United States Court of Appeals

For the First Circuit

No. 15-1193

No. 15-1597

TIMOTHY W. HILL, on behalf of himself and all others similarly 

situated; PUBLIC EMPLOYEES' RETIREMENT SYSTEM OF MISSISSIPPI; 

UNION ASSET MANAGEMENT HOLDING AG; PENSION FUND GROUP,

Plaintiffs, Appellees,

v.

STATE STREET CORPORATION; GOLDMAN, SACHS & CO.; MORGAN STANLEY & 

CO, INC.; CREDIT SUISSE SECURITIES (USA), LLP; LEHMAN BROTHERS 

INC.; UBS SECURITIES, INC.; KENNETT F. BURNES; PETER COYM; NADER 

F. DAREHSHORI; AMELIA C. FAWCETT; DAVID P. GRUBER; LINDA A. 

HILL; CHARLES R. LAMANTIA; MAUREEN J. MISKOVIC; RICHARD P. 

SERGEL; RONALD L. SKATES; GREGORY L. SUMME; ROBERT E. WEISSMAN; 

RONALD E. LOGUE; EDWARD J. RESCH; PAMELA D. GORMLEY; ERNST & 

YOUNG, LLP,

Defendants, Appellees,

CHARLES F. FRANZ; NITA W. FRANZ,

Interested Parties, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

Before

Thompson, Lipez, and Kayatta,

Circuit Judges.
John C. Browne, Bernstein Litowitz Berger & Grossman LLP, 

William H. Narwold, and Motley Rice LLC on brief for lead 

plaintiffs-appellees Public Employees' Retirement System of 

Mississippi and Union Asset Management Holding AG.

Christopher T. Cain and Scott & Cain on brief for interested 

parties Charles F. Franz and Nita W. Franz.

July 24, 2015
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KAYATTA, Circuit Judge. This appeal arises out of the 

settlement of a securities class action brought on behalf of all 

who purchased the common stock of State Street Corporation during 

a period of just over three years. In settling the case, the lead 

plaintiff and plaintiff's counsel agreed with defendants that some 

class members would be deemed uninjured, and that others who were 

injured in amounts less than $10.00 would be paid nothing. They 

justified this sacrifice of the claims of small investors as 

reducing transaction costs in the interests of "the class as a 

whole," meaning in fact the interests of those class members with 

larger claims, class counsel, and defendants.1 

The lead plaintiffs began distributing notice of the 

settlement (including the allocation plan, the right to opt out, 

and the right to object) on August 18, 2014, by mailing notice 

packets to over 7,000 potential class members and the nominee 

owners who held potential members' stock in street name. The 

notice plan was implemented in a manner that ensured that all large 

investors got ample notice of their right to opt out, and their 

 

1 Suppose a settlement is predicated on a twenty percent risk 

that defendants lose at trial. A class member with a harm of 

$1 million should get $200,000, and 10,000 class members each with 

a $40 harm should get $8. Assume further that it costs at least 

$5 to send a check to each class member. By setting a $10 "minimum 

allocation," the deal frees up $130,000 to be argued over by the 

remaining parties while still delivering to defendants releases 

covering what would be a liability of $450,000 in judgment and 

costs should the case have been tried to a verdict in favor of the 

class.
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right to object. For many small investors, though, there were 

foreseeable delays in forwarding the notices from the nominee 

owners to the investors.2 On September 4, 2014, the district court 

pushed back the final settlement hearing from October 27 to 

November 20. Nevertheless, the notices thereafter distributed 

continued to publish an objection deadline of October 6 and a 

hearing date of October 27. As a result, lead plaintiffs' counsel 

did not send individual notices directly to many small investors 

until a few days before, and in many cases after, the published 

deadline for opting out and for objecting.

Par for the course, virtually no one (even those who may 

have actually opened, read, and understood the notices) objected 

to the settlement. See generally Am. Law Inst., Principles of the 

Law: Aggregate Litigation § 3.05 cmt. a (2010) (hereinafter "ALI 

Principles") ("[A] settlement may raise serious fairness issues, 

but the amounts involved per class member may be so small that no 

class member has a sufficient incentive to object."). 

Surprisingly, the only ones who both objected and appealed the 

rejection of the objection raise no complaint about the substance 

of the settlement, including either the allocation formula or the 

 

2 Almost all securities that most investors purchase through 

brokerage companies are held in the name of the companies. See

U.S. Securities & Exchange Commission, Fact Answers: Street Name

(Oct. 5, 2005), http://www.sec.gov/answers/street.htm (last 

visited July 16, 2015).
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minimum allocation threshold, each of which has the effect of 

causing many class members to release their claims in return for 

no consideration of any type. Instead, the objectors who appeal

voice only two complaints: (1) they were given too little time 

to register objections with the district court; and (2) the 

district court should not have approved the amount of attorneys' 

fees awarded to class counsel.

The district court rejected these objections in full. 

It was also sympathetic to the argument of the lead plaintiffs 

that any appeal would increase the costs of plaintiffs' counsel 

(who have received $10.2 million plus interest as part of the 

settlement) and postpone distribution of the proceeds to the class 

members. Citing our 1987 decision in Sckolnick v. Harlow, 820 

F.2d 13 (1st Cir. 1987), the district court used Federal Rule of 

Appellate Procedure 7 to bar objectors from appealing unless they 

posted a bond in the amount of $75,300. To justify this order, 

the district court determined that any appeal from its rulings on 

the objections would be frivolous, and the bond amount would ensure 

there would be funds available to pay plaintiffs' counsel for their 

fees defending the frivolous appeal.

In Sckolnick, before allowing the bond requirement to 

stand, our court also conducted a "preliminary examination of the 

merits," concluding that "we cannot say that the district court 

abused its discretion in judging [the appeal] to be frivolous." 
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Id. at 15. Such a preliminary review is crucial in protecting 

against the possibility that a district court could effectively 

immunize its decisions from review by declaring any appeal 

frivolous. Cf. Azizian v. Federated Dep't Stores, Inc., 499 F.3d 

950, 961 (9th Cir. 2007) ("[T]he question of whether, or how, to 

deter frivolous appeals is best left to the courts of 

appeals . . . . Allowing district courts to impose high Rule 7 

bonds . . . risks impermissibly encumber[ing] appellants' right to 

appeal and effectively preempt[ing] this court's prerogative to 

make its own frivolousness determination." (second and third 

alterations in original) (citation and internal quotation marks

omitted)). Here, a preliminary review left us less comfortable 

with any pre-judgment that the appeal would be frivolous. We 

therefore stayed the order to post a bond, but also stayed 

appellees' need to file any opposition to the appeal, and 

considered on an expedited basis whether to summarily dismiss the 

appeal on the merits under First Circuit Local Rule 27.0(c).

Having now fully reviewed objectors' brief on the merits 

of their appeal, we find that the district court was well within 

its discretion in rejecting the objections that are now pressed on 

this appeal. As far as the time given objectors to object, it 

does seem that the delivery of a notice on or around October 4 

informing objectors that they had until October 6 to object was 

likely unreasonable. This was not a mailing gone awry. Rather, 
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plaintiffs knowingly mailed notices with the wrong objection 

deadline to at least half of the class members, justifying the 

decision as a cost-saving move. As for plaintiffs' argument that 

small investors, most of whom necessarily hold stock in street 

name, assume the risk of late notice, it is not clear why such a 

routine and known practicality of investing common to small 

investors should mean that those investors get late or no notice. 

It was apparently feasible to send the notice directly to them 

once names and addresses were obtained from the investment 

intermediaries.

In this case, though, we need not decide whether the 

notice was defective. Rather, the district court remedied any 

defect (as far as it concerned objectors) by delaying the hearing 

and allowing objectors to make their objections notwithstanding 

the published deadline.3 Objectors received written notice on or

around October 4, and they filed their objections in writing on 

 

3 Any harm caused by the erroneous dates in the mailed notice 

may have been mitigated to some extent by the fact that plaintiffs 

established a publicly available website detailing the settlement 

information on August 18, 2014. See

https://www.statestreetclassactionsettlement.com (last visited 

July 16, 2015). The mailed notice provided the website address 

and stated that "any related orders entered by the Court will be 

posted on the website." The website's homepage currently contains 

the correct hearing date. Plaintiffs claim in their brief that 

the hearing date was updated on the website after the district 

court's rescheduling order. However, the complete settlement 

notice document that is available on the website still contains 

the October 6 and 27 dates for the objection deadline and hearing, 

respectively. Id. (follow "Important Documents" hyperlink).
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November 4. The district court then held its rescheduled approval 

hearing on November 20 to consider all objections on the merits.

The district court even gave objectors' counsel the right to appear 

at the approval hearing by telephone. Thus, we find that the 

objectors here had notice in fact and a sufficient opportunity to 

have any of their objections heard by the court before it approved 

the settlement.

That leaves objectors' complaint about the attorneys' 

fee award. Plaintiffs point out that class counsel secured from 

defendants an agreement "not to take a position on any such 

application for an award of attorneys' fees and/or Litigation 

Expenses." Objectors reason, not implausibly, that defendants

must have thought that they received something for gagging 

themselves in this manner. On the other hand, it is hard to see 

why defendants would have cared very much how the money they paid 

was divided. In any event, again we need not decide the merits 

of this objection. Because objectors take nothing at all under 

the allocation formula, and because they do not appeal that 

formula, no decrease in the portion of the $60 million settlement 

amount that is paid to counsel will in any way benefit objectors. 

This is another way of saying that they have no standing to 

complain about the fee award. See Friends of the Earth, Inc. v. 

Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 185 (2000) ("[A] 

plaintiff must demonstrate standing separately for each form of 
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relief sought."); cf. Silverman v. Motorola Solutions, Inc., 739 

F.3d 956, 957 (7th Cir. 2013) (concluding that an objector who did 

not file a claim "lack[ed] any interest in the amount of fees, 

since he would not receive a penny from the fund even if counsel's 

take should be reduced to zero"); Knisley v. Network Assocs., Inc., 

312 F.3d 1123, 1126 (9th Cir. 2002) ("[W]here a class member 

refuses to participate in the settlement and appeals only the fee 

award, . . . . [t]he court must closely scrutinize the terms of 

the settlement agreement to determine whether modifying the fee 

award would actually benefit the objecting class member. If not, 

the appeal would not redress his injuries, and he would lack 

standing to proceed.").4

We therefore summarily dismiss pursuant to Local Rule 

27.0(c) objectors' appeal from the court orders approving the 

settlement and the award of counsel fees. We also dismiss as moot 

objectors' appeal from the stayed order that they post a bond as 

a condition of proceeding further with the merits appeal.

Finally, while we award costs to appellees for both the 

bond appeal and the merits appeal as is customary pursuant to 

 

4 Objectors claim that class counsel failed to adequately 

protect the interests of the class members who received late 

notice. But in relying on, in effect, objectors' lack of 

individual standing, we note that they did not ask to be certified 

as representatives of other similarly situated class members who 

received the belated notice, and those thousands of other class 

members voiced no objection to the timing of the notice or the fee 

award.
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Federal Rule of Appellate Procedure 39(a), we decline to award any 

further sanctions. The manner in which plaintiffs' counsel 

knowingly sent to a large block of class members notices containing 

stale deadlines, and the need plaintiffs apparently felt to muzzle 

any possible opposition to the fee request by defendants, created 

subjects for at least some inquiry, especially in a case in which 

class counsel traded releases for nothing at all on behalf of many 

class members. And the basis on which we reject the challenge to 

the attorneys' fee award was not even relied upon by the district 

court.

Thus, although we easily conclude, for the reasons 

already stated, that objectors' arguments with respect to the 

notice and fee rulings lack merit, we decline to impose a sanction 

against objectors' counsel for filing a frivolous appeal. See ALI 

Principles § 3.08 cmt. c (2010) (in considering awards of costs 

and fees for improper objections to a class settlement, "the court 

should err on the side of not ordering such awards unless the 

abusive conduct is clear"). We employ instead our summary 

dismissal procedure to end the appeal much more quickly without 

full briefing by plaintiffs, or argument.5

 

5 We note that the settlement funds were deposited into an 

escrow account and invested in United States Treasury bills before 

the district court issued final approval of the settlement, with 

all earned interest reinvested into the account. Any harm to the 

class members caused by the delay in releasing the account funds-

-even as condensed by the expedited nature of our disposition--
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These appeals are dismissed.

 

has therefore likely been mitigated to some extent by the interest 

earned on the escrow account during the delay.