Opinion
00 CIV. 2284 (DLC), 00 CIV. 2498 (DLC)
October 22, 2002
MEMORANDUM OPINION AND ORDER
On October 4, 2002, this Court approved a final settlement between the class action plaintiffs in the Cromer action and defendants Fund Administration Services (Bermuda) Ltd., Ernst Young Bermuda and Kempe Whittle Associates Limited (now known as Ernst Young Services Limited) (collectively, the "Ernst Young Defendants"), as well as Ernst Young International. A partial judgment pursuant to Rule 54(b), Fed.R.Civ.P., was signed on October 4, 2002 in Cromer and on October 15, 2002 in Argos, a related joinder action. This Memorandum Opinion provides an explanation for the entry of partial judgments pursuant to Rule 54(b).
These cases arise out of the alleged fraud perpetrated on investors in the Manhattan Investment Fund (the "Fund"). The Cromer securities fraud class action was filed on March 24, 2000, alleging that the Fund's manager, Michael Berger, hid the Fund's losses by manufacturing false statements showing the Fund to be profitable. The investors in the Fund suffered losses of approximately $394 million. In addition to the claims against the setthng defendants, the plaintiffs sued and continue to litigate against the Fund's auditors, Deloitte Touche Bermuda and Deloitte Touche Tohmatsu, among others.
By Order of October 4, 2002, after a hearing, the proposed settlement in Cromer was approved as fair, reasonable and adequate in all respects. The settlement provides that the plaintiffs in the Cromer and Argos actions will receive an aggregate payment of $40,800,000, less attorneys fees and expenses to be approved. Prior to entering into an agreement with the setting defendants, the parties had engaged in extensive discovery, as well as significant jurisdictional and substantive motion practice. The experience of the counsel for all parties, the complexity of the factual and legal issues and the likelihood of further litigation exhausting the insurance funds that would otherwise be available to the settlement class insured that the settlement, as approved, was a just way of resolving all claims between the Cromer plaintiffs and the setting defendants. Although the Court has yet to approve an award of fees associated with the settlement, all legal and factual disputes between the parties to the settlement were effectively resolved through the settlement.
Rule 54(b) states in relevant part:
When more than one claim for relief is presented in an action . . . or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.
Fed.R.Civ.P. 54(b). For entry of a partial judgment under 54(b), there must be
(1) multiple claims or multiple parties . . ., (2) at least one claim, or the rights and liabilities of at least one party must be finally decided within the meaning of 28 U.S.C. § 1291, and (3) the district court must make "an express determination that there is no just reason for delay" and expressly direct the clerk to enter judgment.Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 16 (2d Cir., 1997)
As discussed above, in this case there are multiple parties, and all issues relating to the claims against the setting defendants have been resolved. Entry of a partial judgment will permit the Fund investors to receive a distribution of approximately $40,800,000, less attorneys' fees. Delay in entry of a judgment until the claims against the remaining defendants are resolved is not warranted. The losses in this case occurred prior to the collapse of the Fund in January 2000. Summary judgment motions by the remaining defendants will not be fully submitted for some months; a trial of any surviving claims has not yet been scheduled. There is no reason to delay entering a partial judgment at this juncture; indeed, failing to do so could frustrate the goals of the negotiated settlement.
Accordingly, a partial judgment has been entered in the Cromer andArgos actions pursuant to Rule 54(b), Fed.R.Civ.P. as to defendants Fund Administration Services (Bermuda) Ltd., Ernst Young Bermuda and Kempe Whittle Associates Limited (now known as Ernst Young Services Limited) and Ernst Young International.