Opposition Brief — American Broadcasting Cos. v. BankAtlantic Financial Corp.

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In THE

Supreme Court of the United States

OCTOBER TERM, 1996

AMERICAN BROADCASTING COMPANI2ZS, INC., a New York

corporation, and WILLIAM H. WILLSOon, an individual,

. Petitioners,

BANKATLANTIC FINANCIAL CORPORATION, a Florida cor-

poration, ALAN LEVAN, an individual, JoHN D. and

DEBRA A. PURCELL, as Class Representatives, WILLIAM

A. and-Exsz M. Situ, as Class Representatives, and

TimMoTHY J. CHELLING, as Class Representative,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

BRIEF IN OPPOSITION

OF BANKATLANTIC FINANCIAL CORPORATION

AND ALAN LEVAN

Of Counsel: EUGENE E. STEARNS

BRADFORD SWING STEARNS WEAVER MILLER

ALAN H. FEIN WEISSLER ALHADEFF &

STEARNS WEAVER MILLER SITTERSON, P.A.

WEISSLER ALHADEFF & Suite 2200, Museum Tower

SITTERSON, P.A. 150 West Flagler Street

Miami, Florida Miami, FL 33130

(305) 789-3200

Counsel of Record for

BankAtlantic Financial

Corporation and

Alan B. Levan

WILSON - Epgs PRINTING Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Petitioners have framed their questions based upon an

erroneous version of the facts. The appropriate question

is:

May a non-party whose only interest in a case is a

potential collateral estoppel effect intervene as of

right in that case in an attempt to prevent a dis-

trict court from setting aside its own prior interlocu-

tory order, an action necessary to effectuate a settle-

ment agreement between the parties reached after a

jury verdict but prior to entry of a final, appealable

judgment?

(i)

ii

RULE 29.6 STATEMENT

The Respondent BankAtlantic Financial Corporation is

now known as BFC Financial Corporation, which is the

largest shareholder in BankAtlantic Bancorp, Inc., which

in turn wholly owns BankAtlantic, a Federal Savings

Bank.

TABLE OF CONTENTS

Page

QUESTION PRESENTED 2oo..o.o...--cccccccccoccccocs-.-.--..... i

RULE, 20.6 STATICMIENT i. ccccccciccsocceccceccscosesecscocoene.ne. i

TABLE OF AUTHORITIBS 2. iv

I I 2

STATEMENT OF THE CASE ..................................... 3

A. The Underlying Purcell Class Action... 3

B. The Trial Judge Enters An Interlocutory Order.. 5

C. The Trial Court Encourages Settlement...._. 5

D. BFC Files A Defamation Action Against ABC.. 7

E. ABC Seeks Intervention To Block The Settle-

ag a eset Gent NI SAK Lic ast A ea 8

F, The Hearing To Approve Class Settlement...

G. The Court Finds The Settlement Fair, Reason-

eee ee Se 5 eS oe Se 10

H. The Magistrate’s Report In Levan Is Referred

GNP NEE T= O te Odes oe ee 12

I. The Magistrate’s Second Report And Recommen-

nN Oe OE eee) i rs 13

J. The Eleventh Circuit’s Decision In This Case.... 14

REASONS FOR DENYING THE WRIT... 16

A. U.S. Bancorp Does Not Apply To This Case. 16

B. ABC Had No Basis To Intervene In The Purcell

eter staiie nalts ii i ls ai a aaa 19

Se SRS aes Se 24

(iii)

iv

TABLE OF AUTHORITIES

Cases Page

Athens Lumber Co., Inc. v. Federal Elections Com-

mission, 690 F.2d 1864 (11th Cir. 1982) -........... 21

Cascade Natural Gas Corp. v. El Paso Natural Gas

Oe Bit RB Fi: RE ie nee 21

Chiles v. Thornburgh, 865 F.2d 1197 (11th Cir.

ROD acviecsseninrerccictptledeaidinsiendenmieialiidaccaititecaspiasis 15

Clarendon Ltd. v. Nu-West Industries, Inc., 936

A 8 i fs 2. | eae 17-18

County of Fresno v. Andrus, 622 F.2d 436 (9th

Cir. 1980) 21-22

Donaldson v. United States, 400 U.S. 517 (1971).. 21, 22

In re Memorial Hospital, 862 F.2d 1299 (7th Cir.

1988) 18

In re United States, 927 F.2d 626 (D.C. Cir.

1991) . 18

Izumi Seimitsu Kogyo Kabushiki Kaisa v. U.S.

Philips Corp., 114 S.Ct. 425 (1998) -................. 17, 19-20

Mateo v. M/S Kiso, 805 F.Supp. 761 (N.D. Cal.

1008) Ne Ca See 18

Nuesse v. Camp, 385 F.2d 694 (D.C. Cir. 1967) ...... 22

Smuck v. Hobson, 408 F.2d 175 (D.C. Cir. 1969) .... 21

U.S. Bancorp Mortgage Co. v. Bonner Mall Part-

nership, 115 S. Ct. 886 (1994) ..............-........-2.....4 passim

United States v. Jerry, 487 F.2d 600 (8d Cir.

1973) = ‘3 18

Virginia Bankshares v. Sandberg, 111 S.Ct. 2749

RII scciieichaeeninodcietas mm adie 10

Rules

Fed.R.Civ.P.

| TEIN LACES ENT TE LE OTE MeO Te ate ee eT Fe 8 22

Rule 60(b), Advisory Committee Notes, 1946

BID stack cacicttsaciteheinidguncicteitliiuscuditnuldaannete 18

Other

Judicial Code

Ee AN EO ces cniscinnsdecaniiniibbinennnictninicts ie 17

In THE

Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-124

AMERICAN BROADCASTING COMPANIES, INC., a New York

corporation, and WILLIAM H. WILLSon, an individual,

; Petitioners,

BANKATLANTIC FINANCIAL CORPORATION, a Florida cor-

poration, ALAN LEVAN, an individual, JoHN D. and

DEBRA A. PURCELL, as Class Representatives, WILLIAM

A. and Ese M. Smitu, as Class Representatives, and

TIMOTHY J. CHELLING, as Class Representative,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

BRIEF IN OPPOSITION

OF BANKATLANTIC FINANCIAL CORPORATION

AND ALAN LEVAN

Respondents, BankAtlantic Financial Corporation

(“BFC”) and Alan Levan (“Levan”) request that the

petition for writ of certiorari be denied. The facts are not

as ABC states them. U.S. Bancorp Mortgage Co. v. Bon-

ner Mall Partnership, 115 S. Ct. 386 (1994) has nothing

to do with this case. Moreover, ABC had no basis,

whether as a matter of right or permissively, to intervene

in the Purcell class action litigation for the purpose of

preventing a settlement between the parties to that litiga-

tion.

2

OPINIONS BELOW

ABC has not included in its appendix the two Reports

and Recommendations of the Magistrate Judge in the

Levan libel case that are referenced in ABC’s petition to

this Court. They are appended to this brief.

STATEMENT OF THE CASE

A. The Underlying Purcell Class Action

The plaintiffs in the underlying class action (the

“Purcell” class action) were investors in three real estate

limited partnerships. R1-1. Each of the Purcell investors

had voted against a proposed exchange transaction in

which the assets of the three partnerships were exchanged

for corporate debentures issued by BFC, a parent of

BankAtlantic, a Federal savings bank. R1-1. As a result

of the exchange transaction, BFC ended up with the as-

sets of the partnerships, including real estate, mortgages

and cash, but it also ended up with the liabilities of the

partnerships, including mortgage debt, payables and en-

vironmental liabilities. R10-343-1106-1112. The ex-

change transaction was consummated, despite the negative

votes of the Purcell plaintiffs, because a majority of the

limited partners in each partnership voted in favor of it.

In connection with the proposed exchange, BFC had

prepared and circulated, after review by the Securities and

Exchange Commission, a detailed offering circular that

was required to fully disclose all of the material facts that

a reasonable investor would want to know about the trans-

action. R1-1-Ex. B. The prospectus, in fact, disclosed in

considerable detail the terms and conditions of the ex-

change, the risks of the exchange, the possible adverse

events that could have occurred, and an opinion of fair-

ness by an investment banking firm. R1-1-Ex. B.

The prospectus also included a statement that BFC and

its principals believed the transaction to be fair, although

BFC qualified that opinion of fairness in a number of

3

particulars. Among other things, BFC noted that its opin-

ion of fairness should be considered in light of its fully

disclosed conflicts of interest and economic interest in the

transaction. R1-1-Ex. B. at 5, 13, 35, 47 and 49. More-

over, BFC stated that in making its determination of fair-

ness, it did not consider that a market would ever develop

for the BFC debentures. R1-1-Ex. B. at 47.

BFC’s fairness statement became the crux of the Purcell

litigation. Initially, the plaintiffs had brought a series of

contract, common-law, and securities claims allegedly aris-

ing out of the exchange. R-1-1. By the time the case

went to the jury, however, only one discrete issue sur-

vived: Did BFC and Levan violate the disclosure require-

ments of federal securities laws by opining in the offering

circular that the transaction was fair when in fact they

believed otherwise?

The essential argument advanced by the plaintiffs as

to the alleged unfairness of the transaction was that the

value of the debentures given in the exchange was neither

the expressly stated face amount of the notes nor some

lesser amount reduced to present value, but, instead, was

the market value for the BFC debentures in a market that

never developed. R6-339-263-265; R9-342-885. Plaintiffs

argued to the jury that since the debentures had little or

no “market value.” as they described it, the exchange

could not possibly have been “fair” and BFC must have

known that “fact” even before stating otherwise in the

offering circular. Plaintiffs advanced this theory despite

full and complete disclosure throughout the offering cir-

cular of the possibility that no market would develop for

the debentures, a disclosure that is conspicuously and re-

peatedly stressed in the first three pages of the circular.

R1-1-Ex. B. In this manner, what had been pleaded as a

“disclosure” case under the securities laws became instead

a case in which the jury was simply allowed to determine

if, with the benefit of hindsight, they thought the trans-

action was fair.

4

The jury found that BFC and Levan falsely stated that

they believed the transaction to be fair and found that the

plaintiffs were damaged by that false opinion. They re-

turned a verdict in favor of the class of plaintiffs, awarding

them a total of $8 million in damages (based on a jury

instruction which stated that such a verdict would have

the effect of cancelling the outstanding debt owed by BFC

to these same plaintiffs, a debt in the face amount of $16.5

million plus interest in excess of 10%). R2-292.

Put most charitably, plaintiffs’ case to the jury was

deficient of relevant evidence. For example, although no

one could argue that essential elements of a securities vio-

lation are materially false or omissive statements that were

relied upon to cause a loss, not one single witness testified

that a single voter who approved the transaction relied

upon Mr. Levan’s opinion of fairness in voting for the

transaction or thought it was material. No evidence was

offered that any investor, much less enough investors to

have swayed the vote, relied upon the heavily qualified

opinion of fairness of BFC and Levan or thought it was

material. Indeed, to the extent there was any evidence

about this element of a securities claim, the plaintiffs testi-

fied that they would never have relied upon or considered

Levan’s opinion of fairness to be material because Mr.

Levan admitted in the disclosures that he had conflicts

of interest, because he said he was not objective, and

because he said, that in giving his opinion, he was not

considering the existence of any market for the debentures.

R9-342-899. Each of the testifying plaintiffs expressly

stated that they formed their opinion to vote against the

proposed exchange by reading the plain language in the

prospectus disclosing the risks and conflicts. R9-342-722,

899; R6-339-206, 218; R12-345-1460.

In addition, the plaintiffs offered no evidence that Alan

Levan and BFC did not believe the transaction to be fair.

Instead, they simply offered evidence that they thought

the deal was unfair because it offered long-term debentures

in exchange for their limited partnership interest in real

5

estate. The jury was no doubt swayed by the repeated

‘esiemeny Vi severdi dideriy investors that at their age,

they did not like the long-term aspect of the debentures,

including the comment of one witness that “I don’t even

buy green bananas any more.” R3-447-2-4.

Not only was the jury verdict unusual given the ab-

sence of a proper evidentiary foundation, its practical

effect was also unique. Although the reputations of BFC

and Mr. Levan were no doubt sullied by an adverse ver-

dict in this securities case, the practical result of the case

as a whole—finding liability for $8 million while extin-

guishing liability in the face amount of $16.5 million

plus interest running at well over 10%—was of substan-

tial economic benefit to BFC. R2-345-1555.

B. The Trial Judge Enters An Interlocutory Order

After the jury verdict, but before resolution of the post-

trial motions and several other pending issues, the court

entered an order based upon the verdict, which order was

erroneously entitled “Final Judgment.” R2-314. BFC

believed that the order was not in fact a final judgment

because of the other substantial issues that were still left

to be resolved by the parties and the court. Among the

other matters that had not yet been ruled upon by the

trial judge, there remained complex issues on how to

give effect to the jury instruction that a verdict for dam-

ages in favor of the plaintiff required a return of the out-

standing debentures. R2-292. Given the title of the inter-

locutory order, however, BFC felt compelled, in an abun-

dance of caution to appeal the order. R2-369. On Feb-

ruary 11, 1994, the Eleventh Circuit confirmed BFC’s

belief by formally determining that the order in fact

lacked the requisite finality, and it dismissed the appeal.

R2-419.

C. The Trial Court Encourages Settlement

Throughout the trial and post-trial hearings, the pre-

siding judge pointedly remarked to counsel for the parties

6

about the lack of evidence supporting the verdict. The

court observed that the jury’s verdict “did not comply

with any of the evidence” and did not “rest on solid judi-

cial concepts.” R14-379-13, 31. The court also re-

marked: “If I were a trier of fact I wouldn’t have found

this way” and “I wouldn’t be surprised at all if this case

got turned around.” * R15-409-31, 32.

The court’s comments regarding the lack of support for

the verdict, coupled with the prospect of more litigation

in the district court (and likely appeals), did in fact

prompt the parties to structure a settlement. Settlement

was also facilitated by very unusual circumstances: The

verdict of $8 million was actually millions of dollars less

than the amount which BFC consistently maintained was

owed to the class. R2-345-1555. Indeed, the settlement

provided for the elimination of corporate debt reflected

in the debentures of $16.5 million, earning interest at well

above market. And, as the district court observed, the

verdict was based upon the jury’s erroneous conclusion

that BFC violated the securities laws. R14-379-13, 31;

R3-447-3, 4.

The ground for a settlement was thus established. BFC

was not opposed to paying the $8 million—indeed, it

recognized its obligation to pay much more—but BFC

and Levan simply could not live with the erroneous ver-

1 Having made these telling observations, why did the trial court

deny post-trial motions? The court addressed this issue succinctly:

There are certainly enough legal issues in this case, and I

have already denied the post-trial motions for remittitur and

judgment NOV. My experience with the Eleventh Circuit is

that they don’t like trial judges tampering with jury verdicts.

It’s all right for them to do it, but they don’t want us to do it,

so whether they do it or not, that’s—we will find out, but they

certainly have got enough legal issues to consider and I

wouldn’t be surprised if they did something with it, but every

time I do something they say you are just disagreeing with

the jury.

R14-379-4 (emphasis added).

Sorat! Hee 0

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7

dict, particularly because their business is in the highly

regulated area of banking. The class wanted to settle

because it knew that the verdict was subject to reversal

on appeal, having been expressly told by the presiding

judge that the judgment stood on very shaky legal

grounds. In sum, the class wanted to settle for the

amount of the verdict, and BFC was willing to settle for

that amount and forego its right to an appeal if the er-

roneous jury verdict and interlocutory order were vacated.

D. BFC Files A Defamation Action Against ABC

In 1991, representatives from ABC’s news magazine

“20/20,” including William H. Willson, a petitioner here,

began to pursue a story about “real-estate roll-ups.”

BFCApp. at la. On November 29, 1991, prior to the

trial in Purcell, the story, entitled “Too Good to Be True,”

was broadcast. BFCApp. at 2a. The story discussed so-

called “roll-ups” in which the real estate holdings of part-

nerships are exchanged for some other investment.

BFCApp. at 2a. BFC’s exchange transaction was deemed

by ABC to be a “roll-up,” and it was the purported focus

of the story. BFCApp. at 2a-3a. In fact, the story was a

very nasty and personal character assassination of Mr.

Levan.

On February 7, 1992, BFC and Levan filed a com-

plaint because of ABC’s broadcast (“the Levan action’).

BFCApp. at 5a. In February 1993, ABC moved for sum-

mary judgment, contending that the interlocutory order

entered in Purcell precluded BFC from bringing its defa-

mation action. BFCApp. at 8a. The Magistrate in Levan

filed his first Report and Recommendation on July 22,

1993, recommending that ABC’s motion for summary

judgment be granted on estoppel grounds because of the

so-called “final judgment” in the Purcell class action.

BFCApp. at 18a.

In the text of his report, however, the Magistrate ob-

served, with regard to the 20/20 broadcast, that “many

8

of the individual statements in the story were misleading,

if not completely false,” and then he listed “some of the

more egregious examples.” BFCApp. at 16a-17a. In that

context, the Magistrate noted that ABC “took license with

the facts”; that ABC used “tactics [which] allowed [them]

to use Levan’s own words to produce false or misleading

impressions”; and that ABC utilized “reprehensible” and

“crafty” editing techniques to convey false images.

BFCApp. at 16a-17a. Ultimately, the Magistrate con-

cluded that ABC’s practices were “shamefully irresponsi-

ble,” and that ABC “cared more about telling a good

story than an accurate one.” * BFCApp. at 17a.

E. ABC Seeks Intervention To Block The Settlement

By this point, the parties in the Purcell case had de-

cided to settle. BFCApp. at 21a. So, more than five

years after the Purcell action was commenced, and after

the parties had reached settlement of the underlying litiga-

tion, ABC filed a motion for intervention to prevent the

parties from consummating the settlement. R2-419. Sig-

nificantly, ABC failed to request permission to file an

amicus curiae brief to raise any public interest issues.

In its motion for intervention, ABC contended that al-

though it was not a real party in interest in the transac-

tion that was the subject matter of this case—the ex-

change transaction—it should nevertheless be allowed to

intervene because it wanted to preserve fox itself the in-

terlocutory order for its own use in the Levan action.

R2-419-6. In its memorandum, ABC briefed both the

issues of intervention as of right and of permissive in-

2On August 4, 19938, ABC filed objections to the Magistrate’s

Report and Recommendation, specifically asking the court to strike

the Magistrate’s blistering critique of its behavior. In fact, the

Magistrate had been careful to use as examples of ABC’s misbe-

havior facts which were not arguably at issue. On August 31, 1994,

the Levan Court declined to grant ABC’s objections. Order on

Defendants’ Objections to the Magistrate’s July 22, 1992, Report

And Recommendation.

9

tervention. R2-419-20. The district court, however,

recognizing that ABC has no legal right at stake in this

class action, rejected ABC’s novel proposition and denied

its motion to intervene by orders dated June 30, 1994,

and July 15, 1994. R3-423; R3-429. ABC appealed the

latter order on August 3, 1994. R3-441.

F. The Hearing To Approve Class Settlement

The parties in the Purcell action drafted a proposed

settlement in June of 1994. R3-443. Then, on September

12, 1994, the district court held a settlement conference

so that any party could voice objection to the terms of the

proposed settlement. R16-452; R3-447.

ABC’s representative attended the conference, but artic-

ulated no objections when queried by the court. Indeed,

the district court began the hearing by stating: “Have

there been objections or anyone want to be heard on this

matter?” No one responded. R16-452-2. When the

Court later noted its surprise that no one from ABC was

present at the hearing, BFC’s counsel pointed out that an

attorney for ABC was indeed present. When invited to

speak, ABC’s counsel noted that “I don’t believe I have

standing to address this issue right now.” He stated that

“quite frankly, I was not prepared to address the Court

on this topic today.” R16-452-11.

After this exchange, the court inquired what value (be

it evidentiary or estoppel) the vacated “judgment” would

be to ABC. The parties explained in no uncertain terms

that the vacated order would have no value to ABC, and

that if it did have any such value to ABC, then BFC

would prefer to proceed to appeal. R16-452-5-7.

G. The Court Finds The Settlement Fair, Reasonable And

Adequate

Thus, on September 12, 1994, the district court, which

had presided over this class action for more than five

years, entered its Final Judgment Approving Settlement

10

And Order of Dismissal (“Final Judgment”). R16; R3-

447. This was the first true “final judgment” entered in

the Purcell action. The Final Judgment, which approved

the settlement and vacated the earlier interlocutory order

that had been erroneously denominated as a final judg-

ment, includes the following findings of the court:

1. As previously observed by this Court, in the trial

of this cause, the court entertained serious doubt as

to the merit of the case brought by plaintiffs. The

court found during the pre-trial and trial that the

disclosure document distributed to the former limited

partners of the three partnerships fully and ade-

quately disclosed the terms of the proposed trans-

action and the risks of the proposed transaction. The

aspects of the proposed transaction that plaintiffs con-

tended at trial to be unfair, were fully and adequately

disclosed to the plaintiffs in the disclosure docu-

ments. Indeed, these plaintiffs, who each voted

against the transaction, did so in large measure

because what they read about the transaction in the

prospectus persuaded them that it was not in their

best interest.

2. The claim asserted under the principles of Vir-

ginia Bankshares v. Sandberg, 111 S.Ct. 2749

(1991) that, notwithstanding the adequacy of dis-

closure, defendants’ stated opinion of fairness while

allegedly believing otherwise, was a troublesome one

for the court because of the adequacy of risk and

confict disclosure, because the evidence that anyone

relied upon that opinion was scanty at best, and be-

cause the evidence that BankAtlantic Financial Cor-

poration and Alan B. Levan believed the transaction

to be unfair was weak, particularly since Bank-

Atlantic Financial Corporation agreed to pay more

for the former partnership assets than those assets

turned out to be worth, albeit over a lengthy time

period.

3. The court was also concerned that a jury might

make a decision in this case not on legal principles

11

but on their own judgment of whether they thought

the proposal was fair, regardless of the merit of the

claim. That concern was heightened by the fact that

their decision could easily have been influenced by

the progression of elderly claimants who did not want

twenty year debentures regardless of the fairness of

the proposed transaction (“I don’t even buy green

bananas any more”) or by the extensive adverse pre-

trial publicity. In fact, as this court has observed on

several occasions earlier, the evidence offered in sup-

port of the verdict did not persuade the court and,

had the case been tried, non-jury, would have resulted

in a judgment in favor of the defendants.

5. The court previously observed and continues to

believe that an appeal of the judgment in this case is

hardly frivolous. The court has serious reservations

about the award and has serious reservations about

the legal rulings upon which it is based. In denying

directed verdict and motions to set aside the verdict,

the court was hardly convinced that the result rested

on a solid legal or factual base, but was persuaded to

allow the verdict to stand believing that the issues

were well formed for appellate review.

6. The terms of the settlement of this case are con-

ditioned upon setting aside the verdict of the jury

and the final judgment in this cause. This court has

no reservation whatsoever in doing so.

R3-447-2-4.

Based on these findings, the court ruled as follows:

4. Having balanced the competing values of finality

versus the right to relitigate an unreviewed dispute

in light of the circumstances of this action as set out

more fully in the Settlement Agreement, the De-

cember 18, 1992 judgment, December 17, 1992

verdict, and all findings and conclusions embodied

therein, are hereby set aside, vacated, dissolved, and

nullified and shall have absolutely no force or effect,

including, but not limited to, any res judicata, col-

12

lateral estoppel, or other preclusive effect whatsoever,

for use against defendants, its successors or assigns,

by plaintiffs or any third parties.

R3-447-6-7.

The district court, very much aware of the weak under-

pinnings of the jury’s verdict, had “no reservation what-

soever” about vacatur, or holding that it “shall have abso-

lutely no force or effect, including, but not limited to any

res judicata, collateral estoppel, or other preclusive effect

whatsoever.” R3-447-4, 7. While the Final Judgment

was prepared by Levan’s counsel and approved by Pur-

cell’s counsel, a fact which ABC argues diminishes its

significance, in fact, the statements of the trial court

criticizing the jury deliberations and the evidence came

directly from comments made by the trial court during the

trial and thereafter on the record.

Although the trial court had previously denied ABC’s

motion for intervention, ABC nonetheless filed an appeal

of this Final Judgment as well. R3-453. By contrast, no

party to the Purcell action appealed the Final Judgment.

H. The Magistrate’s Report In Levan Is Referred Back

In an order dated June 6, 1994, the Levan court recog-

nized that the settlement and vacatur of the interlocutory

order in Purcell would impact whatever collateral estoppel

effect the order might have had, thus eliminating the sole

basis for the Magistrate’s recommendation for summary

judgment. R3-427-Ex. I. In its order, therefore, the

Levan court rejected the collateral estoppel portion of the

Magistrate’s Report and Recommendation relating to

ABC’s motion for summary judgment and referred the

matter back to the Magistrate for further consideration.

R3-427-Ex. I.

Upon reconsideration by the Magistrate of ABC’s mo-

tion for summary judgment, ABC claimed, as it does here,

that the Purcell record established that the Final Judg-

13

ment and vacatur was nothing more than a “buy-off” of

the verdict by BFC, and therefore violated the general

principles of U.S. Bancorp Mortgage Co. v. Bonner Mall

Partnership, 115 S. Ct. 386 (1994). BFCApp. at 24a.

I. The Magistrate’s Second Report And Recommendation In

Levan

After a thorough review of the record, the Magistrate

in Levan filed his second Report and Recommendation

on April 17, 1995, which recommended that ABC’s mo-

tion for summary judgment be denied. BFCApp. at 32a.

The Magistrate specifically rejected ABC’s “buyout” argu-

ment, and held that, even if he had the equitable power

to review the district court’s decision to vacate the inter-

locutory order in Purcell, he would find that the “vacatur

was proper even under the reasoning set forth in U.S.

Bancorp.” BFCApp. at 28a.

Specifically, the Magistrate held that:

the record in Purcell indicates that the vacatur was

based on more than a wealthy litigant’s buy out of

an unfavorable judgment. Rather, the Purcell final

judgment included specific findings in which the [trial

court] expressed its belief that the judgment had

weak underpinnings, was likely to be overturned on

appeal, and noted the possibility of jury bias. These

findings were consistent with the court’s commentary

made throughout the trial.

BFCApp. at 28a (emphasis added).

Based upon his own review of the Purcell record. the

Magistrate further stated that “the record here shows that

the Purcell consent decree received careful scrutiny.”

BFCApp. at 28a n.2. He added: “[T]he vacated judg-

ment in Purcell is insufficient to preclude the litigation of

any of the issues in the instant case. To hold otherwise

would prevent a trial on the merits of this action based

upon a judgment in a separate action which neither the

14

parties to the prior litigation, nor the trial judge, believes

is valid.” BFCApp. at 28a-29a.

The Magistrate concluded his report with the following

observation:

Finally, the undersigned believes that the public

interest dictates that the merits of Levan be decided

by a jury at trial. The First Amendment guarantees

the press a right to engage in rasping and controver-

sial discussions on all topics of public interest. How-

ever, it does not guarantee a defense against libel.

So far, the public has only heard one side of the

story, that is, the “20/20” broadcast. Certainly, pub-

lic interest dictates that both the content of the broad-

cast and its production deserve scrutiny on the merits.

In such cases summary judgment is not appropriate.

BFCApp. at 32a.

J. The Eleventh Circuit’s Decision In This Case

Not surprisingly, the Eleventh Circuit affirmed the Pur-

cell court’s denial of ABC’s attempt to scuttle the settle-

ment in the underlying class action case. App. 12a. Re-

lying upon well-established precedent, considering the very

limited interest ABC had in the class action case, and

recognizing the absence of any direct authority to sup-

port ABC’s “unprecedented” claim for intervention, the

Eleventh Circuit held “that ABC lacks sufficient interest

in the class action to permit intervention as of right, and

that the district court did not abuse its discretion in deny-

ing ABC’s motion for permissive intervention.” App. 2a.

In so holding, the Eleventh Circuit did not reject U.S.

Bancorp. App. 6a. Instead, the court expressly stated

that it did not reach ABC’s arguments premised upon that

decision because “we are persuaded that the district court

properly denied ABC’s motion to intervene,” which sought

intervention both as of right and permissively. App. 6a.

The court explained that upon a determination the district

15

court’s disposition of the motions to intervene was correct,

its jurisdiction evaporated, citing Chiles v. Thornburgh,

865 F.2d 1197, 1212 (11th Cir. 1989). App. 6a.

The Eleventh Circuit affirmed the district court’s deci-

sions on intervention for a number of reasons. Among

other points, the court noted ABC’s own admission that

it was not a real party in interest to the exchange trans-

actions that were the basis of the Purcell class action.

App. 8a. Moreover, the court recognized that “ABC’s

interest in the collateral estoppel effect of the jury’s ver-

dict in this case is too collateral, indirect, and insubstantial

to support intervention as of right.” App. 9a. The court

also recognized that ABC’s argument in support of per-

missive intervention—a claim that no party to the under-

lying class action would be prejudiced by vacating the

jury verdict and the order based upon that verdict—was

“woefully unconvincing.” App. lla. As the court ex-

plained, “the result ABC seeks would effectively vitiate

the settlement agreement through which the plaintiffs are

receiving payments from the damage award.” App. lla.

Finally, the Eleventh Circuit noted that a nonparty

such as ABC “is not necessarily entitled to preserve the

beneficial effects of a jury verdict and judgment, however

much the nonparty may cherish those effects.” App. lla.

An opportunity to preclude issues as a result of litigation

involving other parties is not some absolute right. “More-

over, ABC will have its day in court. In the trial of the

libel lawsuit, ABC will have an opportunity to establish

in the old-fashioned way the defense it sought to pre-

clusively establish with the class action jury verdict and

judgment.” App. 11a.

The jury trial of the libel action referred to by the

Eleventh Circuit is presently set to begin in October 1996.

16

REASONS FOR DENYING THE WRIT

A. U.S. Bancorp Does Not Apply To This Case

This case does not raise any question about U.S. Ban-

corp Mortgage Co. v. Bonner Mall Partnership, 115 S.Ct.

386 (1994), let alone some question about “enforcement”

of that ruling. In its excessive zeal to manufacture an

issue for this Court’s review, ABC has attempted to stretch

the “rationale” of U.S. Bancorp beyond the facts, beyond

the question presented, beyond the holding, beyond the

dicta, and even beyond the underlying statutory authority

of that case. In short, ABC has stretched its argument

well beyond the breaking point.

In the first place, the facts in U.S. Bancorp bear no

resemblance to the facts in this case. In U.S. Bancorp,

vacatur was sought in this Court, not in a Court of Ap-

peals, and, even more importantly, not in a district court,

as occurred here. 115 S.Ct. at 389. In U.S. Bancorp,

vacatur was sought by only one of the settling parties and

was opposed by the other settling party, totally unlike the

situation in the present case. 7d. And finally, in U.S.

Bancorp, vacatur was sought only after appellate juris-

diction had vested, whereas no appellate court had juris-

diction in this case when the order in question was set

aside by the district court. /d. The factual patterns in

U.S. Bancorp and the present case could not be more

dissimilar.

Dissimilar, too, are the questions presented. In U.S.

Bancorp, the question was “whether appellate courts in

the federal system should vacate civil judgments of sub-

ordinate courts in cases that are settled after appeal is filed

or certiorari sought.” Jd. at 388-89 (emphasis added).

In the present case, a district court set aside an interlocu-

tory order before any appellate jurisdiction attached. Even

this Court’s express holding in U.S. Bancorp—“mootness

by reason of settlement does not justify vacatur of a judg-

ment under review’—does not, on its face, apply to the

17

present case. Id. at 393 (emphasis added). There was no

review pending when the order on the jury verdict was

set aside by the district court here.

Even the more broadly ranging discussion by this Court

about the effect of its holding in U.S. Bancorp was strictly

limited to situations where appellate review of a final

judgment—totally unlike the situation in the present case

—was ongoing at the time of settlement and vacatur. Id.

at 392-93. Indeed, during the course of that discussion,

the Court specifically distinguished those cases in which

settlement occurred while the case was still before the

district court. Jd. at 393. For example, this Court noted

that “the judicial economies achieved by settlement at the

district-court level are ordinarily much more extensive

than those achieved by settlement on appeal.” /d.

Finally, the statute that supplies “the power of vacatur”

(28 U.S.C. § 2106), which was the focal point of this

Court’s holding and discussion in U.S. Bancorp, has no

application whatsoever to the present case. 115 S.Ct. at

389. That statute, on its face, applies only to “The Su-

preme Court or any other court of appellate jurisdiction.”.

Id. (emphasis added). Moreover, it is a part of Chapter

133 of Title 28, the subject of which is limited to appel-

late review. The statute expressly does not apply to dis-

trict courts, the level of court that set aside the order in

this case.

Perhaps that explains why all of the case authorities

cited by ABC in an attempt to support its argument on

vacatur involved only situations where appellate jurisdic-

tion had been invoked and where appellate courts were

being asked to set aside either appellate court decisions or

lower court decisions. See Izumi Seimitsu Kogyo Kabu-

shiki Kaisa v. U.S. Philips Corp., 114 S.Ct. 425 (1993)

(where even the motion for intervention, as discussed by

ABC, was filed in an appellate court, not the district

court); Clarendon Ltd. v. Nu-West Industries, Inc., 936

18

F.2d 127 (3d Cir. 1991); In re United States, 927 F.2d

626 (D.C. Cir. 1991) (seeking vacatur of an appellate

court decision); In re Memorial Hospital, 862 F.2d 1299

(7th Cir. 1988). Decisions by district courts to set aside

their own orders or judgments constitute an entirely dif-

ferent subject matter.

The present case is not, therefore, a U.S. Bancorp-type

case or even a potential extension of it; the present case

is an entirely different situation. ABC wants this Court

to simply gloss over that fact, however, and extend the

holding of U.S. Bancorp to a territory where it has no

application. In essence, ABC asks this Court to take a

giant, blind leap over a grand canyon and, on new soil,

firmly implant rules designed to guide appellate courts

onto district court judges.

ABC asks this Court to use those inapplicable appellate

court principles for the purpose of severely restricting, or

nearly abolishing, the power of trial judges to alter, amend,

or set aside their own orders and judgments or the verdic‘s

of juries. Moreover, ABC wants this Court to take that

giant step without any consideration of the numerous

rules, statutes, and decisions covering the power of dis-

trict courts to affect their own prior decisions, especially

the broad power to alter or set aside interlocutory orders

and judgments. See, e.g., Advisory Committee Notes to

the 1946 Amendment to Rule 60(b), Federal Rules of

Civil Procedure (“interlocutory judgments are not brought

within the restrictions of the rule, but rather they are left

subject to the complete power of the court rendering them

to afford such relief from them as justice requires”);

United States v. Jerry, 487 F.2d 600, 605 (3d Cir. 1973)

(“so long as the district court has jurisdiction over the

case, it possesses inherent power over interlocutory orders,

and can reconsider them when it is consonant with justice

to do so”); Mateo v. M/S Kiso, 805 F.Supp. 761, 785-86

(N.D. Cal. 1991).

Thus, even if this Court were inclined to elaborate on

the vacatur issue or to consider means to enforce its hold-

19

ing on vacatur in U.S. Bancorp, this would not be the ap-

propriate case in which to do so. To consider ABC’s

petition, this Court would have to extend U.S. Bancorp

well beyond vacatur of final judgments to the point of

considering, under rules designed for appellate courts, the

setting aside by a district court of its own interlocutory

orders. Moreover, this Court would be required to under-

take its review in a case where the circuit court never

even reached the issue. Needless to say, ABC’s radical

and thoroughly unprecedented request to throttle district

court judges without even adequate consideration of the

consequences should be summarily rejected.*

B. ABC Had No Basis To Intervene In The Purcell Class

Action

As this Court has previously explained, the question of

“(w]hether petitioner should have been granted leave to

intervene is quite distinct, both analytically and factually,

from the question of whether the Court of Appeals should

vacate judgments where the parties have so stipulated.”

Izumi, 114 S.Ct. at 427. A question concerning interven-

tion is “akin to a question regarding a party’s standing,

* ABC repeatedly invokes the argument that injustice results

when wealthy parties can “buy off” judgments. Totally apart from

the fact that nothing ever happened to any truly final judgment in

this case, it is highly ironic that ABC should be trying to cloak

itself in the garb of the poor or the weak.

Not only is the “buy off” argument not factually supported, the

claimed preclusive effect in this case has value only to ABC, a

corporate colossus whose power and wealth vastly exceed that of

all the plaintiffs and defendants in the Purcell action combined.

Only the private economic interest of ABC’s even more powerful

and wealthy shareholders is at stake here.

ABC simply wants to avoid the expense and—given its truly

egregious misbehavior in the broadcast attack on BFC and Mr.

Levan—the likelihood of a loss when it faces a jury. In its zeal

to promote its own economic interest, ABC has been quite willing to

utterly destroy the settlement that the district court judge expressly

approved. ABC’s claim to be promoting the public interest is hollow

indeed.

20

which [this Court has] described as a ‘threshold inquiry’

that ‘in no way depends on the merits’ of the case.” I/d.

In a case such as the present one, where a district court

rather than a Court of Appeals vacated an interlocutory

order, any questions relating to intervention are even more

“distinct” from the “merits” of vacatur than as discussed

in Izumi.

Moreover, as this Court has further explained, deci-

sions on any particular motion to intervene are “always

to some extent bound up in the facts of the particular

case.” Id. at 428. That being the case, this Court has

concluded it would have to be a very unusual situation to

warrant the grant of certiorari to review solely the “rela-

tively factbound issue” of intervention in a Court of Ap-

peals decision. /d.

There is absolutely nothing unusual in the Eleventh

Circuit’s review of ABC’s motion for intervention in this

case. In fact, the Eleventh Circuit’s decision is solely a

garden variety intervention decision. As explained above,

enforcement of the vacatur decision by this Court in U.S.

Bancorp is not implicated in the present situation. Nor

were there any issues of broad public interest or impor-

tance involved in Purcell, the underlying case in which

ABC sought to intervene. Indeed, the only issue impli-

cated by ABC’s motion to intervene was ABC’s economic

self-interest. The fact that ABC will have to face a jury

in the Levan case is hardly an issue of sufficient impor-

tance to warrant review by this Court.

Although ABC argues that a conflict between the cir-

cuits exists as to the standards for intervention as of

right,* ABC does not argue that the alleged conflict is

itself a sufficiently significant issue to warrant this Court

granting the requested writ. It is only in the context of

the inappropriately claimed need to “enforce” U.S. Ban-

* ABC raises no issue in this Court about the denial of its motion

for permissive intervention.

21

corp that ABC contends the “conflict” attains such signifi-

cance. Considering that U.S. Bankcorp is fundamentally

irrelevant to the present case, the significance, if any, of

the alleged conflict for this case diminishes to the vanish-

ing point.

Additionally, the “conflict” may actually be, more than

anything, a result of the “relatively factbound” nature of

motions for intervention, to use this Court’s term, than a

true conflict in legal principles. That is, the “conflict” may

be more linguistic than real, with the real problem being

the difficulty of setting forth black letter rules for a sub-

ject matter that depends heavily on the facts of each case.

See, Smuck v. Hobson, 408 F.2d 175, 179 (D.C. Cir.

1969) (“Since this task [deciding whether intervention

of right is warranted] will depend upon the contours of

the particular controversy, general rules and past decisions

cannot provide uniformly dependable guides.” ).

After all, as ABC points out, this Court has itself al-

ready twice addressed the issue of the interest necessary

for intervention as of right. Cascade Natural Gas Corp.

v. El Paso Natural Gas Co., 386 U.S. 129 (1967);

Donaldson v. United States, 400 U.S. 517 (1971). And

the most recent of those decisions (Donaldson) was even

cited by the Eleventh Circuit as one of the authorities for

its adoption of the standard that intervention of right

“must be supported by ‘direct, substantial, legally pro-

tectible interest in the proceeding.’” Athens Lumber Co.,

Inc. v. Federal Elections Commission, 690 F.2d 1364,

1366 (11th Cir. 1982).

Moreover, even if one were to accept that a conflict

exists, the notion of “interest” in the “less restrictive” cases

cited by ABC is far different than the type of interest

advanced by ABC in this case. The “interest” involved

in those cases focuses on the extent or degree to which

there must be a real involvement of some kind by a

prospective intervenor in the subject matter of the under-

lying lawsuit to intervene as of right. See County of

22

Fresno v. Andrus, 622 F.2d 436 (9th Cir. 1980); Nuesse

v. Camp, 385 F.2d 694 (D.C. Cir. 1967).

ABC has absolutely no such interest. ABC has not

claimed to be an investor in any kind of real estate limited

partnership for which an exchange offer has been made.

Nor has ABC claimed to be engaged in the business of

real estate limited partnerships, let alone ever actually

been involved in an exchange transaction of any kind.

ABC’s claimed interest—in a jury verdict against BFC

and Levan—is collateral and far more remote. That is

not the kind of “interest” contemplated by Rule 24. See

Donaldson, 400 U.S. at 531.°

Even if this “conflict;” despite its relative insignificance

compared to other issues faced by the Court, were to be

a subject of review, this is not an appropriate case in

which to undertake the review. As ABC itself admits,

it has no direct interest in the subject matter of the under-

lying Purcell case. ABC is a total stranger to that litiga-

tion, never having had any stake, however remote, in the

exchange transaction. If review of this particular case

were undertaken, therefore, the Court would have no

factual basis with which to even attempt further refine-

ment of the meaning of an “interest” sufficient to grant

intervention as of right. Even if the Court were prepared

to take the extreme position that the mere possibility of

collateral estoppel effect without more is sufficient to allow

intervention of right, the Court, to accept this case, would

5 This Court’s opinion in Donaldson strongly suggests that the

Court would hold against ABC if it were to hear the case on the

merits. The Court rejected, as not “the kind [of interest] con-

templated by Rule 24(a),” a movant’s argument that he should be

allowed to intervene because a lower tribunal’s decision whether to

require production of certain documents from a third party would

have a collateral effect on his own subsequent trial. 400 U.S. at

581. The Court further noted, in a manner similar to the observa-

tion of the Eleventh Circuit in this case, that the movant’s inter-

ests may be asserted “at its proper place in any subsequent

trial.” Jd.

23

also have to be prepared to take a still more extreme step

and hold that upon the return of a jury verdict, even be-

fore entry of a final judgment, anyone who might be able

to claim some form of preclusive effect is entitled to inter-

vene as a matter of right.

This is also not an appropriate case to consider the

“conflict” because there were no questions of great gen-

eral importance or broad public interest in the issues that

were actually litigated in the underlying class action. It

was a “disclosure” case under well-established securities

law. Although highly important to the parties, it was of

no interest to the public. Not even the general issue of

“roll-ups,” a subject of the libelous ABC broadcast, was

featured in the trial. The only question considered by the

jury was whether BFC and Levan actually thought the

exchange transaction was fair. As evidence of the lack

of public importance, it should be noted that ABC did

not even try to file an amicus brief. There is, therefore,

no basis at all in this case for the Court to hold, even if it

were so inclined, that the mere existence of important

policy issues in a case could support intervention as of

right.

It comes down to this: ABC wants the Court to in-

struct all district courts that they must allow intervention

as of right whenever any party claims that a jury verdict

(or, at least, a jury verdict followed by some form of

interlocutory order) might afford that party some pre-

clusive effect. For ABC it is not enough that district

courts can, in the exercise of their sound discretion, permit

intervention on a permissive basis to promote judicial

economy or other objectives. ABC seeks an absolute

right of intervention in the most extreme of circumstances

to promote its own self-interest. That is, ABC wants this

Court to expend its valuable resources to create an out-

landish rule of sweeping and unprecedented impact so that

ABC will not have to face a jury in one particular case.

24

CONCLUSION

The petition for writ of certiorari should be denied.

Of Counsel:

BRADFORD SWING

ALAN H. FEIN

STEARNS WEAVER MILLER

WEISSLER ALHADEFF &

SITTERSON, P.A.

Miami, Florida

Dated: August 22, 1996

Respectfully submitted,

EUGENE E. STEARNS

STEARNS WEAVER MILLER

WEISSLER ALHADEFF &

SITTERSON, P.A.

Suite 2200, Museum Tower

150 West Flagler Street

Miami, FL 33130

(305) 789-8200

Counsel of Record for

BankAtlantic Financial

Corporation and

Alan B. Levan