# Opposition Brief — Grimes, Trustees Under the Will of Chaplin v. Navigant Consulting, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2002
- **Citation:** 536 U.S. 920

## Text

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No. 01-1297 APR 25 2002 |
| CR 7+ (RK |
IN THE Pies
Supreme Court of the United States

CHARLES L. GRIMES AND GORDON W. CHAPLIN,
TRUSTEES UNDER THE WILL OF LOUISE C. CHAPLIN;
CHARLES L. GRIMES AND GORDON W. CHAPLIN,
TRUSTEES UNDER THE LOUISE D. CATHERWOOD
TRUST; AND GORDON W. CHAPLIN, INDIVIDUAL
TRUSTEE OF THE JESSICA D. CATHERWOOD TRUST,

Petitioners,
v.

NAVIGANT CONSULTING, INC.;
POLICEMEN AND FIREMEN RETIREMENT
SYSTEM OF THE CITY OF DETROIT; et al.,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

BRIEF IN OPPOSITION FOR RESPONDENT

PLAINTIFF CLASS
DANIEL L. BERGER Fay CLAYTON
Lisa BUCKSER-SCHULZ Counsel of Record
BERNSTEIN LiITOWITZ BERGER RosBert L. MARGOLIS
& GROSSMANN, L.L.P. RoBINSON CurLeEY & CLAYTON, P.C.

1285 Avenue of the Americas 300 South Wacker Drive
New York, New York 10019 Suite 1700

(212) 554-1400 Chicago, Illinois 60606
Co-Lead Counsel for the (312) 663-3100
Plaintiff Class Lead Counsel for the

Plaintiff Class

1

TABLE OF CONTENTS

Table Of Cited Authorities ....................

Statement 2... ww cece See eee ee rere

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The Petition For Certiorari Should Be Denied

@2e @G2 242624 6A GER HRBEA SOA EOD OG OE SDS STE OD HG D6 OS

If This Court In Devlin Requires Intervention
To Preserve Appeal Rights, The Seventh
Circuit’s Decision Would Stand. .........

Even If This Court In Devlin Holds
Intervention Is Not Necessary To Preserve
Appeal Rights, The Petition For Certiorari
Should Be Denied Because Petitioners’
Argument In Support Of Their Objection To
The Settlement Is Precluded By Res Judicata.

Soe @@ 6A O22 GHZCHCEH CH HEHeOEO BEE HEC O@ O44 58 06 6 6 8

If This Court In Devlin Requires Intervention
To Preserve Appeal Rights And Holds It Must
Be Granted Liberally, the Petition For
Certiorari Should Be Denied Because
Petitioners’ Motion to Intervene Failed Under
The Most Liberal Standard. .............

EEG RAS oN A Mo it oh ee ReMANO cs ae

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TABLE OF CITED AUTHORITIES

Page
Cases:
California Public Employees’ Retirement System v.
Feizen, $25 U.S. 315 (1999) ...cccccccscvecs 4
Crawford v. Equifax Payment Servs., Inc., 201 F.3d
eae Ce EE 6-6 on a 5d eo eee ens ee sees 8
Deposit Bank of Frankfort v. Board of Counciimen
of Frankfort, 191 U.S. 499 (1903) ............ 8
Devlin v. Scardelletti (No. 01-417) ............. 5, 6,8
Federated Dep t Stores, Inc. v. Moitie, 452 U.S. 394
CREE cea eas Aetna eR ese ee ease ee aan 7
Felzen vy. Andreas, 134 F.3d 873 (7th Cir. 1998) ... 4
Grimes v. Camilli, 238 A.D.2d 289 (N.Y. App. Div.
3: es EPP E TEE PS eCETTETCrY TTT re 2
Grimes v. John P. McCarthy Profit Sharing Plan, 506
Se cia sdce pac ueaen es enanee kes 2
Grimes v. Navigant Consulting, Inc.; 185 F. Supp.
ps eer rer rr err 4, 6,7

Grimes v. Navigant Consulting, Inc., No. 00 C 7609
erie inns s bUes bed cna weg eben ons 3

ase Perey s

lil

Cited Authorities

Grimes v. Northwest Airlines, Inc., No. Civ. A. 98-
CV-4794, 1999 WL 562244 (E.D. Pa., Jul. 30.
a Sree e aks Vie tan knoe eae

Grimes v. Northwest Airlines, Inc., 531 U.S. 879
DERG NW Dl aus sad shaw eh ein tkh oak EO

Grimes v. Vitalink Comm. Corp., 525 U.S. 867 (1998)

Ste eese eee es 649042802 2 2 6E 2 OCS CEE COO 42 OA EE OAS SE O

Grimes v. Wetzler, 749 A.2d 535 (Pa. Super. Ct.
2000), appeal denied, 766 A.2d 1249 (Pa.), and
cert. denied, 533 U.S. 924(2001) ............

In re Synthroid Marketing Litig., 264 F.3d 712
SE ON St bccc accede cbesteveswcusss

Smith v. SEC, 129 F.3d 356 (6th Cir. 1997) .......
Stutson v. United States, 516 U.S. 163 (1996) .....

United Airlines, Inc. v. McDonald, 432 U.S. 385
re eee eee eee ee

Vollmer v. Publishers Clearing House, 248 F.3d 698
ED ah o-deos wah 6s had Cakes Ades

Wade v. Hopper, 993 F.2d 1246 (7th Cir. 1993) ...

Winfield v. Kaplan, 512 U.S. 1253 (1994) ........

Page

7

iv

Cited Authorities
Page
Rules:
POR. Te TI ak ss is anche, ee ye
. § Re | Bs Peer rrr rrr Tre rie. 6
ee es dv cs hn cen a bch awd wee as 10, 11

1

STATEMENT

Petitioners are objectors to a securities class action
settlement that was approved by the trial court over their
objections. The claims in the class action stem from Navigant
Consulting, Inc.’s (“Navigant”) improper use of the pooling of
interests method of accounting to account for four companies it
acquired during the first quarter of 1999. As a result of that
improper accounting, Navigant reported earnings that were
wrongfully inflated. Investors were alerted to the alleged
improprieties before the stock market opened on November 22,
1999, when Navigant publicly disclosed that its accountants
had questioned the Company’s use of the pooling method and
that it might have to restate its prior financial statements.
The market’s reaction to this disclosure was swift and dramatic.
Navigant’s common stock dropped 45% on November 22,
falling from $26.00 to $14.25 per share. Pet. App. 4a.
Subsequently, on January 24, 2000, Navigant confirmed that it
had restated its financial statements for the first three quarters
of 1999. After the January 24, 2000, disclosure, the price of
Navigant common stock rose 13.8%, from $9.9375 to $11.5125.
See Lead Plaintiff’s Reply Memorandum in Support of Final
Approval of Settlement, Plan of Distribution and Attorney’s
Fees, at 8.

The class action settlement resolved the claims of all those
who purchased Navigant securities during a class period from
January 1, 1999, through and including November 19, 1999
(the last trading day prior to Navigant’s disclosure). The
settlement provided that in exchange for $23 million in cash
(plus 50% of any recovery obtained by Navigant as a result of
its litigation with one of its insurance carriers), class members
released all claims for damages arising from statements
defendants made during the class period, including any damages

2

with respect to purchases of Navigant stock after the class
period based on these class-period statements that Plaintiffs
challenged as being false and misleading. See Stipulation of
Settlement (Sept. 22, 2001), at 8-9.

Petitioner Charles L. Grimes (“Grimes”) represents
certain trusts (the “Trusts”’) that allegedly purchased Navigant
stock in both November and December 1999.' No later than
August 2000, Grimes was informed that the class period
would conclude on November 19, 1999, and that there would
be no recovery in this case with respect to purchases of
Navigant securities after that date.’ Pet. App. 4a. Grimes did

1. Grimes, a lawyer, is a serial plaintiff who has filed no
fewer than eight cases, all of which were ultimately dismissed.
See, e.g., Grimes v. Wetzler, 749 A.2d 535 (Pa. Super. Ct. 2000) (suing
New York Tax Commissioner for constitutional violations); appeal
denied, 766 A.2d 1249 (Pa.), and cert. denied, 533 U.S. 924 (2001);
Grimes v. Northwest Airlines, Inc., No. Civ. A. 98-CV-4794, 1999
WL 562244 (E.D. Pa., Jul. 30, 1999) (suing for damages relating to
injuries he allegedly sustained after being arrested on an airplane for
disorderly conduct); Grimes v. Camilli, 238 A.D.2d 289 (N.Y. App.
Div. Ist Dept. 1997) (action to recover legal fee notwithstanding
Grimes’ admission that “he was never the counsel of record and never
took part in any court proceeding related to the probate matter in
which defendant was involved, did not prepare any documents in
their final form, did not maintain any time records and did not conduct
depositions”). This Petition for Certiorari is Grimes’ fifth attempt to
seek this Court’s review. His four prior petitions were denied.—
See Grimes v. Wetzler, 533 U.S. 924 (2001); Grimes v. Northwest
Airlines, Inc., 531 U.S. 879 (2000); Grimes v. Vitalink Comm. Corp.,
525 U.S. 867 (1998); Grimes v. John P. McCarthy Profit Sharing
Plan, 506 U.S. 861 (1992).

2. Separately, in his personal capacity, Grimes claims to be the
largest individual holder of Navigant common stock, but he purchased
(Cont'd)

3

not then seek to intervene on behalf of the Trusts. Instead, in
September 2000, after the settlement of this case was
announced, Grimes filed his own separate class action
against Navigant. That action, Grimes v. Navigant
Consulting, Inc., No. 00 C 7609 (N.D. IIl.), is based on
identical misrepresentations but alleged a class period that
extended through January 24, 2000, to provide a recovery
for purchases of Navigant securities after November 19, 1999.
Grimes unsuccessfully sought to have Grimes v. Navigant
consolidated with this case, and the case was assigned to a
different judge (Honorable Elaine Bucklo). Rather than
having the Trusts opt out of this class action to pursue their
claims in Grimes v. Navigant, Grimes chose to keep the Trusts
as class members and object to the settlement. See Objection
to Approval of Settlement by Charles L. Grimes and Gordon
W. Chaplin (“Objection”), at 11-12.° Despite many

(Cont’d)
none of his shares during the class period; he purchased 513,000 shares
between November 26, 1999, and January 24, 2000. See Certification

of Charles L. Grimes to Complaint in Grimes v. Navigant Consulting,
Inc., No. 00 C 7609 (N.D. II1.).

3. Unlike most objectors to class action settlements, Grimes did
not challenge the amount of the settlement. On the contrary, he thought
the recovery it provided was so good that he wanted class members to
share it with non-class members: post-November 19 purchasers,
including himself. See Objection at 11-12. Grimes also objected to one
aspect of the Notice of Class Action Settlement, regarding disclosure of
counsel fees. Because the precise amount of the portion of the settlement
related to the pending litigation with Navigant’s insurer was not known
when the Notice was sent, the Notice stated that counsel would seek
20% of the Settlement Fund. The District Court found that the Notice
adequately informed the class that attorneys’ fees would be calculated
on the total Settlement Fund, including both the fixed and as-of-yet
undetermined portions. Tr. of Proceedings, Mar. 22, 2001. Notably,
Grimes did not object to the fee percentage sought by class counsel.

4

opportunities (see Pet. App. 4a-5Sa, 13a-14a), Grimes did not
seek to intervene the Trusts as parties to the action while the
case was pending in the District Court.

After the Trusts’ objection was denied and the settlement
was approved by the District Court, Grimes filed a Notice of
Appeal to the Seventh Circuit. However, that appeal was
voluntarily dismissed after the Seventh Circuit questioned
Petitioners’ standing due to their failure to intervene.
Pet. App. 10a, 12a. Only then did Grimes move on behalf of
the Trusts to intervene as a party. The District Court denied
Petitioners’ motion to intervene, finding it “as untimely as it
gets,” because Petitioners did not move until nearly nine
months after their disagreement with certain terms of the
settlement became clear and nearly two months after their
objections had been overruled. Pet. App. 14a. The Seventh
Circuit affirmed. Pet. App. 7a. The Seventh Circuit also
dismissed Petitioners’ conditional appeal from the trial
court’s order approving the class action settlement, due to
lack of jurisdiction, citing Felzen v. Andreas, 134 F.3d 873
(7th Cir. 1998), affirmed by an equally divided court under
the name California Public Employees’ Retirement System
v. Felzen, 525 U.S. 315 (1999). Pet. App. 7a.

Since the Seventh Circuit’s decision, Judge Bucklo has
dismissed Grimes v. Navigant Consulting, Inc. in its entirety
for failure to state a claim. 185 F. Supp. 2d 906 (N.D. Il.
2002). Thus, the very claims that Grimes contends should
have been included in the resoiution of this case have been
found meritless as a matter of law.

5

ARGUMENT

THE PETITION FOR CERTIORARI
SHOULD BE DENIED

There is no reason to grant certiorari in this case.
As Petitioners concede, the issue presented by the petition is
the same issue now before the Court in Devlin v. Scardelletti
(No. 01-417), in which this Court heard argument on March
26, 2002. Pet. 9. This Court routinely holds or defers
consideration of petitions for certiorari pending the outcome of
another case that raises the same issues for which review is
sought. See, e.g., Stutson v. United States, 516 U.S. 163 (1996)
(Scalia, J. dissenting) (“We regularly hold cases that involve
the same issue as a case on which certiorari has been granted
and plenary review is being conducted”); Winfield v. Kaplan,
512 U.S. 1253 (1994) (Scalia, J. dissenting) (noting that
disposition on petition for certiorari was deferred pending
announcement of judgment in a case that presented similar
issues).* In this case, however, certiorari should be denied
immediately because Petitioners cannot prevail no matter how
this Court rules in Deviin.

I. If This Court In Devlin Requires Intervention To
Preserve Appeal Rights, The Seventh Circuit’s
Decision Would Stand.

- Should this Court rule in Devlin that party status is necessary
to appeal the denial of objections to a settlement, the Seventh
Circuit’s decision would stand and certiorari should be denied.

4. The fact that Grimes formulated a second question in his
petition —- if intervention is required, should it be pro forma?
(Pet. 10) — does not make this case any more worthy of certiorari,
since Grimes already presented that very argument to the Court as
an amicus in Devlin. See No. 01-417, Brief of Charles L. Grimes,
et al. as Amici Curiae in Support of Petitioner, at 24-25.

6

II. Even If This Court In Devlin Holds Intervention
Is Not Necessary To Preserve Appeal Rights,
The Petition For Certiorari Should Be Denied
Because Petitioners’ Argument In Support Of
Their Objection To The Settlement Is Precluded By
Res Judicata.

In their Statement of the Case, Petitioners failed to
disclose two key facts: (1) Grimes has instituted a separate
class action in which he sought to recover on the very same
claims Petitioners contend were improperly excluded by the
settlement here; and (2) that action was dismissed under
Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which
relief can be granted. Grimes v. Navigant, 185 F. Supp. 2d
906. Therefore, the Petition should be denied because the
post-November 19 claims that Petitioners contend were
improperly excluded from the settlement are precluded by
res judicata.

Petitioners objected to the settlement because it released
all claims of class members arising from alleged
misrepresentations made during the class period. Petitioners
contended that it was unjust to release any such claims
relating to post-class period purchases allegedly made in
reliance upon misrepresentations made during the class
period because the settlement did not provide a recovery for
those purchases.° See Objection at 8. The premise of Grimes’

5. Importantly, this was a Rule 23(b)(3) class with full opt out
rights. At the point when class members had to decide whether
to opt out of the class, they knew the value of the settlement.
Thus, each class member, including the Trusts, was able to evaluate
whether the consideration being offered was adequate to warrant the
release of all claims based on statements made during the class period,
which was required to participate in the settlement.

7

objection is that these claims, based on the impact of class
period statements on post-class-period purchases, have value.
However, in Grimes v. Navigant, the court held as matter of
law that those very claims have no value.

In Grimes v. Navigant, Petitioner Grimes, individually
and on behalf of a class of persons who purchased Navigant
stock from May 6, 1999, through January 24, 2000, asserted
10b-5 claims identical to those asserted in this class action
— that the accounting for Navigant’s first quarter acquisitions
was improper — but with a different class period. 185
F. Supp. 2d at 908-09. Grimes v. Navigant alleged that the
misrepresentations concerning the pooling method of
accounting were not corrected until the Company announced
the restatement of its financial statements on January 24,
2000. The District Court dismissed that action in its entirety,
holding that shareholders could not recover for purchases of
stock made after the November 22 disclosures.° Because the
price of Navigant stock actually rose on January 24, 2000
(Grimes’ purported cure date), the court held that any
misrepresentations not cured by the November 22
disclosures, as a matter of law, were not material. Jd. at 914.

The court’s dismissal of Grimes v. Navigant pursuant to
Rule 12(b)(6) “constitutes a final adjudication on the merits”
for res judicata purposes. Wade v. Hopper, 993 F.2d 1246,
1252 (7th Cir. 1993). See also Federated Dept Stores, Inc.
v. Moitie, 452 U.S. 394, 399 n.3 (1981) (“The dismissal for
failure to state a claim under Federal Rule of Civil Procedure

6. The court dismissed claims asserted for pre-November 22
misrepresentations because Grimes purchased his shares on
November 26, 1999, and as a matter of law he could not recover for
frauds disclosed before he bought his stock. Grimes v. Navigant,
185 F. Supp. 2d at 912. ;

8

12(b)(6) is a ‘judgment on the merits” with full res judicata
effect). That Grimes has appealed the dismissal of his claims
does not deprive the judgment of its res judicata effect. Deposit
Bank of Frankfort v. Board of Councilmen of Frankfort, 191
U.S. 499 (1903) (original state court judgment entitled to res
judicata effect in subsequent federal action so long as state case
remained pending without decision on appeal); Smith v. SEC,
129 F.3d 356, 362 n.7 (6th Cir. 1997) (pending appeal of
judgment does not deprive the judgment of res judicata effect).

Thus, even if Grimes (on behalf of the Trusts) could appeal
the denial of his objection, such an appeal would be futile: the
issue of whether there can be a recovery for purchases of
Navigant securities after November 19, 1999, based on
statements made before that date has been determined and is
res judicata. Accordingly, the issue underlying Grimes’ objection
has been resolved against him in his subsequent action.

Ill. If This Court in Devlin Requires Intervention To
Preserve Appeal Rights And Holds It Must Be Granted
Liberally, the Petition For Certiorari Should Be Denied
Because Petitioners’ Motion to Intervene Failed Under
The Most Liberal Standard.

The Seventh Circuit liberally grants class members’ motions
to intervene to preserve appeal rights. See Jn re Synthroid
Morketing Litig., 264 F.3d 712, 715 (7th Cir. 2001); Crawford
v. Equifax Payment Servs., Inc., 201 F.3d 877, 881 (7th Cir.
2000). Though it applied that standard in this case, Pet. App.
3a, the intervention motion did not succeed, given Grimes’
lengthy and prejudicial delay. Thus, even if the Court were
inclined in Devlin to liberalize the granting of intervention
motions by objecting class members solely to preserve appeal
rights, certiorari still should be denied in this case.

9

In affirming the District Court, the Seventh Circuit noted
“that intervention should be freely allowed, if limited to the
purpose of taking an appeal. But this attitude cannot abolish
the requirement in Rule 24 that intervention be timely.”
Pet. App. 3a. In light of this liberal allowance of intervention,
and applying the timeliness standard derived from this
Court’s decision in United Airlines, Inc. v. McDonald, 432
U.S. 385 (1977),’ the Seventh Circuit concluded that the
District Court properly exercised its discretion as gatekeeper
in denying the motion to intervene. Nearly nine months before
moving to intervene, Petitioners knew that the settlement
provided no recovery for post-class period purchasers yet
waited without justification to seek intervention until final
judgment had been entered and their first attempt to appeal
had been questioned. Pet. App. 4a-5a. Indeed, Petitioners did
not lose on the motion to intervene simply because it was
made post-judgment. While noting that it is “hard to see how
a post-judgment motion could be timely,” the Seventh Circuit
stated “‘hard’ differs from ‘impossible’” and cited United

7. The rulings below are wholly consistent with this Court’s
holding in United Airlines. In United Airlines, this Court held that a
putative class member’s motion to intervene for the purpose of
appealing the District Court’s denial of class certification should have
been granted as timely when that motion was made as soon as it was
clear that the named plaintiffs would not appeal that denial, which
did not become apparent until after judgment. Notably, the standard
this Court applied is the very standard applied below: intervention is
required “as soon as it became clear to the respondent that the interests
of the unnamed class members would no longer be protected by the
named class representatives.” 432 U.S. at 394. Far from the blanket
approval of post-judgment intervention motions that Petitioners
erroneously characterize it to be, United Airlines is further support
for the need of unnamed class members to move timely for
intervention to preserve appeal rights once they conclude that the
class representative will not protect their interests.

10

Airlines as an example of a circumstance where post-
judgment intervention motions are properly allowed.
-Pet. App. 2a. The plain fact is that Grimes knew his claims
were not being represented in this case at least seven months
before judgment and did not seek to intervene.

This case illustrates the prejudice that can occur when
there is no gatekeeper to screen out persons who lack bona
fides. Although Rule 24(a) sets a liberal standard for
intervention by a class member, it requires the trial court to
screen out those who fail to satisfy the requirements of the
rule, including the plain requirement to maké a timely motion.
See Vollmer v. Publishers Clearing House, 248 F.3d 698, 705
(7th Cir. 2001). As the Seventh Circuit noted, Petitioners’
failure to intervene timely prejudiced the Respondents by
depriving them of the opportunity to develop a factual record
concerning the circumstances surrounding Petitioners’ stock
purchases and whether the objection was being pursued in
good faith. Pet. App. 7a. Grimes claims to be the largest
individual shareholder of Navigant but he is not a class
member. See Affidavit of Charles L. Grimes (Feb. 23, 2001)
at {{ 6, 8. In August 2000 (seven months before the settlement
approval hearing), Grimes learned of the settlement and
expressed to Lead Counsel his intention to object on his own
behalf, only to be told that, as a non-class member, he lacked
standing. See Lead Plaintiff’s Position on Reassignment of
the Grimes Action, at J 6. Even though Grimes could have
excluded the Trusts from the class and preserved all of the
claims he contended had value, he chose not to opt out and
instead filed objections on the Trusts’ behalf which, if
successful, would have had the effect of benefitting himself
personally far more than the Trusts for which he is a fiduciary.
Had the Trusts timely moved to intervene, they would have.
subjected Grimes to discovery concerning the true party in

11

interest behind the objection and whether Grimes was
elevating his personal interests over those of the Trusts.
By failing to seek intervention, as the Seventh Circuit
observed, “these objectors hobbled that inquiry.” Pet. App.
7a. Given that intervention requirements under Rule 24(a)
are easily met by class members with legitimate objections,
there was no justification for sidestepping the Rule’s
gatekeeping function in this case.

Thus, even under the very liberal standards the Seventh
Circuit has formulated for class member intervention under
Rule 24(a), Petitioners’ motion was properly denied.

12

CONCLUSION
The petition for writ of certiorari should be denied.
Respectfully submitted,

Fay CLAYTON
Counsel of Record
Rosert L. MARGOLIS
ROBINSON CuRLEY & CLayTon, P.C.
300 South Wacker Drive :
Suite 1700

Chicago, Illinois 60606
(312) 663-3100

Lead Counsel for the
Plaintiff Class

DANIEL L. BERGER

LisA BUCKSER-SCHULZ
BERNSTEIN LiTow!Tz BERGER
& GROSSMANN, L.L.P.

1285 Avenue of the Americas
New York, New York 10019
(212) 554-1400

Co-Lead Counsel for the
Plaintiff Class

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_1511%3A3. Public record. Not legal advice.