# Petition for Writ of Certiorari — Hoffman v. Sylva > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_0569%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1986 - **Citation:** 476 U.S. 1169 ## Text ibn Supreme Court, U.S. ——} +17. 1 D 8 o “2 3 J AUG 10 1985 NO . JOSEPH F. SPANIOL, JR. _ CLERK Supreme Court of the United States October Term, 1985 CARL H. HOFFMAN and CARL H. HOFFMAN, P.A., Petitioners, VS. DAVID SYLVA, Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT BRUCE S. ROGOW 3100 S.W. 9th Avenue Fort Lauderdale, Florida 33315 (305) 522-2300 Counsel for Petitioner QUESTIONS PRESENTED I MAY A COURT OF APPEALS, INVOKING ITS “SUPERVISORY POWERS” MAKE DETERMINATIONS OF FACTS NOT TRIED IN THE DISTRICT COURT AND THEN DEPRIVE COUNSEL AND HIS CLASS ACTION CLIENTS OF TERE PROPERTY DISTRIBUTED TO THEM BY ORDERS OF THE DISTRICT COURT? DOES SUCH ACTICN RESULT IN A DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW AND A USURPATION OF THE DISTRICT COURT’S FACT FINDING FUNCTION? II MAY A COURT OF APPEALS, INVOKING ITS “SUPERVISORY POWERS” MAKE DETERMINATIONS OF FACTS NOT TRIED IN THE DISTRICT COURT AND THEN SUMMARILY TERMINATE INSTANTER A LONG STANDING LAWYER CLIENT RELATIONSHIP, THUS PRECLUDING COUNSEL FROM ANY FURTHER REPRESENTAT'VE ROLE IN THE CASE, AND PRECLUD.1NG HIS CLIENTS FROM EXERCISING THEIR RIGHTS TO PETITION FOR REHEARING OR CERTIORARI? DOES SUCH ACTION RESULT IN A DEPRIVATION OF PROPERTY OR LIBERTY WITHOUT DUE PROCESS OF LAW AND A USURPATION OF THE DISTRICT COURT'S FACT FINDING FUNCTION? iil MAY THE EXTRAORDINARY REMEDY OF MANDAMUS BE USED BY A COURT OF APPEALS TO REVIEW A DISTRICT COURT’S ALLEGED ABUSE OF DISCRE- TION IN INTERPRETING ITS DUTIES WITH REGARD TO SPECIFIC ISSUES PREVIOUS. LY REMANDED TO IT BY THE COURT OF APPEALS? il THE PARTIES TO THE PROCEEDING IN THE COURT BELOW The parties to the proceedings in the Court of Appeals were Peter Piambino and Joseph F. Kucklick, class representatives of all persons who purchased or invested in direct distributorships of Bestline Corporation during the period of March 7, 1970 through August 10, 1973. The defendants below were Bestline Corporation, a California corporation, which is the parent corporation of a wholly owned subsidiary, Bestline Products, Inc., and William E. Bailey and David L. Eastis. Another party below was David R. Sylva, the trustee of a California Restitutionary Fund. Carl H. Hoffman and Carl H. Hoffman P.A. were not parties below. Carl Hoffman was one of the two Lead Counsel for plaintiffs. The decision below removed him and co-lead counse! irom that role, immediately terminated Hoffman's lawyer-client relationship with the plaintiff class, and required that he immediately repay the fees and costs he had been awarded seven years earlier. Thus he, and his professional association which received those monies have now become parties to this litigation. ill TABLE OF CONTENTS Page QUESTIONS PRESENTED................... i, ii THE PARTIES TO THE PROCEEDINGS IN THE COURT BELOW ........................ iii TABLE OF AUTHORITIES ................ vi, vii, Lae 5 | OPINION BELOW ........................... 1 PE ho 5k ech ce) eae st ae CONSTITUTIONAL PROVISION INVOLVED... 2 STATEMENT OF THECASE................. 2 i ee a ee ee eee 4 SC nto snr a ee a vat ee nig Le 7 REASONS FORGRANTING CERTIORARI ..... 13 I THE DECISION BELOW PRESENTS IMPORTANT BUT UNANSWERED QUESTIONS OF AN APPELLATE COURT'S AUTHORITY TO MAKE DE NOVO FACTUAL FINDINGS, AND CONFLICTS WITH THE DECISIONS OF THIS COURT WHICH MAKE FACTUAL DETERMINATIONS THE PROVINCE OF THE UNITED STATES fgg te les yy Se an er oe 13 A. B. ‘ TABLE OF CONTENTS (Continued) Page II THE DECISION BELOW, BY ENGAGING IN APPELLATE FACT FINDING WHICH PRETERMITTED THE OPPORTUNITY FOR AN EVIDENTIARY INQUIRY CONFLICTS WITH THE DUE PROCESS DECISIONS OF THIS COURT REQUIRING A MEANINGFUL OPPORTUNITY TO BE HEARD PRIOR TO THE TAKING OF PROTECTED PROPERTY AND LIBERTY INTERESTS.............. lil THE DECISION BELOW PRESENTS IMPORTANT BUT UNANSWERED QUESTIONS REGARDING THE USE OF MANDAMUS AND THE SUPERVISORY POWERS DOCTRINE AND CONFLICTS WITH THE DECISIONS OF THIS COURT AUTHORIZING THE USE OF THOSE EXTRAORDINARY REMEDIES AND of ; Ra ett ren rar as ae ee Superviaary Pawers .. «5 vee ee COINAGE se ov ns ke 15 TABLE OF AUTHORITIES Page Anderson v. Bessemer, taal, SE , 105 S.Ct. 1504 (1985) ......... 13 Bell v. Burson, Gan Ui. See ee oe ee el 16 Board of Regents v. Roth, Ge Ui Ee. SRO tees oe ee es eee eee ee 16 Cossette v. Country Style Donuts, Inc., 647 F.2d 526 (Sth Cir. 1981) ................. 13 Craig v. Boren, Se | re ee 3 Fuentes v. Shevin, Ge Wdes GE GROTEE s sv sacha veeee ea ee Goldberg v. Kelly, teh Nach’ ip ELEERSEE CU Te 16 Goland v. Central Intelligence Agency, 607 F.2d 339 (D.C. Cir. 1979) .............. — Klapprott v. United States, See es GOL IED oc ik oc cs ca cseeaaneees 19 Lassiter u Departmeni of Social Services of Durham County, GOR U.S. IS RGSS oi. oi Sins kn tee 20 McNabb v. United States, an6 U.S. SUR tIOGR oo sk kcal ee 19 vi TABLE OF AUTHORITIES (Continued) Page Oregon v. Kennedy, Se Ce TI ok 5s od ee cd eae Weekes 14 Photovest Corp. v. Fotomat Corp., 606 F.2e¢ 704 (7th Cir. 1978)... .............. 19 Piambino v. Baile y, 610 F.2d 1306, (Sth Cir. 1980)... ..... -.. passim Piambino v. Bailey, 757 F.2d 1112, (11th Cir. 1985) ........... passim Sniadach v. Family Finance Corporation, te en eee 16 United States v. Dante, 739 F.2d 547 (11th Cir. 1984) ................ 14 'nited States v. Wodtke, 711 F.2d 86 (8th Cir. 1983) ............. one Vendo Company v. Lektro-Vend Corporation, oe eer . 19 Weisberg v. Department of Justice, 705 F.2d 1344 (D.C. Cir. 1983) ............... 13 Will v. United States, Oe Ws GP CNUED os vc heck cnceseaseneecs 18 Wisconsin v. Constantineau, Ee Et | rarer 16 Zenith Radio Corp. v. Hazeltine Research, Inc., See ar PEE hc a even ee ne ae 13 OTHER AUTHORITIES Page 26 U.S.C. 12642) ......... rr 3 | 2 28 U.S.C. 1291 (1982) .... 7 | rt 28 U.S.C. 1651 (1982)... 7 28 U.S.C. 2101{e) 2 The Supervisory Power of the Federal Courts, '6 Harv.L.Rev. 16. «°{1963) | 20 vill NO. in the Supreme Court of the United States October Term, 1985 CARL H. HOFFMAN and CARL H. HOFFMAN, P.A., Petitioners, vs. DAVID SYLVA, Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT OPINION BELOW The opinion of the United States Court of Appeals fur the Eleventh Circuit is reported at 757 F.2d 1112 (llth Cir. 1985). A copy of the opinion and the Order Denying Rehearing and Rehearing en banc appear in the Appendix to this Petition. A copy of a former opinion of the Eleventh Circuit in this case which was reported at 610 F.2d 1306 (5th Cir.), cert. denied, 449 U.S. 1011 (1980), is also reproduced in the Appendix. JURISDICTION The decision of the Court of Appeals was rendered on March 18, 1985. A timely Petition for Rehearing and Suggestion for Rehearing En Banc was denied on May 15, 1985. This Petition has been filed within 90 days of that date pursuant to 28 U.S.C. §2101(c). The jurisdiction of this Court is invoked under 28 U.S.C. §1254(1). CONSTITUTIONAL PROVISION INVOLVED AMENDMENT V No person shall. . . be deprived of life, liberty, or property, without due process of law. STATEMENT OF THE CASE Carl H. Hoffman and Car! H. Hoffman, P.A. seek certiorari to review a decision of the United States Court of Appeals for the Eleventh Circuit which sua sponte and summarily stripped Carl H. Hoffman of his class action clients, denied those three thousand clients a right to be heard on rehearing or certiorari, and ordered that those clients, and Hoffman, repay instanter, with accrued interest, the monies which had been disbursed to them in 1977 pursuant to a United States District Court order approving a several million dollar class action settlement against various perpetrators of an alleged securities fraud.’ That extraordinary decision, Piambino v. Bailey, 757 F.2d 1112 (11th Cir.1985) (A 65-142), (Piambino ID, cast in the form of mandamus, found, as a matter of fact, that . . . the lawyers who have been representing the plaintiff class have a conflict of interest with the minority segment of the class. They have used this conflict of interest to benefit themselves and the majority of the class members since the case began. 757 F.2d at 1115; A 65. In arriving at its finding of conflict and decision to “terminate” the existing lawyer client relationship, and compel the return of approved fees and settlement ‘“'The te. mination of the lawyer-client relationship became effective as of the date this opinion is published.” 757 F.2d 1147; A 141. Thus the plaintiff class was denied any opportunity to petition the court of appeals for rehearing. A motion to extend the time for rehearing until 30 days after new counsel was appointed for the class was denied (A 143). The harshness of that ruling is underscored by the fact that the Court of Appeals, convinced of a conflict, allowed Lead Counsel to argue plaintiffs’ case, and then denied their losing clients any right to post-decision review. As of the date of the filing of this Petition, no new counsel has been appointed to represent the affected class plaintiffs. Petitioners cannot represent them as a result of the decision below. However, we believe that the doctrine of jus tertii standing permits this Court to consider the class plaintiffs’ injuries. The petitioners have plainly suffered an “injury in fact”, and are entitled to assert “those concomitant rights of third parties that would be ‘diluted or udversely affected’ =hould [their] constitutional challenge fail and the [decision belowj remain in force.” Craig v. Boren, 429 U.S. 190,194-95 (1976). proceeds, the Court below engaged in fact finding without the benefit of a district court trial on the issue. This Petition focuses upon the important questions presented by the appell-te court usurpation of a power traditionally left to the trial courts. The long history of this case is not wholiy pertinent to the specific questions presented here, but it must be told. Therefore we begin with Piambino I, Piambino v. Bailey, 610 F.2d 1306 (5th Cir.1980). A. Piambino 1 In Piambino v. Bailey, 610 F.2d 1306 (5th Cir. 1980), the Fifth Circuit reversed a District Court decision granting summary judgment and other relief in favor of a class of plaintiffs who had been the victim of a nationwide pyramid scheme bilking them out of millions of dollars. Bestline Products, Inc., a Califcrnia corporation, was the culprit, along with its principals, William E. Bailey and Jerry G. Brassfield. The California Attorney General successfully pursued state law remedies and ultimately created a restitutionary trust fund ‘the California fund) for the benefit of certain categories of persons harmed by the Bestline scheme Piambino I, 610 F.2d at 1313; A 13, 14. Shortly thereafter a federal class action alleging, inter alia, violations of the Securities Exchange Acts of 1933 and 1934, was filed in the United States District Court for the Southern District of Florida. That Court issued an injunction enjoining Bestline from complying with the California judgment. In addition, a $1,036,000 sum which had been deposited into the registry of a federai court in California as a result of Bailey’s payment of a judgment secured by the Federal Trade Commission was transferred to the United States District Court for the Southern District of Florida for distribution there to the plaintiff class. 610 F.2d at 1315; A 17. By enjoining Bestline from complying with the California judgment, the beneficiaries of the California fund were denied Bestline’s continuing contributions to the California fund. David Sy!va, Compliance Officer of the California restitutionary fund souzht to intervene in the Florida case to protect the California fund. The District Court denied his motion. 610 F.2d at 1320; A 30. Subsequently, with the District Court’s approval, two separate setilements occurred: first, Bailey settled and then Bestline and 27 individual defendants agreed to pay, in various forms, approximately $2,300,000. 610 F.2d at 1327; A 46. The District Court aiso approved an attorneys’ fee of $750,000, and expenses of $50,000. Sylva’s appeal challenged all of the District Court’s rulings and its approval of the Bestline settlement. However, Sylva did not seek an appellate stay of the District Court’s order permitting disbursement of the Bestline funds. Sylva ultimately prevailed, and the Fifth Circuit concluded its lengthy discussion this way: We summarize our holdings in this case as follows: 1. Summary judgment should not have been entered. 2. Sylva was entitled to intervention as a matter of right. ul 3. The attorneys’ fees as proposed in the Bestline settlement should not have been approved as presented. 4. The entry of an injunction against enforcement of the judgment of the California Superior Court is reversed. 5. The order entering final judgment as to Bestline and 27 individual defendants is vacated. 610 F.2d at 1334; A 61, 62. The Court was “convinced that the District Court fell into serious error when it approved the attorneys’ fees proposed in the Bestline settlement”, 610 F.2d at 1328; A 49, and refused the request of the settling parties to “independently evaluate the reasonableness of those fees”, saying: This is not our normal practice; however, since the District Court is infinitely better situated to conduct the factual inquiry necessary under Johnson [v. Georgia Highway Express, 488 F.2d 715 (5th Cir.1974). . . Id., 610 F.2d at 1329; A 49, 50. Thus, Pzambino I did not compel the District Court to secure return of the already paid fees and expenses. Nor did Piambino I, by setting aside the Bestline settlement, compel the injured plaintiffs to return the monies they had received to the Court. Finally, Piambino I did not compel the District Court to remove Lead Counsel from the case. Piambino II did compel the return of the attorneys’ fees; did compel the injured plaintiffs to return the monies disbursed to them; and did compel the removal of Lead Counsel from the case. It did so by utilizing mandamus, claiming that the failure of the District Court to order those results violated the “implicit” holdings of Piambino J: “{Ift [the District Court] is bound to follow the appellate court’s holdings, both express and implied.” Pzambino II, 757 F.2d at 1119; A 77. B. Piambino II On remand from Piambino I the District Court . . acting sua sponte, issued an order on our mandate. The order followed the letter of the mandate with one exception: it refused to grant Sylva intervention as a party plaintiff. 757 F.2d 1118; A 74 (emphasis supplied) Sylva also asked the District Court to “order plaintiffs and Lead Counsel to transfer to the California Fund the monies they had received as a result of the settlement, contending that such action was mandated.” 757 F.2d at 1118; A 74. Upon the District Court’s denial of Sylva’s intervention and transfer motion, Sylva appealed. The Eleventh Circuit “treat(ed) Sylva’s appeal as a petition for writ of mandamus pursuant to 28 U.S.C §1651 (1982) because there is some question whether the District Court’s action in failing to follow our mandate constitutes a final judgment reviewable under 28 U.S.C. §1291 (1982).” 757 F.2d at 1115 n.2; A 66. Sylva did not see mandamus as the proper remedy, characterizing the case as an appeal “to review the District Court's abuse of discretion in refusing to grant restitution of funds seized pursuant to a subsequently reversed order.” Brief of Appellant Intervenor David R. Sylva, Compliance Officer of the California Restitutionary Fund, at 2 (emphasis supplied). The Court below traced the history of the litigation and then concluded “that the Piambino J panel properly intended that the monies disbursed in connection with the Bestline settlement be restored to the registry of the district court”, 757 F.2d at 1137; A 119. The panel no doubt would have expressed this view had Lead Counsel informed it in oral argument, or later in their petition for rehearing that they intended to preserve their settlement and notwithstanding the panel’s decision, would resist any effort to make them, or their clients, return the proceeds thereof to the district court’s registry. Moreover, the panel would have included among its explicit holdings the instruction that the district court forthwith order Lead Counsel and the plaintiffs who had participated in the settlement to deposit the funds they had received, with interest, in the court’s registry. Finally, the panel would have instructed the district court to determine whether Lead Counsel's financial stake in the case was such that Lead Counsel could no longer represent the interests of the Majority Group. 757 F.2d 1139 ; A 123 (emphasis supplied.) The Piambino IJ panel, having opined the “intent” of the Piambino I panel, exercised its “power to supervise the district courts” and “terminated” Lead Counsel's representation of the plaintiff class.* 757 F.2d 1146; A 140. Thus, despite its view that the Piambino J, panel “would have instructed the district court to determine [if there was a conflict]”, the Piambino IJ panel, without providing notice and an opportunity to be heard, made that determination itself. As a result, thousands of beneficiaries of Lead Counsels’ settlement were stripped of their right to counsel, and they, and Lead Counsel, were ordered to immediately repay the monies disbursed to them years before by court order. The Piambino IJ Court summarized the pertinent part of its holding this way: Firsi, David R. Syiva, as an intervenor in behalf of the Minority Group, is a party plaintiff in this ease. The district court shall recognize him as such and shall certify the Minority Group as a plaintiff-subclass upon receipt of our mandate. Second, Lead Counsel shall pay into the registry of the district court the attorney's fee and reimbursed litigation expenses they received in connection with the Bestline settlement, with interest at the legal rate from the date of this court’s issuance of the mandate in Piambino I. Immediately upon its receipt of our mandate, the district court shall instanter, "Lead Counsel had, in response to Piambino J, limited their represent.tion to the majority group—the non beneficiaries of the California Fund. without a hearing, issue an order directing Lead Counsel to deposit such amount in the court’s registry within thirty days of the date of its order. The order shall recite that Lead Counsel's failure to comply therewith shall subject them to the district court’s contempt power. Third, each of the class plaintiffs who received any of the proceeds of the Bestline settiement shall pay the total amount of such proceeds into the registry of the district court, with interest from the date the clerk of the court disbursed such proceeds to them. Immediately upon its receipt of our mandate, the district court shall imstanter, without a hearing, issue an order directing that each such plaintiff deposit the amount of the proceeds he received in the court’s registry within thirty days of the date of its order. The order shall recite that failure of such plainiff to comply therewith shall subject him to the district court's contempt power. * * * Seventh, Lead Counsei are barred from appearing as counsel for any party in this case, save themselves, effective as of the date this opinion is published. Eighth, on receipt of our mandate, the district court shall appoint counsel to represent the members of the plaintiff-class comprising the Majority Group, in the event such class members are unable to employ counsel. 10 These holdings with regard to Lead Counsel and their conflict were made without distinguishing between the petitioner and James H. Joseph, a Pittsburgh attorney who handled the California litigation and who was co-counsel in the Florida proceedings. The underlying factual bases for these hoidings were the Court of Appeals findings that: ‘a) The Bestline settlement was accormplished at the expense of the California class primarily to provide Lead Counsel an attorneys’ fee; (b) Lead Counsel knew that Sylva’s appeal was meritorious; (c)} Lead Counsel crew that the June 30. 1976 injunction . . . was entirely baseless; (d) Lead Counsel could not have been surprised when the Piambino I panel rejected [the injunctive relief]; (3) Lead Counsel knew that if the panel concluded that Sylva had a right to intervene. their settlement would fall. Piambino IT, 757 F.2d 1140, 1141; A 127, 128. ‘emphasis supplied) Those findings form the foundation of the conflict and the punitive sanctions imposed upon the petitioners and the class members who are now without counsel in this court, and who must return funds paid to them via a valid order of the United States District Court for the Southern District of Florida. Those appeliate court findings of fact also form the foundation of this Petition for Writ of Certiorari 11 which raises questions regarding the power and authority of an appellate court to dispense with the opportunity to present testimony on issues of knowlec ze intent and conflict of interest, and instead usurp the fact finding function historically assigned to the United States District Courts. REASONS FOR GRANTING CERTIORARI I THE DECISION BELOW PRESENTS IMPORTANT BUT UNANSWERED QUESTIONS OF AN APPELLATE COURT'S AUTHORITY TO MAKE DE NOVO FACTUAL FINDINGS, AND CONFLICTS WITH THE DECISIONS OF THIS COURT WHICH MAKE FACTUAL DETERMINATIONS THE PROVINCE OF THE UNITED STATES DISTRICT COURTS. The opinion below, insofar as it found a conflict of interest and terminated the lawyer client relationship between Carl H. Hoffman and his class clients, is premised upon the court’s belief that Lead Counsel knowingly and intentionally manipulated this case “to benefit themselves and the majority of the class members since the case began.” 757 F.2d at 1115; A 65. Whether or not a conflict exists is a question of fact. Cossette v. Country Style Donuts, Inc., 647 F.2d 526, 530 (5th Cir. 1981). Questions of fact are for trial courts, not appellate courts. In Anderson v. Bessemer, ____ U.S. ___, 105 S.Ct. 1504, 1512 (1985), this Court, quoting Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123 (1969) cautioned: “[A]ppellate courts must constantly have in mind that their function is not to decide factual issues de novo.” The Courts of Appeals have recognized that “An appellate court has no fact finding function.” Goland v. Central Intelligence Agency, 607 F.2d 338,371 (D.C. Cir.1979); Weisberg vu. Department of Justice, 705 F.2d 1344 (D.C. Cir.1983). 13 Where, as here, the alleged intent of the lawyer was the critical factor prompting the panel to find conflict, a trial court was the proper forum for making that determination. This Court, addressing intent in the context of a prosecutor's desire to cause a mistrial, has unequivocally described the inquiry as a factual one. [A] standard that examines the intent of the prosecutor, though certainly not free from practical difficulties, is a manageable standard to apply. It merely calls for the court to make a finding of fact. Inferring the existence or non-existence of intent from objective facts and circumstances is a familiar process in our criminal justice system. Oregon v. Kennedy., 456 U.S. 667,675 (1982). The Courts of Appeals have recognized that the trial courts, not the appellate courts. are the proper forum for determining that intent. United States v. Dante, 739 F.2d 547 (11th Cir.1984); United States v. Wodtke, 711 F.2d 86 (8th Cir.1983). Had the Piambino I] panel followed what it believed the Prambino J panel intended to do— instruct the district court to determine the intent of counsel and whether a conflict existed —its decision would have been consistent with tke decisions of this Court which leave fact finding to the district Courts. Instead, the panel usurped the district court's role and in so doing, posed conflict with the dwe process clause. 14 Il THE DECISION BELOW, BY ENGAGING IN APPELLATE FACT FINDING WHICH PRETERMITTED THE OPPORTUNITY FOR AN cVIDENTIARY INQUIRY CONFLICTS WITH THE DUE PROCESS DECISIONS OF THIS COURT REQUIRING A MEANINGFUL OPPORTUNITY TO BE HEARD PRIOR TO THE TAKING OF PROTECTED PROPERTY AND LIBERTY INTERESTS. The Petitioners, and the three thousand clients Carl H. Hoffman represented, had received funds pursuant to presumptively valid orders of the district court. Based upon Piambino II's appellate de novo finding that there was a conflict of interest “since the case began” (the Florida case began in 1973), those property rights have been destroyed. Moreover, they were destroyed by a decision which, by terminating the lawyer- client relationship, precluded the class action plaintiffs from seeking rehearing in the Court of Appeals, or certiorari review here. The district court never tried the issue of whether Lead Counsel achieved a settlement “primarily to provide . au attorneys’ fee”; or whether Lead Counsel “knew . . . Sylva’s appeal was meritorious”; or “knew that the . . . injunction was baseless”; or “could not have been surprised” with the Piambino J decision; or “knew that . . . their settlement would fall.” 757 F.2d 1140, 1141; A 126-128. Thus, without any opportunity for the kind of process which always precedes findings of fact, the Court of Appeals terminated constitutionally protected property and liberty interests. Several protected interests are implicated here. First, the money. Second, the interest in utilizing the appellate remedies of rehearing and Oo>peop To California, right.” (A. 818). (By Ms. Greer) Please tell the Court what you did when you received the Notice. (By Susie Rosenrot) When I received the letter, you know, I answer saying I don't see any I have to make another claim because I already did it.” (A. 822). * + * * ” . (By Ms. Greer) Mrs. Rosenrot, what steps did you take to try to get information about the Notice? What did you do to try to get information? I wrote the letter to Mr. Dan Sylva saying that I did not see why I have to do it all over again because I already filed it so I could not understand it. Did you read the Notice? I read it but I could not understand too much, you know. I don’t know why I had to do that.” (A. 823). ~ +. * * * * (By Ms. Greer) Did you file a Proof of Claim form here in Florida? No. Other than writing that letter? That’s right. You wrote that letter for more information? That's all. Do you have the documents for your claim or did you send them to California? I sent everything to California when I made the claim. So tha’ the California Fund has ail of your documents and the claim form? That's right.” (A. 825-826). App. 44 of Bestline’s assets. Such an action might have affected Sylva's ability to carry out the Superior Court's instructions to him to liquidate Bestline’s California assets. We also think that the manner in which this group was treated in the Florida litigation. including the fact that the District Court failed to employ the subclassing power spelled out in Rule 23(c(4\(B) and to designate a representative for the California group, is an “unusual cireumstance” militating for a determination that the application is timely. See Stallworth, supra at 266, Therefore, we hold that it was error as a matter of law to deny Sylva’s application to intervene and we reverse on this point. V. THE BAILEY AND BESTLINE SETTLEMENTS By separate orders, the District Court approved two settlements. In the first order, dated February 15, 1977 (the Bailey Settlement), the Court entered fina! judgment as to defendant William Bailey and dismissed all claims against Bailey with prejudice. Bailey gave no consideration whatsoever for the release of these claims; the Court’s order merely directs him to apply to the Northern District of California pursuant to the final judgment in the FTC case for an order directing the clerk of that court to transfer the amount of $1,036,000 to the Southern District of Florida. No notice of appeal was filed from the February 15 order, nor could there have been due to the lack of a Rule 54(b) certificate. On February 25 the District Court directed the payment of $250,000 in attorneys’ fees to lead counsel from the Bailey settlement funds. App. 4° In the second order, dated March 22, 1977 (the Bestline Settlement), the District Court approved a settlement to which Bestline and 27 individual defendants had subscribed. Jn return for the dismissal of all claims against them with prejudice, the defendants agreed: (1) _ to pay $900,000 (collectively); (2) to tender a note for $300,000 (executed by Bestline Products. Inc. and guaranteed by Brassfield); (3) to pay whatever sums might be realized by liquidating Bestline’s assets (approximately $600,000); and (4) to waive any claim to the $491,636.59 deposited with the court pursuant to the preliminary injunction, plus interest. This settlement also provided that attorneys’ fees of $750.00 21d expenses of up to $50,000 would be paid out »/ *»« fund. The March 22 order both denied interven: oi and entered final judgment as to the settling defendants. Our jurisdiction to review the merits of the settlement can be supported on three grounds. First, this may be a case for invoking the “hardship finality” doctrine of Forgay v. Conrad, 47 U.S. ‘6 How.) 201, 12 L.Ed. 404 (1848), since the District Court immediately ordered the payment of attorneys’ fees out of the settlement proceeds. This was surely an execution on the judgment. See generally 15 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure §3910 (1976). In the circumstances of this case, there seems to be no reason not to review the merits of the settlement since the intervenor has already presented his evidence and arguments to the lower court. Second, the order entered final judgment as to Bestline, which had been enjoined by the court since June 30, 1976. The order was therefore appealable under 28 U.S.C. §1292(a\(1) as an interlocutory order dissolving an injunction. Finally, the order appointed lead counsel as “trustees” of the real and personal App. 46 property of Bestline with instructions to liquidate the property within six months in a commercially reasonable manner. We have no doubt that this was in effect an appointment of a receiver and was an order appealable under 28 U.S.C. §1292(a\2). “A receiver by any other name, or by no name, is still a receiver.’ United States v. Sylacauga Properties, Inc., 323 F.2d 487, 490 (5th Cir. 1963). We shall examine only Sylva’s objections to the Bestline settlement. [9] Rule 23(2) requires the trial judge to review any proposed settlement of a class action. The purpose of this salutary requirement is to protect the nonparty members of the class from unjust or unfair settlements affecting their rights. 7A C. Wright & A. Miller, Federal Practice & Procedure §1797, at 226 (1972). Conflicts may arise between the attorney and the class, between the named plaintiffs and the absentees, and between various subclasses. ji0, Li) To minimize tie first conflict —ihat between the attorney and the class— district courts must address the issue of attorneys’ fees under the standards of Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir., 1974). If the agreement leaves attorneys’ fees to be fixed by the Court then, as stated in Jn re Air Crash Disaster at Florida Everglades, 549 F.2d 1006, 1021 (5th Cir. 1971): The district court must set and conduct a hearing in the full sense of the word and must address the fee issue under the Johnson standards. [C]lounsel must offer relevant evidence and must be available for cross-examination. The court should enter findings of fact and conclusions of law setting eut the basis App. 47 for the fee award and adequately presenting the issue for further appellate review should this be necessary. [12, 13] See also Norwood v. Harrison, 581 F.2d 518 (5th. Cir., 1978); Premier Corp. v. Serrano, 578 F.2d 566 (5th Cir.), cert. denied sub nom. Premier Corp. v. Shevin, Shapo & Shevin, P.A., 439 U.S. 1003, 99 S.Ct. 613, 58 L.Ed.2d 678 (1978). If he has not done so, then he must require that notice be given to the class of the proposed attorneys’ fees as well as the rest of the settlement agreement and afford anyone who objects an opportunity to be heard. Finally, he must himself determine whether the attorneys’ fees proposed are reasonable. A district court is not bound by the agreement of the parties as to the amount of attorneys’ fees. Foster v. Boise-Cascade, Inc., 577 F.2d 335 (5th Cir. 1978), affirming 420 F.Supp. 674 (S.D., Tex., 1976). In fixing the amount of attorneys’ fees the court must, of course, take all of the Johnson criteria into account, including the difficulty of the case and the uncertainty of recovery. He is not, however, merely to ratify a pre-arranged compact. The second and third conflicts are much more difficult to prevent and police. Generally, courts depend upon structuring the settlement process to promote adequate representation and, hopefully, fair settlements. As a backstop, the law requires that the trial court eva!uate whether the settlement is fair, adequate and reasonable and is not the product of fraud or collusion. Pettway v. American Cast Iron Pipe Company, 576 P.2d 1157, 1169 (5th Cir. 1978); Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir. 1977); Miller v. Republic National Life Insurance Company, 559 F.2d 426, 428, 429 (5th Cir. 1977); Young v. Katz, 447 F.2d 431, 433 (5th Cir. App. 48 __) i 1971). Against these concerns must be weighed the general policy of the law to favor settlements and to uphold them whenever possible because they produce an amicable resolution of disputes and minimize demands on judicial time and resources. Pettway, supra, at 1214; Miller, supra, at 428. We are convinced that the District Court fell into serious error when it approved the attorneys’ fees proposed in the Bestline settlement. The order entering final judgment states: This court is not being asked to set reasonable attorney's fees in conjunction with the instant settlement; rather the court is being presented with a proposed settlement, agreed to by all parties and unopposed by the class, which incorporates an award of attorney’s fees in the amount of $750,000 as a vital part of the settlement. Certainly, different procedures and considerations might obtain were the court being requested to initially fix an attorney's fee. Since the award and amount of attorney’s fees comes before the court in the posture of an unopposed settlement, the court finds that the amount is reasonable under the circumstances of this protracted and complicated case. (Emphasis in original.) [14] On this reasoning, the District Court abdicated its responsibility to assess the reasonableness of attorneys’ fees proposed under a settlement of a class action, and its approval of the settlement must be reversed on this ground alone. On this appeal, the parties to the settlement urge that the record is adequately developed to enable this Court to independently evaluate the reasonableness of those fees. This is not our normal practice, however, App. 49 since the District Court is infinitely better situated to conduct the factual inquiry necessary under Johnson, and since we are not asked to determine reasonable attorneys’ fees incident to an appeal to this Court. See Davis v. Roadway Express, Inc., 590 F.2d 140 (5th Cir. 1979). [15] Regrettably, this does not end the matter. For reasons about to be stated, we must vacate in its entirety the order entering final judgment as to Bestline and 27 individual defendants. This is demanded by the failure to assess the interests of the two categories of plaintiffs and whether the settlement was fair, adequate and reasonable as to each.” One group of plaintiffs was comprised of the 7,043 participants in the California restitution fund, all of whom had either reduced their claims against the defendants to a judgment or had settled. Approximately $4.5 million had been distributed to these persons before the District Judge issued his preliminary injunction halting further payments from Bestline to the Bank of America. Although that recovery may seem large when compared to the proposed settlement in this case, it must be remembered that those 7,043 people had an average claim against Bestline of $3000 each, for a “If this were simply a case of defining the zone of acceptable settlements, we would look to the standards set forth by the Supreme Court in a bankruptcy approval case, Protective Committee v. Anderson, 390 U.S. 414, 424-25, 88 S.Ct. 1157, 20 L.Ed.2d 1 (1968). Those criteria wou!d be especially applicable in this case because the assets of the corporation were so likely to be liquidated. See also Cotton v. Hinton, 5 Cir. 1977, 559 F.2d 1326; Miller v. Republic National Life Ins. Co., 5 Cir. 1977, 559 F.2d 426, 429; Developments in the Law—Class Actions, 89 Harv.L.Rev. i318, 1573-75 (1976). App. 50 total claim of perhaps $21 million. Rather than execute their judgments and force Bestline into bankruptcy, those 7,043 people chose to accept smaller installment payments and to keep Bestline afloat for the greater good of all concerned. Cf. Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1178 (9th Cir. 1977) (approving a similar settlement in a pyramid scheme nearly identical to that involved in this case). Since the issuance of the preliminary injunction, Bestline has failed to make at least $4,500,000 in payments to the California restitution fund. See note 14, supra. Therefore the members of the fund have been deprived of over $600, on the average, to which they were entitled as a result of their judgments against Bestline. The interest of these 7.043 people in protecting their judgments has not been adequately recognized or protected. This is not a bankruptcy proceeding in which the debtor's assets are being parcelled out to creditors on an equitable basis.” The participants in the California fund all had judgments that were entitled to full faith and credit under Article IV of the Constitution and 28 U.S.C. §1738. As the amicus brief filed by the State of Wisconsin indicates, those 7,04° people waived their rights to pursue any claims against Bestline, either as part of their judgments or upon *The February 10, 1977, Notice of Proposed Partial Settlement of Litigation contains some interesting statistics concerning the composition of the class which was certified. Notice was originally mailed to approximately 34,000 potentiai plaintiffs. 3,744 of these elected to exclude themselves from the litigation, and 8,779 of the notices were returned as undeliverable. Of the remaining ciass members, 4,332 completed and returned a proof of claim form. Apparently, the District Judge intended to distribute the settlement proceeds only to those 4,332 people. The record on appeal does not indicate how many of the California group excluded themselves from the litigation or how many filed proof of claim forms in Florida. App. 51 joining the California fund. Unless those waivers were somehow not entitled to full faith and credit, it would seem that those 7,043 people never should have been included in the class. The record on appeal does not permit us to rule definitively on this point, however, and we shall assume that the California fund participants constituted a subclass in this litigation. Unitess it was proper for the District Judge to enjoin Bestline from complying with those judgments, a question which is answered in the negative in part VI of this opinion, the District Court erred by not making the California group whole out of the settlement proceeds, or at least according them an absolute priority to all such funds. Furthermore, since those 7,043 people were already entitled to such funds (up to $4,500,000 plus interest), this litigation has generated no common fund from which to pay attorneys’ fees and expenses. Thus, the result which we reach, by assuming that the 7,043 California fund participants were properly included in the class as defined by the District Court, is the same as that which would have been reached if those persons had not been included in the class and if the preliminary injunction had not issued. By concluding that those persons are entitled to settlement proceeds up to $4,500,000 plus interest, they are placed in the same position they would have been in if Bestline had made all the scheduled payments to the trustee. If, however, Bestline would have defaulted on those payments before now, the California class would still have obtained Bestline’s assets through liquidation long before this settlement. Therefore, the order approving the Bestline settlement and entering final judgment as to the subscribing defendants is vacated in its entirety. App. 52 i THE PRELIMINARY INJUNCTION [16] In the face of Rule 52(a)’s requirement that courts set forth findings of fact and conclusions of law which form the grounds for granting interiocutory injunctions, and after having been clearly apprised of the barrier presented by 28 U.S.C. §2283 (the “Anti- Injunction Act’), both by briefs and oral argument, the District Judge brushed past the statute in the belief that it would be “inequitable” not to issue the injunction. Since the appeal in No. 76-3495 has not been dismissed, and since Bestline has represented to this Court that it would not move to dismiss if Sylva were allowed to intervene in No. 77-2045, we clearly have jurisdiction under 28 U.S.C. §1292(a)(1) to review the issuance of that injunction. We reverse. The Anti-Injunction Act, the predecessor of which was enacted in 1793, has long been an important and integral part of our federal system. As amended in 1948, it now provides: A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments. 28 U.S.C. §2283. The Supreme Court has on many occasions explicitly declared that this statute must be given a strict construction due to the sensitive nature of federal interference with state court proceedings. On its face the present Act is an absolute prohibition against enjoining state court proceedings, unless the injunction falls within one of three App. 53 specifically defined exceptions. The respondents here have intimated that the Act only establishes a “principle of comity,” not a binding rule on the power of the federal courts. The argument implies that in certain circumstances a federal court may enjoin state court proceedings even if that action cannot be justified by any of the three exceptions. We cannot accept any such contention. . . . [We] hold that any injunction against state court proceedings otherwise proper under general equitable principles must be based on one of the specific statutory exceptions to §2283 if it is to be upheld... . Mitchum v. Foster, 407 U.S. 225, 229, 92 S.Ct. 2151, 2155, 32 L.Ed.2d 705 (1972), quoting Atlantic Coast Line R. Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 286-87, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970). See also Amalgamated Clothing Workers v. Richman Bros., 348 U.S. 511, 75 S.Ct. 452, 99 L.Ed. 600 (1955); Carter v. Ogden Corp., 524 F.?d 74, 76 (5th Cir. 1975); International Ass'n of Machmists & Aerospace Workers v. Nix, 512 F.2d 125, 129 (5th Cir. 1975). Furthermore, it has long been “settled that the prohibition of §2283 cannot be evaded by addressing the order to the parties or prohibiting utilization of the results of a completed state proceeding.” Atlantic Coast Line R. Co., supra, 398 U.S. at 287, 90 S.Ct. at 1743, citing Oklahoma Packing Co. v. Gas Co., 309 US. 4, 9, 60 S.Ct. 215, 84 L.Ed. 537 (1940), and Hill v. Martin, 296 U.S. 393, 403, 56 S.Ct. 278, 80 L.Ed. 293 (1935). In Mill, Justice Brandeis wrote as follows for a unanimous court: The prohibition of [§2283] is against a stay of “proceedings in any court of a State.” That term is comprehensive. It includes all steps taken or which App. 54 may be taken in the state court or by its officers from the institution to the close of the final process. It applies to appellate as well as to original proceedings; and is independent of the doctrine of res judicata. It applies alike to action by the court and by its ministerial officers; applies not only to an execution issued on a judgment, but to any proceeding supplemental or ancillary taken with a view to making the suit or judgment effective. The prohibition is applicable whether such supplementary or ancillary proceeding is taken in the court which rendered the judgment or in some other. And it governs a privy to the state court proceeding. . . as well as the parties of record. Thus, the prohibition applies whatever the nature of the proceedings 296 U.S. at 403, 56 S.Ct. at 282-283 (footnotes omitted). Alt' ough the plaintiffs make a feeble attempt to argue that che injunction did not stay “proceedings in a State court”, Hill leaves absolutely no doubt that the scheduled ._ payment of $500,000 to the trustee of an express trust set up by a judgment of the California Superior Court was, at the least, a “proceeding supplemental or ancillary taken with a view to making the suit or judgment effective.” Therefore, we cannot accept this argument and proceed to determine whether the injunction can be justified by any of the three express exceptions.” "We do not consider the “protect or effectuate its judgments” exception for the simple reason that there was no judgment to protect when the injunction issued. See Mitchum v. Foster, 407 U.S. 225, 236 & n. 21, 92 S.Ct. 2151, 32 L.Ed.2d 705 (1972); International Ass'n of Machinists & Aerospace Workers v. Nix, 5 Cir. 1975, 512 F.2d 125, 129-33 (recognizing the federal court under this exception may enjoin “the relitigation in state court of issues that federal courts have fully and finally adjudicated’). App. 55 A. The “expressly authorized” exception {17, 18] The plaintiffs first argue that the injunction was “expressly authorized” by Fed.R.Civ.P. 23(d), and claim that the rule cannot insure the fair and efficient conduct of class actions unless injunctions are permitted against state court proceedings by absent class members. The trouble is that this argument was never presented to the District Ceurt and there is no rea! reason to suppose that it formed the unexpressed rationale for its decision. Moreover, this Court has never held that Rule 23(d) is an express exception to 28 U.S.C. §2283, and we cannot accept that theory today. As stated in Mitchum v. Foster, 407 U.S. 225, 238, 92 S.Ct. 2151, 2160, 32 L.Ed.2d 705 (1972), “The test. . . is whether an act of Congress, clearly creating a federal right or remedy enforceable in a federal court of equity, could be given its intended scope only by the stay of a state court proceeding.” Rule 23(d) is a rule of procedure and it creates neither a right nor a remedy enforceable in a federal court of equity. Thus, even under the expansive Mitchum test, which may not be quite as expansive as it seems,” this argument must fail. Next, the plaintiffs claim that the injunction was authorized by 42 U.S.C. §1983, which the Supreme Court held in Mitchum to be one of the “expressly authorized” exceptions to §2283. Section 1983 speaks in terms of the “the deprivation of any rights, privileges, or immunities secured by the Constitution and laws,” and if it were construed to mean all federal laws, then the exception would quickly swallow the rule set forth in §2283. Cf. Chapman v. Houston Welfare Rights *See, e.g., Juidice v. Vail, 430 U.S. 327, 341-47, 97 S.Ct. 1211, 51 L.Ed.2d 376 (1977) (Brennan, J., dissenting); Huffman v. Pursue, Ltd., 420 U.S. 592, 613-18, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1975). App. 56 Organization, 441 U.S. 600, 99 S.Ct. 1905, 60 L.Ed.2d 508 (1979) (Powell, J., concurring, asserting that the word “laws” in §1983 should be interpreted to mean laws providing for equal rights). This was not the result intended by the Supreme Court in Mitchum, as is evidenced by its direct progeny, e.g., Juidice v. Vail, 430 U.S. 327, 97 S.Ct. 1211, 51 L.Ed.2d 376 (1977); Huffman v. Pursue, Ltd., 420 U.S. 592, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1975); as well as the case of Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977). [19] In this case the plaintiffs allege that they have been deprived of two separate constitutional rights. First, they argue that they were somehow deprived of property without due process of law because they never received notice of the California proceedings. Those proceedings were instituted by the California attorney general on behalf of California residents against a California corporation alleging violations of California law. As to themselves, non-Californians were not bound by that judgment, and it cannot be thought that the Constitution required t..e attorney general to notify residents of other states of the institution of his lawsuit. The fact that Californians ultimately won a judgment against Bestline and began to recover has not deprived the plaintiff class of property without notice. Second, the plaintiffs argue that they have been denied the equal protection of the laws because the California restitution fund denied participation solely on the basis of residence. This arguement is meritless, if not frivolous. In the first place, the Modified Judgment allows anyone with a judgment to participate in the restitution fund, and it does not differentiate on the basis of residence. Next, even if the judgment allowed App. 57 no persons outside California to participate, which it does not, there is no showing that this involved suspect classes, or fundamental interests or that it would be an arbitrary or irrational distinction; hence there could be no equal protection violation. Although the plaintiffs have not articulated their arguments well, they could be advancing an assertion that Section 27 of the Securities Exchange Act, 15 U.S.C., Section 78aa, when coupled with the authority to issue injunctions and writs of mandamus contained in Section 21 of the Act, 15 U.S.C., Section 78u, constitutes an “expressly authorized” exception to Section 2283. The Second Circuit rejected a similar contention in International Controls Corporation v. Vesco, 490 F.2d 1334, 1349 (2d Cir., 1974); and we think that decision, at least insofar as it affects private lawsuits, compare SEC vu Wencke, 577 F.2d 619 (9th Cir., 1978), is eminently correct. [20] There can be no doubt of this conclusion after the decision of the Supreme Court in Vendo Co. »v. Lektro-Vend Corp., 433 U.S. 623, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977). In that case, three Justices concluded that §16 of the Clayton Act, 15 U.S.C. §26, did not constitute an express exception to the Anti-Injunction Act. Those three Justices concluded that the Mitchum decision, which held that 42 U.S.C. §1983 was an express exception to the Anti-Injunction Act, was based upon a “recognition that one of the clear congressional concerns underlying the enactment of §1983 was the possiblity that state courts, as well as other branches of state government, might be used as instruments to deny citizens their rights under the Federal Constitution.” 433 U.S. at 633, 97 S.Ct. at 2888. They were unable to find such concerns in either the clear language or the legislative history of App. 58 =e the antitrust laws and therefore concluded that §16 of the Clayton Act was not such an exception. Two concurring Justices would have held “that no injunction may issue against currently pending state-court proceedings unless those proceedings are themselves part of a ‘pattern of baseless, repetitive claims’ that are being used as an anticompetitive device, all the traditional prerequisites for equitable relief are satisfied, and the only way to give the antitrust laws their intended scope is by staying the state proceedings.” 433 U.S. at 644, 97 S.Ct. at 2894 (Blackmun, J., concurring). We are unable to find any Congressional concern in the language of the Securities Exchange Act that state courts might be used to deny individuals their rights under the Act, nor have we been pointed to any convincing legislative history to that effect. Nor can we ascertain any manner in which state court proceedings could be used to defeat the goals of the Securities Exchange Act. The California litigation was based upon violations of the state’s deceptive advertising and unfair competition laws, which arguably are congruent in purpose with the Exchange Act and most assuredly do not defeat the purposes of that Act. Finally, the fact that 15 U.S.C. §78u is concerned entirely with the authority of the SEC to seek injunctions or other equitable reliei strongly militates against any contention that it expressly authorizes a federal court to enjoin state court proceedings at the behest of private parties. Therefore, we conclude that for private lawsuits the Securities Exchange Act does not constitute an “expressly authorized” exception to 28 U.S.C. §2283. See Vendo Co., supra, 433 U.S. at 635-39 & n. 7, 97 S.Ct. 2881. App. 59 B. The “in aid of its jurisdiction” exception The last argument advanced by the plaintiffs is that the District Court acted to protect its exclusive jurisdiction to adjudicate controversies arising under the Securities Exchange Act of 1934. See 15 U.S.C. §78aa. In Carter v. Ogden Corp., 524 F.2d 74 (5th Cir. 1975), we consia2red and rejected a similar claim. In that case, Carte: filed a suit in a Louisiana federal court alleging antitrust violations and a state law breach of contract claim. Ogden then filed suit in Delaware state court, and the Louisiana federal court enjoined Ogden from prosecuting any other suit. We reversed, noting that “[t]he phrase ‘where necessary in aid of its jurisdiction, . . . should be interpreted narrowly, in the direction of federal non-interference with orderly state proceedings.” 524 F.2d at 76, quoting T. Smith & Sons, Inc. v. Williams, 275 F.2d 397, 407 (5th Cir. 1960). Finding no evidence that the Delaware proceedings would interfere with the jurisdiction of the Louisiana court to hear the case, we held that the grant of exclusive jurisdiction to federal courts to entertain antitrust actions had no impact on state law breach of contract claims. In this case the plaintiffs have alleged violations of state law, the Securities Act of 1933, and the Securities Exchange Act of 1934. The federal courts have jurisdiction to entertain the state law claims only if diversity of citizenship is present or under the doctrine of pendent jurisdiction. The state and federal courts have concurrent jurisdiction to decide cases arising under the Securities Act of 1933, and no case originally brought in a state court of competent jurisdiction under that Act may be removed to a federal court. 15 U.S.C. §77v. Under the Securities Exchange Act of 1934, the federal district cou:ts have exclusive jurisdiction to decide cases arising App. 60 — under that act. 15 U.S.C. §7Saa. Thus, in this case, the plaintiffs’ argument seems to include the proposition that if they are correct in their assertion that the “in aid of its jurisdiction” exception applies because of the Exchange Act, then the District Court may enjoin state court prosecutions of either state law claims or of Securities Act claims, simply because such claims have been attached to a complaint alleging violations of the Exchange Act. [21] The California litigation was based solely upon violations of state law, and it never purported to adjudicate a claim under the Exchange Act. Those proceedings in no way affected the “flexibility and authority” of the federal court to decide the Exchange Act claims. See Atlantic Coast Line R. Co., supra, 39& U.S. at 295, 90 S.Ct. 1739. The fact that Bestline might hav- fewer assets available to satisfy any judgment entered as a result of the Florida federal litigation in no way affects the jurisdiction of the federal court. Just as we rejected in Williams, supra, the claim that a federal district court may enjoin state court proceedings simply because it has before it a case arising under the antitrust laws, we reject the argument that a federal court may enjoin state court proceedings in order to decide a private lawsuit brought under the Securities Exchange Act of 1934. SUMMARY We summarize our holdings in this case, as follows: 1. Summary judgment should not have been entered. 2. Sylva was entitled to intervention as a matter of . cht. App. 61 3. The attorneys’ fees as proposed in the Bestline settlement should not have been approved as presented. 4. The entry of an injunction against enforcement of the judgment of the California Superior Court is reversed. 5. The order entering final judgment as to Bestline and 27 individual defendants is vacated. CONCLUSION The Judgment of the District Court is reversed. The case is remanded for further proceedings not inconsistent herewith. REVERSED and REMANDED. App. 62 APPENDIX Chronology of Events in Bestline Litigation July 22, 1970 May 12, 1971 Nov. 3, 1971 Oct. 25, 1972 June 13, 1973 July 20, 1973 July 23, 1973 July 25, 1973 Dec. 2i, 1973 Jan. 31, 1974 May 3, 1974 June 30, 1974 Sept. 20, 1974 Oct. 8, 1974 Nov. 14, 1974 Nov. 15, 1974 Nov. 22, 1974 Dec. 20, 1974 Jan. 1, 1975 F7TC issues complaint against Bestline. California files suit Bestline. Consent order with FTC becomes final. Trial begins in Cal. Superior Court. Trial ends. Piambino plaintiffs file class action in So. Dist. Florida. Bestline files bankruptcy petition in N.D. California. Cal. Superior Court issues written judgment and order, later stayed by N.D. California. Modified Judgment entered and Bestline withdraws bankruptcy petition. First payment made from restitution fund ($1,000,000). Multidistrict panel first transfers cases to S.D. Florida. Second payment made from restitution fund ($1,000,000). Lead counsel threaten Bank of America. Lead counsel threaten Bank of America. Cal. Superior Court orders payments to be made. Lead counsel file class action in N.D. California to enjoin payments. S.D. Florida certities class. Multidistrict panel conditionally transfers N.D. California suit te S.D. Florida. Third payment made from restitution fund ($1,000,000). App. 63 APPENDIX—Continued Chronology of Events in Bestline Litigation Feb. 14, 1975 March 28, 1975 April 4, 1975 June 30, 1975 Jan. 1, 1976 Feb. 23, 1976 March 19, 1976 April 2, 1976 june 30, 1976 July 19, 1976 Oct. 20, 1976 Feb. 25, 1977 Multidistrict panel vacates previous order. Case returns to N.D. California. Hearing held in N.D. California; plaintiffs fail to appear. N.D. California dismisses complaint with prejudice. Fourth payment made irom restitution fund ($1,000,000). Fifth payment made from restitution fund ($250,000). Ninth Circuit dismisses appeal. S.D. Florida grants motion for summary judgment. N.D. California holds that Bestline has violated consent order. S.D. Florida enjoins Bestline from bench; written order follows on July 7. N.D. California enters judgment against Bailey. S.D. Florida ayproves Bailey settlement; money then transferred from N.D. California to S.D. Florida. S.D. Florida approves Bestline settlement and denies intervention. App. 64 Peter PIAMBINO and JOSEPH F. KUCKLICK, Plaintitfs-A ppellees. v. William E. BAILEY and David L. Eastis, Defendants, and Bestline Products, Inc., a Californi: corporation, Defendant-Appellee, David Sylva, Intervenor-Appellant. No. 82-5844. United States Court of Appeals, Eleventh Circuit. March 18, 1985. * * * Appeal from the United States District Court for the Southern District of Florida. Before TJOFLAT and CLARK, Circuit Judges. and GOLDBERG”, Senior Circuit Judge. TJOFLAT, Circuit Judge: I. This is a class action in which the plaintiffs seek money damages under the federal! securities laws. The lawyers who have been representing the plaintiff-class have a conflict of interest with the minority segment of the class. They have used this conflict of interest to benefit themselves and the majority of the class members since the case began. On March 11, 1977, they concluded a settlement and obtained an attorney’s fee award, beth of which were highly unfair to the minority members. App. 65 We set aside the settlement and the fee award in Piambino v. Bailey (Piambino I), 610 F.2d 1306 (5th Cir.),' cert. denied, 449 U.S. 1011, 101 S.Ct. 568, 66 L.Ed.2d 469 (1980), and instructed the district court to grant David R. Sylva the status of an intervening party plaintiff to protect the interests of these minority members of the plaintiff-class (the “Minority Group”). When the district court received our mandate, the plaintiff's lawyers resisted its enforcement because the proceeds of the vacated settlement had been disbursed . and they had spent the attorney's fee the court had awarded them. Faced with this problem, the district court refused to enforce our mandate. Sylva now turns to us for relief.” A brief synopsis of the events that led to our decision in Piambino J and thereafter took place in the ‘Piambino I was decidec oy our predecessor circuit, the former Fifth Circuit. On October 1, 1981, that circuit divided into the new Fifth Circuit and our Eleventh Circuit. Throughout this opinion we treat Piambino J, which is binding on chis court, as if the Eleventh Circuit had decided it. In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (iith Cir. 1981) (en banc), we adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to October 1, 198i. “We treat Sylva's appeal as a petition for a writ of mandamus pursuant to 28 U.S.C. §1651 (1982) because there is some question whether the district court's action in failing to follow our mandate constitutes a final judgment reviewable under 28 U.S.C. §1291 (1982). See United States v. Haley, 371 U.S. 18, 83 S.Ct. 11, 9 L.Ed.2d 1 (1962); United States v. United Siates District Court, 334 U.S. 258, 263, 68 S.Ct. 1035, 1037, 92 L.Ed. 1351 (1948); United States v. Ritter, 273 F.2d 30 (10th Cir. 1959), cert. denied, 362 U.S. 950, 80 S.Ct. 863, 4 L.E'd.2d 869 (1960); cf Baltuomore & O.R. Co. »v. United States, 279 U.S. 781, 785, 49 S.Ct. 492, 493, 73 L.Ed. 954 (1929); In re Sanford Fork & Tool Co., 160 U.S. 247, 255-56, 16 S.Ct. 291, 293, 40 L.Ed. 414 (1895). App. 66 — district court is necessary to give context to the holdings of that decision, the serious legal and ethical questions this appeal presents, and our disposition of those questions. A. The plaintiffs in this case are purchasers of distributorships in a nationwide pyramid marketing scheme devised and operated by Bestline Corporation’ to sell soap products. The plaintiffs became Bestline distributors, they allege, in reliance upon Bestline’s represent: tion that its distributors were making substantial profits and that they would also. This representation was false, and the plaintiffs lost their investments. They brought this class action, on July 20, 1973, against Bestline and its principals, contending that their distributorships were “securities” and seeking money damages under federal securities laws. The plaintiffs comprising the Minority Group are the beneficiaries of a multimillion dollar state court judgment (the “California Judgment”) the attorney geieral of Caifornia obtained against Bestline Corporation in 1973, about the time this litigation began, under California's consumer fraud laws. That judgment required Bestline to make periodic restitution payments into a fund (the “California Fund”), established by the judgment, for distribution Bestline’s California distributors. David R. Sylva is the trustee of that fund; he is charged with the responsibility of approving the distributors’ claims and forwarding Bestline’s restit'*tion payments to them. ‘Bestline Corporation, a California corporation, is the parent corporation of a wholly-owned subsidiary, Bestline Products, Inc., also a California corporation and also a defendant in many of the lawsuits discussed infra. These two entities will be referred to, collectively, as Bestline. App. 67 Soon after they filed the present class-action suit, if not before, it became evident to the plaintiffs’ lawyers (“Lead Counsel”) that Bestline would lack sufficient financial resources to make a significant settlement offer, or to satisfy any judgment the plaintiff-class might obtain after a trial on the merits, and to pay them an attorney's fee, if Bestline continued making restitution payments to their clients in the plaintiff- class who were beneficiaries of the California Judgment, i.e., the Minority Group. Lead Counsel therefore took steps to stop the flow of money from Bestline to these clients. First, Lead Counsel appeared before the Superior Court of Los Angeles County, whose ‘udgment was providing the vehicle for Bestiine’s restitution payments, and requested that court to impose a constructive trust on the California Fund for the benefit of their clients in the plaintiff-class who were not beneuciaries of the California Judgment (the “Majority Group”). The Superior Court rejected Lead Counsel’s request. Lead Ccunsel then brought suit in the U.S. District Court for the Northern District of California. They named as plaintiffs the entire plaintiff-class now before us (the Majority and the Minority Groups) and as defendants, among others, Sylva,‘ the Superior Court of Los Angeles County, and the California attorney general. Lead Counsel asked the district court to enjoin Sylva from distributing to the Minority Group the restitution funds Bestline was paying into the California Fund on the grounds, inter alia, that the California Judgment, by not providing for ‘H. Lee Holden, Sylva’s predecessor as trustee of the California Fund, was actually named as defendant. When Sylva replaced Holden as trustee he was substituted as the proper party defendant. A pp. 68 A restitution to the Majority Group, denied the members of that Group rights secured by the ninth and fourteenth’ amendments to the U.S. Constitution. The district court refused to grant the injunction and dismissed the case, with prejudice, iur faiiure to state a claim for relief.’ See Fed.R.Civ.P. 12(b\(6). Having failed in California, Lead Counsel turned to the district court below for relief. The district court had previously determined, on plaintiffs’ motion for summary judgment, that the distributorships plaintiffs had purchased from Restiine were securities within the meaning of the federal securities laws, and the parties were in the process of preparing for trial. On June 18, 1976, Lead Counsel moved the court to enjoin Bestline Corporation from making a $500,000 restitution payment to the California Fund that was due on June 30. In urging the court to issue the injunction, they pointed out that Bestline was rapidly disposing of its ‘The ninth amendment to the U.S. Constitution provides that “[t]he enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people. ‘Section One of the fourteenth amendment to che U.S. Constitution provides that: All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shail any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. ‘The court made its ruling in an unpublished memoraudum order. App. 69 © assets and that, unless the court took action, Bestline would soon have no assets to pay the plaintiffs’ claims. On June 30, the district court preliminarily enjoined Bestline from making the payment due that day and ordered it to deposit the sum of $500,000 in the registry of the court. The court further enjoined Bestline from making any subsequent payment called for by the Califernia Judgment. Bestline objected to the issuance of this injunction on the ground, inter alia, that the court had not required the plaintiffs to post a bond as required by Fed.R.Civ.P. 65(c).* In response, the court said that Bestline’s $500,000 deposit would serve as the plaintiffs’ bond and would remain in the court's registry as long as the injunction remained in effect. Bestline immediately appealed the district court's injunctive order to this court. While Bestline’s appeal was pending, Lead Counsel negotiated a settlement with Bestline and twenty-seven of the individual defendants. On January 28, 1.77, the distriet court preliminarily approved the settlement. Two weeks later, Sylva moved the court to intervene as a party plaintiff, representing the Minority Group. He requested the court to designate that Group a plaintiff-subelass, claiming that Lead Counsel's representation of both the Majority and the Minority Groups constituted a conflict of interest. ‘Fed.R.Civ.P. 65(c) provides: (c) Security. No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment ol! such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. No such security shall be required of the United States or of an officer or agency thereof. App. 70 ————— LLL Ll ll Sylva sought to intervene for two reasons: to seek the vacation or modification of the injunction that was preventing Bestline from fulfilling its obligations under the California Judgment, and to contest the settlement the court had preliminarily approved. Sylva objected to the settlement because most of the members of the Minority Group would not share in the proceeds thereof and because, under its terms, Bestline would be precluded from making further restitution to that Group under the California Judgment. The district court entertained Sylva’s motion to intervene on March 11, 1977, at a hearing on Lead Counsel's application for the final approval of the iforementioned settlement and the award of an attorney's fee and expenses. The court denied Sylva’s motion as untimely and meritless, without further explication. It then addressed the propriety of the settlement and the issue of Lead Counsei's attorney's fee and litigation expenses. The court approved the settlement as “fair, reasonable and adequate’ and, stating that there were no objections, approved Lead Counsel's request for a $750,000 attorney's fee and $50,000 in expenses. Three days later, the clerk of the court disbursed the fee to Lead Counsel out of fuads on deposit in the court’s registry. On April 1, 1977, Sylva took an appeal from the district court’s order denying his motion to intervene; at the same time, he moved the district court te stay the execution of the settlement and to set aside the attorney's fee the clerk had disbursed to Lead Counsel. The district court, on May 2, 1977, refused to set aside the fee disbursement or to grant the stay, and, by the time we heard Sylva’s appeal, the district court had disbursed all of the settlement proceeds to the eligible members of the plaintiff-class. App. 71 crenata B. On December 5, 1980, we decided Piambino I. 610 F.2d 1306 (5th Cir.), cert. denied, 449 U.S. 1011, 101 S.Ct. 568, 66 L.Ed.2d 469 (1980), Svlva’s appeal and Bestline’s earlier appeal from the district court's preliminary injunction,’ which had been consolidated for argument and decisional purposes.'® We reversed the district court's order enjoining Bestline from making the restitution payments called for by the California Judgment, because that order had no basis in law. Jd. at 1334. We also reversed the district court’s order denying Sylva intervention, concluding that the court should have allowed him to intervene in behalf of the Minority Group because its interests were at odds with those of the Majority Group and were not being adequately represented by Lead Counsel. Accordingly, we instructed the district court, on remand, to treat Sylva as a party plaintiff. Most of the factors that counseled our decision on the intervention issue made clear the unfairness of the settlement. We therefore vacated the settlement. Having “Although the settlement between Besiline and the plaintiff- class would have ordinarily mooted Best!ine’s appeal, see United Airlines, Inc. v. McDonald, 432 U.S. 385, 400, 97 S.Ct. 2464, 2473, 93 L.Ed.2d 423 (1977), the possibility that Sylva might be permiited to intervene, as the representative of the Minority Group, to contest the validity of the injunction, the settlement, and Lead Counsel's attorney's fee and expense award kept the controversy alive and ripe for appellate review. “In its notice of appeal, Bestline also sought review of the district court's partial summary judgment which determined that Bestline’s distributorships were securities. The partial summary judgment was not appealabie. See infra note 56. This point, however, is not germane to this appeal. App. 72 eee taken this action, we could not allow the district court's award of an attorney's fee and expenses to stand; accordingly, we set it aside as well. Our decision in these consolidated appeals swept beyond the foregoing issues and reached the district court’s summary judgment determination that Bestline’s distributorships constituted securities. We found a genuine issue of material fact as to whether these distributorships were securities and thus vacated that ruling. In sum, we restored the status quo ante. We anticipated that, following the issuance of the mandate, the case would go forward in the district court as if the parties had just joined issue and Sylva had intervened as a party plaintiff, representing the Minority Group. What we anticipated would occur in the district court has not transpired, however. Rather, Lead Counsel have attempted to avoid the consequences of our decision in order to preserve the settlement and their award of a fee and expenses. They have been so motivated because the settlement proceeds have been disbursed and their fee has been “spent.”'' Bestline and the twenty-seven individual settling defendants have also attempted to preserve the settlement. Bestline, whose assets have been liquidated as required by the settlement, has tended to be indifferent. The twenty-seven individual defendants, however, have been far from indifferent. If the district court were to treat their settlement as a nullity and they had to proceed to trial, they would be exposed to substantial liability and, moreover, would have to finance their defense of the case. The defendants have therefore joined ranks with Lead Counsel in their attempt to preserve the settlement they made. "ead Counsel informed us of this fact during the oral argument of this appeal. App. 73 hl Lead Counsel's first step in pursuit of this goal was to move the district court to amend its original class certification order to eliminate the Minority Group; with that Group out of the case, Lead Counsel and the defendants could recast their settlement and present it to the court for approval. While this motion was pending, the district court, acting swa sponte, issued an order on our man ite. The order followed the letter of the mandate with one exception; it refused to grant Sylva intervention as a party plaintiff. The court then granted Lead Counsel's pending motion, severing the Minority “~ up from the plaintiff-class. Sylva, upon learning of the encry of these two orders, moved the court to grant him intervernor status instanter, as directed by our mandate. He also moved the court to order the plaintiffs and Lead Counsel to transfer to the California Fund the monies they had received as a result of the settlement, contending that such action was mandated. The district court denied Sylva’s motion in its entirety, and Syiva perfected this appeal. C. Sylva presents two claims of error. He contends, first, that our mandate required the district court to grant him immediate status as an intervenor, representing the Minority Group, and that the district court could not avoid this obligation. Second, he contends that the mandate, by clear implication, required the district court to order Lead Counsel and the members of the plaintiff-class who shared in the settlement to pay to the California Fund all of the monies they have received, including the $500,000 June 30, 1976 restitution payment the district court enjoined Bestline to deposit in the registry of the court. App. 74 Lead Counsel, appearing solely in behalf of the Majority Group since the Minority Group has been severed from the plaintiff-class, contend in response that our mandate does not call for the relief Sylva seeks. With respect to Sylva’s first point, Lead Counsei argue that we did not grant Sylva intervention; rather, we held that Sylva’s motion to intervene had been timely and meritorious but left it to the district court to determine whether the motion met the procedural requirements of Fed.R.Civ.P. 24(c).'"* They suggest that the district court refused to grant Sylva intervention because his motion for leave to intervene failed to meet those procedural requirements. With respect to Syiva’s second claim of error, Lead Counsel! argue, alternatively, that our mandate did not contemplate a return of the monies paid out in connection with the settlement, and that, if it did, we should not enforce the mandate because it has no basis in law a.id is manifestly unjust. Bestline and the twenty-seven individua! defendants join in Lead Counsel's arguments and urge us to affirm the district court. We reverse. We hold as follows: First, Piambino /, and its mandate, correctly obligated the district court to grant Sylva intervention as a party plaintiff, representing the Minority Group. The district court's refusal to grant such intervention and its later action in deleting the Minor:ty Group from the plaintifi-class violated that provision of the mandate. “Fed.R.Civ.P. 24(c) provides in pertinent part: (c) Procedure. N person desiring to intervene shall serve a motion to intervene upon the parties as provided in Rule 5 The motion shali state the grounds therefor and shall be accompanied by a pleading setting forth the claim or defense for which intervention is sought. App. 75 Second, the status quo ante the Piambino I panel clearly intended cannot be achieved if those who participated in the settlement retain the monies they have received. We therefore instruct the district court, upon receipt of the mandate that issues with our decision in this appeal, to order the plaintiffs and Lead Counsel to pay such monies into the district court’s registry. Third, Lead Counsel, having a patent and substantial conflict of interest not only with Sylva and the Minority Group but with the Majority Greup as well, are disqualified from representing any partv in this case, save themselves. We set forth our reasons for these holdings serzatim, in Parts II.A., B., and C below. Il. [1,2] A trial court, upon receiving the mandate of an appellate court, may not alter, amend, or examine the mandate, or give any further relief or review, but must enter an order in strict compliance with the mandate. In re Sanford Fork & Tool Cov, 160 U.S. 247, 255, 16 S.Ct. 291, 293, 40 L.Ed. 414 (1895). The trial court must implemen’ doth the letter and the spirit of the mandate, Nixon v. Richey, 513 F.2d 430, 435-36 (D.C. 1975), aff'd on other grounds, 433 U.S. 425, 97 S.Ct. 2777, 53 L.Ed.2d 867 (1977); Reserve Mining Co. v. Environmental Protection Agency, 514 F.2d 492, 541 (8th Cir.1975) (en bane), taking into account the appellate court’s opinion, In re Sanford Fork & Tool Co., 160 U.S. at 256, 16 S.Ct. at 293 (1895); Cherokee Nation v. Oklahoma, 461 F.2d 674, 678 (10th Cir.), cert. denied, 409 U.S. 1039, 93 S.Ct. 521, 34 L.Ed.2d 489 (1972), and the circumstances it embraces. Sherwin v. Weich, 319 F.2d 729, 731 (D.C.Cir.1963). Although the trial court is free to address, as a matter of first impression, those issues not disposed of on appeal, Holcomb v. United States, 622 F.2d 937, App. 76 940 (7th Cir.1980); see also, Dorsey u Continental Casualty Co., 730 F.2d 675, 678, 679 (11th Cir. 1984), it is bound to follow the appellate court’s holdings, both expressed and implied. Cherokee Nation, 461 F.2d at 678; see also 1B J. Moore, J. Lucas, & T Currier Moore’s Federal Practice $0.404{10] (2d ed. 1984). If the trial court fails fully to implement the mandate, the aggrieved party may apply to the appellate court for enforcement, by petitioning for a writ of mandamus." [3] The “mandate rule,” as it is known, is nothing more than a specific application of the “law of the case” doctrine. Greater Boston Television Corp. v. Federal Communications Commission, 463 F.2d 268, 279 (D.C.Cir.1971), cert. denied, 406 U.S. 950, 92 S.Ct. 2042, 32 L.Ed.2d 338 (1972); City of Cleveland v. Federal Power Commission, 561 F.2d 344, 348 (D.C.Cir.1977). This doctrine stands for the proposition that an appellate decision on an issue must be followed in all subsequent trial court proceedings ur ess the presentation of new evidence or an intervening change in the controlling law dictates a different result, or the appellate decision is clearly erroneous and, if implemented, would work a manifest injustice. Westbrook v. Zant, 743 F.2d 764, 768-69 (11th Cir. 1984); Bawmer v. United Siates, 685 F.2d 1318, 1320 (11th Cir. 1982) (quoting White v. Murtha, 377 F.2d 428, 431-32 (5th Cir. 1967)). [4,5] The law of the case doctrine is not an “inexorable command,” White v. Murtha, 377 F.2d at 431, but rather a salutary rule of practice designed to bring an end to litigation, id@., discourage “panel shopping,” Lehrman wv. Gulf Oil Corp., 500 F.2d 659, 662 (5th Cir.1974), cert. denied, 420 U.S. 929, 95 S.Ct. 1128, 43 L.Ed.2d 400 ‘See supra note 2. App. 77 (1975), and ensure the obedience of lower courts. United States v. Williams, 728 F.2d 1402, 1406 (11th Cir.1984). As with the mandate rule, the law of the case doctrine applies to all issues decided expressly or by necessary implication; it does not extend to issues the appellate court did not address. Terrell u Household Goods Carriers’ Bureau, 494 F.2d 16, 19 (5th Cir.), cert. dismissed, 419 U.S. 987, 95 S.Ct. 246, 42 L.Ed.2d 260 (1974); Fogel v. Chestnutt, 668 F.2d 100 (2d Cir.1981), cert. denied, 459 U.S. 828, 103 S.Ct. 65, 74 L.Ed.2d 66 (1982). With these legal principles in mind, we turn to the holdings we reach in this appeal. A. [6] Sylva contends that our decision in Piambino I explicity gave him intcrvenor status and that the district court, on receipt of our mandate, should have accorded him such status without further consideration. Lead Counsel contend, in response, that our decision did not conclusively adjudicate Sylva’s right to intervention; rather, it left to the district court the task of determining whether Sylva’s motion to intervene met all of the procedural requirements for intervention prescribed by Fed.R.Civ.P. 24(c) and thus should be granted.'* Lead Counsel suggest that the district court has now made this determination, concluding that Sylva failed to comply with Rule 24(c) because he did not file with his motion to intervene a separate pleading setting forth the claims he desired to prosecute, and has properly denied Sylva’s motion. Although the court did not cite “The Piambino I panel found, in addressing the question of Sylva’s intervention, that he had a genuine and significant stake in the controversy and met the real party in interest requirements of Fed.R.Civ.O. 17(a). Piambino I, 610 F.2d at 1322-23. No one questions the correctness of this determination. App. 78 | this procedural failure, or any other reason, for its ruling, we will assume, for discussion purposes, that the court based its ruling on such failure. Sylva’s failure to file a separate pleading setting forth his claims for relief could not have justified the district court’s departure from this court’s decision in Piambino I that Sylva be accorded intervention as a matter of right. As we have stated, the law of the case doctrine extends to every issue the reviewing court has decided, both explicitly and by necessary implication. Although our opinion did not explicitly address the procedural requirements of Rule 24, its command that Sylva be allowed to intervene necessarily implied that any procedural noncompliance with Rule 24 on his part was inconsequential. Accord Walston v. School Board of City of Suffolk, 566 F.2d 1201, 1205 (4th Cir.1977) (appellate court’s determination that school teacher was entitled to various remedies for the discriminatory practices of her employer implied that her failure properly to name herself as party plaintiff would not justify dismissal of her action on remand); Fogel v. Chestnutt, 668 F.2d at 105, 108-09 (appellate court’s determination that defendants were liable to private plaintiffs for damages under the Investment Company Aci. implied that there existed under that act a private right of action). The conclusion that we did not comtemplate a subsequent district court resolution as to the procedural adequacy of Sylva’s motion to intervene does not end the matter, however. We must now proceed one step further and decide whether the district court’s refusal to follow our mandate, though not explained, could have been based on any of the exceptions to the law of App. 79 ee the case doctrine we have mentioned. See supra text at 11.20 The district court’s refusal could not have been based on the first exception, new evidence, because the parties presented no new evidence on the intervention issue. The second exception, involving an intervening change in the controlling law, could not have applied, because the law has not changed. The court could not have invoked the third exception, because our decision that Sylva was entitled to intervene as a matter of right was not clearly erroneous and, when implemented, will not work a manifest injustice. Our decision was not clearly erroneous, we are convinced, because Sylva’s motion was timely and had merit, and his failure te file a pleading in the nature of a complaint as required by Rule 24(c) was inconsequential. Lead Counsel concede, as they must, the timeliness and merit of Sylva’s motion; their argument is that we committed clear error, and created a manifest injustice, in attaching no legal significance to Sylva’s procedural default. Rule 24(c) requires that a motion to intervene shall be accompanied by a pleading setting forth the claim — or defense the movant seeks to present. Some courts of appeals have denied intervention to movants who have failed strictly to heed the requirements of Rule 24(c), see, e.g., Abramson v. Pennwood Investment Corp., 392 F.2d 759. 761-62 (2d Cir.1968), but the majority of circuits, including this circuit, has not, choosing instead to disregard nonprejudicial technical defects. Farina ». Mission Investment Trust, 615 F.2d 1068, 1075 (5th Uir.1980) (court treats motion to remove as motion to intervene, noting that a contrary position would render federal pleadings excessively technical contrary to Fed.R.Civ.P.8(e\(1) and 8(f) ). See also, e.g., Howse v. S/V App. 80 EE “Canada Goose I’. 641F.2d 317, 319 & n.° (5th Cir.1981); Spring Construction Co. v. Harris, 614 F.2d 374, 376-77 (4th Cir.1980). Sylva’s failure to annex a complaint to his motion to intervene could not possibly have prejudiced the plaintiff-class or the defendants in this case. Everyone knew the nature of Sylva’s substantive claims for relief; they were the very claims Lead Counsel had asserted in their complaint. Sylva sought intervention not to prosecute different, or additional, claims against the defendants, but only to protect the minority members of the plaintiff-class; Lead Counsel, he argued, were not properly representing the interests of these members. Lead Counsel point out that Sylva also wanted the court to lift the injunction that had stopped the flow of restitution payments from Bestline to the California Fund and thus had a new claim to present. We do not view this ground for intervening as an additional claim, however; Sylva was merely renewing Bestliné’s previously articulated objection to the injunction. Even if we were to treat it as a new claim, we would have to conclude that Sylva satisfied Rule 24(c)’s separate pleading requirement because his motion to intervene, and the accompanying papers, clearly spelled out his position on the propriety of the injunction. An additional “pleading,” which merely replicated these documents, would have been surplusage. In sum, our Piambino I decision to accord Sylva intervention, though he had not filed a separate pleading containing his claims for relief, was not clearly erroneous. Moreover, that decision, when finally implemented, will not work a manifest injustice. In fact, the contrary is true; if the decision is not implemented, we will have worked manifest injustice on the Minority Group. App. 81 — | ee | We therefore instruct the district court, on receipt of our mandate, to aecord Sylva intervenor status instanter. It necessarily follows that the district court shall treat its order severing the Minority Group from the plaintiff-class, as void ab initio. B. Sylva contends that Pzambino I, by clear implication, calls for Lead Counsel and the plaintiffs who shared in the settlement tc pay over to the California Fund all the monies they have received, including the $500,000 bond (posted pursuant to Fed.R: Civ.P. 65(c) after the district court enjoined Bestline’s restitution payments to the Fund) which the court erroneously dissolved and turned over to Lead Counsel and the plaintiffs. Lead Counsel and the defendants, in response, argue that Piambino I cannot be read in this manner. They argue, alternatively, that, if it is, such a reading would amount to clear error and will lead to manifest injustice. We should therefore invoke the third exception to the law of the case doctrine and refuse to enforce the mandate. As we have indicated in the summary of our holdings, see supra text at 1119, the Pxambino J panel, in setting aside the settlement and the attorneys’ fee award and in granting Sylva intervention, intended to achieve the status quo ante. Obviously, that status could not be achieved if Lead Counsel and the plaintiffs who participated in the settlement retain the monies they have received. We therefore conclude that implicit in the panel’s decision is the holding that the district court order these recipients to restore such monies to the court’s registry. This holding is implicit for several reasons. First, the settlement was the product of an unlawful injunction. App. 82 OO eo Without the injunction, Bestline would have satisfied the California Judgment and would have had few, if any, resources remaining to devote to this case. Second, the settlement was patently unfair to the Minority Group. Lead Counsel and the settling defendants, acting in concert, created the settlement proceeds and the monies used to pay Lead Counsel's fee and expenses principally out of Bestline resources that, absent Lead Counsel’s intervention, would have gone to the Minority Group; moreover, they prevented that Group from sharing in those proceeds equally with the other members of the plaintiff-class. Third, the setilement was patently unfair even to the other members of the plaintiff-class, because, as the Piambino J panel observed, the settlement provided for the payment to “Uuead Counsel of a substantial attorney's fee and expenses (cut of funds that, presumably, would have gone to the plaintiff-class) even though the litigation generated “rv common fund from which to pay attorneys’ fees and expenses.’ Piambino IJ, 610 F.2d at 1330. Fourth, the negotiation and subsequent judicial approval of the settlement was markedly tainted by, if not the direct result of, a stark conflict of interest between Lead Counsel and his clients in the Minority Group. Fifth, to allow Lead Counsel and the plaintiffs for whose benefit the settlement was crafted to retain the fruits of the settlement under the circumstances presented here would seriously disparage the rule of law. We are also convinced that the district court could not, and cannot now, refuse to implement Piambino I’s implied holding—that the fruits of the settlement be paid into the district court’s registry —under any of the three exceptions to the law of the case doctrine. The first exception, that new evidence justifies a departure from the appellate court’s decision, is | App. 83 inapplicable because there was, and is, no new evidence, save Lead Counsel’s announcement that the money has been spent. The second exception cannot come into play because there has been no change in the controlling law that wou!d counsel a result different from that reached in Piambino J. The third exception, the one Lead Counsel would invoke, could not, and through the passage of time cannot, be relied upon; making Lead Counsel and the plaintiffs return the monies they have received is not a clearly erroneous decision and will not work a manifest injustice. This conclusion becomes inescapable when one examines the magnitude of Lead Counsel's conflict of interest in this case and the casual relationship between that conflict of interest and the critical, and substantial, errors the district court made to the detriment of Sylva and the Minority Group. We begin our examination by revisiting in greater detail than we have some of the events that took place before this litigation began and the bold facts which put Lead Counsel on actual notice that they had a substantial conflict of interest with their own clients in this case, the Minority Group. We then describe how Lead Counsel expoited this conflict. Finally, we deal with the question of whether it would be clear error and manifestly unjust to require Lead Counsel and the plaintiffs to pay the monies they have received into the registry of the district court. 1. The history of Bestline Corporation and its promoters has been reported extensively. See, e.g., Piambino I, supra; United States v. Bestline Products Corporation, 412 F.Supp. 754 (N.D.Cal.1976); People u Bestline Products, Inc., 61 Cal.App.3d 879, 132 Cal.Rptr. 767 (1976). We App. 84 —————— repeat that history to the extent necessary to place our holdings, those in Piambino I and those we reach today, in perspective. Restline was organized in 1966 by William E. Bailey and Jerry Brassfield for the purpose of manufacturinz and selling soap products for home use. Both Bailey and Brassfield had considerable experience in marketing consumer products through pyramid distribution systems,” and they formed a “pyramid” system” to distribute Bestline’s products. At the bottom of the pyramid were “local distributors” who paid nothing for their distributorships." They bought Bestline’s products at 70% of the retail price and scold them to consumers, thus making a gross profit of 30%."* Local distributors were mostly housewives who were looking for a way to supplement the family income with part-time work. They usually sold their products to friends and neighbors who would gather for a demonstration party at the distributors’ homes. ‘One of the companies they had been involved in was Holiday Magic, Inc., itself the subject of litigation similar to the Bestline litigation. See Marshall v. Holiday Magic, Inc., 550 F.2d 1173 (9th Cir. 1977). '*See generally Note, Pyramid Schemes: Dare to be Regulated, 61 Geo.L.J. 1257 (1973), for an overview of pyramid sales schemes and the attempts made by both the federal and state governments to regulate or prohibit such schemes. ‘They were required to pay a nomiral sum of $5 annually as dues. '*A local distributor could receive an additicnal discount, in the form of a rebate, if his monthly sales exceeded $4,800. This fact is not material to the issues before us. | App. 85 At the next level of the pyramid were “direct distributors.” They paid Bestline approximately $3,000" for their distributorship.” For that payment, they were entitled to receive Bestline’s soap products with a retail value of $5,000, which they could sell directly to consumers or to local distributors. They were also entitled to purchase additional products from Bestline, for similar resale, at 48% of the retail price. At the top of the pyramid were “general distributors.” They were former direct distributors who had recruited for Bestline two other direct distributors and paid Bestline $600, ostensibly to help Bestline offset the cost of operating its general distributors school which they were never required to attend.” General distributors were entitled to purchase Bestline products at 40% of the retai: price and to sell them to consumers or to local or direct distributors. They were also entitled to continue recruiting direct distributors. For each direct distributorship a general distributor sold, Bestline paid him a $400 commission.” A general distributor therefore "This price varied over time but never fell below $3,000. "One could also become a direct distributor by first becoming a local distributor and then selling at least $5,600 in retail value of Bestline products in one month. These were known as “work-in” direct distributorships. This path to direct distributorship was far less common, however, than the straight cash purchase of such distributorships. "One could also become a general distributor by recruiting one other direct distributor and generating a sales volume of $5,000 in a single month. As with the “work-in” direct distributorship, see supra note 20, this was a far less common method of advancement. "This $400 was equivalent to the difference between the general distributor's discount (60%) and the direct distributor's discount (52%) on the $5,000 worth of products which a direct App. 86 eee needed to sell nine direct distributorships or $6,000 worth of soap products to recoup his $3,600 investment. Considering that the typical home sales party usually grossed no more than $75 to $100 in sales, it would take a general distributor, operating at a 60% profit margin, from a year to a year and a half, at a party a week, to recoup his initial investment. A direct distributor, operating at a 48% profit margin, would take about the same amount of time to recoup his investment. (Footnote 22 Continued) distributor was entitled to take delivery of when he purchased his direct distributorship. Thus, Bestline attempted to make it appear that it was not compensating distributors for recruiting other distributors. The fact that direct distributors were never required to take delivery of the products they “purchased” with their initial $3,000 investment, see infra text at 1125, belies this fact. In addition to this commission, Bestline created another mei ns by which it compensated general distributors for recruitiag others to become direct distributors, known as the “Special Incentive Bonus.” To be eligible for the bonus, a general distributor, or those in the general distributor's pyramid (i.e., direct or local distributors whom he had recruited) were required to generate at least $36,000 of “product movement.” Although “product movement” included sales of Bestline products to the public or the saies of such products between distributors ai different levels in the pyramid, it consisted primarily of the “sale” of products by a general distributor to a direct distributor at the time the direct distributorship was purchased. Again, a general distributor was considered to have “sold” or generated $5,000 worth of product movement regardless of whether the direct distributor actually took delivery of the products. Bestline paid a general distributor a 3.3% commission on all product movement if he generated from $36,000 to $200,000 worth of product movement and a 15% commission on all product movement if he generated over $200,000 of product movement. Rach direct distributor recruited who later rose to the level of general distributor generated about $15,000 worth of product movement. App. 87 a It proved to be well nigh impossible for a general or direct distributor to make any money selling soap. They thus devoted their time and efforts to selling direct distributorships which they believed would net them substantial commissions. Bestline encouraged them to sell such distributorships rather than soap products because Bestline could earn far more from the sale of distributorships than from the sale of soap products. Bestline’s profits were even greater if a direct distributor, after paying Restline for his distributorship, chose not to take delivery of the soap to which he was entitled. ior in such a case Bestline made a profit of at least $2,600.° It was not at all uncommon for a direct distributor to request that none of his soap products be delivered. Most direct distributorships were sold at “Opportunity Meetings.” These meetings, of which dozens. perhaps even hundreds, were held daily throughout the United States, typically took place in large hotel meeting rooms in the evening. Although these meetings were staged by Bestline, the gencral and direct distributors, who were dependent upon their success, provided the prospective purchasers and the majority of the financing for the meetings. Bestline showed these prospects how a Bestline distributor could earn a five or six figure annual income even ii his spare time by recruiting other distributors. Bestline further represented that the supply of future distributors was inexhaustible. Invariably, several distributors would appear on the program to bear witness to these representations. *, ‘his is eq). valent to the direct distributor's initial investment of $3,000 less uhe $400 commission Bestline was required to pay his sponsoring general distributor. App. 88 ar ea eee res email Sil Bestline’s representations were false. Few of those who purchased direct distributorships ever rose to the level of general distributor, and few of those who achieved general distributorship status ever recouped their investment, much less earned substantial profits.” Bestline’s representation that there was an endless supply of potential distributors was also false. As a community became saturated with Bestline distributors, a distributor's ch>=ce of recovering any of his investment diminished. Unlike the plight of the majority of its distributors, Bestline and its principals prospered. Bestline’s sales organization expanded to all fifty states and several foreign countries. Top executives received handsome six figure salaries and enjoyed such perquisites as access to the company yacht and aircraft. As Bestline’s pyramids grew, it produced more and more dissatisfied distributors. Many turned to the Federal Trade Commission and to state and loca! consumer protection agencies for relief. The Federal Trade Commission (FTC) was the first to take formal action. On July 22, 1970, the FTC commenced administrative proceedings against Bestline “The California Court of Appeals, in People vu. Bestline Products, Inc., 61 Cal.App.3d 879, 132 Cal.Rptr. 767, 775 (1976), found that 87% of the direct distributors recruited in California from January 15, 1971, through November 30, 1972, never rose to the level of general distributor. And of those who did rise to the level of general distributor, 80.7% received commissions and bonuses of less than $5000, with the median being !ess than $1,000. The court concluded that “most of the new direct and general distributors did not even recoup the investment they made to acquire the initial inventory.” Jd. App. 89 and William E. Bailey® under 15 U.S.C. §45(b) (1982).”° In its complaint, the FTC charged Bestline with operating an unfair and deceptive multilevel marketing plen under which persons were lured into purchasing distributorships by the promise of large financial rewards, when in fact such rewards depended on a “virtually, endJess recruiting of participants into the scheme” and were “necessarily predicated on the exploitation o. others who [had] virtually no chance of receiving a return on their investment.” Although refusing to admit that the acts and practices condemned in FTC’s complaint violated any laws, Bestline and Bailey consented to the entry of a cease and desist order under which Bestline would abandon its pyramid marketing scheme.” ©The FTC also proceeded against Robert W. Depeu, another Bestiine officer. Depeu subsequently left Bestline, however, and the FTC dropped him from the case. 15 U.S.C. §45(b) provides in pertinent part: Whenever the [FTC] shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair method of competition or unfair or deceptive act or practice in or affecting commerce, and if it shall appear to the [FTC] that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve upon such person, partnership, or corporation a complaint stating its changes in that respect... . “The FTC’s description of Bestline’s scheme is more fully set forth in United States v. Bestline Products Corp., 412 F.Supp. 754, 759 (N.D.Cal. 1976). *Specifically, the cease and desist order prohibited Bestline from: (1) eperating a program where financial gains were dependent upon the successive recruitment of others; (2) paying bonuses or commissions for the recruitment of others; (3) paying bonuses or App. 90 a | ill At the same time the FTC was proceeding administratively against Bestline, the attorney general of the state of California, acting in the name of the people of California, brought suit against Bestline and several of its principals, including Bailey, in California state court, seeking relief similar to that sought by the FTC. Settlement negotiations ensued. Subsequently, the defendants entered into a consent decree with the State whereby they agreed to cease operating their pyramid scheme and making false representations about a Bestline distributor’s prospects of success. Despite the entry of this consent decree, Bestline “ontinued to market its product as it had in the past, thus prompting the California attorney general to seek stronger measures. On May 12, 1971, the attorney general, acting for the benefit of Bestline’s California distributors, filed suit in the Superior Court of Los Angeles County against Bestline and Bailey and several other Bestline (F ootnote 28 Continued) commissions in connection with the sale of products unless the recipient performs a bona fide supervisory, distributive or selling function and the products are actually delivered to the buyer; (4) requiring participants to purchase products or pay other consideration beyond the actual cost of necessary sales materials; {5) using a scheme wherein profits are dependent on chance rather than skill; (6) using a scheme that fails to inform participants that all contracts for participation may be cancelled within three days; (7) representing the amount of money a participant might earn; (8) representing that it is not difficult to recruit others; (9) representing that it is easy to move up the ladder of distributorships; (10) repre. »nting that all participants will succeed; (11) representing that the supply of new recruits is inexhaustible; and (12) failing to disclose the terms of the cease and desist order to prospective distributors. App. 91 a officers under California's consumer fraud laws.” The attorney general souvent several forms of relief. First, he asked the court to enjoin Bestline from operating its pyramid scheme. Second, he sought restitution from Bestline for the losses the California direct distributors had sustained as a result of their purchases of direct distributorships. Third, he sought the imposition of civil penalties. The case went to trial, and the court found against the defendants. In its final judgment, entered July 25, 1973, the court ordered Bestline to dismantle its pyramid scheme, required Bestline and “Specifically, the California attorney general charged the defendants with having violated Cai.Bus. & Prof.Code §17500 (West 1979) which provided in pertinent part: False or misleading statements. It is unlawful for any person, firm, corporation or association, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, professional or otherwise, or anything of any nature whatsoever or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this State, in any newspaper or other publication, or any advertising device, or by public outery or proclamation, or in any other manner or means whatever, any statement, concerning such real or personal property or services, professional or otherwise, or concerning any circumstance or matter of fact connected with the proposed performance or disposition thereof. which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, or for any such person, firm, or corporation to so make or disseminate or cause to be so made or disseminated any such statement as part of a plan or scheme with the intent not to sell such personal property or services, professional or otherwise, so advertised at the price stated therein, or as so advertised. The attorney general introduced as evidence of this charge the consent decree entered into between the defendants and the State of California. He also charged the defendants with having - App. 92 ’ 4 Bailey to make restitution to several thousand California direct distributors (Bestline being primarily liable; Bailey being secondarily liable), and imposed civii penalties of $1,000,000 against Bestline, $250,000 against Bailey, and a total of $200,000 against the other individual defendants. To effectuate such restitution, the court provided for the appointment of a receiver who would process the claims of distributors and determine the amounts due them. (Footnote 29 Continued) violated Civil Code §3369(2) (West 1979) and Cal.Penal Code §327 (West 1979) which provided as follows: Cal.Civil Code §3369(2): Any person performing or proposing to perform an act of unfair competition within this State may be enjoined in any court of competent jurisdiction. Cal.Civil Code §3369(3) (West 1979) defined “unfair competition” as follows: As used in this section, unfair competition shall mean and include unlawful, unfair or fraudulent business practice and unfair, untrue or misleading advertising and any act denounced by Business and Professions Code Sections 17500 to 17535, inclusive. Cal.Penal Code §327 (West 1979) provided: §327 Endless chain scheme Every person who contrives, prepares, sets up, proposes, or operates any endless chain is guilty of a misdemeanor. As used in this section, an “endless chain” means any scheme for the disposal or distribution of property whereby a participant pays a valuable consideration for the chance to receive compensation for introducing one or more additional persons into participation in the scheme or for the chance to receive compensation when a person introduced by the participant introduces a new participant. Compensation, as used in this section, does not mean or include payment based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme. App. 93 By the iime the superior court entered its judgment, Bestline had instituted Chapter 11 reorganization proceedings” in the bankruptcy court of the Northern District of Ca: tornia. The bankruptcy court immediately stayed the enforcement of that judgment and any further proceedings against Bestline. With this stay order in place, Bestline and its codefendants moved the superior court to vacate its judgment on the ground that Bestline’s pyramid structure and marketing practices were not in violation of California state law. In the alternative Bestline moved the court to modify the remedial provisions of its judgment providing for restitution and penalties. While these motions were pending, the Bestline defendants entered into negotiations with the California attorney general as to some modifications the court might incorporate into its final judgment. They eventually came to an agreement and jointly proposed several modifications to the superior court. The court accepted the parties’ suggestions and on December 21, 1973, after the Chapter 11 bankruptcy court’s stay order had been dissolved, denied the defendants’ motion to vacate the judgment and entered a modified judgment (the California Judgment), incorporating the agreed-upon changes. This modified judgment provided that the defendants would make restitution to all of Bestline’s direct distributors in California (which the parties anticipated would amount to approximately $12 million) and to direct distributors elsewhere who obtained judgments through private lawsuits or were the beneficiaries of judgments obtained against Bestline by state attorneys “Bestline sought reorganization under the Bankruptcy Act of 1898. App. 94 I ee eres ears general proceeding parens patriae.*' Although the California attorney general was under no obligation to provide a remedy to non-Californian distributors, the restitutionary provisions were expanded to include outside distributors in the hope that they would seek satisfaction under the provisions of the modified judgment and forego execution on their judgments, thus avoiding, perhaps, the depletion of Bestline’s assets and possible bankruptcy proceedings. The superior court, in its modified judgment, appointed Sylva®* “Compliance Officer,” to act as an ombudsman or special master charged with the duty of approving direct distributor claims and monitoring the Bestline defendants’ compliance with the court’s judgment. The court also created in the Bank of America an irrevocable trust fund, the California Fund, to which Bestline would forward its restitution payments and from which the distributors would be paid, at Sylva’s direction. The court required Bestline to make an initial payment of $3,986,000* and thereafter semiannual “The judgment also provided that a direct di*tributor who received an arbitration award pursuant to a national plan of arbitration or whose claim Bestline approved was also entitled to participate. The first group, arbitration award recipients, never materialized because a national plan of arbitr~ ion was never adopted. As for the second group, the record does not indicate how many distributors became eligible to participate because Bestline approved their claims. The number, if any, however, would not affect the issues before us here. *See supra note 4. “It appears that Bestline actually transferred $4,085,936.61 to the California Fund. We are unable to ascertain the cause of this discrepancy. | App. 95 payments until all eligible distributors received full restitution. The first semiannual payment, $250,000, was to be made on January 1, 1976.* If Bestline failed to make two consecutive semiannual payments, the California attorney general could petition the superior court to terminate the California Fund and appoint a receiver to liquidate Bestline’s California assets. The eligible distributors were to begin receiving restitution on January 1, 1975, after Bestline made its initial payment, and thereafter semiannually until full restitution was made.” “The remaining payments by Bestline to the California Fund were scheduled as Follows: June 30,1976 ....... 500,000, or 50% of pre-tax profits whichever is greater. January 1,1977..... 500,000 June 30,1977 ....... 750,000, or 50% of pre-tax profits whichever is greater. January 1,1978..... 750,000 June 30,1978 ...... 1,000,000, or 50% of pre-tax profits and on or before each whichever is greater. June 30 of each successive year. January 1,1979..... 1,000,000 and on or before each January of each successive year. *The remaining payments from the California Fund were scheduled as follows: January 1,i1975..... 1,000.000 June 30,1975 ....... 1,000,000 January 1,1976..... 250,000 June 30,1976 ....... 500,000, or 50% of pre-tax profits whichever is greater. App. 96 On January 4, 1974, Bailey, who remained secondarily liable under the modified judgment for Bestline’s restitutionary obligations and who was liable for $250,000 in civil penalties, entered into a settlement with the State of California under which the State agreed to accept from Bailey $750,000 in full accord and satisfaction of his contingent liability for restitution and $250,000 for his liability for the civil penalties. Under this settlement, Bailey made no admission of liability® and retained the right to question the superior court's adjudication of liability on appeal. The defendants thereafter appealed, challenging the superior court’s determination that Bestline’s practices were in violation of state law; they did not attack the remedial provisions of the court’s modified judgment. The court of appeals affirmed the superior court’s (Footnote 35 Continued) January 1, 1977 300,000 June 30, 1977 (50,000, or 50% of pre-tax profits whichever is greater. January 1,1978 _. 750,000 June 30,1978 ... 1,000,000, or 50% of pre-tax profits and on or before each whichever is greater. June 30 of each successive year. January 1,1979.... 1,000,000 and on or before each January of each successive year. *Tlnited Airlines, Inc. v. McDonald. 432 U.S. 385, 400. 97 S.Ct. settiement of tne issue of liability renders the case or controversy moot). 04, 2473, 05 L.Bd.Zd 423 (1977) ‘ord App. 97 determination on all issues. People uv. Bestline Products, Inc., 61 Cal. App.3d 879, 132 Cal.Rptr. 767 (1976). Following the implementation of the California Judgment, the attorneys general of Missouri, Ohio, Pennsylvania, New Jersey, Texas, and Wisconsin and the New York City Bureau of Consumer Protection brought similar parens patriae suits on behalf of Bestline direct distributors and ubtained money judgments. All the beneficiaries of these judgments elected to seek restitution through the California Fund. 2 On July 20, 1973, five days before the Los Angeles County Superior Court entered its original judgment against Bestline and Bailey, attorney Carl H. Hoffman filed this class action in the U.S. District Court for the Southern District of Florida against Bestline, Bailey, and another Bestline officer,” alleging that the sale of Bestline’s distributorships violated both the Securities Act of 1933 (the Securities Act of 1932), 15 U.S.C. §77a et seq. (1982), and the Securities Exchange Act of 1934 (the Exchange Act of 1934), 15 U.S.C. §78a et seq. (1982), and seeking money damages. The district court, on being advised that the bankruptcy court for the Northern District of California had stayed all judicial proceedings agzinst Bestline, dismissed the complaint without prejudice. On September 27, 1973, after the stay order was lifted, the district court vacated its [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_0569%3A1. Public record. Not legal advice.