Fund v. Ebbers, No. 03 Civ. 1315 (W.D.Pa. Sept. 30, 2003).
In sum, although no difference of opinion has arisen in the district courts of this Circuit on the first question presented, a handful of courts elsewhere have reached a different conclusion and at least one member of the Second Circuit has indicated a possible disagreement with this Court's ruling. It appears that there may be ground for a difference of opinion on this issue of first impression sufficient to meet the Section 1292(b) threshold for certification.
The issue presented by the second question — whether the claims of the type present here are sufficient to confer bankruptcy jurisdiction — is less unusual and not a question of first impression. The Court of Appeals for the Second Circuit has spoken on the issue of "related to" jurisdiction. See In re Cuvahocra Equip. Corp., 980 F.2d 110 (2d Cir. 1992). Two other courts also have held that indemnification and/or contribution claims in the WorldCom bankruptcy support "related to" jurisdiction. See Pacific Life Ins., 2003 WL 2205158, at *1 (indemnification and contribution); Tenn. Consol Ret. Sys., 2003 WL 22190841, at *2 (indemnification and contribution). Since the filing of the March 3 Opinion, other district courts in this Circuit have followed its analysis to find that "related to" jurisdiction existed in circumstances similar to those that prevail in the WorldCom litigation. See Connecticut Res. Recovery Auth. v. Lay, 292 B.R. 464, 470 (D. Conn. 2003); In re Global Crossing, Ltd. Sec. Litig., 2003 WL 21659360, at *1.
Reported decisions from at least four courts have held, however, that the contribution and/or indemnification claims in the WorldCom bankruptcy do not support "related to" jurisdiction. See Steel Workers Pension Trust v. Citigroup, Inc., 295 B.R. 747, 753-54 (E.D.Pa. 2003);City of Birmingham Ret. Relief Fund, 2003 WL 22697225, at *3; Illinois Mun. Ret. Fund v. Citigroup, Inc., 2003 U.S. Dist. Lexis 16255, at *7; Retirement Sys. of Ala. v. J.P. Morgan Chase Co., 285 B.R. 519, 530 (M.D. Ala. 2002).
The parties refer to at least two unreported cases in which courts have also ruled that there was no bankruptcy jurisdiction.
It is also important to note that the Intervenors have not shown that there is a substantial ground for a difference of opinion that their actions are "related to" the WorldCom bankruptcy under the standard applied in this Circuit. In particular, they have not shown that "automatic liability," in contrast to the need to file a separate action, must exist for jurisdiction to be present. This issue was fully addressed in the March 3 Opinion, and the Intervenors have not shown where that analysis was wrong. See In re WorldCom, Inc. Sec. Litig., 293 B.R. at 321-24.
Moreover, it is unclear precisely to what the Intervenors are referring in that portion of the question for certification that asks whether "claims that are likely to be subordinated" in a bankruptcy proceeding. Assuming that this refers to the fact that the claims may be extinguished in a plan of reorganization, then the Intervenors have not shown that there is a substantial basis for disagreeing with the holding in the May 20 Opinion that jurisdiction is determined as of the time of removal. In this regard, it is important to observe that the bankruptcy court has continued throughout its proceedings to indemnify the WorldCom directors for their legal expenses in defending against this civil litigation, and that the Honorable Arthur Gonzalez, who is overseeing the WorldCom bankruptcy, has declared that litigation regarding the insurance policies through which those payments are apparently being made is a "core" bankruptcy proceeding.
Ultimate Termination of the Litigation
The third prong of Section 1292(b), which requires a finding that an immediate appeal may materially advance the ultimate termination of the litigation, poses the greatest challenge for the movants. A decision on either question presented through this certification motion will not advance the ultimate termination of this litigation, if that issue should be understood as terminating the active litigation of a case, as opposed to terminating the litigation of the case before a particular court.
Indeed, even with an affirmance of the reasoning in the March 3 Opinion, there may be additional motion practice. If the Court of Appeals decides that the remand motions were properly denied, Milberg Weiss has indicated that it will move to amend the complaints in the Milberg Weiss Actions to plead state law claims and fraud claims under the Securities Exchange Act of 1934.
As described briefly above, the Milberg Weiss Actions consist of at least forty-seven individual actions filed by at least 120 public and private pension funds. Those actions have been consolidated for pre-trial purposes with the WorldCom Securities Litigation, which includes consolidated class actions as well as individual actions brought by plaintiffs represented by counsel other than Milberg Weiss. The progress of the Securities Litigation has been swift, and thick with motion practice brought by all parties. If the present appeal is certified, accepted and granted, the Milberg Weiss Actions may be remanded, but it is unlikely that they will terminate as a consequence of that remand. The litigation will not terminate, it will multiply into scores of separate state court actions, proceeding on different schedules in courts across the country. At the same time, the vast class action litigation will remain here and will continue apace.
By comparison, it is much more likely that several Milberg Weiss Actions will be terminated on statute of limitations grounds. On November 21, 2003, the Court granted in part the motion to dismiss claims against certain defendants in one Milberg Weiss Action as time-barred on statute of limitations grounds, and to dismiss claims based on a private placement of securities in December 2000. Defendants have now moved to dismiss approximately nine Milberg Weiss Actions for the reasons set forth in the November 21 Opinion. Those motions are set to be fully submitted on January 9, 2004, and if granted would result in a dismissal with prejudice. An appeal from final judgments entered in those actions would raise not only the issues decided in the November 21 Opinion, but also the questions of subject matter jurisdiction presented through this certification motion.
By Order dated November 14, fact discovery in the consolidatedSecurities Litigation (with the exception of fact discovery of the plaintiffs in the individual actions) is scheduled to conclude on June 18, 2004, summary judgment motions in the class action are to be fully submitted by August 27, 2004, and the trial of the class action is to begin on January 10, 2005.
In multidistrict litigation, however, it is important to view the "ultimate termination" of litigation in broad perspective. After all, the cases transferred to this Court by the MDL Panel are visitors to this district, here for pre-trial purposes only. Eventually, if not settled during the pre-trial stages, and if they survive motion practice, they will return home to district courts across the country for trial, and will reach their ultimate conclusions there. In multidistrict litigation, as the Honorable Robert W. Sweet has noted, the better practice may be to allow appeal of appropriate issues before the transferred cases are returned for trial. See In re Air Crash Off Long Island, New York on July 17, 1996, 27 F. Supp.2d 431, 434 (S.D.N.Y. 1998). Although MDL cases may be less "exceptional" now than they were when Judge Sweet considered the issue — particularly here in the Southern District — his reasoning remains apt. An appropriate appeal while the cases remain consolidated for pre-trial purposes may materially advance the ultimate termination of the litigation by avoiding "protracted litigation and multiple appeals in courts throughout the country." Id.
At a minimum, the first question presented by this motion presents an appropriate question for appeal. Because no circuit court has yet ruled on the issue, it has generated and continues to generate duplicative and time-consuming motion practice. If not resolved at this juncture, the issue will need to be addressed by separate courts of appeals unless the litigation concludes through settlement. Such duplicative and distant review of an issue of subject matter jurisdiction ill serves the litigants and the court system.
There are similar concerns with respect to the second question. Yet, because the issue of the reach of bankruptcy jurisdiction is not novel, and because the question as posed by Milberg Weiss entails to some degree a fact-specific inquiry, this question is by its very nature less appropriate for interlocutory appellate review. On balance, and after considering each of the factors in Section 1292(b), this Court finds it appropriate to certify only the first of the two questions framed by the forty-one movants.
This certification of a question for interlocutory appellate review is based on the current state of this litigation. The landscape in which this litigation is being conducted is constantly shifting. It may well again change significantly in the coming weeks as plaintiffs in individual actions choose whether to pursue their separate actions, or to join the consolidated class action, and as many individual action plaintiffs face motions to dismiss their claims in whole or in part. The opt out period for the class action ends on February 20, 2004, and the plaintiffs in the individual actions have been advised in a Notice sent directly to each of them that they must opt out of the class action if they desire to continue with their individual actions. Should the forty-one plaintiffs who bring this renewed motion decide not to opt out of the class, or decide for other reasons to discontinue the effort to pursue the remand of their actions, then certification would no longer be warranted.
A brief epilogue is required to address Milberg Weiss's repeated accusations that this Court has "delayed" consideration of this motion. Milberg Weiss contends that it waited more than seventy days before filing its petition for a writ of mandamus, and that as of December 1, it has waited 102 days for a decision. When Milberg Weiss renewed its motion on November 5, the defendants were allowed the standard two weeks to oppose the motion, and Milberg Weiss received the usual week to reply. The motion was due to be fully submitted on November 25, but Milberg Weiss filed its reply on November 21 in order to expedite its motion.
It is unclear what the 102 day figure is intended to measure. The seventy days that the first motion was purportedly pending, is incorrectly measured from the date the notice of motion was first filed, rather than the date on which the motion was fully submitted. When Milberg Weiss filed its petition for mandamus, its first motion for interlocutory certification had in fact been pending less than fifty days from the date of its reply brief, fourteen days from its last submission on the motion, and nine days from the defendants' response.
This is a complex securities litigation which is moving as swiftly and smoothly as its girth allows. Scores of individual actions have been consolidated with the class actions: The sheer bulk of parties and issues has generated a significant amount of motion practice and requires continuous case management and frequent conferences. In this case, as in all civil and criminal cases, the Court has made every effort to allow all parties an opportunity to be fully heard and to respond quickly, thoughtfully and thoroughly to the many issues raised. The Milberg Weiss motion joined the long queue of motions in this case (and in the Court's civil and criminal dockets), each raising issues of importance to the movants and those opposing them. It has been decided within a month of being fully submitted and no motion fully submitted after it in the Securities Litigation was addressed before it.
See, e.g., In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21219037 (S.D.N.Y. Dec. 1, 2003) (corrected amended complaint); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22831008 (S.D.N.Y. Nov. 25, 2003) (denying motion to dismiss in Ohio action); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22738546 (S.D.N.Y. Nov. 21, 2003) (motion to dismiss claims in Milberg Weiss Actions);In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22701241 (S.D.N.Y. Nov. 17, 2003) (addressing Milberg Weiss's provision of potentially misleading information to putative class members); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22533398 (S.D.N.Y. Nov. 7, 2003) (motion for interlocutory appeal); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22420467 (S.D.N.Y. Oct. 24, 2003) (granting motion for class certification); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22383090 (S.D.N.Y. Oct. 20, 2003) (unanimity and removal); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22299350 (S.D.N.Y. Oct. 7, 2003) (Rule 41(a) clarification); In re WorldCom, Inc. Sec. Litig., Nos. 02 Civ. 3288, 03 Civ. 1052, 03 Civ. 1897 (DLC), 2003 WL 21872391 (S.D.N.Y. Aug. 8, 2003) (consolidation of GOALs actions); In re WorldCom, Inc. Sec. Litig., Nos. 03 Civ. 1283, 03 Civ. 3860, 03 Civ. 2839, 03 Civ. 4499, 03 Civ. 3859, 03 Civ. 4500 (DLC), 2003 WL 21702284 (S.D.N.Y. Jul. 23, 2003) (remand); In re WorldCom, Inc. Sec. Litig., Nos. 02 Civ. 3288, 03 Civ. 3593, 03 Civ. 3597, 03 Civ. 2840, 03 Civ. 3594, 03 Civ. 3298, 03 Civ. 3591, 03 Civ. 3595, 03 Civ. 3599 (DLC), 2003 WL 21705229 (S.D.N.Y. Jul. 23, 2003) (remand); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21488087 (S.D.N.Y. Jun. 25, 2003) (motion to dismiss the auditors); In re WorldCom, Inc. ERISA Litig., 263 F. Supp.2d 745 (S.D.N.Y. 2003) (motion to dismiss);In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21242882 (S.D.N.Y. May 29, 2003) (consolidation opinion order);In re WorldCom, Inc. Sec. Litig., 02 Civ. 3288 (DLC), 2003 WL 21219049 (S.D.N.Y. May 19, 2003) (motion to dismiss); In re WorldCom, Inc. Sec. Litig., 294 B.R. 553 (S.D.N.Y. 2003) (remand bankruptcy reorganization); In re WorldCom, Inc. Sec. Litig., Nos. 02 Civ. 3288, 03 Civ. 167, 03 Civ. 338, 03 Civ. 998 (DLC), 2003 WL 21031974 (S.D.N.Y. May 5, 2003) (remand); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 1563412 (S.D.N.Y. Mar. 25, 2003) (severance); In re WorldCom, Inc. Sec. Litig., Nos. 02 Civ. 3288, 02 Civ. 8981 (DLC), 2003 WL 716243 (S.D.N.Y. Mar. 3, 2003) (remand); In re WorldCom, Inc. Sec. Litig., Nos. 02 Civ. 3288, 02 Civ. 8981, 02 Civ. 9520 (DLC), 2002 WL 31867720 (S.D.N.Y. Dec. 23, 2002) (individual actions); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2002 WL 31729501 (S.D.N.Y. Dec. 5, 2002) (stays); In re WorldCom, Inc. Sec. Litig., 234 F. Supp.2d 301 (S.D.N.Y. 2002) (discovery); In re WorldCom, Inc. ERISA Litig., No. 02 Civ. 4816 (DLC), 2002 WL 31599531 (S.D.N.Y. Nov. 18, 2002) (lead plaintiff); In re WorldCom, Inc. ERISA Litig., No. 02 Civ. 4816 (DLC), 2002 WL 31095170 (S.D.N.Y. Sept. 18, 2002) (consolidation); Albert Fadem Trust v. WorldCom, Inc., No. 02 Civ. 3288 (DLC), 2002 WL 31059859 (S.D.N.Y. Aug. 15, 2002) (consolidation and lead plaintiff); Albert Fadem Trust v. WorldCom, Inc., No. 02 Civ. 3288 (DLC), 2002 WL 1485257 (S.D.N.Y. July 12, 2002) (stay).
Milberg Weiss has never had occasion to invoke the rule in this Court's Individual Practices that requires parties in all civil cases to advise the Court if a fully submitted motion has been pending for 60 days. This decision is being issued well within the Court's self-imposed deadline for deciding motions.
Similarly, prior to the Intervenors' filing of their petition for a writ of mandamus on August 8, 2003, no opinion was issued for a motion in the Securities Litigation that had been fully submitted after June 20 (the date on which the first Section 1292(b) motion was fully submitted). The only decisions on motions that were entered during that time in the Securities Litigation were decisions on two remand motions by individual action plaintiffs (including plaintiffs in six Milberg Weiss Actions) that summarily denied the motions for the reasons stated in the March 3 Opinion without requiring responsive briefing, and the entry of a consolidation order in related litigation.
Conclusion
The motion for certification of an interlocutory appeal of the May 5 and May 20 Orders is granted as to the first question posed by the forty-one plaintiffs in Milberg Weiss Actions. The Underwriter Defendants' requests for permission to submit their June 25 sur-reply and July 28 response are granted.SO ORDERED