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POLAR INTERNATIONAL BROKERAGE CORP. v. REEVE

September 19, 2000

POLAR INTERNATIONAL BROKERAGE CORP., CHRISTOPHER CORROON, PETER CORROON AND FAITH
V.
HYNDMAN, ON THEIR OWN BEHALF AND ON BEHALF OF ALL SIMILARLY SITUATED SHAREHOLDERS OF WILLIS CORROON GROUP, PLC, PLAINTIFFS, V. JOHN REEVE, THOMAS COLRAINE, BRIAN D. JOHNSON, GEORGE F. NIXON, KENNETH H. PINKSTON, MICHAEL R. RENDLE, JOSEPH M. RODGERS, WILLIAM A. SCHREYER, ALLEN SYKES, RAYMOND G. VIAULT, PATRICK LUCAS, WILLIS CORROON GROUP, PLC, TRINITY ACQUISITION, PLC, KOHLBERG KRAVIS ROBERTS & CO., L.P., GUARDIAN ROYAL EXCHANGE, ROYAL & SUNALLIANCE, THE CHUBB CORPORATION, THE HARTFORD FINANCIAL SERVICES GROUP, INC., TRAVELERS PROPERTY CASUALTY CORP., WARBURG DILLON READ, INC., CHASE MANHATTAN BANK AND HSBC INVESTMENT BANK, DEFENDANTS.



The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.

MEMORANDUM ORDER

In a Memorandum Order dated August 8, 2000, this Court imposed sanctions against plaintiffs' counsel for violations of Rule 11 in connection with the above-captioned securities fraud action. See Polar Int'l Brokerage Corp. v. Reeve, 98 Civ. 6915, 2000 WL 1127936 (S.D.N.Y. Aug. 8, 2000)[hereinafter "Polar III"].*fn1 Plaintiffs' counsel now seeks, pursuant to Rule 6.3 of the Local Civil Rules for the United States District Courts for the Southern and Eastern Districts of New York, reconsideration of the August 8 Order.*fn2 With two exceptions, reconsideration is denied.

I. Legal Standard

"[R]econsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). Motions for reconsideration must be narrowly construed and the standard strictly applied "to discourage litigants from making repetitive arguments on issues that have been thoroughly considered by the court", "to ensure finality" and "to prevent the practice of a losing party examining a decision and then plugging the gaps of the lost motion with additional matters". Range Road Music, Inc. v. Music Sales Corp., 90 F. Supp.2d 390, 391-92 (S.D.N.Y. 2000) (quotation marks and citations omitted).

II. Discussion*fn3

The August 8 Order concluded that (i) sanctions were not warranted with respect to plaintiffs' § 13(e) claim because that claim, while meritless, was not legally frivolous for purposes of Rule 11, see Polar III, 2000 WL 1127936, at *2; (ii) sanctions were warranted with respect to plaintiffs' § 14(e) claim because that claim was both legally frivolous and without factual support in violation of Rules 11(b)(2) and (b)(3), see id. at *2-4; and (iii) sanctions against Lead Counsel were warranted on the additional ground that Lead Counsel made conflicting assertions to both this Court and the plaintiff class concerning the fairness of the tender offer at the heart of plaintiffs' suit, see id. at *4-6. Pursuant to these findings, the Court assessed sanctions against plaintiffs' counsel in the total amount of $105,191.43. See id. at *6. This figure represents 80% of the reasonable attorneys' fees and expenses incurred by defendants' counsel in seeking dismissal of the amended complaint. See id.*fn4 I reduced the requested fees by 20% based upon my determination that plaintiffs' § 13(e) claim — one of five claims asserted — was colorable for purposes of Rule 11. See id. Finally, sanctions were imposed 70% against Lead Counsel and 30% against Berger & Montague, counsel for Hyndman, in light of the fact that Hyndman did not join the litigation until the amended complaint was filed. See id.

Plaintiffs' counsel now seeks reconsideration of the August 8 Order citing various grounds, three of which are briefly addressed below.*fn5

A. Limited Role of Berger & Montague

Berger & Montague urges this Court to strike — or, alternatively, to significantly reduce — the sanctions imposed against it. Berger & Montague argues that this Court did not "consider [its] limited role and its actual involvement in [plaintiffs'] case". B&M Mem. at 1-2.

As evidenced by the allocation of sanctions 30% against Berger & Montague and 70% against Lead Counsel, this Court certainly considered Berger & Montague's relatively limited role in the litigation. However, the Court did not fully appreciate to what extent Berger & Montague acted solely at the direction of Lead Counsel. See B&M Mem. at 2-4. The Court was similarly unaware that Berger & Montague was "not made privy to . . . certain matters relevant to the imposition of sanctions". Id. at 4. Specifically, the August 8 Order references several letters in which defendants encouraged plaintiffs to voluntarily withdraw their amended complaint and warned that, if plaintiffs failed to do so, defendants would seek sanctions. See Polar III, 2000 WL 1127936, at *3 n. 8. In its motion for reconsideration, Berger & Montague explains that the cited warning letters . . . from defense counsel were addressed only to Lead Counsel, not to Berger & Montague. Moreover, Lead Counsel did not transmit these letters to Berger and Montague. Berger & Montague neither received nor had knowledge of the contents of these letters. Notably, the letter from [defendants' counsel] Paul C. Curnin [of Simpson Thacher] states, "I have explained in detail why your allegations are baseless. . . ." Berger & Montague was unaware not only of the letter Curnin sent but also of the information provided to Lead Counsel referred to by Curnin. B&M Mem. at 4 (emphasis in original).*fn6

Berger & Montague signed its name to the amended complaint and various other materials filed with this Court.

Therefore, regardless of the firm's limited knowledge and attenuated role, some amount of sanctions is warranted. However, after reweighing the equities in light of Berger & Montague's motion, I grant that firm's request for a reduction in the sanctions previously imposed. Accordingly, the amount of sanctions assessed against Berger & Montague is hereby reduced from 30% to 10%. The 20% difference is not added to Lead Counsel's share for reasons discussed infra Part II.C.

B. No Inconsistency Between § 13(e) and § 14(e) Rulings

Plaintiffs' counsel also seeks reconsideration based upon an alleged inconsistency between my treatment of plaintiffs' § 13(e) and § 14(e) ...


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