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BUXBAUM v. DEUTSCHE BANK AG

May 3, 2003

HADASSA Y. BUXBAUM, ET AL., PLAINTIFFS, AGAINST DEUTSCHE BANK AG AND ROLF-ERNST BREUER, DEFENDANTS.


The opinion of the court was delivered by: John G. Koeltl, United States District Judge

OPINION AND ORDER

This is a motion to intervene, pursuant to Fed R. Civ. P. 24(a), brought by MDNH Traders LLC ("MDNH") and a motion pursuant to Fed.R.Civ.P. 60(b), to vacate the Order and Final Judgment issued on September 5, 2002, approving the class action settlement in this action. Deutsche Bank AG and Rolf-Ernst Breuer (the "defendants") and Hadassa Y. Buxbaum, Nancy Neale Enterprises, Inc., Bright Trading Incorporated by Tony Gentile, Melvin Hall, and Russel P. Young (collectively "the Lead Plaintiffs") have opposed the motions.

I.

On April 12, 1999, the Lead Plaintiffs filed a First Amended Complaint, alleging violations of federal securities laws, including § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, by Deutsche Bank, AG and Rolf-Ernst Breuer (collectively the "defendants"), arising out of allegedly false statements made by Breuer denying the existence of takeover talks between Deutsche Bank AG ("Deutsche Bank") and Bankers Trust Corporation ("Bankers Trust"). The First Amended Complaint alleged that these false statements were made during an interview with a German magazine published on October 25, 1998 and alleged that these statements had the effect of depressing the price of Bankers Trust stock.*fn1

An order was issued on November 3, 2000 granting the Lead Plaintiffs' unopposed motion for class certification of "all persons [subject to certain exceptions not here relevant] who sold the common stock or call options, or purchased put options of Bankers Trust Corporation between October 26, 1998 through and including November 20, 1998" (the "Class"). (Order dated Nov. 3, 2003 ("Class Certification Order") at 2.) The Lead Plaintiffs were designated as the representatives of the class. (See id.)

An order was issued on February 9, 2001, directing the defendants to direct the Bankers Trust's transfer agent to provide to the Lead Plaintiffs the names and addresses of all persons who sold Bankers Trust common stock during the class period. (Order dated Feb. 9, 2001 ("Class Notice Order") at ¶ 1.) The Class Notice Order directed the Lead Plaintiffs to mail a "Notice of Pendency" of the class action to those class members identified by Bankers Trust and individuals who requested copies of the Notice of Pendency, and requested that securities brokers, financial institutions, and relevant nominee companies who received the Notice to send it to the relevant class members. (Class Notice Order ¶¶ 1-4.) The Class Notice Order also provided that the Lead Plaintiffs were to cause the publication of a summary notice of pendency of class action on one occasion in the national edition of the Wall Street Journal and PR or Business Wire within 10 days of the mailing of the Notice of Pendency. (Class Notice Order ¶ 3.) The order provided that parties wishing to opt out of the class must file a notice of exclusion postmarked 45 days after the mailing date of the Notice of Pendency.

The Notice of Pendency was mailed to these individuals and entities beginning on April 4, 2001. (Aff. of Jack R. DeGiovanni ("DeGiovanni I Aff.") dated Aug. 19, 2002 ¶ 2.) In addition, a Summary Notice of the Pendency of Class Action was also published.

After the class was certified, the parties engaged in and completed extensive pre-trial discovery. Shortly before trial, with the assistance of the mediation by former Judge Nicholas Politan, the Lead Plaintiffs and the defendants were able to arrive at a tentative settlement. On June 19, 2002 the Preliminary Approval Order tentatively approving the settlement was issued. The settlement provided for a settlement fund of $58 million. Pursuant to this order, the Court approved the form and content of the "Notice of Proposed Settlement of Class Action, Hearing on Proposed Settlement and Attorneys' Fee Petition and Right to Share in Settlement Fund" (the "Notice"). (Order dated June 19, 2002 ("Preliminary Approval Order") at ¶ 3.) In addition, the Court approved the form and content of the "Proof of Claim and Release Form" (the "Proof of Claim") as well as the Summary Notice to be published. (Id.) This Preliminary Approval Order provided that a fairness hearing on the proposed settlement would be held on September 5, 2002 and that the deadline for the filing any objections to the settlement was August 22, 2002. (Preliminary Approval Order ¶¶ 2, 10.)

The Preliminary Approval Order contained provisions for providing the Notice and Proof of Claim to class members. Pursuant to those provisions, the Lead Plaintiffs' claim administrator mailed 14,600 copies of the Notice and Proof of Claim to potential class members and brokers, based on lists provided by the defendants and the Bankers Trust transfer agent. (DiGiovanni I Aff. ¶ 5.) The Summary Notice was published in The Wall Street Journal and USA Today on July 9, 2002. (Decl. of Stanley Bernstein & Lester L. Levy ("Joint Decl.") dated August 29, 2002 ¶ 86.) Despite the sophisticated nature of some of the institutional members of the class, no objections to the settlement were filed. A fairness hearing was conducted by the Court on September 5, 2002. (Joint Decl. ¶ 87.) The Order and Final Judgment approving the settlement was issued by the Court on September 5, 2002 and entered on September 11, 2002. (Order dated September 5, 2002 ("Judgment Order" or "Order and Final Judgment").)

In the Order and Final Judgment this Court found that the terms of the settlement and the Plan of Allocation for damages to be "fair, just, reasonable and adequate" for the class. (Judgment Order ¶¶ 5, 7.) In addition, the Notice of settlement given to class members was found to be "the best notice practicable under the circumstances" and it also "fully satisfied the requirements of Fed.R.Civ.P. 23 . . . and the requirements of due process." (Judgment Order ¶¶ 11.)

As part of the Judgment Order, the Lead Plaintiffs and each Class member, with the exception of three individuals who had opted out of the class, were "deemed to have . . . fully, finally, and forever released, relinquished and discharged all Released Claims against the Released Parties, whether or not such Class member executes and delivers the Proof of Claim and Release." (Judgment Order ¶ 8.) All class members, with the exception of the three individual opt outs, were "forever barred and enjoined from prosecuting any of the Released Claims against any of the Released Parties." (Judgment Order ¶ 9.)

MDNH, during the class period, bought and sold the common stock of Bankers Trust and was a member of the Class certified by the Judgment Order. (Decl. of Van E. Hart (Hart Decl.) dated Dec. 3, 2002 at ¶¶ 3-4.) On December 4, 2002, nearly three months after the Order and Final Judgment was entered in this case, MDNH filed its motion to intervene, and now seeks to vacate the judgment. MDNH argues that although it filed its motion to intervene after judgment was entered, its motion is timely because it failed to receive proper and timely notice of the class settlement, and that it should be permitted to intervene because the lead plaintiffs failed to protect adequately the interests of MDNH, which allegedly related to different Bankers Trust securities than those held by the Lead Plaintiffs. In particular, MDNH argues that the Plan of Allocation in the settlement only gives MDNH 50% of the actual value of the loss sustained during the course of selling Bankers Trust securities on November 19, 1998 and provides no compensation for the loss in value of the securities sold on November 20, 1998.

With respect to their Rule 60(b) motion, MDNH argues that the judgment should be vacated because the class settlement failed to comport with due process requirements and because in failing to provide actual notice to MDNH the Lead Plaintiffs perpetrated a fraud upon the Court.

II.

In order to establish that it has a right to intervene in this action pursuant to Fed.R.Civ.P. 24(a), MDNH must (1) file a timely motion; (2) show an interest in the litigation; (3) show that its interest may be impaired by the disposition of the action; and (4) show that its interest is not adequately protected by the parties to the action. In re Holocaust Victim Assets Litig., 225 F.3d 191, 197-98 (2d Cir. 2000) (citation omitted); accord New York News, Inc. v. Kheel, 972 F.2d 482, 485 (2d Cir. 1992). The failure to meet any one of these requirements is sufficient grounds ...


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