Opposition Brief — LNC Investments, Inc. v. First Fidelity Bank, 123 S. Ct. 2080 (2003) (No. 02-1351)

| APR 14 2003

No. 02-1351 4

IN THE

Supreme Court of the United States

LNC INVESTMENTS, INC. and

CHARTER NATIONAL LIFE INSURANCE COMPANY,

Petitioners,

V.

FLEET NATIONAL BANK and

WACHOVIA BANK, N.A.,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION FOR RESPONDENT

WACHOVIA BANK, N.A.

RICHARD W. HILL

Counsel of Record

JOsEPH T. BoccassINI

McCarter & ENGLISH, LLP

100 Mulberry Street

Four Gateway Center

Newark, New Jersey 07102

(973) 622-4444

Attorneys for Respondent

Wachovia Bank, N.A.

180262 ce

COUNSEL PRESS

(800) 274-3321 * (800) 359-6859

i

COUNTER-STATEMENT OF THE

QUESTION PRESENTED

Should the United States Supreme Court review a

determination by the Court of Appeals affirming a jury

verdict, at the conclusion of a second trial, where the Court

of Appeals has not construed any federal statute and whose

ruling is not contrary to any decision of this Court or any

Circuit Court.

il

STATEMENT PURSUANT TO RULE 29.6

Defendant-Appellee First Fidelity Bank, N.A., New

Jersey, whose name was changed to First Union National

Bank as of January 1, 1996, was a wholly-owned subsidiary

of First Union Corporation, a public company whose common

stock was traded on the New York Stock Exchange.

On September 1, 2001, Wachovia Corporation merged

with and into First Union Corporation and the surviving

entity was named Wachovia Corporation. On April 1, 2002,

Wachovia Bank, N.A. merged with and into First Union

National Bank and the surviving entity was named Wachovia

Bank, N.A., a wholly-owned subsidiary of Wachovia

Corporation, a public company whose common stock is

traded on the New York Stock Exchange.

ill

TABLE OF CONTENTS

Counter-Statement of the Question Presented .....

Statement Pursuant to Rule 29.6 ...............

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Table of Cited Authorities ............-..0005.

Counter-Statement of the Case .................

The Petition For Writ Should Be Denied

Because There Is No Conflict Among The

Courts Of Appeals, No Decision On An

Important Federal Question, And No

Pirmcmeremee OF FOsICe jw... eee e sess

Petitioners’ Attempt To Manufacture Conflict

Between The Two Opinions Of The Second

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eS er ee wee ka wes ee

Page

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iv

TABLE OFCITEDAUTHORITIES

Page

Cases: g

Karsten v. Kaiser Foundation Health Plan of the

Mid-Atlantic States, Inc., 36 F.3d 8 (4th Cir. 1994)

LNC Investments, Inc. v. First Fidelity Bank, N.A.

New Jersey, 173 F.3d 454 (2d Cir. 1999) ...... 1,2,7

LNC Investments, Inc. v. National Westminster Bank,

N.J., et. al., 308 F.3d 169 (2d Cir. 2002) ..... «i Se. ey

McDonough v. Royal Caribbean Cruises, Ltd.,

66 F.3d 150 (7th Cir. 1995) ................. 4

National Collegiate Athletic Associate v. R.M. Smith,

we ge eg, Se ree ee rere 5

Phillips Petroleum Co., v. Lujan, 4 F.3d 858

Se SUE 6 oot oka ctreuveaa ea eeeees 5

Putnam Resources v. Pateman, 958 F.2d 448 (1st Cir.

|» nag rare aera cream ner gne rere are meer 5

Southwestern Sugar & Molasses v. River Terminals

Corp.., FOO US. UL TGR) oo ccc vsisevenvens 6

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

PCED 554.0554 4b ech e ees 6

Wisniewski v. United States, 353 U.S. 901 (1957) ... 6

Cited Authorities

Page

Statutes:

11 U.S.C.A. § 362 2... ccc eee e ences eeecesenss 2

11 US.C.A. 63S «050 cc sce ces ener seveveween 2

11 U.S.C.A. § 507Q@D) .. 0. eee eee cece eee passim

l

Respondent, Wachovia Bank, N.A. (formerly known as

First Fidelity Bank, N.A.), respectfully submits the following

brief in opposition to Petitioners’ Petition for Writ of

Certiorari.

COUNTER-STATEMENT OF THE CASE

During the course of the bankruptcy of Eastern Air Lines,

Inc. (“Eastern”), LNC Investments, Inc. and Charter National

Life Insurance Company (“Petitioners”), purchased, on

the open market, bonds issued by an Equipment Trust

(the “Trust”) and secured by airplanes (“Collateral Aircraft’)

utilized by Eastern. First Fidelity Bank, N.A. New Jersey

(n/k/a Wachovia Bank, N.A.), National Westminster Bank, N.J.,

and United Jersey Bank (collectively, the “Respondents’’) were

trustees of the Trust.

Petitioners alleged that they were damaged by the

Respondents’ failure to act prudently to protect the value of

the Collateral Aircraft during the Eastern Bankruptcy.

This matter has been tried twice to a jury. In each trial

the jury was asked to determine: (i) whether the Respondents

acted prudently; and (ii) if imprudent, whether the

imprudence caused Petitioners’ injury. In the first trial, the

jury found for the Respondents, determining that although

Respondents acted imprudently, their imprudence did not

cause any loss to the Petitioners. Petitioners appealed the

Judgment of Dismissal to the United States Court of Appeals

for the Second Circuit (the “Second Circuit”), which reversed

and remanded for a new trial. LNC Investments, Inc. v. First

Fidelity Bank, N.A. New Jersey, 173 F.3d 454 (2d Cir. 1999)

(“LNC I’)

2

At the second trial, the jury concluded that the

Respondents acted prudently and never reached the issue of

causation. Another appeal to the Second Circuit followed

and the Judgment of Dismissal was affirmed by the Second

Circuit on October 17, 2002. LNC Investments, Inc. v.

National Westminster Bank, N.J., et al., 308 F.3d 169

(2d Cir. 2002) (“LNC JT’). A petition for both panel rehearing

and en banc rehearing was denied. Petitioners seek review

of this affirmance.

In the underlying dispute, Petitioners alleged that

Respondents should have filed, at an earlier date, a motion for

relief from stay or for the provision of adequate protection under

either § 362 or § 363 of Chapter 11 of Title 11 of the United

States Code (the “Bankruptcy Code”). See 11 U.S.C.A. §§ 362

and 363. Petitioners argued that Respondents should have filed

such a motion at an earlier time because they would have been

entitled to a “superpriority” administrative claim under § 507(b)

of the Bankruptcy Code for the decreased value of the Collateral

Aircraft, even if the motion were denied (the “§ 507(b) Issue”’).

Respondents disagreed.

Because the District Court did not decide the § 507(b)

Issue in the first trial, in LNC J, the Second Circuit reversed

and remanded the matter concluding that “... the district

court should. . . decide the [507(b)] issue and determine what

type of charge on superpriority and causation is appropriate

...’ LNC I, 308 F.3d at 468 (emphasis added).

In the second trial, the District Court did decide the

§ 507(b) Issue. In LNC JI, the Second Circuit concluded again

that the District Court’s decision with respect to § 507(b)

was relevant only to the jury’s deliberation on causation

(reaffirming what it stated in its first opinion). See LNC II,

3

308 F.3d at 175 (“[o]ur direction to the district court to

determine the superpriority question as a legal matter went

solely to the issue of causation”). Since, in the second trial,

the jury found for the Respondents on the issue of prudence

(never reaching the causation question), and since the

§ 507(b) Issue applied only to causation, the Second Circuit

saw no need to review the District Court’s decision on the

§ 507(b) Issue. See id. at 176-77.

This case has been considered by multipie judges on

multiple occasions and Petitioners have not prevailed.

The decision from which Petitioners seek review does not

involve construction of a Federal statute, is not at variance

with a decision of another Circuit, and is not at variance with

any decision of this Court. The Second Circuit reviewed the

facts and record of this case, and found that there was no

basis for a third trial.

This Court’s exercise of its supervisory power is

unnecessary.

THE PETITION FOR WRIT SHOULD BE DENIED

BECAUSE THERE IS NO CONFLICT AMONG THE

COURTS OF APPEALS, NO DECISION ON AN

IMPORTANT FEDERAL QUESTION, AND NO

MISCARRIAGE OF JUSTICE

Petitioners do not attempt to argue that a conflict exists

among the Courts of Appeals, that the Second Circuit decided

an important federal question or, for that matter, that the

Second Circuit decided any federal question. Petitioners’ plea

for review is based solely on the argument that the Second

Circuit “. . . departed from the accepted and usual course of

judicial proceedings .. .” (Petitioners’ Brief at 19) by

4

rendering a decision, and disposing of the case, on grounds

other than the § 507(b) Issue.

Petitioners fail to clearly articulate the “accepted and

usual course of judicial proceedings” from which the Second

Circuit allegedly departed. However, the Petition suggests

that the “accepted and usual course of judicial proceedings”

requires that all issues raised before a circuit court must be

decided. This is simply incorrect.

It is common for circuit courts to refrain from addressing

all issues raised if the appeal can be decided on independently

sufficient grounds.' In the instant case, the Second Circuit

1. See McDonough v. Royal Caribbean Cruises, Ltd., 66 F.3d

150 (7th Cir. 1995). McDonough states:

If the district court’s reasoning fails, but another rationale

supports the judgment in light of the facts of the case,

an appellate court may affirm on the alternate ground

[citation omitted], but if the district court’s reasoning is

sound and has sufficient evidentiary support, the

appellate court need not consider the issues on which

the district court’s holding did not rest

Id. at 151. See also Karsten v. Kaiser Foundation Health Plan of the

Mid-Atlantic States, Inc., 36 F.3d 8 (4th Cir. 1994). Karsten states:

alternative holdings also provide courts, particularly

appellate courts reviewing alternative holdings below,

with the tempting opportunity to stray into the practice

of advisory opinion-making, solving questions that

do not actually require answering in order to resolve

the matters before them. If the first reason given is

(Cont’d)

5

was able to decide the case by reviewing the jury charge on

prudence, which was the only issue decided by the second

jury. As the § 507(b) Issue was irrelevant to the jury charge

on prudence (and Petitioners waived appeal on the separate

issue of whether the prudence charge should include an

instruction that the law as to the § 507(b) Issue was unsettled

at the time of the Eastern bankruptcy) the Second Circuit

did not need to address the § 507(b) Issue in order to render

a decision. As stated by the Second Circuit, “. . . because

prudence is the sole issue on which the jury decided the case,

and the correct interpretation of the [Bankruptcy] Code is

irrelevant to the issue of prudence, we would not need to

address the parties’ contentions regarding the [Bankruptcy]

Code in any case. .. .” LNC II, 308 F.3d at 177.

Because the Second Circuit did not decide the § 507(b)

Issue, this Court should not grant a writ of certiorari to review

this issue. See National Collegiate Athletic Assoc. v. R.M.

Smith, 525 U.S. 459, 470 (1999) (citing Roberts v. Galen of

Va., Inc., 525 U.S. 249, 253-54 (1999) and United States v.

Best Foods, 524 U.S. 51, 72-73 (1998)) (reiterating the

Supreme Court’s rule that “we do not decide in the first

instance issues not decided below”).

(Cont'd)

independently sufficient, then all those that follow are

surplusage; thus, the strength of the first makes all the

rest dicta.

Id. at 11. See also Phillips Petroleum Co. v. Lujan, 4 F.3d 858, 864

(10th Cir. 1993) (“As [appellee’s] issue is not necessary for appeal,

we decline to address it”); Putnam Resources v. Pateman, 958 F.2d

448, 458 (ist Cir. 1992) (“if determination of an issue effectively

disposes of an appeal, the appellate court should resolve the case on

that basis without reaching other presented issues [citations

omitted]”).

6

Based on the foregoing, Petitioners’ argument that this

Court should exercise its supervisory power over the Second

Circuit’s decision is misplaced. Indeed, the cases relied upon

by Petitioners are distinguishable from the present case.’

At its core, Petitioners seek review or summary reversal

of a Second Circuit decision involving facts and principles

important only to the parties, having no importance to the

public, and not involving any miscarriage of justice. After

two trials and two appeals, Petitioners have been afforded

ample justice and due process. The Petition is merely an

attempt to give life to Petitioners’ dead arguments.

2. See Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

336, 344-45 (1976). Thermtron Products stands for the proposition

that congestion in the court system will not warrant remanding cases.

As this proposition does not apply to the instant case, it is unclear

why Petitioners cite it. See also Southwestern Sugar & Molasses v.

River Terminals Corp., 360 U.S. 411, 414 (1959) (the Supreme Court

held that the Court of Appeals should not have deferred on an issue

solely because there was a pending administrative proceeding).

This is inapplicable to the instant case. See also Wisniewski v. United

States, 353 U.S. 901, 902 (1957) (stating that it is the task of the

Court of Appeals to “decide all properly presented cases coming

before it” as opposed to all issues presented in a single case)

(emphasis added).

7

PETITIONERS’ ATTEMPT TO MANUFACTURE

CONFLICT BETWEEN THE TWO OPINIONS OF THE

SECOND CIRCUIT IS MERITLESS

Petitioners have premised their entire argument on the

suggestion that there is a conflict between the LNC J and

LNC IJ decisions. No such conflict exists.’ In 1999, following

a jury verdict in Respondents’ favor, the Second Circuit

remanded the case and directed the District Court to decide

the § 507(b) Issue and instruct the jury on the relevant law

for its deliberations on causation. See LNC I, 173 F.3d at

468. See also LNC II, 308 F.3d 175.

In 2002, after the second jury trial, the Second Circuit

reaffirmed the plain meaning of its decision in LNC I that

the law with regard to the § 507(b) Issue was only relevant

to causation and not to prudence. See LNC II, 308 F.3d at

173. As the second jury found that the Respondents were not

imprudent, and thus did not reach the issue of causation, the

District Court’s instruction on the law regarding § 507(b)

was irrelevant.

3. In addition to Petitioners’ manufactured conflict between

the LNC J and LNC II decisions, Petitioners also misstate the record

by incorrectly suggesting that the two trials were identical in all

respects other than a dichotomy in the rulings of the two District

Court Judges on the § 507(b) Issue. In fact, there were many

differences between the first and second trials, including the witnesses

who were called, the evidentiary rulings, the documents admitted

into evidence and the arguments made to the jury. Further, Petitioners’

alleged dichotomy between the two District Court Judges on the

§ 507(b) Issue does not exist. In the final analysis, the District Court

Judge in the first trial never reached any firm conclusion on the

§ 507(b) Issue. See Appendix C n. 4 at p. 39a-4la.

8

CONCLUSION

For the foregoing reasons, the petition for writ of

certiorari should be denied.

Respectfully submitted,

RICHARD W. HILL

Counsel of Record

JosEPH T. Boccassini

McCarter & ENGLISH, LLP

100 Mulberry Street

Four Gateway Center

Newark, New Jersey 07102

(973) 622-4444

Attorneys for Respondent

Wachovia Bank, N.A.