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May 19, 2003


The opinion of the court was delivered by: Constance Baker Motley, United States District Judge

The court is in receipt a Notice of Withdrawal of Plaintiff David Buse ("Mr. B use"), accompanied by a declaration by his attorney stating the reason for his withdrawal: despite their best efforts, attorneys for plaintiffs have been unable to contact Mr. Buse. Soon after the Notice was filed, the court received a letter brief from a defendant in this case, Keefe, Bruyette & Woods, Inc. ("Keefe"), requesting the court's "assistance in resolving a discovery dispute." Keefe May 14, 2003 at 1.*fn1 According to the letter brief, Mr. Buse had not appeared for his deposition despite being ordered to do so by this court. See Funke v. Life Financial Corp., 2003 WL 1787125, at *3 (S.D.N.Y. April 3, 2003) ("Funke April 3").

For the reasons that follow, the court now orders Mr. Buse to appear for his deposition by May 30, 2003 or face sanctions for contempt of court.


This is not the first time Mr. Buse has been at the center of controversy in this case. In their Memorandum in Opposition to Plaintiffs' Motion for Approval of Lead Plaintiff and Lead Counsel ("Mem. in Opp. to Lead P&C"), defendants Life Financial Corporation and several individual defendants (collectively, "LFC et al.") brought to this court's attention some rather unusual activity on the part of Mr. Buse and plaintiffs' counsel. According to LFC et al., Mr. Buse filed a complaint in the Central District of California on January 21, 2000 on behalf of the same purported class as is represented in the complaint filed in the Southern District of New York ("the instant Complaint") on December 8, 1999. LFC et al. Mem in Opp. to Lead P&C at 3; see Exhibit A to Decl. of John Cannon, March 8, 2000 ("the California Complaint"). The California Complaint was virtually a verbatim copy of the instant Complaint. Compare the instant Complaint with the California Complaint.

On the same day that plaintiffs filed their Motion for Approval of Lead Plantiff and Lead Counsel, Mr. Buse's attorney in California executed a "Notice of Dismissal Without Prejudice" of the California Complaint, without seeking the approval of the court. See Exhibit B to Decl. of John Cannon ("Notice of Dismissal"). According to LFC et al., this Notice of Dismissal constituted a violation of Rule 23(e) which requires approval of the court when a party seeks to dismiss a class action. Fed.R.Civ.P. 23(e). Plaintiffs responded that since defendants had not yet answered the California Complaint, Rule 23(e) did not apply. The court, rather than get bogged down in allegations of ethical violations (and noting that LFC et al. had misquoted Rule 23(e) by creating an extra clause "whether before or after an answer is filed"), announced that "[t]o the extent that attorneys on both sides of this law-suit are exploring the edges of ethical behavior, this court will be watching them closely." Funke v. Life Financial Corp., 2003 WL 194204, at *6 (S.D.N.Y. January 28, 2003) ("Funke January 28") (emphasis added).

Subsequently, on March 27, 2003, Keefe wrote to the court for assistance in resolving several discovery disputes. One such dispute involved Mr. Buse, who, according to Keefe, "platintiffs' counsel have refused to make . . . available for deposition on the grounds that he intends to withdraw his application to serve as class representative." Keefe March 27, 2003 at 4. Keefe further argued that such a withdrawal might "bear on the issue of class representatives generally," and cited two cases in support. Id. (citing Williams v. Balcor Pension Investors, 150 F.R.D. 109, 115 (N.D. Ill. 1993) and Mashek v. Silberstein, 20 F.R.D. 421, 422 (S.D.N.Y. 1957)). Counsel for plaintiffs responded to the allegations and argument by stating that "we have simply been unable to contact [Mr. Buse], despite repeated attempts. Defendant's attempt to characterize this inability to schedule his deposition as something untoward is misplaced." Plaintiffs, March 28, 2003 at 3. Plaintiffs made no mention of Mr. Buse's intent to withdraw, *fn2 but noted that if he could "not be scheduled for deposition then Defendants' recourse is to request the Court disqualify him. . . ." Id.Based on plaintiffs' representations, the court decided that there was "no need to address the issue of [Mr. Buse's] withdrawal and simply order[ed] that he . . . appear for his deposition . . . by May 9, 2003." Funke April 3, 2003 WL 1787125, at *3,


The court is not persuaded by the cases cited by Keefe in opposition to Mr. Buse's withdrawal. First, Keefe misconstrues the holding of Williams, which does not hold that the withdrawal a named plaintiff bears "on the adequacy of class representatives generally," Keefe May 14, 2003 at 2, but rather that the initial selection of a clearly inadequate named plaintiff bears on the adequacy of class counsel. Williams, 150 F.R.D. at 115.*fn3 Second, Mashek's reasoning was largely dependent on the derivative nature of the suit — class representatives were representing not only themselves and class members, they were also representing the corporation. See Mashek, 20 F.R.D. 421, 422 ("Such plaintiffs are not acting as individuals but as representatives of the corporation whose rights they professedly assert. In such a situation the corporation which has appeared in the action is entitled to have the benefit of their testimony"). The instant action is not a derivative suit, but rather a shareholder (putative) class action.

Nevertheless, this court does not intend to allow Mr. Buse to evade its order to appear for his deposition merely by refusing to answer the phone or open his mail. Accordingly, Mr. Buse is ordered to appear for his deposition by May 30, 2003. If he does not appear on or before May 30, he is subject to contempt of court pursuant to Fed.R.Civ.P. 37(d) & 37(b)(2)(D) and, upon being found in contempt, will be ordered to pay $250 per day until he appears for his deposition.

In light of the above order, the deadlines for submission of papers with respect to plaintiffs' Motion for Class Certification are modified as follows:

1. Defendants are to file and serve their opposition(s) to plaintiffs' Motion on or before June 9, 2003; and
2. Plaintiffs are to file and serve their reply on or before June 16, 2003.

The next pre-trial conference will take place on Thursday, June 26, 2003 at 11:00 a.m. in Courtroom 26A of the United States Courthouse located at 500 Pearl Street, New York, New York. The court will hear argument on plaintiffs' Motion at the conference.

SO ...

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