Petition for Writ of Certiorari — Harry & Jeanette Weinberg Foundation Inc. v. Croyden Associates, 113 S. Ct. 1251 (1993) (No. 92-613)

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No. \7OGAG2 OF Bia AlAs |

In The

Supreme Court of the United States

October Term, 1992

THE HARRY AND JEANETTE WEINBERG

FOUNDATION INCORPORATED,

a Maryland corporation,

Petitioner,

CROYDEN ASSOCIATES; and SERVICE AMERICA

CORPORATION, a Delaware corporation,

Respondents.

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

RosBert ARTHUR BRUNIG

O’ConnNorR & HANNAN

3800 IDS Tower

80 South Eighth Street

Minneapolis, Minnesota 55402

Telephone: (612) 343-1200

Counsel of Record

COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

Whether a member of a conditionally certified class

who enters a timely appearance in response to a district

court's first notice and who objects to certification of and

participation in a non-opt-out class, to the adequacy of

the class representative and to the terms of a proposed

settlement, but who does not move to intervene, lacks

“standing” to appeal from a judgment certifying the class

on a non-opt-out basis and approving the settlement.

Whether an appeal by an unnamed class member

whose intervention in an action under 28 U.S.C. § 1332 is

precluded by 28 U.S.C. § 1367(b) because the class mem-

ber’s intervention would have destroyed “complete

diversity” may be dismissed for lack of “standing”

because the class member did not move to intervene.

PARTIES BELOW

The parties to the proceedings in the United States

Court of Appeals for the Eighth Circuit included Alleco

Inc. in addition to the parties whose names appear in the

caption.!

Service America Corporation is a wholly-owned sub-

sidiary of Servam Corporation.

1 The Eighth Circuit stayed the proceedings as to Alleco

Inc. because Alleco Inc. had “sought protection under Chapter

11 of the Bankruptcy Act.” Croyden Assoc. v. Alleco Inc., 969 F.2d

675, 677 (8th Cir. 1992). The proceedings there remain subject

to the “automatic stay,” and the Eighth Circuit has not filed an

Opinion or entered a judgment as to Alleco Inc.

ill

TABLE OF CONTENTS

Page

OE eg 1 i

ne Sin ven vk a Ged ule cabo kant ii

es 5 > iii

Ee tae as |) iv

PETITION FOR WRIT OF CERTIORARI............ 1

pa rn as ei 2

aE ee a 2

8 > ea 3

merece GOP Fhte CASE... ccc cca n esas 4

REASONS FOR ISSUING THE WRIT —

I. The Eighth Circuit’s Decision Is In Conflict With

Decisions Of Other Courts Of Appeals. ...... 8

Il. The Eighth Circuit’s Decision So Far Departed

From The Accepted And Usual Course Of Judi-

cial Proceedings As To Call For An Exercise Of

This Court’s Power of Supervision. .......... 14

Ill. The Eight Circuit Decided A Question Concerning

The Federal Court’s “Supplemental Jurisdiction”

Which Ought To Be Settled By This Court. ..... 19

renin cas bce sk su bei e a Nas whew 22

APPENDIX -

Decision And Judgment (8th Cir. Jul. 13,

ee re ce ocak sk bee Wk Cheian Pet. App. 1

Order Denying Petition For Rehearing With Sug-

gestion For Rehearing En Banc (8th Cir. Aug.

od ac wees a Pet. App. 13

TABLE OF CONTENTS - Continued

Page

Excerpts From Class Action Complaint (D. Minn.,

ee et rere ere Pet. App. 14

Excerpts From Affidavit Of Bernard Siegel (D.

iin, Tine fae. 7, TFPL) .. weve ne cvcses Pet. App. 15

Excerpts From Transcript Of Proceedings (D.

ge eer, rea Pet. App. 16

Final Judgment And Order Of Dismissal (D. Minn.

PU Be BR waka cee enced eet eedivuvds Pet. App. 18 i

Amended Final Judgment And Order Of Dis-

missal (D. Minn. Jul. 3, 1991)........... Pet. App. 24

Excerpts From Notice Of Appearance And Objec-

tion To Motion For Amended Judgment (D. ts

Minn., filed ful. S, THT)... 2.5 cece ccc Pet. App. 30

TABLE OF AUTHORITIES

Page

CAsEs:

Ace Heating & Plumbing Co. v. Crane Co., 453

oe 8 Es eg) rrr renee pute ra tt. Jt! 9

Adams v. Morton, 581 F.2d 1314 (9th Cir. 1978),

cert. denied sub nom. Gros Ventre Tribe v.

United States, 440 U.S. 958 (1979)................. 11

Aldinger v. Howard, 427 U.S. 1 ho, | OR io! 19

American Pipe & Constr. Co. v. Utah, 414 U.S. 538

(BGA) oon vo ineeencecdsanidecsees eee 15, 16

Armstrong v. Board of School Directors of City of

Milwaukee, 616 F.2d 305 (7th Cir. 1980)............ 9

Bender v. Williamsport Area School Dist., 475 U.S.

Ne QUO ink bec ccun nse eeeayekeciasanes ee 21

Central S.C. Chapter, Soc’y of Professional Jour-

nalists v. United States Dist. Ct., 551 F.2d 559

ROE CO DIFF one ck v0vn danse 11

Cohen v. Young, 127 F.2d 721 (6th Cir. et Sat 12 a

Commercial Sec. Bank v. Walker Bank & Trust Co.,

456 F.2d 1352 (10th Cir. 1972)................0005. 16

Croyden Assoc. v. Alleco Inc., 969 F.2d 675 (8th

Cle, BORED as sexes axe eb sana bwyecuneieeereeee passim

Dosier v. Miami Valley Broadcasting Corp., 656

rae Uo CR CH POs 5 ciccceecs eee 9

Finley v. United States, 490 U.S. 545 (1989).......... 19

Gendron v. Shastina Properties, Inc., 578 F.2d 1313

ee ME rnp re re, Jor st: 11

TABLE OF AUTHORITIES - Continued

Page

Greenfield v. Villager Indus., Inc., 483 F.2d 824 (3d

Che, WSGSD aie vsncenen cde ensue eee eee 12

Grunin v. International House of Pancakes, 513

F.2d 114 (8th Cir.), cert. denied, 423 U.S. 864

(IGF SD os. 650 04dk cae vakeen eee eee chee eee ees 18

Guthrie v. Evans, 815 F.2d 626 (11th Cir. 1987)...... 13

Hansberry v. Lee, 511 U.S. So CURD). .55 xa ssesccenes 15

In re Cement Antitrust Litigation, 688 F.2d 1297

(9th Cir. 1982), aff’d sub nom. Arizona v. Ash

Grove Cement Co., 459 U.S. 1190 (1983) ........... 9

In re Dennis Greenman Sec. Litigation, 829 F.2d

1559 Clith Cie 1967)... <0éxccasccesnn4e eee 13

In re Eastern Sugar Antitrust Litigation, 697 F.2d

$24 (3d Cle. T9508) vnc iacessaecneeses eee 11

In re Federal Skywalk Cases, 680 F.2d 1175 (8th

Cir.), cert. denied sub nom. Stover v. Rau, 459

LS. SOG COGGRD ov ckewchucceet ce eeeeeeee eee 18

In re W.T. Grant Co., 699 F.2d 599 (2d Cir.), cert.

denied sub nom. Cosoff v. Rodman, 464 U.S. 822

(1GBS) . . ncviccuxaescunee an eae 095s ee 11

Kenny v. Quigg, 820 F.2d 665 (4th Cir. 1987)........ 10

Marino v. Ortiz, 484 U.S. 301 (1988)................. 15

Marshall v. Holiday Magic, Inc., 550 F.2d 1173 (9th

ee ) er re rr ee 9

Martin-Trigona v. Shiff, 702 F.2d 380 (2d Cir. 1983) .... 11

Mitchell v. Maurer, 293 U.S. 237 (1934).............. 10

Vii

TABLE OF AUTHORITIES ~— Continued

Page

Moore v. New York Cotton Exchange, 270 U.S. 593

FROME Chis dav annakaue se upec acer eer accent aa de 19

Ohio v. Roberts, 448 U.S. 56 (1980).................. 21

Owen Equip. & Erection Co. v. Kroger, 437 U.S.

FE GOMES tee vixecnednGeie ee eT EN. 19

Patterson v. Stovall, 528 F.2d 108 (7th Cir. 1976)...... 9

Pettway v. American Cast Iron Pipe Co., 576 F.2d

1157 (Sth Cir. 1978), cert. denied, 439 U.S. 1115

be) EET ETE EEE TRE ELIE Lares hve ee ee 11

Research Corp. v. Asgrow Seed Co., 425 F.2d 1059

PRE A: POPU sx emai sa Gun durad ace ee ee 8

Reynolds v. National Football League, 584 F.2d

ES Berea ny Glenn aetiA Bhp, PPnaee 18

SEC v. An-Car Oil Co., 604 F.2d 114 (1st Cir. Sg | ee

SEC v. Lincoln Thrift Ass’n, 577 F.2d 600 (9th Cir.

a EEE Te Ter err er re 11

SEC v. Wencke, 783 F.2d 829 (9th Cir.), cert. denied

sub nom. deLusignan v. Gould, 479 U.S. 818

GOWER SUN SNA seNS4GN 4 a nae Ls bensaNKT beau uees 10

Sertic v. Cuyahoga, Lake, Geauga & Ashtabula

Counties Carpenters Dist. Council, 459 F.2d 579

GO ee Meas Hoes AapWe s Naan d wre di neeneeee. és 12

St. Paul Mercury Indem. Co. v. Red Cab Co., 303

hy Me CUMS 5 <b once keuci be enduddubansvcetaunuc 21

Sumner v. Mata, 449 U.S. 539 (1981) ................ 21

Thompson v. Freeman, 648 F.2d 1144 (8th Cir.

ie) EE eee TT Cer ry er ree a orem 16

Viii

TABLE OF AUTHORITIES - Continued

Page

United Mine Workers v. Gibbs, 383 U.S. 715 (1966) .... 19

United States v. American Soc’y of Composers,

ee ek err ye ere 16

Walker v. City of Mesquite, 858 F.2d 1071 (5th Cir.

ag, REET E EET CE EET CLEP T REET OUT Tee TET eee 13

West v. Radio-Keith-Orpheum Corp., 70 F.2d 621

ee ee rere rere Serre eee 12

Zenith Radio Corp. v. Hazeltine Research, Inc.,

POS Ue. WE CIGGF) oo ios ie ic ice ceeansvesnsccees 16

STATUTES:

SP ee OP I ws aio ee ox PKA 9 hsoe 04 pone Se WKS 3

BS | oe eer re ere re 2, 20

| A ee ee ere ee ee a im ee

RULE:

PAINT Beds Nh is kos kaeaewanetiern rs 2, 3, 8, 14, 17

MIscELLANEOUs:

3B J. Moore & J. Kennedy, Moore’s FEDERAL PRAc-

lea ga) eeV EER GS PERT ENS Ce NCEA 12

9 J. Moore, B. Ward & J. Lucas, Moore’s FEDERAL

PUNE CONE UN, SUED oo ck vai cbendesbaceecnvers iz, 1

D. Siegel, Practice Commentary: The 1990 Adoption

of § 1367, 28 U.S.C.A. § 1367 (Supp. 1992)........ 19

7B C. Wright, A. Miller & M. Kane, Feperat PRac-

TicE & Procepure (2d ed. 1986)................20.. 12

In The

Supreme Court of the United States

October Term, 1992

THE HARRY AND JEANETTE WEINBERG

FOUNDATION INCORPORATED,

a Maryland corporation,

Petitioner,

CROYDEN ASSOCIATES; and SERVICE AMERICA

CORPORATION, a Delaware corporation,

Respondents.

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

The petitioner The Harry and Jeanette Weinberg

Foundation Incorporated (hereinafter “the Foundation”)

respectfully prays that a writ of certiorari issue to review

the judgment and opinion of the United States Court of

Appeals for the Eighth Circuit entered in this proceeding

on July 13, 1992.

OPINIONS

The judgment and opinion of the Eighth Circuit is

reported at 969 F.2d 675 and is set forth in the Appendix.

(Pet. App. 1-12). The order of the Eighth Circuit denying

rehearing is reported at 969 F.2d 675 and is set forth in the

Appendix. (Pet. App. 13).

The unreported final judgment and order of the

United States District Court for the District of Minnescta

(hereinafter “district court”) is set forth in the Appendix.

(Pet. App. 18-23). The unreported amended final judg-

ment and order of dismissal of the district court is set

forth in the Appendix. (Pet. App. 24-30).

JURISDICTION

The respondent Croyden Associates (hereinafter

“Croyden Associates”) invoked the jurisdiction of the

district court under 28 U.S.C. § 1332(a)(1). (Pet. App. 14).

The Foundation, as a member of a conditionally certified

class, appeared, filed a written objection and made oral

argument that certification of a class under

Fed.R.Civ.P.23(b)(1) and (b)(2) was improper and that, in

the alternative, Croyden Associates was not an adequate

class representative and that the proposed settlement was

not “fair, reasonable and adequate.”? Croyden Assoc. v.

Alleco Inc., 969 F.2d at 676-77.

? The Foundation also asserted other objections. Croyden

Assoc. v. Alleco, Inc., 969 F.2d at 676-77.

On June 19, 1991, the district court entered judgment

in which the district court certified a class (which

included the Foundation) under Fed.R.Civ.P. 23(b)(1) and

(b)(2), enjoined any class member (including the Founda-

tion) from commencing or pursuing any other action and

approved the settlement. (Pet. App. 19-21). On July 3,

1991, the district court amended its judgment without

notice or a hearing. (Pet. App. 24-30). On July 9, 1991, the

Foundation filed a notice of appeal as to both the judg-

ment and the amended judgment.3

On July 13, 1992, the Eighth Circuit entered a judg-

ment and filed an opinion in which the Eighth Circuit

dismissed the Foundation’s appeal for lack of “standing”

to appeal. Croyden Assoc. v. Alleco Inc., 969 F.2d at 680. A

petition for rehearing with a suggestion for rehearing en

banc was denied on August 24, 1992. Id. at 675.

This petition is being filed within ninety (90) days of

the date of judgment.

The jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1).

STATUTE INVOLVED

28 U.S.C. § 1367. Supplemental jurisdiction.

(b) In any civil action of which the district

courts have original jurisdiction founded solely

* Although the Eighth Circuit stated that the amended

judgment was not at issue, Croyden Assoc. v. Alleco Inc., 969 F.2d

at 677 n.3, that statement conflicts with the explicit language of

the Foundation’s notice of appeal and the issues raised in the

Eighth Circuit.

on section 1332 of this title, the district courts

shall not have supplemental jurisdiction under

subsection (a) over claims by plaintiffs against

persons made parties under Rule 14, 19, 20, or

24 of the Federal Rules of Civil Procedure, or

over claims by persons proposed to be joined as

plaintiffs under Rule 19 of such rules, or seeking

to intervene as plaintiffs under Rule 24 of such

rules, when exercising supplemental jurisdiction

over such claims would be inconsistent with the

jurisdictional requirements of section 1332.

STATEMENT OF THE CASE

On September 1, 1985,4 Alleco Inc. (hereinafter

“Alleco”) issued $105,000,000 of 91/2% Convertible Senior

Subordinated Debentures due 2010 (hereinafter “9!/2%

Debentures”). Croyden Assoc. v. Alleco Inc., 969 F.2d at 676.

Alleco subsequently sold the stock of the respondent

Service America Corporation (hereinafter “Service Amer-

ica”) to SAC Acquiring Corporation, a wholly-owned

subsidiary of Servam Corporation. Immediately thereaf-

ter, SAC Acquiring Corporation merged into Service

America, and Service America survived as a wholly-

owned subsidiary of Servam Corporation. Service Amer-

ica assumed Alleco’s obligations under the 9!/2% Deben-

tures. 1d.

Alleco then sued the original indenture trustee seek-

ing a declaratory judgment that Alleco had been released

from liability to pay principal or interest on the 9'/2%

* The Eighth Circuit incorrectly dates the offering as

“August 1985.” Croyden Assoc. v. Alleco Inc., 969 F.2d at 676.

Debentures. The successor indenture trustee substituted

itself as a defendant and counterclaimed for a declaratory

judgment that Alleco remained obligated to pay. Id. at 677

n.2. The district court granted summary judgment declar-

ing that Alleco had not been released from its obligation,

concluding that Alleco’s actions “constituted a repudia-

tion of Alleco’s obligations under the 91/2% Debentures”

and “gave rise to a default and permitting the successor

trustee to give notice of default” and to declare principal

and interest immediately due and payable.

Alleco and Service America appealed. Neither Alleco

nor Service America made interest payments due to the

9'/2% Debentureholders on September 1, 1990, or thereaf-

ter. The appeal was then stayed by agreement.

An “informal committee” of 91/2% Debenturenolders

then began to meet.¢ Id. at 677. The “informal committee”

negotiated with Service America, with General Electric

Capital Corporation, Service America’s senior lender, and

with Alleco. On March 20, 1991, the “informal commit-

tee” and Alleco and Service America ultimately reached

an “agreement in principle” to settle all claims against

° The “informal committee” was called together by Service

America; it was not formally elected or appointed. The “infor-

mal committee” included Croyden Associates, Fidelity

Magellan Fund, Fidelity Growth & Income Portfolio, Salomon

Brothers Inc., Salomon Partners Ltd., Steven Mizel IRA, Mutual

Series Furnd Inc., Mabon Securities, Inc., Angelo, Gordon & Co.,

L.P., Guardian Park Ave. Fund, Guardian Stock Fund Inc. and

The Guardian Life Employees Incentive Savings Plan.

* Goldman, Sachs & Co., the general partner of Water Street

Corporate Recovery Fund I, L.P., followed the progress of the

“informal committee.”

Alleco and Service America. Id. The “agreement in princi-

ple” contemplated that its terms would be “effectuated

by a court-approved class action settlement” and was

contingent “on approval by the [district c]ourt of the

proposed settlement and the certification of a non-opt-out

class.” Id.

On May 14, 1991, Croyden Associates, a member of

the “informal committee” acting in accord with the

“agreement in principle,” invoked the district court’s

jurisdiction under 28 U.S.C. § 1332(a)(1), (Pet. App. 14),

and commenced an action against Alleco and Service

America. Croyden Assoc. v. Alleco Inc., 969 F.2d at 676.

Croyden Associates immediately moved for the entry of

judgment “certifying th[e] action as a class action” and

“[djeclaring that the terms of the proposed settlement

[we]re fair, reasonable and adequate,” id. at 676-77, and

Alleco and Service America immediately stipulated to the

relief sought by Croyden Associates.

On May 21, 1991, the district court scheduled a June

14, 1991 hearing and directed both published and mailed’

notice to the beneficial owners of the 91/2 Debentures. Id.

at 677. On May 24, 1991, members of the “informal com-

mittee,”® Alleco and Service America reduced the “agree-

ment in principle” to writing. Id. The Foundation?

appeared in the action, filed a written objection, attended

7 The mailed notice was not distributed to the beneficial

owners of the 9'/2% Debentures prior to the June 14, 1991 hear-

ing.

8 Goldman, Sachs & Co., joined with the “informal commit-

tee,” approved the “agreement in principle” and executed the

Settlement Agreement.

° The Foundation beneficially owns $13,292,000 of 9'/2%

Debentures.

the June 14, 1991 hearing and orally objected. Id. The

Foundation’s principal objection was that the certification

of a class on a non-opt-out basis was improper.!° (Pet.

App. 18-19).

On June 19, 1991, the district court entered judgment

certifying the class on a “non-opt-out” basis and approved

the Settlement Agreement. Croyden Assoc. v. Alleco Inc., 969

F.2d at 677. On July 3, 1991, Service America moved to

amend the judgment so as to release General Electric Capital

Corporation from all claims. Id. at n.3. Although Croyden

Associates had assured the district court that General Electric

Capital Corporation was not being released, the district court

amended the judgment immediately — before giving notice

and without a hearing. (Pet. App. 26).

The Foundation appealed. Croyden Assoc. v. Alleco

Inc., 969 F.2d at 676. On July 13, 1991, the Eighth Circuit

stated:

We dismiss the . . . Foundation’s appeal against

Croyden Associates and Service America for

lack of standing... .

Id. at 680. The basis of the Eighth Circuit’s dismissal was

that the Foundation had not moved to intervene in the

district court and that a motion to intervene was a prereq-

uisite for “standing” to appeal. Id. at 677-80.

10 In the alternative, the Foundation argued that Croyden

Associates was not an adequate class representative and that the

terms of the settlement were not “fair, reasonable and adequate”

and made other objections. Croyden Assoc. v. Alleco Inc., 969 F.2d

at 677.

REASONS FOR ISSUING THE WRIT

I. The Eighth Circuit’s Decision Is In Conflict With

Decisions Of Other Courts Of Appeal.

The Eighth Circuit dismissed the Foundation’s

“appeal against Croyden Associates and Service America

for lack of standing.” Id. at 680. The Eighth Circuit did so

because it now requires “intervention as a condition of

appeal” by a class member who is not a named party and

who objects “to a class settlement, with respect to the

settlement itself and adequacy of class representation.”

Id. The Eighth Circuit explains that “unnamed class mem-

bers who object . . . must move to intervene” and holds

that “they will be denied standing to appeal when they

have not done so. Id. at 679. That decision is in direct

conflict with the decisions of certain Courts of Appeals; it

also appears to conflict in principle with the decisions of

yet other Courts of Appeals.

In holding that a class member who is not a named

plaintiff must move to intervene in order to establish

“standing” to appeal, the Eighth Circuit concedes a con-

flict with the holding of Research Corp. v. Asgrow Seed Co.,

425 F.2d 1059, 1060 (7th Cir. 1970) (“[i]f a class member

intervenes or even appears in response to a notice pur-

suant to Fed.R.Civ.P. 23(e) and objects to the dismissal or

compromise, he has a right to appeal from an adverse

final judgment”). The Eighth Circuit attempts to distin-

guish its holding by referring to a footnote in Research

Corp. v. Asgrow Seed Co. in which the Seventh Circuit

stated that “the failure of the appellants to formally inter-

vene after receiving notice under Rule 23(e), before final

judgment forecloses their right to appeal.” That distinc-

tion is, as the Eighth Circuit also concedes, of little sub-

stance because the Seventh Circuit subsequently “ignored

th[e] footnote and .. . relied on the text.” Croyden Assoc. v.

Alleco Inc., 969 F.2d at 679. The Eighth Circuit recognizes

that the Seventh Circuit continues to adhere to its hold-

ing. See, e.g., Armstrong v. Board of School Directors of City

of Milwaukee, 616 F.2d 305, 327 (7th Cir. 1980) (“unnamed

class member who appears in response to a Rule 23(e)

notice and objects to a settlement has a right to appeal

from an adverse judgment” and “right to appeal exists

independent of” motion to intervene in district court);

Patterson v. Stovall, 528 F.2d 108, 109 n.1 (7th Cir. 1976)

(objecting class member has standing to appeal from

judgment approving settlement).

The Eighth Circuit also acknowledges that other

Courts of Appeals permit a class member who is not a

named plaintiff to appeal even though the class member

had made no attempt to intervene. See, e.g., Ace Heating &

Plumbing Co. v. Crane Co., 453 F.2d 30, 32 (3d Cir. 1971)

(“aggrieved class members may appeal any final order of

a district court in proceedings held pursuant to Rule 23.

This general proposition holds true even though such

class members have the right to exclude themselves from

the class”); In re Cement Antitrust Litigation, 688 F.2d 1297,

1309 (9th Cir. 1982), aff'd sub nom. Arizona v. Ash Grove

Cement Co., 459 U.S. 1190 (1983) (Rule 23 allows class

member to appeal from order approving settlement to

which class member objects); Dosier v. Miami Valley Broad-

casting Corp., 656 F.2d 1295, 1299 (9th Cir. 1981) (dissat-

isfied class member can challenge judgment approving a

settlement by direct appeal); Marshall v. Holiday Magic,

Inc., 550 F.2d 1173, 1176 (9th Cir. 1977) (because they had

standing to sue and their legal rights were affected by a

settlement, unnamed class members could appeal from

district court’s approval of a settlement). The Eighth Cir-

cuit dismisses those holdings and explains that those

Courts of Appeal had “not faced the issue of standing.”

Croyden Assoc. v. Alleco Inc., 969 F.2d at 680. That explana-

tion reads those holdings too narrowly and ignores the

basic principle that an appellate court has an obligation

to assume itself that it has jurisdiction of an appeal. See,

e.g., Mitchell v. Maurer, 293 U.S. 237, 244 (1934) (“appellate

federal court must satisfy itself not only of its own juris-

diction, but also of that of the lower courts in a cause

under review”).

The Eighth Circuit’s decision appears to conflict in

principle with another line of cases. That line of cases —

with roots in the majority of circuits - permits a person

whose interests are represented by another (e.g., a class

representative, a fellow shareholder or a governmental

agency) and who is affected by a judgment to appeal

from an adverse judgment even if the person did not

attempt to intervene. See, e.g., Kenny v. Quigg, 820 F.2d

665, 667-68 (4th Cir. 1987) (nonparty “who had an interest

in the cause litigated [by the Secretary of Labor] and who

participated in the proceeding actively enough to make

him privy to the record may appeal despite the fact he

was not named in the complaint and did not intervene”);

SEC v. Wencke, 783 F.2d 829, 834 (9th Cir.), cert. denied sub

nom. deLusignan v. Gould, 479 U.S. 818 (1986) (“persons

who were not paities of record before the district court”

may appeal if “(1) they participated in the district court

proceedings and (2) the equities weigh in favor of hearing

the appeal”); Martin-Trigona v. Shiff, 702 F.2d 380, 385-86

(2d Cir. 1983) (“nonparty is allowed to appeal if the trial

court’s judgment has affected the nonparty’s interest); In

re W.T. Grant Co., 699 F.2d 599, 607 (2d Cir.), cert. denied

sub nom. Cosoff v. Rodmen, 464 U.S. 822 (1983) (“ ‘even

where class members had the right to exclude themselves

from the class, they may appeal from an order approving

a settlement which they deem unsatisfactory’ ”); In re

Eastern Sugar Antitrust Litigation, 697 F.2d 524, 527-28 (3d

Cir. 1982) (person who was not a party to a class action,

but who did participate <xtensively in settlement pro-

ceedings and who was affected by district court’s order

has standing to appeal); Adams v. Morton, 581 F.2d 1314,

1318 (9th Cir. 1978), cert. denied sub nom. Gros Ventre Tribe

v. United States, 440 U.S. 958 (1979) (nonparty who partici-

pates in case and has interest in result may appeal); SEC

v. An-Car Oil Co., 604 F.2d 114, 119 (1st Cir. 1979) (deben-

tureholders who were “not parties to the SEC suit,” but

who “participated in hearings,” were afforded “standing”

to appeal); Gendron v. Shastina Properties, Inc., 578 F.2d

1313, 1315 (9th Cir. 1978) (class member who objects to

settlement must file timely appeal from judgment); SEC v.

Lincoln Thrift Ass'n, 577 F.2d 600, 602-03 (9th Cir. 1978)

(because nonparty had participated in proceedings in

district court and had legitimate interest in the_outcome,

nonparty had standing to appeal); Pettway v. American

Cast Iron Pipe Co., 576 F.2d 1157, 1180-81 (5th Cir. 1978),

cert. denied, 439 U.S. 1115 (1979) (“dissenters to a class

action settlement may . . . appeal the district court's

approval” of the settlement); Central S.C. Chapter, Soc’y of

Professional Journalists v. United States Dist. Ct., 551 F.2d

559, 566 (4th Cir. 1977) (nonparty has “standing” to

appeal if he is aggrieved by final decision); Greenfield v.

Villager Indus., Inc., 483 F.2d 824, 829 (3d Cir. 1973) (indi-

viduals who are within definition of class have “stand-

ing” to appeal from exclusion from class when they

appeared and participated); Sertic v. Cuyahoga, Lake, Gea-

uga & Ashtabula Counties Carpenters Dist. Council, 459 F.2d

579, 581 (6th Cir. 1972) (class members who “were not

parties to the proceeding” because they did not receive

notice and who did not have an opportunity to object had

“standing to bring the appeal”); Cohen v. Young, 127 F.2d

721, 724 (6th Cir. 1972) (class member whose motion to

intervene was denied and who did not appeal from that

denial has “standing” to appeal and “is entitled as of

right to prosecute the appeal”); West v. Radio-Keith-

Orpheum Corp., 70 F.2d 621, 623-24 (2d Cir. 1934) (one

whose interests are affected by judgment has standing

and is “allowed to appeal”); cf. 3B J. Moore & J. Kennedy,

Moore’s Freperat Practice J 23.80[5] at 23-496 (2d ed.

1991) (“member of a class who appears in response to the

court’s notice . . . and objects to [a] compromise has a

right to appeal from an adverse final judgment although

he did not become a formal party of record”); 7B C.

Wright, A. Miller & M. Kane, Feperat Practice & Pro-

CEDURE § 1802 at 463 (2d ed. 1986) (“any class member

who has objected . . . has a right to appeal”); 9 J. Moore,

B. Ward & J. Lucas, Moore’s FeperaAt Practice 203.06 at

323 (2d ed. 1987) (“a person who has an interest in the

cause litigated and participated actively enough to make

him privy to the record may appeal despite the fact that

he was not named in the complaint and did not inter-

vene”).

EEE

The Eighth Circuit finds support for its holding only

in Guthrie v. Evans, 815 F.2d 625, 627 (11th Cir. 1987) and

in Walker v. City of Mesquite, 858 F.2d 1071, 1072-74 (5th

Cir. 1988). The Eighth Circuit cites with approval the

rationale of Guthrie and notes that Guthrie

outlined three alternative avenues of relief for a

class member who is unsatisfied with the class

settlement. First, the objector may move to inter-

vene as of right pursuant to Fed.R.Civ.P.

24(a)(2), ... and the district court’s denial of the

motion to intervene of right is appealable. . . .

Second, the objector may collaterally attack the

settlement approval by filing a separate suit

challenging the adequacy of the class represen-

tation. .. . Third, if the class is certified under

Rule 23(b)(3), the individual class member may

opt out... . With these legal avenues available,

Guthrie concluded that there was no need to

allow a class member to appeal a judgment sat-

isfactory to the class representatives and pre-

sumably the majority of class members.

Croyden Assoc. v. Alleco Inc., 969 F.2d at 678. The Eighth

Circuit acknowledges that the holding of Guthrie has been

undercut by a subsequent decision of the Eleventh Cir-

cuit. See In re Dennis Greenman Sec. Litigation, 829 F.2d

1539, 1542 (11th Cir. 1987) (class member may preserve

right to appeal from a judgment approving a settlement

by objecting to the terms of the settlement). The Eighth

Circuit itself vitiates Guthrie’s rationale by holding that a

class member who objects will not be permitted to collat-

erally attack a judgment approving a settlement of a class

action by filing a separate action or to opt out if the

district court certifies the class “under Fed.R.Civ.P.

23(b)(1) and (b)(2).” Croyden Assoc. v. Alleco Inc., 969 F.2d

at 680.

The Eighth Circuit adopted and twisted precedent

from the Fifth and Eleventh Circuits. In doing so, it

generated further confusion by eliminating the mitigating

rationale of those Circuits. The conflict between the

Eighth Circuit and the majority of Circuits merits plenary

consideration.

II. The Eight Circuit’s Decision So Far Departed From

The Accepted And Usual Course Of Judicial Pro-

ceedings As To Call For An Exercise Of This Court's

Power of Supervision.

The Eighth Circuit holds that, even though an

unnamed class member appears in a timely fashion and

objects to certification of the class on a non-opt-out basis,

to the adequacy of the class representative and to the

terms of a proposed settlement, the class member is to be

denied “standing” to appeal. Id. at 677-80. That holding

departs from the accepted and usual course of judicial

proceedings.

First, the accepted and usual statement of the doc-

trine of “standing” to appeal may be set forth succinctly:

Standing to appeal rests on two require-

ments. The appellant must be privy to the

record and must be aggrieved by the order

appealed from. Ordinarily, parties privy to the

record means parties of record at the time the

judgment was entered... .

9 J. Moore, B. Ward & J. Lucas, Moore’s FEDERAL PRACTICE

{ 203.06 at 3-21 (2d ed. 1992). Indeed, this Court echoes

that statement:

The rule that only parties to a lawsuit or those

that property become parties, may appeal an

adverse judgment, is well settled. See, e.g.,

United States ex rel. Louisiana v. Jack, 244 U.S. 397,

402 (1917); Fed. R. App. Proc. 3(c) (“The notice

of appeal shall specify the party or parties tak-

ing the appeal”).

Marino v. Ortiz, 484 U.S. 301, 304 (1988). The Eighth

Circuit needed to go no further.

The Foundation satisfied the requirements for

“standing” to appeal. The Foundation was and remains

“an unnamed class member.” Croyden Assoc. v. Alleco Inc.,

969 F.2d at 677. As an unnamed class member, the Foun-

dation was and is “privy to the record” as a “party.”

American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 551

(1974) (“claimed members of the class st[an]d as parties

to the suit until and unless they . . . cho[o]se not to

continue”). The Foundation, as a class member and

“party,” was also bound by the judgment. Hansberry v.

Lee, 311 U.S. 32, 41 (1940) (judgment in class action binds

all members of class). The Foundation was also

“aggrieved by the order appealed from,” i.e., the district

court’s adverse judgment. Croyden Assoc. v. Alleco Inc., 969

F.2d at 676-77. The Eighth Circuit disregards the Founda-

tion’s status as a “party” and insists that it and any other

unnamed “party” move to intervene, i.e., ask to become

what it already is, if it wishes to appeal.

Second, accepted and usual policy to be followed in

managing class actions militates against intervention by

unnamed class members. This Court explains that requir-

ing immediate intervention by unnamed class members

would frustrate the principal function of a class

suit, because then the sole means by which

members of the class could assume their partici-

pation in the judgment . . . would be to file

. individual motions to joint or intervene as

parties — precisely the multiplicity of activity

which Rule 23 was designed to avoid... .

American Pipe & Constr. Co. v. Utah, 414 U.S. at 551. The

Eighth Circuit gives no weight to that policy and would

return courts and litigants to the days of the “spurious”

class action. The Eighth Circuit should have guarded that

legitimate function of a class action: avoidance of multi-

plicitous and unnecessary motions to intervene.

Third, accepted and usual procedure allows all who

are bound by an injunction’s restriction to appeal from

the judgment. See, e.g., Zenith Radio Corp. v. Hazeltine

Research, Inc., 395 U.S. 100, 107-10 (1969) (nonparty who is

enjoined may appeal); Thompson v. Freeman, 648 F.2d 1144,

1146-47 & n.5 (8th Cir. 1981); Commercial Sec. Bank v.

Walker Bank & Trust Co., 456 F.2d 1352, 1354 (10th Cir.

1972) (person who was not joined as a party and who did

not intervene, but who is enjoined, may appeal); United

States v. American Soc’y of Composers, 442 F.2d 601, 605 (2d

Cir. 1971) (person who is “given no choice” and who is

subjected to injunction has “standing to take . . . appeal”).

Although the district court

permanently enjoined [the Foundation and all

other members of the class] from prosecuting,

commencing or continuing any or all causes of

action . . . against [Alleco, Service America and

others] based in any manner upon the 91/2%

Debentures,

(Pet. App. 20-21, 26-27), the Eighth Circuit denies the

Foundation “standing” to appeal. That fails to insure that

all who are to be bound by an injunction and who may be

subject to a district court’s contempt power have an

opportunity to obtain appellate review of the injunction.

Fourth, accepted and usual practice bars a litigant’s

appeal from an order which the litigant sought. The

Eighth Circuit’s decision would undermine that salutary

practice.

The Foundation objected to certification of a class

under Fed.R.Civ.P. 23(b)(1) and (b)(2), (Pet. App. 16-17,

30), and explicitly requested that the district court afford

the Foundation the “right to pursue its rights separately.”

(Pet. App. 16). The Eighth Circuit nevertheless holds that

the Foundation and other

unnamed class members who object to a settle-

ment must move to intervene, and they will be

denied standing to appeal when they have not

done so.

Croyden Assoc. v. Alleco Inc., 969 F.2d at 679. The Eighth

Circuit makes no attempt to explain why a class member

who seeks to opt out should be required to move to

intervene before seeking to opt out.

Fed.R.Civ.P. 24(c) requires an intervenor to

serve a motion to intervene upon the parties as

provided in Rule 5. The motion shall state the

grounds therefor and shall be accompanied by a

pleading setting forth the claim . . . for which

intervention is sought.

The Eighth Circuit would force an unnamed class mem-

ber to serve a proposed complaint even though the class

member’s only purpose is to seek to opt out, i.e., avoiding

the assertion of a claim in that proceeding.

District courts undoubtedly will be frustrated by the

Eighth Circuit’s required sequence: motions to intervene

followed by requests to opt out. If a district court denies a

request to opt out, it would be difficult to fault an appel-

late court’s affirmance.

Finally, the accepted and usual course of proceedings

suggests that traditional methods of practice not be aban-

doned abruptly and without compelling reason. The

Eighth Circuit had always permitted an unnamed class

member to appeal. See, e.g., In re Federal Skywalk Cases, 680

F.2d 1175, 1177 (8th Cir.), cert. denied sub nom. Stover v.

Rau, 459 U.S. 988 (1982); Reynolds v. National Football

League, 584 F.2d 280, 281 (8th Cir. 1978); Grunin v. Interna-

tional House of Pancakes, 513 F.2d 114, 120 (8th Cir.), cert.

denied, 423 U.S. 864 (1975). There was no reason not to

endorse that traditional practice.

The issue raised is an important one. There should be

uniformity in the procedure to be followed by an

unnamed class member who wishes to preserve an

Opportunity for appellate review. There should also be

economy in allocating the scarce judicial resources

required to manage class actions. This Court’s review can

accomplish both those ends.

III. The Eighth Circuit Decided A Question Concern-

ing The Federal Courts’ “Supplemental Jurisdic-

tion” Which Ought To Be Settled By This Court.

The issue of “pendent” and “ancillary” jurisdiction is

one which has long troubled the courts. See, e.g., Finley v.

United States, 490 U.S. 545, 555 (1989) (rejecting jurisdic-

tion over “pendent party”); Aldinger v. Howard, 427 U.S. 1,

13 (1976) (“little profit in attempting to decide

. . whether there are any principled differences between

pendent and ancillary jurisdiction”); Owen Equip. & Erec-

tion Co. v. Kroger, 437 U.S. 365, 374 (1978) (district court

cannot defeat “statutory requirement of complete diver-

sity” by asserting ancillary jurisdiction over claims

against nondiverse defendants who are subsequently

impleaded); United Mine Workers v. Gibbs, 383 U.S. 715,

725 (1966) (recognizing jurisdiction over “pendent

claim”); Moore v. New York Cotton Exchange, 270 U.S. 593,

610 (1926) (recognizing ancillary jurisdiction over manda-

tory counterclaim). Congress set out to clarify and codify

that area of the law. 28 U.S.C. § 1367(b) now provides:

In any civil action of which the district

courts have a original jurisdiction founded

solely on [28 U.S.C. §] 1332. . . the district court

shall not have supplemental jurisdiction under

Subsection (a) . . . over claims by persons

.. . Seeking to intervene as plaintiffs under Rule

24 of [the Federal Rules of Civil Procedure,]

rules, when exercising supplemental jurisdiction

over such claims would be inconsistent with the

jurisdictional requirements of [28 U.S.C. §] 1332.

Application of that subsection precluded intervention by

the Foundation. D. Siegel, Practice Commentary: The 1990

Adoption of § 1367, 28 U.S.C.A. § 1367 at 234 (Supp. 1992)

(“second reference to Rule 24 in subdivision (b) of § 1367

makes it explicit that one seeking to intervene as a plain-

tiff under Rule 24 is not to be given supplemental juris-

diction of the claim the intervenor proposes to plead”).

Croyden Associates commenced its action against

Alleco and Service America by invoking the district

court’s subject matter jurisdiction based solely on 28

U.S.C. § 1332(a)(1). Croyden Associates premised diver-

sity jurisdiction upon the following: (1) Croyden Associ-

ates was a Florida partnership whose partners reside in

the State of Florida, (2) Alleco was a Maryland corpora-

tion with its principal place of business in the State of

Maryland, (3) Service America was a Delaware corpora-

tion and has its principal place of business in the State of

Connecticut and (4) the amount in controversy exceeded

$50,000. (Pet. App. 14). The district exercised “original

jurisdiction founded solely on [28 U.S.C. §] 1332.” (Pet.

App. 14, 18, 24).

Because the district court exercised “original jurisdic-

tion founded solely on [28 U.S.C. §] 1332,” the district

court could not exercise “supplemental jurisdiction under

[28 U.S.C. § 1367(a)] over claims by persons. . . seeking to

intervene as plaintiffs under Rule 24” if “exercising sup-

plemental jurisdiction over such claims would be incon-

sistent with the jurisdictional requirements of [28 U.S.C.

§] 1332.” If the Foundation had sought “to intervene as

[a] plaintiff under Rule 24,” the district court’s exercise of

“jurisdiction over such claims would [have been inconsis-

tent with the jurisdictional requirements of (28 U.S.C. §]

1332” because the Foundation, as a proposed plaintiff-

intervenor, was and is a Maryland corporation with its

principal place of business in the State of Maryland, (Pet.

App. 15), Alleco, one of the defendants, was also a Mary-

land corporation with its principal place of business in

the State of Maryland, (Pet. App. 14), and there therefore

would no longer have been complete diversity of citizen-

ship.

The Eighth Circuit makes no mention of 28 U.S.C.

§ 1367(b) and apparently assumes that there would have

been no bar to the Foundation’s intervention. The Eighth

Circuit dismissed the Foundation’s appeal for lack of

“standing” on the ground that the Foundation had not

sought to intervene and explained: “We believe it is par-

ticularly appropriate to require intervention as a condi-

tion for appeal.” Croyden Assoc. v. Alleco Inc., 969 F.2d at

680. The Eighth Circuit did not analyze whether or not

the Foundation was entitled to intervene. That was the

genesis of its error.

The Eighth Circuit should have made its own deter-

mination as to whether there would have been subject

matter jurisdiction over the Foundation’s claims against

Alleco and Service America. See, e.g., Bender v. Wil-

liamsport Area School Dist., 475 U.S. 534, 541 (1986); Sum-

ner v. Mata, 449 U.S. 539, 547 n.2 (1981); St. Paul Mercury

Indem. Co. v. Red Cab Co., 303 U.S. 283, 287 n.10 (1928).

The record clearly set forth the “citizenship” of the Foun-

dation, the “citizenship” of Alleco and the ensuing lack of

complete diversity.

The Eighth Court requires the Foundation to seek

what 28 U.S.C. § 1367(b) expressly prohibits. That

requirement violates the principle that the “law does not

require the doing of a futile act.” See Ohio v. Roberts, 448

U.S. 56, 74 (1980). That requirement also raises an impor-

tant question — one which has not been, but should be,

decided by this Court.

CONCLUSION

For the foregoing reasons, a writ of certiorari should

issue to review the judgment and opinion of the United

States Court of Appeals for the Eighth Circuit.

Respectfully submitted,

RoBert ARTHUR BRUNIG

O’Connor & HANNAN

3800 IDS Tower

80 South Eighth Street

Minneapolis, Minnesota 55402

Telephone: (612) 343-1200

Counsel of Record

October 6, 1992.

Pet. App. 1

No. 91-2641

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

CROYDEN ASSOCIATES, a Florida

partnership, individually and on

behalf of all those similarly situated,

Appellee,

and

THE HARRY AND JEANETTE

WEINBERG FOUNDATION INCOR-

PORATED,

Appellant,

ALLECO INC. and SERVICE AMER-

ICA CORPORATION,

Appellee.

JUDGMENT AND OPINION

JOHN R. GIBSON, Circuit Judge.

The Harry and Jeanette Weinberg Foundation appeal

the district court’s order! approving the settlement of a

. class action suit pursuant to Fed.R.Civ.P.23(e), in which

the Foundation was an unnamed class member. The

| Weinberg Foundation objects to the settlement between

the plaintiff class, represented by Croyden Associates,

and Alleco Inc. and Service America Corporation, the

1 The Honorable Paul A. Magnuson, United States District

Judge for the District of Minnesota.

Pet. App. 2

defendants. The Weinberg Foundation raises a number of

arguments regarding justiciability, subject matter jurisdic-

tion, Croyden Associates’ standing to sue, a violation of

the Trust Indenture Act of 1939, the adequacy of class

representation, the certification of a non-opt-out class,

adequacy of notice and the fairness, reasonableness and

adequacy of the settlement. We need not address these

arguments because we dismiss the Foundation’s appeal

for lack of standing.

Alleco issued $105 million in 9'/2% debentures to the

public in August 1985. Through a series of transactions

occurring in 1987 and 1988, Service America was to

assume Alleco’s obligations under the debentures. A con-

troversy then arose as to whether the debentures had

gone into default due to the transactions between Alleco

and Service America. Prompted by Service America’s

deteriorating financial condition, a group of deben-

tureholders, including Croyden Associates, organized a

committee in July 1990 to negotiate a consensual restruc-

turing of Alleco’s and Service America’s obligations to

the debentureholders. After months of negotiations, the

parties reached a tentative settlement on March 20, 1991.

The agreement contemplated that its terms would be

“effectuated by a court-approved class action settlement,”

and was contingent upon court approval of the settlement

and certification of a non-opt-out class.

On May 14, 1991, Croyden Associates filed a com-

plaint individually and on behalf of the putative class of

debentureholders against Alleco and Service America,

seeking the payment of principal and interest on the

debentures as well as a declaration of the class’s rights

Pet. App. 3

regarding the acceleration and payment of the deben-

tures. The complaint also outlined the terms of the pro-

posed settlement between the parties and asked for a

declaration that the settlement was fair, reasonable and

adequate. Croyden Associates also moved for conditional

class certification under Fed.R.Civ.P. 23(b)(1) and (b)(2)

for settlement purposes and approval of the form of

notice to be sent to class members regarding the proposed

settlement.

The district court granted Croyden Associates’ class

certification motion, approved the proposed form of

notice and scheduled a hearing for June 14, 1991, to

consider the fairness of the proposed settlement to all

class members. In the meantime, negotiations continued,

leading to a formal settlement agreement on May 21,

1991, executed by Alleco, Service America and the

holders of more than two-thirds of the aggregate princi-

pal amount outstanding on the debentures.

The Weinberg Foundation, an unnamed class mem-

ber, submitted written objections to the fairness of the

settlement, appeared at the June 14 hearing and made

oral objections to the proposed settlement. The Weinberg

Foundation made no attempt, however, to intervene in

the action. No other class members objected to the pro-

posed settlement.

The district court entered a final judgment on June

19, 1991, approving the settlement as “fair and adequate

to the Class,” and also granted related relief to the

Pet. App. 4

parties.? Croyden Associates v. Alleco Inc. & Service America

Corp., No. 3-91-0323 (D. Minn. June 9 [sic], 1991).? The

Weinberg Foundation then appealed.

While this appeal was pending, indeed, while the

court was considering a draft of our opinion, Alleco’s

counsel notified us that it has sought protection under

Chapter 11 of the Bankruptcy Act. Alleco is plainly enti-

tled to a stay under 11 U.S.C.A. § 362(a)(1) (West Supp.

1992), and we sought response of the other parties as to

the proper extent of that stay. The Weinberg Foundation

argues that the stay should apply only to Alleco, and the

case should proceed as to the other parties. Croyden

Associates argues that the stay should apply to all pro-

ceedings. Service America takes no position as to whether

Alleco is entitled to a stay, but argues that if the action is

stayed as to Alleco, it should be stayed also as to Service

America.

We are persuaded that the stay required by section

362 should extend only to claims against Alleco, and that

the stay is not available to nonbankrupt codefendants,

“even if they are in a similar legal or factual nexus with

the debtor.” Maritime Elec. Co. v. United Jersey Bank, 959

F.2d 1194, 1205 (3d Cir. 1992). See also Fortier v. Dona Anna

2 The settlement agreement also provided for the dismissal

of a separate lawsuit Alleco had brought against the indenture

trustee in November 1987 to determine whether its sale of assets

to Service America had released it from its obligations on the

debentures.

3 On July 3, 1991, the district court made an amendment to

its judgment that is not germane to this appeal.

Pet. App. 5

Plaza Partners, 747 F.2d 1324, 1330 (10th Cir. 1984) (noth-

ing in section 362 purports to extend automatic stay to

~ claims against debtor’s solvent codefendants). The only

exception to this rule that any of the circuits recognize

seems to relate only to nonbankrupt codefendants in

“ “unusual circumstances.’ ” A.H. Robins Co. v. Piccinin,

788 F.2d 994, 999 (4th Cir.), cert. denied, 479 U.S. 876

(1986). Decisions involving whether a stay is appropriate

when a supersedeas bond has been filed or whether a

party may move to dismiss an action commenced by a

debtor do not reach the issue before us. We stay further

proceedings in this appeal with respect to Alleco but

decide the issues presented with respect to the remaining

parties.

The Weinberg Foundation argues that its appearance

at the fairness hearing and its filing of objections to the

proposed settlement gives it standing to prosecute this

appeal. The appellees contend that the Weinberg Founda-

tion lacks standing to appeal the district court’s approval

of the consent decree because the Foundation failed to

intervene in the action pursuant to Fed.R.Civ.P. 24. The

appellees also make the telling point that the Foundation

benefited from the settlement, which preserved the via-

bility of the corporate entities, and then attempted to gain

full recovery on the debentures not available to the rest of

the class by bringing this appeal.

This court has not ruled on whether an unnamed

class member has standing to appeal from an order

approving a settlement agreement between the named

parties of a class action suit. In Grunin v. International

House of Pancakes, 513 F.2d 114 (8th Cir.), cert. denied, 423

U.S. 864 (1975), a class member who opposed a court-

rere iia

Pet. App. 6

approved settlement agreement appealed the settlement

without objection from the named parties. Id. at 120.

Grunin is silent as to whether the objector was a named

party, or whether he had intervened in the suit. Because

of this ambiguity, and because no one raised the issue of

standing on appeal, Grunin gives us no guidance for the

issue we face. See also Reynolds v. National Football League,

584 F.2d 280 (8th Cir. 1978) (named parties did not raise

standing issue when objector appealed from class action

settlement).

The circuits are divided on this issue, and some have

inconsistent holdings. The Eleventh Circuit has held that

“a Class member who is not a named plaintiff[] does not

have standing to appeal the final judgment in [a] class

action.” Guthrie v. Evans, 815 F.2d 626, 627 (11th Cir.

1987). Guthrie gave three reasons for its holding:

First, such individuals cannot represent the class

absent the procedures provided for in Rule 23 of

the Federal Rules of Civil Procedure. Second,

class members who disagree with the course of

a class action have available adequate pro-

cedures through which their individual interests

can be protected. Third, class actions could be

unmanageable and non-productive if each mem-

ber could individually decide to appeal.

Id. at 628 (emphasis in original).

Guthrie expands upon the first reason above by

explaining that the named plaintiffs cannot represent a

class until the district court makes findings “that they

will fairly and adequately protect the interests of the

class.” Id. Because there had been no such findings made

regarding the non-named plaintiffs, the court held that

Pet. App. 7

they “clearly ha[d] no standing to take action on behalf of

the class.” Id.

Guthrie outlined three alternative avenues of relief

for a class member who is unsatisfied with the class

settlement. First, the objector may move to intervene as of

right pursuant to Fed.R.Civ.P. 24(a)(2), id., and the district

court’s denial of the motion to intervene of right is

appealable. Id. (citing Sellers v. United States, 709 F.2d

1469, 1471 (11th Cir. 1983)). Second, the objector may

collaterally attack the settlement approval by filing a

separate suit challenging the adequacy of the class repre-

sentation. 815 F.2d at 628. Third, if the class is certified

under Rule 23(b)(3), the individual may opt out. Id. With

these legal avenues available, Guthrie concluded there

was no need to allow a class member to appeal a judg-

ment satisfactory to the class representatives and pre-

sumably the majority of class members. Id.

Finally, Guthrie looked to the rationale for class

actions: namely, to render manageable litigation involv-

ing numerous class members who otherwise would all

have access to the court through individual lawsuits. Id.

at 629. If each class member could appeal individually,

the litigation would become “unwieldy,” and the purpose

of class actions would be defeated. I¢. See also Shores v.

Sklar, 844 F2d 1485, 1491 (11th Cir. 1988) (relying on

Guthrie, court states that unnamed class member has no

standing to appeal final judgment when named plaintiff

does not appeal), cert. denied, 493 U.S. 1045 (1990) (subse-

quent history omitted). But see In re Dennis Greenman Sec.

Litig., 829 F.2d 1539, 1542 (11th Cir. 1987) (although court

stated that class member may preserve appeal from class

settlement by objecting to terms of settlement, none of the

Pet. App. 8

parties raised issue of standing or the Guthrie decision,

decided some six months earlier).4

The Fifth Circuit followed Guthrie in Walker v. City of

Mesquite, 858 F.2d 1071 (5th Cir. 1988). The court held that

unnamed members of a certified plaintiff class lacked

standing to challenge a consent decree that the district

court had ordered approving a settlement between the

named parties. Id. at 1072. The court held that the objec-

tors’ alternative avenues of relief were to either move to

intervene or to bring a separate suit in district court

challenging the adequacy of the class representation. Id.

at 1073-74. See also Baylor v. United States Dep't of Housing

& Urban Dev., 913 F.2d 223, 225 (5th Cir. 1990); But see

Kincade v. General Tire & Rubber Co., 635 F.2d 501, 504 (5th

Cir. 1981) (unnamed class member who objected to settle-

ment appealed consent decree without opposition on

basis of standing), rev'd on other grounds, 716 F.2d 319 (5th

Cir. 1983).

Guthrie found support for its holding in Marino v.

Ortiz, 484 U.S. 301 (1988), in which a consent decree

approving the settlement of a Title VII lawsuit was chal-

lenged by individuals who were not parties to the under-

lying litigation. The certified class represented Hispanic

police officers who claimed that a civil service examina-

tion they were required to take caused a disparate impact

in promotion decisions. Hispanic Soc'y v. New York City

Police Dep't, 806 F.2d 1147, 1151 (2d Cir. 1986). A group of

police officers appealed the settlement eventually reached

4 Interestingly, Judge Hill of the Eleventh Circuit sat on

both the Guthrie and Greenman cases.

ieee ia alia atl iia al

Pet. App. 9

between the class and the city. The Supreme Court

affirmed the dismissal of the appeal, stating:

[W]e hold that because petitioners were not par-

ties to the underlying lawsuit, and because they

failed to intervene for purposes of appeal, they

may not appeal from the consent decree approv-

ing that lawsuit’s settlement. . . . We think the

better practice is for such a nonparty to seek

intervention for purposes of appeal; denials of

such motions are, of course, appealable.

Marino, 484 U.S. at 304.

The Supreme Court was referring to officers who had

filed objections to the settlement, and whose counsel was

allowed to speak at the hearing and argue against the

proposed settlement. See Hispanic Soc’y, 806 F.2d at 1152,

1153. While they were not unnamed class members, they

were in a position similar to the Weinberg Foundation in

that they were objecting to the approval of a settlement of

the class action. We agree with Guthrie that Marino pro-

vides substantial support for holding that unnamed class

members who object to a settlement must move to inter-

vene, and they will be denied standing to appeal when

they have not done so.

The Seventh Circuit has followed a different path. In

Research Corp. v. Asgrow Seed Co., 425 F.2d 1059 (7th Cir.

1970), the court stated that “[i]f a class member inter-

venes or even appears in response to a notice pursuant to

Fed.R.Civ.P. 23(e) and objects to the dismissal or compro-

mise, he has a right to appeal from an adverse final

judgment.” Id. at 1060 (citations omitted). The court cau-

tioned in a footnote, however, that “the failure of the

appellants to formally intervene after receiving notice

Pet. App. 10

under Rule 23(e), before final judgment forecloses their

right to appeal.” Id. at 1060 n.2. Later cases have ignored

this footnote and have relied on the text of Research Corp.

to perpetuate the rule that an unnamed class member-

objector may appeal from a class action-judgment. See,

e.g., Armstrong v. Board of Sch. Directors, 616 F.2d 305, 327

~ (7th Cir. 1980) (quoting text of Research Corp.); Patterson v.

Stovall, 528 F.2d 108, 109 n.1 (7th Cir. 1976) (objecting

class members have standing to appeal settlement agree-

ment).®

Several circuits have allowed an appeal from a class

action judgment without intervention, but they have not

faced the issue of standing. In Ace Heating & Plumbing Co.

v. Crane Co., 453 F.2d 30 (3d Cir. 1971), the court stated,

“Ordinarily, aggrieved class members may appeal any

final order of a district court in proceedings held pur-

suant to Rule 23. This general proposition holds true even

though such class members have the right to exclude

themselves from the class.” Id. at 32. In Marshall v. Holiday

Magic, Inc., 550 F.2d 1173 (9th Cir. 1977), appellants were

> A more recent Seventh Circuit case, Bash v. Firstmark Stan-

dard Life Insurance Co., 861 F.2d 159 (7th Cir. 1988), considered

the appeal of three unnamed class members who objected to and

appealed from a settlement. Id. at 160. Their attorney had also

represented the settling plaintiff class and negotiated the

court-approved settlement. Id. The thrust of the appeal is

directed to counsel’s action, and standing does not seem to have

been raised. On petition for rehearing, however, the court cited

Guthrie, Shores and Walker, and made clear that the parties had

not brought these cases to the court’s attention. Id. at 164.

Because the principle of these cases had no practical conse-

quences on the court’s decision, the court made no further

comment on standing. Id.

Pet. App. 11

unnamed class members who appealed from the court’s

approval of the class action settlement. Id. at 1176. The

Ninth Circuit stated that the appellants had legal rights

affected by the settlement and had standing to sue. Id.é

See also In re Cement Antitrust Litig., 688 F.2d 1297, 1309

(9th Cir. 1982) (court states in dicta that Rule 23 allows

class member to appeal from order approving settlement

to which member objects), aff'd sub nom. Arizona v. Ash

Grove Cement Co., 459 U.S. 1190 (1983); Dosier v. Miami

Valley Broadcasting Corp., 656 F.2d 1295, 1299 (9th Cir.

1981) (citing Research Corp., court states that dissatisfied

class member could have challenged settlement by direct

appeal).

We have set out in some detail the reasoning articu-

lated in Guthrie. We believe that Guthrie and Walker are

persuasive authority and we see no decision that has

pointed to a flaw in their analysis. Indeed, most of the

cases advocating a contrary rule were decided before

Guthrie and Walker. We believe it is particularly appropri-

ate to require intervention as a condition for appeal when

a class member’s challenge to the adequacy of a settle-

ment is contrary to the view of all the other class mem-

bers. This is such a case. We also believe that by requiring

intervention as a condition of an appeal, the effect is to

channel into one line of litigation all issues of the class

action settlement. This will avoid the bifurcation that

would result from dismissal of the appeal on a standing

® The appellees had argued that the appellants lacked

standing, not because the appellants failed to intervene in the

suit, but because they were not members of the plaintiff class.

Marshall, 550 F.2d at 1176.

Pet. App. 12

basis, followed by an independent action by the challeng-

ing class member.

We realize that the Weinberg Foundation could not

have opted out of the class under Fed R.Civ.P. 23(b)(1)

and (b)(2). We also recognize that both Guthrie and Walker

refer to the right of individual nonnamed class members

to file a separate suit challenging the adequacy of class

representation. Walker, 858 F.2d at 1074-75; Guthrie, 815

F.2d at 628. In arguing the appeal before us, the parties

seem to assume that other avenues of collateral attack

were open. We express the thought that intervention to

allow assertion of all objections to a class settlement, with

respect to the settlement itself and adequacy of class

representation, represents a preferable method of resolv-

ing such differences. We need not consider whether inter-

vention is necessary to assert a claim of inadequacy of

class representation, and we will leave consideration of

this question for another day.

We dismiss the Weinberg Foundation’s appeal

against Croyden Associates and Service America for lack

of standing and stay further proceedings in this appeal

with respect to Alleco.

Pet. App. 13

No. 91-2641

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

CROYDEN ASSOCIATES, a Florida partnership,

individually and on behalf of all those

similarly situated, Appellee,

and

THE HARRY AND JEANETTE

WEINBERG FOUNDATION,

INCORPORATED, a Maryland corporation, Appellant,

ALLECO INC. and SERVICE AMERICA

CORPORATION, Appellee.

ORDER DENYING PETITION FOR REHEARING

AND SUGGESTION FOR REHEARING EN BANC

Appellant’s petition for rehearing with suggestion for

rehearing en banc is denied as untimely.

August 24, 1992

Pet. App. 14

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

THIRD DIVISION

Civil No. 4-91-368

CROYDEN ASSOCIATES, individually and as

representatives of a class of those

similarly situated, Plaintiff,

Vv.

ALLECO INC. and SERVICE AMERICA

CORPORATION, Defendants.

CLASS ACTION COMPLAINT

Plaintiff Croyden Associates (“Plaintiff”), individu-

ally and as representative of a class of those similarly

situated, for its complaint against Alleco Inc. (“Alleco”)

and Service America Corporation (“Service America”)

states as follows:

+ * *

2. Alleco, the successor to Allegheny Beverage Cor-

poration, is a corporation organized and existing under

the laws of the State of Maryland, with its principal place

of business located at Allegheny Circle, Cheverly, Mary-

land 20781.

* * *

4. This Court has subject matter jurisdiction .

pursuant to 28 U.S.C. § 1332 in that there is complete

diversity... .

7. * *

Dated: May 14, 1991.

Pet. App. 15

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

THIRD DIVISION

Civil No. 4-91-368

AFFIDAVIT OF BERNARD SIEGEL

Filed June 7, 1991

[Title Omitted In Printing]

Bernard Siegel, being duly sworn, deposes and says:

» * *

2. I am the president of The Harry and Jeanette

Weinberg Foundation Incorporated, a Maryland corpora-

tion (the “Foundation”).

* * *

I SOLEMNLY SWEAR AND AFFIRM under the pen-

alties of perjury that the contents of the foregoing are true

and correct.

Dated: June 6, 1991.

/s/ Bernard Siegel

Pet. App. 16

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

THIRD DIVISION

Civil No. 3-91-323

EXCERPT FROM TRANSCRIPT OF

PROCEEDINGS ON JUNE 14, 1991

[Title Omitted In Printing]

(p. 26) MR. BRUNIG: I represent The Harry and

Jeanette Weinberg Foundation Incorporated.

* * *

(p. 29) Now, I’d like to look for a moment at the

terms of rules — of Rule 23(b), because if we assume that

23(a) has been satisfied, it is clear that this case is most

appropriately one brought under 23(b)(3), not (b)(1) or

(b)(2).

* * *

Now, the obvious reason that counsel seeks to com-

press this case into the strictures of (b)(1) and (b)(2) is

that there is no opt-out under (b)(1) and (b)(2), and there

would be an opt-out under (b)(3), the = where it is

logically brought.

* * *

(p. 34) What we are saying is due process gives The

Weinberg Foundation the right to pursue its right sep-

arately. We’re not bound by an agreement reached by

others even if they bought the same debentures. We

‘a

Pet. App. 17

ought to be allowed to pursue those and have our day in

GONE 646 ed

(p. 40) And at this point, at the very least, people should

be given an opt-out option. Without an opt-out option,

this becomes a kangaroo court, at best... .

Pet. App. 18

UNITED STATES DISYRICT COURT

DISTRICT OF MINNESOTA

THIRD DIVISION

Civil No. 3-91-323

FINAL JUDGMENT AND ORDER OF DISMISSAL

Filed June 19, 1991

[Title Omitted In Printing]

This matter has come before the court to determine

whether there is any cause why this court should not

approve the proposed settlement (the “Settlement”) set

forth in the Settlement Agreement, dated as of May 24,

1991 (the “Settlement Agreement”), relating to the above-

captioned action and the related action filed in this court

captioned Alleco Inc., et al. v. IB] Schroder Bank & Trust

Company (Civil File No. 3-87-0802) (the “Alleco Action”)

now consolidated before this court. The court has consid-

ered papers filed and proceedings had herein, and other-

wise is fully informed in the premises, and has

determined that the Settlement set forth ir the Settlement

Agreement should be approved. The court hereby enters

this judgment which constitutes a final adjudication of

this matter on the merits.

Good cause appearing therefore, IT IS HEREBY

ORDERED, ADJUDGED AND DECREED that:

1. This court has jurisdiction over the subject matter

of this litigation and over all parties to this litigation,

including all members of the Class. This Action is hereby

consolidated with the Alleco Action.

arene

Pet. App. 19

2. The definitions of terms set forth in the Settle-

ment Agreement and in the Order certifying the action as

a non-opt-out class action and approving the form of

notice (the “Notice Order”) are hereby incorporated as

though fully set forth in this judgment.

3. The court hereby approves the Settlement set

forth in the Settlement Agreement and finds that said

Settlement is, in all respects, fair, reasonable and ade-

quate to the Class and within the authority of the parties.

The court reaffirms its Order of May 21, 1991 certifying

the Action as a class action for settlement purposes pur-

suant to Rules 23(a) and 23(b)(1) and (2) of the Federal

Rules of Civil Procedure. The Class, as defined in the

Settlement Agreement and used herein (the “Class”),

means a class consisting of the named plaintiff and all

other holders of the 9 1/2% Debentures as of the date of

this order and hereafter.

4. Neither this Judgment, the Settlement Agree-

ment, nor the Settlement is an admission by any party of

the validity of any of the claims in this Class Action or

any of the claims, counterclaims or appeals in the Alleco

Action or of any wrongdoing by any of them or of any

violation of law. Neither this Judgment, the Settlement

Agreement nor the Settlement is a concession and none

shall be used as an admission of any fault or omission by

any party to either the Alleco Action or the Class Action

or any other person in any statement, release or written

document issued, filed or made. Neither this Judgment,

the Settlement Agreement, the Settlement nor any related

document shall be offered or received in evidence in any

civil, criminal or administrative action or proceeding

Pet. App. 20

other than such proceedings as may be necessary to con-

summate, enforce or demonstrate the occurrence of, this

Judgment, the Settlement Agreement or the Settlement.

5. This court hereby dismisses this action on the

merits and with prejudice against all persons and entities

who are members of the Class” in favor of each and all of

the defendants and without costs, except as agreed to by

the parties. This court hereby dismisses the Alleco Action

and all claims, counterclaims and appeals asserted

therein with prejudice and without costs, except as

agreed to by the parties. This court hereby vacates each of

its prior orders in the Alleco Action including, without

limitation, the order of August 16, 1989, the order of

February 11, 1991, and the order of March 18, 1991.

6. All persons and entities who are members of the

Class are, as of the Effective Date, hereby barred and

permanently enjoined from prosecuting, commencing or

continuing any and all causes of action, demands, rights,

damages, liability, fees, costs or claims of any nature

be whatsoever, known or unknown, suspected or

unsuspected and whether or not concealed or hidden,

that have been, could have been or in the future might be

asserted by any member of the Class against either of the

defendants, Allegheny Beverage Corporation, LP Acqui-

sition Corp., Lapides Corporation and their past, present

and future officers, directors, employees, agents, attor-

neys, subsidiaries, affiliates, predecessors, successors and

assigns, and the heirs, legal representatives and assigns

7 The judgment remains subject to the court's supplemental

notice order of June 19, 1991.

Pet. App. 21

of any of said persons, based in any manner upon the

9'/2% Debentures or the facts, transactions, events, occur-

rences, acts, misrepresentations or omissions alleged in,

arising out of or in any way related to the allegations in

the Class Action or the Alleco Action, or based on, related

to or arising out of the subject matter of the Class Action

or the Alleco Action including, without limitation, claims

to unpaid interest on the 91/2% Debentures. As of the

Effective Date, Croyden Associates and all other Class

members shall be conclusively deemed to have released

and discharged the defendants of and from any and all

such causes of action, demands, rights, damages, liability,

fees, costs or claims, whether or not they have filed a

Proof of Claim and Release form with the Exchange

Agent; provided that this release and discharge of Alleco

Inc., Allegheny Beverage Corporation, LP Acquisition

Corp., Lapides Corporation and their successors and

assigns (the “Alleco Releasees”), and the release of the

Alleco Keleasees made in connection with the delivery of

the Proof of Claim and Release Form in the form of

Exhibit C to the Settlement Agreement, and any release

delivered in the form of Exhibits D, E, G, M and O to the

Settlement Agreement shall be null and void to the extent

any holder of 9'/2% Debentures who had surrendered

such 91/2% Debentures is compelled at any time to dis-

gorge any portion of the case proceeds received from

Alleco in the Settlement as a preferential transfer; provided

further that any such holder who disgorges any such

proceeds, while entitled to pursue in full any claim

against the Alleco Releasees that existed prior to the

Effective Date, shall hereby waive its right to recover on

such claim from the Alleco Releasees in any subsequent

Pet. App. 22

proceeding any amount exceeding the sum of (x) the

amount of cash proceeds disgorged plus (y) interest on

such amount form the date of disgorgement to the date

such amount is recovered.

7. The court hereby declares that the 9'/2% Deben-

tures and the Indenture shall be null and void and that

the Trustee shall be discharged of any further obligations

under the Indenture on the Effective Date and approves

the plan of distribution of the Cash Settlement Fund and

the New Securities set forth in Sections 4 and 5 of the

Settlement Agreement. Holders of 9'/2% Debentures and

the Trustee shall hereafter have no claims hereunder

against any of the defendants jointly or individually,

except claims under the Settlement or claims for recovery

in the event of disgorgement of proceeds as described in

the provisos of paragraph 6 hereof.

8. The Notice and Summary Notice given to the

Settlement Class which set forth the principal terms of

the Settlement and the other matters set forth therein,

was the best notice practicable under the circumstances,

including individual notice to all members of the Class

who could be identified through reasonable efforts. Said

notices provided due and adequate notice of these pro-

ceedings and of the matters set forth therein, including

the Settlement set forth in the Settlement Agreement, to

all persons entitled to such notice, and said notices fully

satisfied the requirements of Rule 23 of the Federal Rules

of Civil Procedure and the requirements of constitutional

due process.

9. Without affecting the finality of this judgment in

any way, this court hereby retains continuing jurisdiction

Pet. App. 23

over: (a) implementation of this Settlement an [sic] any

distributions to Class members pursuant to further orders

of this court; (b) this action until this final judgment

becomes effective and each and every act agreed to be

performed by the parties has been performed pursuant to

the Settlement Agreement and (c) all parties to this action

for the purpose of enforcing and administering the Settle-

ment Agreement.

10. In the event that the Settlement does not become

effective in accordance with the terms of the Settlement

Agreement, then this final judgment shall be rendered

null and void and shall be vacated and, in such event, all

orders entered in connection with the Class Action shall

be null and void and all orders vacated pursuant to

paragraph 5 hereof shall be reinstated ab initio.

11. It is expressly determined that there is no just

reason for delay and the entry of this Judgment is hereby

expressly directed by the court.

Dated: June 19, 1992.

/s/ Paul A. Magnuson

United States District Court Judge

Pet. App. 24

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

THIRD DIVISION

Civil No. 3-91-323

AMENDED FINAL JUDGMENT

AND ORDER OF DISMISSAL

Filed July 3, 1991

[Title Omitted In Printing]

THIS MATTER has come before the Court to deter-

mine whether there is any cause why this Court should

not approve the proposed settlement (the “Settlement”)

_Set forth in the Settlement Agreement, dated as of May

24, 1991, as amended by the First Amendment to the

Settlement Agreement dated as of July 1, 1991 (the “Set-

tlement Agreement”), relating to the above-captioned

action and the related action filed in this Court captioned

Alleco Inc., et al. v. IBJ Schroder Bank & Trust Company

(Civil File No. 3-87-0802) (the “Alleco Action”) now con-

solidated before this court. The Court has considered

papers filed and proceedings had herein, and otherwise is

fully informed in the premises, and has determined that

the Settlement set forth in the Settlement Agreement

should be approved. The Court hereby enters this judg-

ment which constitutes a final adjudication of this matter

on the merits. Good cause appearing therefore, it is

hereby ORDERED, ADJUDGED AND DECREED that:

1. This Court has jurisdiction over the subject mat-

ter of this litigation and over all parties to this litigation,

—&@&e oo”

Pet. App. 25

including all members of the Class. This Action is hereby

consolidated with the Alleco Action.

2. The definitions of terms set forth in the Settle-

ment Agreement and in the Order certifying the action as

a non-opt-out class action and approving the form of

notice (the “Notice Order”) are hereby incorporated as

though fully set forth in this judgment.

3. The Court hereby approves the Settlement set

forth in the Settlement Agreement and finds that said

Settlement is, in all respects, fair, reasonable and ade-

quate to the Class and within the authority of the parties.

The Court reaffirms its Order of May 21, 1991 certifying

the Action as a class action for settlement purposes pur-

suant to Rules 23(a) and 23(b)(1) and (2) of the Federal

Rules of Civil Procedure. The Class, as defined in the

Settlement Agreement and used herein (the “Class”),

means a class consisting of the named plaintiff and all

other holders of the 91/2% Debentures as of the date of

this order and hereafter.

4. Neither this Judgment, the Settlement Agree-

ment, nor the Settlement is an admission by any party of

the validity of any of the claims in this Class Action or

any of the claims, counterclaims or appeals in the Alleco

Action or of any wrongdoing by any of them or of any

violation of law. Neither this Judgment, the Settlement

Agreement nor the Settlement is a concession and none

shall be used as an admission of any fault or omission by

any party to either the Alleco Action or the Class Action

or any other person in any statement, release or written

document issued, filed or made. Neither this Judgment,

the Settlement Agreement, the Settlement nor any related

Pet. App. 26

document shall be offered or received in evidence in any

civil, criminal or administrative action or proceeding

other than such proceedings as may be necessary to con-

summate, enforce or demonstrate the occurrence of, this

Judgment, the Settlement Agreement or the Settlement.

5. This Court hereby dismisses this action on the

merits and with prejudice against all persons and entities

who are members of the Class in favor of each and all of

the defendants and without costs, except as agreed to by

the parties. This Court hereby dismisses the Alleco

Action and all claims, counterclaims and appeals asserted

therein with prejudice and without costs, except as

agreed to by the parties. This Court hereby vacates each

of its prior orders in the Alleco Action including, without

limitation, the order of August 16, 1989, the order of

February 11, 1991, and the order of March 18, 1991.

6. All persons and entities who are members of the

Class are, as of the Effective Date, hereby barred and

permanently enjoined from prosecuting, commencing or

continuing any and all causes of action, demands, rights,

damages, liability, fees, costs or claims of any nature

whatsoever, known or unknown, suspected or

unsuspected and whether or not concealed or hidden,

that have been, could have been or in the future might be

asserted by any member of the Class against either of the

defendants, Allegheny Beverage Corporation, LP Acqui-

sition Corp., Lapides Corporation, General Electric Capi-

tal Corporation, the holders of the Senior Subordinated

Discount Debentures due 1999 of Service America and

their respective past, present and future officers, direc-

tors, employees, agents, attorneys, subsidiaries, affiliates,

predecessors, successors and assigns, and the heirs, legal

iceman inna tatiana

Pet. App. 27

representatives and assigns of any of said persons, based

in any manner upon the 9'/2% Debentures or the facts,

transactions, events, occurrences, acts, misrepresentations

or omissions alleged in, arising out of or in any way

related to the allegations in the Class Action or the Alleco

Action, or based on, related to or arising out of the

subject matter of the Class Action or the Alleco Action

including, without limitation, claims to unpaid interest

on the 9'/2% Debentures and claims that any transaction

operated as a fraudulent conveyance with respect to the

holders of the 9'/2% Debentures. As of the Effective Date,

Croyden Associates and all other Class members shall be

conclusively deemed to have released and discharged the

defendants of and from any and all such causes of action,

demands, rights, damages, liability, fees, costs or claims,

whether or not they have filed a Proof of Claim and

Release form with the Exchange Agent; provided that this

release and discharge of Alleco Inc., Allegheny Beverage

Corporation, LP Acquisition Corp., Lapides Corporation

and their successors and assigns (the “Alleco Releasees”),

and the release of the Alleco Releasees made in connec-

tion with the delivery of the Proof of Claim and Release

Form in the form of Exhibit C to the Settlement Agree-

ment, and any release delivered in the form of Exhibits D,

E, G, M and O to the Settlement Agreement shall be null

and void to the extent any holder of 9'/2% Debentures

who has surrendered such 9!/2% Debentures is compelled

at any time to disgorge any portion of the cash proceeds

received from Alleco in the Settlement as a preferential

transfer; provided further that any such holder who dis-

gorges any such proceeds, while entitled to pursue in full

any claim against the Alleco Releasees that existed prior

iain iia ileal

Pet. App. 28

to the Effective Date, shall hereby waive its right to

recover on such claim from the Alleco Releasees in any

subsequent proceeding any amount exceeding the sum of

(x) the amount of cash proceeds disgorged plus (y) inter-

est on such amount from the date of disgorgement to the

date such amount is recovered.

7. The Court hereby declares that the 91/2% Deben-

tures and the Indenture shall be null and void and that

the Trustee shall be discharged of any further obligations

under the Indenture on the Effective Date and approves

the plan of distribution of the Cash Settlement Fund and

the New Securities set forth in Sections 4 and 5 of the

Settlement Agreement. Holders of 91/2% Debentures and

the Trustee shall hereafter have no claims thereunder

against any of the defendants jointly or individually,

except claims under the Settlement or claims for recovery

in the event of disgorgement of proceeds as described in

the provisos of paragraph 6 hereof.

8. The Notice and Summary Notice given to the

Settlement Class which set forth the principal terms of

the Settlement and the other matters set forth therein, in

combination with the Supplemental Notice approved by

the Court’s June 19, 1991 Order and the Notice of the

Proposed Amended Settlement and Amended Judgment

approved by the Court’s July __, 1991 Order was the best

notice practicable under the circumstances, including

individual notice to all members of the Class who could

be identified through reasonable efforts. Said notices pro-

vided due and adequate notice of these proceedings and

of the matters set forth therein, including the Settlement

set forth in the Settlement Agreement, to all persons

entitled to such notice, and said notices fully satisfied the

————eEeESESESV———eeaEEE

Pet. App. 29

requirements of Rule 23 of the Federal Rules of Civil

Procedure and the requirements of constitutional due

process.

9. Without affecting the finality of this judgment in

any way, this Court hereby retains continuing jurisdiction

Over: (a) implementation of this Settlement and any dis-

tributions to Class members pursuant to further orders of

this Court; (b) this action until this final judgment

becomes effective and each and every act agreed to be

performed by the parties has been performed pursuant to

the Settlement Agreement; and (c) all parties to this

action for the purpose of enforcing and administering the

Settlement Agreement.

10. In the event that the Settlement does not become

effective in accordance with the terms of the Settlement

Agreement, then this final judgment shall be rendered

null and void and shall be vacated and, in such event, all

orders entered in connection with the Class Action shall

be null and void and all orders vacated pursuant to

paragraph S hereof shall be reinstated ab initio.

11. It is expressly determined that there is no just

reason for delay and the entry of this Judgment is hereby

expressly directed by the Court.

DATED this 3rd day of July, 1991.

/s/ Paul A. Magnuson

United States District Court Judge

Pet. App. 30

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

THIRD DIVISION

Civil No. 4-91-368

NOTICE OF APPEARANCE AND OBJECTION

TO PROPOSED AMENDED JUDGMENT

Filed July 9, 1991

[Title Omitted in Printing]

PLEASE TAKE NOTICE THAT The Harry and

Jeanette Weinberg Foundation Incorporated (“Founda-

tion”), a Maryland corporation, is appearing for the pur-

pose of objecting to the Proposed Amendment to the

Settlement.

The Foundation’s objections include, but are not lim-

ited to, the following:

* * *

4. The action is 10t maintainable as a class action

pursuant to Fed.R.Civ.P. 23(b)(1) or 23(b)(2).

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.