Opinion
Case No. 03-CV-63.
April 18, 2007
OPINION AND ORDER
I. INTRODUCTION
This matter comes before the Court on the United States Securities and Exchange Commission's (the "SEC" or the "Commission") Motion to enter final judgment against certain defendant on certain counts of the complaint pursuant to Fed.R.Civ.P. 54(b). For the reasons stated herein, the SEC's Motion for Final Judgment is DENIED.
II. BACKGROUND
This enforcement action filed by the SEC involves alleged insider trading in the stock of Worthington Foods, Inc. ("Worthington"). The SEC alleges that Defendant Roger D. Blackwell ("Blackwell"), a director of Worthington, provided illegal tips to close friends and family members prior to the October 1, 1999, announcement that the Kellogg Company ("Kellogg") had entered into an agreement to acquire Worthington. The SEC contends that these tips allowed the other named Defendants to profit in violation of the federal securities laws. Jurisdiction is proper under Sections 21 and 27 of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §§ 78u and 78aa. The other Defendants include Kelly Hughes ("Hughes"), Kevin Stacy ("Stacy"), Roger Blackwell in his capacity as trustee of the Blackwell Associates Pension Plan Trust (the `Trust"), Arnold Jack ("Jack"), Black-Jack Enterprises (Black-Jack), Dale Blackwell, and Christian Blackwell.On March 20, 2007, this Court issued an opinion granting summary judgment in favor of the SEC against certain Defendants on certain counts. Specifically, this Court granted summary judgment: (1) against Blackwell, Hughes, and Stacy on Count I, liability for violating of Section 10(b); (2) against the Trust on Count I, finding liability for violating of Section 10(b); and (3) against Blackwell on Count II, finding liability for violating Section 16(a) with respect to the Trust's illegal Worthington stock trades. The court issued a permanent injunction against Blackwell, Hughes, and Stacy, enjoining them from violating Section 10(b) of the Securities Act and any rules promulgated thereunder. The court also entered an injunction against Blackwell, enjoining him from violating Section 16(a) of the Exchange Act. It also granted a disgorgement order against Blackwell, Hughes, and Stacy, jointly and severally, in the amount of $104,954.72 and against Blackwell and the Trust, jointly and severally, in the amount of $57,023.29. This Court also awarded prejudgment interest against Blackwell, Hughes, and Stacy, jointly and severally, in the amount of $51,363.49 and against Blackwell and the Trust, jointly and severally, in the amount of $27,906.47. It denied the SEC's Motion for Summary Judgment against Blackwell on Count II, relating to liability for violating Section 16(a) with respect to the Black-Jack's allegedly illegal Worthington stock trades.
III. STANDARD OF REVIEW
Fed.R.Civ.P 54(b) states, in relevant part, that "when more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, 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." In allowing the trial court to certify a claim against one party for final appeal, Rule 54(b) "tries to strike a balance between the undesirability of piecemeal appeals . . . and the need to make the appellate process available in multi-claim and multi-party litigation to serve the best interests of the parties." Jalapeno Property Management, LLC v. Dukas, 265 F.3d 506, 513 (6th Cir. 2001). In reviewing a district court's decision under Rule 54(b), the appellate court should give substantial deference to the decision of the trial court as long as it articulates the reasons for its decision. Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 12 (1980); Akers v. Alvey, 338 F.3d 491, 495 (6th Cir. 2003).The party seeking Rule 54(b) need not show that "harsh or unusual circumstances" merit such a ruling; instead, "the proper standard against which a district court's exercise of discretion in granting a Rule 54(b) certification is to be judged is the interest of sound judicial administration." Curtiss-Wright, 446 U.S. at 9. Furthermore, the Sixth Circuit, in Akers v. Alvey, 338 F.3d 491, 495 (6th Cir. 2003) citing Corrosioneering, Inc., v. Thyssen Env. Sys., Inc., 807 F.2d 1279, 1283 (6th Cir. 1986) delineated five factors which the trial court should consider when deciding whether to certify a judgment as final:
"1) the relationship between the adjudicated and the unadjudicated claims;
(2) the possibility that the need for review might or might not be mooted by future developments in the district court;
(3) the possibility that the reviewing court might be obliged to consider the same issue a second time;
(4) the presence or absence of a claim or counterclaim which could result in set-off against the judgment sought to be made final;
(5) miscellaneous factors such as delay, economic and solvency considerations, shortening the time of trial, frivolity of competing claims, expense, and the like."
The court is free to weigh the factors unequally based on a case-by-case basis and need not find that each factor favors certification in order to grant it. See Curtiss-Wright, 446 U.S. at 8 n. 2.
IV. ANALYSIS
On April 5, 2007, the SEC submitted to the Court a proposed Judgment Order against Defendants Blackwell, Hughes, Stacy, and the Trust on the aforementioned counts on which the Court has entered summary judgment in favor of the SEC. The proposed order specifies the language for the respective injunctions against Blackwell, Hughes, and Stacy. It also demands that Blackwell, Hughes, Stacy, and the Trust pay the ordered disgorgement and prejudgment interest within tens days of the issuance of the proposed order. In Section VIII of the proposed order, the SEC states that "there being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, the Clerk is ordered to enter this Judgment forthwith and without further notice." The Court will take this as a motion by the SEC for the Court to enter final judgment against Blackwell, Hughes, the Trust, and Stacy on Count I, and against Blackwell on Count II for violating Section 16(a) with respect to the Trust's illegal Worthington stock trades under Fed.R.Civ.P. 54(b).
The Aker's Factors A.) The Relationship Between the Claims on Which Summary Judgment Was Granted and the Remaining Claims
There is a significant connection between the remaining claims in this SEC action and the 10(b) and 16(a) counts on which Defendants Blackwell, Hughes, Stacy, and the Trust have been found liable. Another 16(a) claim is also pending against Blackwell which relates to his failure to report the Worthington stock transactions for the Black-Jack trades. In addition, 10(b) counts remain pending against Blackwell, Christian Blackwell, Dale Blackwell, Jack, And Black-Jack relating to Blackwell's alleged tipping of the Worthington merger. All claims in this case are intertwined. They all stem from Blackwell's alleged passing of inside information regarding the Worthington merger to friends and family.B.) Mootness of Appellate Review
If this Court enters final judgment on the counts on which it granted summary judgment, and the Parties chose to appeal, future rulings of this Court will not moot the necessity of appellate review of this Court's summary judgment opinion. Summary judgment opinions are reviewed de novo by the Sixth Circuit. This same review would be required whether Plaintiffs appeal this ruling immediately or choose to wait until all claims in this case have been adjudicated.
C.) The Likelihood of Duplicative Appellate Review
Granting the SEC's Rule 54(b) Motion and certifying these claims for final appeal is unlikely to lead to duplicative appellate review. The issues in the summary judgment motion are discreet. The main issues in this Court's summary judgment opinion were collateral estoppel and imputation of Hughes' actions to the Trust. These issues will not be raised at trial. The trial will involve the merits of the SEC's 10(b) accusations against Blackwell for allegedly tipping Defendants Jack, Black-Jack, Christian Blackwell, and Dale Blackwell about the Worthington merger.D.) Set-Off
There exists no claim or counterclaim that would result in a set-off against the disgorgement and prejudgment interest that this Court has ordered Blackwell, Hughes, Stacy, and the Trust to pay. Blackwell and other Defendants, however, face the possibility of additional disgorgement. In addition, the SEC has stated its intent to pursue civil penalties against all Defendants. Judicial economy favors one final order which details all the disgorgement and fines that the Defendants are required to pay.
E.) Miscellaneous Considerations
This Court's desire to avoid the possibility of multiple trials weighs in favor of granting the SEC's rule 54(b) Motion. In the event that the Sixth Circuit reverses this Court's award of summary judgment to the SEC, the SEC could pursue the reversed counts in the same trial in which it pursues the remaining claims. If this Court waits until the end of this action to enter final judgment, and then the Sixth Circuit overturns this Court's summary judgment ruling, a second trial is likely to result.
Certifying these issues for immediate appeal, however, will cause significant delay to this court's trial schedule. It would also cost both parties more money to have to go through the appeals process twice, instead of just at the conclusion of the upcoming trial.
V. CONCLUSION
Certifying certain claims for interlocutory appeal is generally a disfavored practice. See General Acquisition v. Gencorp, Inc., 23 F.3d 1022, 1027 (6th Cir. 1994). Efficient case management and the undesirability of piecemeal appeals make it such that it is rare for a court to certify certain claims for interlocutory appeal. See, generally, id. While certain factors weigh in favor of entering final judgment on the requested claims, on the whole, this Court finds that it would be more efficient to dispose of this matter at one time, thus preventing multiple trips to the Sixth Circuit.
No Defendant has been disposed of by this Court's summary judgment opinion. Several 10(b) counts and one 16(a) count remain pending against Blackwell. Hughes and Stacy still face civil penalties. In addition, several 10(b) counts have yet to be adjudicated against Jack, Christian Blackwell, Dale Blackwell, and Black-Jack. In general, when the adjudicated and pending claims are intertwined, the court should wait until the conclusion of the action to enter final judgment. See Solomon v. Atena Life Ins. Co., 782 F.2d 58, 62 (6th Cir. 1986) ("We think judicial economy will best be served by delaying appeal until all the issues can be confronted by this Court in a unified package. This is particularly true where the adjudicated and pending claims are closely related and stem from essentially the same factual allegations.") Thus, for the foregoing reasons, this Court DENIES the SEC's Motion to Enter Final Judgment.
The Court notes, however, that its summary judgment opinion serves to enjoin Defendants from violating Section 10(b) and Defendant Blackwell from violating Section 16(a). The Court intends to enter a final judgment containing the language of the permanent injunction, as well as setting out the parameters for Defendants to pay the ordered disgorgement and prejudgment interest at the conclusion of this action.