FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: HERITAGE BOND LITIGATION, 

RUSSEL BETKER; VIRGINIA BETKER;

BETKER PARTNERS ONE, LP; BETKER

PARTNERS THREE, LP; LORI

O’SHEA; MICHAEL O’SHEA,

Plaintiffs-Appellees,

v.

U.S. TRUST CORP., N.A., et al.,

Defendant-Appellee, No. 05-55072

and  D.C. No.

CV-01-05752-DT BRUCE R. TALLEY,

Defendant-Appellant,

VALUATION COUNSELORS GROUP,

INC., doing business as CBIZ

Valuation Inc., formerly known as

CBIZ Valuation Counselors,

Defendant-Appellee,

ROBERT A. KASIRER; DEBRA

KASIRER,

Defendants-Appellees. 

13951
In re: HERITAGE BOND LITIGATION, 

RUSSEL BETKER; VIRGINIA BETKER;

BETKER PARTNERS ONE, LP; BETKER

PARTNERS THREE, LP; LORI

O’SHEA; MICHAEL O’SHEA,

Plaintiffs-Appellees,

No. 05-55371

v.

D.C. No.

U.S. TRUST CORP., N.A., et al.,  CV-01-05752-DT

Defendant-Appellee,

OPINION

and

BRUCE R. TALLEY,

Defendant-Appellant,

ROBERT A. KASIRER; DEBRA

KASIRER; CBIZ VALUATION GROUP;

CENTURY BUSINESS SVC,

Defendants-Appellees. 

Appeal from the United States District Court

for the Central District of California

Dickran M. Tevrizian, District Judge, Presiding

Argued and Submitted

May 6, 2008—Pasadena, California

Filed October 1, 2008

Before: Raymond C. Fisher and Richard A. Paez,

Circuit Judges, and James L. Robart,* District Judge.

*The Honorable James L. Robart, United States District Judge for the

Western District of Washington, sitting by designation. 

13952 IN RE: HERITAGE BOND LITIGATION
Opinion by Judge Paez

IN RE: HERITAGE BOND LITIGATION 13953
COUNSEL

Robert Scott Dreher and Matthew R. Miller (argued), Dreher

Law Firm, San Diego, California, for Bruce Talley, appellant.

Daniel M. Harkins, Feldhake, August & Roquemore, Irvine,

California, for Russel Betker, Virginia Betker, Betker Partners

One, LP, Betker Partners Three, LP, Lori O’Shea, and

Michael O’Shea, appellees. 

G. Cresswell Templeton, III, Hill, Farrer & Burrill LLP, Los

Angeles, California, for U.S. Trust Corp., N.A., appellee. 

Gary Kurtz, Law Offices of Gary Kurtz, Woodland Hills, California, for Robert A. Kasirer and Debra Kasirer, appellees. 

IN RE: HERITAGE BOND LITIGATION 13955
Garland Kelley, Irell & Manella, LLP, Los Angeles, California, for CBIZ and Century Business Services, appellees. 

OPINION

PAEZ, Circuit Judge:

This case arises from the settlement of a complex of securities fraud cases involving the sale of municipal bonds for renovation and construction of health care facilities. The

litigation was commonly referred to as the In re Heritage

Bond Litigation. The district court ultimately approved multiple settlement agreements between different plaintiffs and

defendants pursuant to Federal Rule of Civil Procedure 23

(“Rule 23”), California Code of Civil Procedure section 877.6

(“section 877.6”), and the Private Securities Litigation

Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4. In

approving the settlements, the district court issued five bar

orders that barred non-settling defendants from bringing

against settling defendants any future claims “arising out of or

related to . . . any of the transactions or occurrences alleged.”

Appellant Bruce Talley (“Talley”), a non-settling defendant,

objected to the scope of the bar orders on the ground that he

sought to pursue independent state law claims against several

of the settling defendants. 

The district court, applying the “interrelatedness” test from

Wisconsin Investment Board v. Ruttenberg, 300 F. Supp. 2d

1210 (N.D. Ala. 2004) (following In re U.S. Oil & Gas Litigation, 967 F.2d 489 (11th Cir. 1992)), determined that Talley’s claims were related to and arose out of the litigation

involving the Heritage Bonds and, in the five bar orders, specifically barred his claims. In this appeal, Talley challenges

the scope of the bar orders and argues that under federal common law, the PSLRA, and section 877.6, the orders should

have been limited to claims for contribution and indemnity or

13956 IN RE: HERITAGE BOND LITIGATION
disguised claims for such relief.1

 Talley concedes that any

claims for indemnity, contribution, and comparative fault

were appropriately barred by the orders at issue here. He contests the bar orders only to the extent they bar his allegedly

independent state law claims. Appellees2 argue that the district court has broad authority to issue bar orders and that this

court should apply the “interrelatedness” test to determine that

Talley’s state law claims arise from the same core facts as

those extinguished by the district court’s approval of the settlement agreements. 

We have jurisdiction under 28 U.S.C. § 1291, and we

vacate the bar orders and remand for modification. In so

doing, we adopt the approach of the Second Circuit in Gerber

v. MTC Electronics Technologies Co., 329 F.3d 297 (2d Cir.

2003), in limiting the scope of a bar order issued as part of a

securities fraud class action settlement.3 We hold that bar

1Talley also requests that we take judicial notice of certain joint stipulations made by the settling parties and approved by the district court in the

underlying In re Heritage Bond Litigation. Because these documents arise

from proceedings that have a direct relation to this appeal, we grant the

request. See Fed. R. Evid. 201; U.S. ex rel. Robinson Rancheria Citizens

Council v. Borneo (“Borneo”), 971 F.2d 244, 248 (9th Cir. 1992) (“[This

court] may take notice of proceedings of other courts, both within and

without the federal judicial system, if those proceedings have a direct relation to matters at issue.”). 

2Appellees include Russel Betker; Virginia Betker; Betker Partners

One, LP; Betker Partners Three, LP; Lori O’Shea; Michael O’Shea; U.S.

Trust Corp., N.A., et al.; Robert A. Kasirer; Debra Kasirer; CBIZ; Century

Business Services; and Valuation Counselors Group, Inc. Although Valuation Counselors Group, Inc. is not listed on this court’s docket, they were

part of Talley’s Notice of Appeal and filed a supplemental brief in this

appeal. 

3As discussed, infra at 13967, although the PSLRA had become effective by the time the Second Circuit issued its decision, it was not in effect

at the time the parties brought the underlying action. Therefore, the Gerber court analyzed the challenged bar order under federal common law

rather than the PSLRA. Gerber, 329 F.3d at 309-10. We agree with the

Eleventh Circuit, however, that Gerber is relevant to the interpretation of

the PSLRA’s contribution bar, which essentially codified federal common

law allowing for issuance of a bar order as part of a securities fraud class

action settlement. See AAL High Yield Bond Fund v. Deloitte & Touche,

LLP, 361 F.3d 1305, 1311 (11th Cir. 2004). 

IN RE: HERITAGE BOND LITIGATION 13957
orders issued pursuant to the PSLRA or section 877.6 may

only bar claims for contribution and indemnity or disguised

claims for such relief. Independent claims—those where the

injury is not the non-settling defendant’s liability to the

plaintiff—may not be barred under either federal law or section 877.6. See Gerber, 329 F.3d at 306 (federal common

law); Cal-Jones Props. v. Evans Pac. Corp., 264 Cal. Rptr.

737, 739 (Cal. Ct. App. 1989) (section 877.6). The bar orders

issued by the district court here do not pass muster under the

PSLRA or section 877.6, and because they are impermissibly

broad, they must be vacated. 

I. Background

The underlying litigation in this case involved investor

plaintiffs’ securities fraud claims against the individuals

responsible for creating, operating, marketing and selling Heritage Bonds; certain defendants’ cross-claims against each

other for indemnity and contribution; and Talley’s separate

tort claims against certain co-defendants—his employers and

the creators and operators of the Heritage Bonds. 

In the mid-1990s, defendant Robert Kasirer joined with

several other entities to develop a series of fraudulent municipal bond offerings (the Heritage Bonds), ostensibly to finance

or renovate healthcare facilities in several states. See In re

Heritage Bond Litigation, 289 F. Supp. 2d 1132, 1137 (C.D.

Cal. 2003). The principals of the Heritage Bonds offerings

included Talley’s employer, Miller & Schroeder, Inc., which

was the underwriter for the offerings. See id. In 1999, investors discovered that the Heritage Bonds principals had been

stealing and commingling the bond investors’ funds, that the

Heritage Bonds principals had lied about their backgrounds

and the nature of the healthcare facilities that were the subjects of the bond offerings, and that Miller & Schroeder’s

principals and lawyers had known of these facts. See id. at

1140. 

13958 IN RE: HERITAGE BOND LITIGATION
The first lawsuit was filed in June 2001 in the United States

District Court for the Central District of California, Case No.

01-CV-5752, captioned Betker Partners One, et al. v. U.S.

Trust Company, et al. (“Betker lawsuit”).4 The Betkers were

investors in the Heritage Bonds. Their claims included securities fraud and control person liability under the Securities

Exchange Act of 1934 and violations of the Securities Act of

1933. They also alleged state law claims for breach of fiduciary duty, violations of the California Corporations Code,

misrepresentation, breach of contract, and negligence. 

In August 2002, the Betker lawsuit and other related class

action lawsuits that had been filed around the country were

consolidated by the Judicial Panel on Multi-District Litigation

and transferred to the Central District of California under the

title of In re Heritage Bond Litigation, Case No. 02-ML-1475.

See 28 U.S.C. § 1407. Talley was a defendant only in the Betker lawsuit. He filed an answer and cross-claims against several co-defendants in the consolidated case. His cross-claims

were for indemnity and contribution. 

4Parties to the Betker lawsuit include Russel and Virginia Betker, as

Trustees of the Betker Family Trust; Betker Partners One, LP; Betker Partners Three, LP; Lori O’Shea; Michael O’Shea (the Betker plaintiffs); U.S.

Trust Corp., N.A.; U.S. Trust Company of Texas, N.A.; Bank of New

York, Inc.; Heritage Geriatric Housing Development VII, Inc.; Heritage

Geriatric Housing Development VIII, Inc.; Heritage Geriatric Housing

Development IX, Inc.; Heritage Care of Chicago, Inc.; Heritage Care of

Sarasota, Inc.; Heritage Housing Development, Inc.; Health Care Holdings, LLC; CareContinuum, LLC; Heritage Acceptance Corp.; Affiliated

Metropolitan Contractors, Inc.; Valuation Counselors Group, Inc.; Robert

Kasirer; Jerold Goldstein; Onofrio v. Bertolini; Debra Kasirer, individually and as Trustee of the Debra Kasirer Trust; Canon Realty Corp; Heritage Housing V, Inc.; BHMC Corp.; JDDJ Holdings, LP; James E.

Iverson; Victor P. Dhooge; John M. Cleary; James F. Dlugosh; Edward J.

Hentges; Kenneth R. Larsen; Jerome E. Tabolich; Steven W. Erickson;

Paul R. Elholm; Joel T. Boehm; Sabo & Green; Coddington Appraisal

Services; Capital Valuation Group; CBIZ (formerly Century Business Services); Healthcare Financial Solutions Group, Inc.; and Zelemkofske,

Axelrod & Co., Ltd (the Betker defendants). 

IN RE: HERITAGE BOND LITIGATION 13959
In December 2002, Talley filed a complaint in the California Superior Court, County of San Diego, No. GIC 802187,

against many of the Heritage Bonds co-defendants and others,

alleging claims for breach of fiduciary duty, negligence, interference with economic advantage, avoidance of fraudulent

transfer, unfair or unlawful business practices, constructive

fraud, and violation of California Labor Code section 2802,

and requesting declaratory relief and both economic and

reputational damages.5 He also alleged the same claims for

indemnity and contribution that he had alleged in his answer

in the Betker lawsuit. In August 2003, upon motion by the

defendants, the Superior Court stayed Talley’s case pending

the outcome of the claims against Talley in the In re Heritage

Bond Litigation. In May 2004, this state court case was dismissed without prejudice while Talley pursued settlement discussions with the Betkers. 

In October 2004, while settlement discussions with the Betkers were in progress, Talley filed a second state court lawsuit

in the California Superior Court, County of San Diego, Case

No. GIC 836807. This case concerned only Talley’s affirmative claims for damages and did not include the contribution

and indemnity claims that he had previously alleged in his

answer and cross-claims in the Betker lawsuit. While the

instant appeal was pending, Talley’s second state court case

moved forward through the California court system, and all of

his claims were ultimately dismissed pursuant to the bar

orders at issue here. See Talley v. Miller & Schroeder, No.

D048438, 2007 WL 2660059 (not reported in Cal. Rptr. 3d)

(Cal. Ct. App. Sept. 12, 2007). On appeal, “[d]ue to the broad

language of all th[e] Bar orders,” the California Court of

5

In addition to the majority of the Betker defendants, including all of the

Appellees other than the Betkers and the O’Sheas, the defendants named

in Talley’s complaint include: Miller & Schroeder Financial, Inc.; The

Marshall Group, Inc.; Jim Arias; Kenneth Halloran; Jim Morrell; Tom

Nelson; John Peterson; William Sexton; Larry A. Rubin; Virgil Lim; Leo

Dierckman; Berman & Bertolini, Inc.; and Kasirer Family Holdings #4

LLC. 

13960 IN RE: HERITAGE BOND LITIGATION
Appeal affirmed the majority of the trial court’s dismissal

orders.6Id. at *3. The decision allowed Talley to pursue certain of his claims against U.S. Trust Corporation and U.S.

Trust Company, N.A. (“U.S. Trust”) and Valuation Counselors Group, Inc. (“Valuation”), but, pursuant to the bar orders

at issue here,7 the superior court, on remand, dismissed the

remaining claims with prejudice as to these two defendants;

Talley did not appeal.8

By February 2005, Talley’s settlement with the Betkers

was finalized, and Talley was dismissed from the In re Heritage Bond Litigation. During this time, other defendants were

also negotiating settlements with the In re Heritage Bond Liti6Appellees urge us to conclude that the state court decision moots this

appeal. We disagree and address this argument, infra. 

7The California Court of Appeal did not address whether the bar orders

applied to U.S. Trust and Valuation because they were not part of the state

court appellate record. The court concluded that, in the absence of the bar

orders, Talley’s state court claims against these defendants could proceed.

See Talley, 2007 WL 2660059, at *24. In so concluding, the court held

that these claims were not subject to claim preclusion or res judicata as a

result of the dismissal of Talley’s indemnity claims in the Betker lawsuit.

Id. 

8U.S. Trust and Valuation both request that we take judicial notice of

five documents relating to the state court proceedings. Specifically, U.S.

Trust requests that we take judicial notice of 1) the California Court of

Appeal’s decision in Talley, 2007 WL 2660059; 2) Notice of Ruling on

Defendant the U.S. Trust Defendants’ Demurrer to Plaintiff’s Amended

Complaint, California Superior Court for the County of San Diego, Case

No. GIC 836807, filed and served on February 11, 2008; 3) Notice of

Entry of Order of Dismissal with Prejudice as to the U.S. Trust Defendants, California Superior Court for the County of San Diego, Case No.

GIC 836807, filed and served on February 20, 2008; 4) Order of the California Court of Appeal, Fourth Appellate District, Case No. D048438

(July 13, 2006); and 5) Order regarding Joint Stipulation to Dismiss the

Betker Plaintiffs’ Sixth Amended Complaint as to Bruce Talley Only and

Dismissal of Bruce Talley’s Cross-Complaint, in Betker v. U.S. Trust Corporation, N.A., et al., U.S. District Court, Central District of California,

Case No. CV 01-5752-DT (Dec. 1, 2004). Valuation’s request is essentially identical. We grant both requests. See Borneo, 971 F.2d at 248. 

IN RE: HERITAGE BOND LITIGATION 13961
gation plaintiffs. As part of the settlements that emerged from

these negotiations, each agreement required a good faith settlement determination and bar order pursuant to section 877.6

and a bar order pursuant to the PSLRA. These determinations

were an essential part of the settlement agreements because

they allowed the court to make a finding that the settling party

would pay its fair share of liability to the settling plaintiffs

and, if so, to bar any further obligation by that settling defendant to contribute funds to the settling plaintiffs, either

directly or indirectly by indemnifying another liable party.

See Cal. Civ. Proc. Code § 877.6; PSLRA, 15 U.S.C. § 78u4)(f)(7)(A); Tech-Bilt, Inc. v. Woodward Clyde & Assocs.,

698 P.2d 159 (Cal. 1985) (discussing section 877.6); Franklin

v. Kaypro Corp., 884 F.2d 1222, 1231-32 (9th Cir. 1989)

(holding that a bar order in a class action securities fraud case

should bar future claims for contribution to ensure that liability is equitably distributed among settling and non-settling

defendants). 

In November 2004, defendants BHMC Corporation; CareContinuum, LLC; Health Care Holdings, LLC; JDDJ Holdings, LP; Debra Kasirer; and Robert Kasirer (“Kasirer

Defendants”) filed a Motion for Approval of Settlement,

Good Faith Determination and Bar Order in the Betker lawsuit before the district court. The motion included a request

that the court enter a broad bar order extinguishing any future

claims by non-settling defendants against the settling defendants related to or arising out of the In re Heritage Bonds Litigation. Talley filed an opposition to this motion, urging the

court to bar only claims for contribution and indemnity. He

argued that the bar orders would preclude his independent

state court claims against the settling defendants. The district

court rejected Talley’s arguments and granted the motion and

entered two orders—one granting preliminary approval and

another granting final approval of the settlement—on December 9, 2004. The district court specifically identified Talley’s

state court case in the final order. 

13962 IN RE: HERITAGE BOND LITIGATION
In doing so, the district court considered whether the proposed settlement satisfied the requirements of Rule 23(e),

which requires that class action settlements be “fair, reasonable, and adequate,” see Hanlon v. Chrysler Corp., 150 F.3d

1011, 1026 (9th Cir. 1998), and section 877.6, which requires

that a settlement be made in good faith. See Tech-Bilt, 698

P.2d at 163. The court was guided by the following factors:

the fact that the proposed settlement was the result of armslength, informed, and court-assisted negotiations; the adequacy and reasonableness of the settlement amount; the

absence of any evidence of collusion or fraud aimed to injure

non-settling defendants; and the fairness of the settlement

amount relative to both the proportionate liability of the settling defendants and the approximate total recovery of the

plaintiffs. See Staton v. Boeing Co., 327 F.3d 938, 959-60 (9th

Cir. 2003) (Rule 23); Dunk v. Ford, 56 Cal. Rptr. 2d 483 (Cal.

Ct. App. 1996) (section 877.6); Tech-Bilt, 698 P.2d at 166-67

(section 877.6). 

Additionally, in response to Talley’s challenge to the bar

orders, the court evaluated the appropriate scope of the orders

by reference to the “interrelatedness” test of Wisconsin Investment Board v. Ruttenberg, 300 F. Supp. 2d 1210 (N.D. Ala.

2004) (following In re U.S. Oil & Gas Litigation, 967 F.2d

489 (11th Cir. 1992)), which asks “whether the claims extinguished by the bar order arise out of the same facts as those

in the underlying . . . securities litigation.” Ruttenberg, 300 F.

Supp. 2d at 1219. The district court found that “Talley’s bald

assertions that his claims rely on facts that are separate and

distinct from the facts alleged in the present securities litigation are insufficient to support a finding that the proposed Bar

Order is overly broad.” Talley filed a Notice of Appeal on

January 4, 2005, appealing the final approval order (Appeal

No. 05-55072). 

In January 2005, defendants Jerold Goldstein; Valuation

Counselors Group, Inc.; CBIZ; Bank of New York; U.S. Trust

Company; Leo Dierckman; and HFS Consultants in the HeriIN RE: HERITAGE BOND LITIGATION 13963
tage Bonds consolidated case each filed an identical Motion

for Approval of Settlement, Good Faith Determinations, and

Bar Orders. Talley filed an opposition to these motions,

asserting the same arguments that he raised in his opposition

to the similar motion noted above. The district court held a

good faith hearing on the motions and entered two orders

granting preliminary approval. The court again rejected Talley’s arguments. The district court subsequently entered four

final orders approving the settlements and bar orders on February 7, 2005.9

 The district court specifically identified Talley’s state court case in the challenged bar orders, with the

exception of the Goldstein bar order. Talley filed his second

Notice of Appeal on March 2, 2005 appealing the four February 7, 2005 final approval orders (Appeal No. 05-55371).10

In sum, each of the five final settlement approval orders

from which Talley appeals includes a broad bar order that

specifically bars his state court claims that relate to the In re

Heritage Bond Litigation. 

II. Discussion

A. Standard of Review

A district court may approve a proposed settlement in a

class action only if the compromise is fundamentally fair, adequate, and reasonable. Fed. R. Civ. P. 23(e); Hanlon, 150 F.3d

at 1026. Ordinarily, we review a district court’s decision to

approve a settlement for abuse of discretion. Hanlon, 150

F.3d at 1026; Resolution Trust Corp. v. Rice (In re Consol.

Pinnacle W. Sec. Litig.) (“Resolution Trust”), 51 F.3d 194,

197 (9th Cir. 1995). Talley, however, does not question the

9

In May 2005, the district court granted Final Approval of Settlement,

Good Faith Determination and Bar Order in the consolidated In re Heritage Bond Litigation, and on June 10, 2005, the court entered a Final Judgment and Order of Dismissal. 

10We subsequently consolidated these two appeals for all purposes. 

13964 IN RE: HERITAGE BOND LITIGATION
district court’s authority to approve a settlement; he challenges the district court’s interpretation of section 877.6 and

the PSLRA to determine the permissible scope of a bar order

issued pursuant to those statutes. “The district court’s interpretation of a statute is a question of law” that we review de

novo. Beeman v. TDI Managed Care Servs., 449 F.3d 1035,

1038 (9th Cir. 2006); see also In re McLinn, 739 F.2d 1395,

1403 (9th Cir. 1984) (en banc) (“Whether the district court

properly construed state law is a question we review de

novo.”). 

B. Mootness

As discussed above, Talley’s state law claims were dismissed pursuant to the bar orders challenged here. Talley,

2007 WL 2660059. The California Court of Appeal affirmed

the superior court’s dismissal “[d]ue to the broad language of

all th[e] Bar orders.” Id. at *3. Appellees argue that because

Talley’s state law claims have been dismissed and the dismissal has been affirmed, this appeal is moot. We disagree. 

[1] The Court of Appeal stated clearly that its reliance on

the bar orders was premised on its view that it was bound by

the broad language of the orders because the bar orders should

be considered final while Talley’s federal appeals were pending. See Talley, 2007 WL 2660059, at *3, 16 (“Plaintiff has

appealed that [bar] order to the Ninth Circuit Court of

Appeals, and appeal is pending, but for our purposes, under

the rule of Levy v. Cohen (1977) 19 Cal.3d 165, 172 . . . it is

currently deemed to be final. We must consider ourselves

bound by the broad language of that Bar order.”). The court

followed the federal res judicata rule applied by the California

Supreme Court in Levy, 19 Cal.3d at 172, that “a judgment or

order, once rendered, is final for purposes of res judicata until

reversed on appeal or modified or set aside in the court of rendition.” See Talley, 2007 WL 2660059, at *16 (quoting Levy,

19 Cal. 3d at 172). By specifying that it affirmed the dismissal

IN RE: HERITAGE BOND LITIGATION 13965
of Talley’s claims solely on this basis, the court implied that

modification of the bar orders could revive Talley’s claims. 

We therefore agree with Talley that this appeal is not moot

because we can still grant relief in his favor. We have previously held that “[a]n appeal is moot when, by virtue of an

intervening event, a court of appeals cannot grant any effectual relief whatever in favor of the appellant.” United States

v. Strong, 489 F.3d 1055, 1059 (9th Cir. 2007). However,

“[t]he party asserting mootness bears a heavy burden of establishing that there is no effective relief remaining for a court

to provide.” Id. (internal quotation marks and citations omitted). 

[2] Although the federal courts are unable to grant Talley

the ultimate relief he seeks—reinstatement of his state law

claims—he has outlined several procedures he could follow in

state court, such as filing a motion under California Code of

Civil Procedure section 473 to vacate the judgment or filing

a new action in state court, once the bar orders are modified.

See Romadka v. Hoge, 283 Cal. Rptr. 878 (Cal. Ct. App.

1991) (reversing denial of plaintiff’s motion to vacate where

plaintiff’s attorney requested dismissal with prejudice without

authorization); Hoover v. Galbraith, 498 P.2d 981, 985 (Cal.

1972) (“[W]here it is not possible to bring an action to trial

pending determination of an appeal in a related case, the time

consumed on such appeal is impliedly excluded from the

period of limitations.”). We cannot order the superior court to

reinstate Talley’s claims, but by limiting the scope of the

orders, we make it reasonably likely that he can succeed in

obtaining reinstatement of his claims and, to the extent they

are truly independent, have them heard on the merits. Because

Talley can point to avenues for relief that will be open to him

when the district court modifies the bar orders at issue here,

Appellees have not carried their burden of demonstrating that

there is no effective relief remaining for us to provide.

Accordingly, we hold that this appeal is not moot and proceed

to the merits of Talley’s arguments. 

13966 IN RE: HERITAGE BOND LITIGATION
C. Scope of the Bar Orders

Talley argues that, to the extent that they would bar him

from bringing independent, non-indemnity or contribution

claims in the superior court, the five bar orders challenged in

this appeal exceed the scope allowed by the contribution bar

provisions of the PSLRA, 15 U.S.C. § 78u-4(f)(7)(A)11 and

section 877.6.12 We agree with Talley and the Second Circuit

that a bar order issued in a partial settlement of a securities

fraud class action case cannot bar independent claims. See

Gerber, 329 F.3d 297. 

[3] We have already acknowledged the authority of a district court under federal common law to issue bar orders bar11In its entirety, section 4(f)(7)(A) of the Private Securities Litigation

Reform Act provides: 

(7) Settlement discharge 

(A) In general 

A covered person who settles any private action at any time

before final verdict or judgment shall be discharged from all

claims for contribution brought by other persons. Upon entry of

the settlement by the court, the court shall enter a bar order constituting the final discharge of all obligations to the plaintiff of

the settling covered person arising out of the action. The order

shall bar all future claims for contribution arising out of the

action— 

(i) by any person against the settling covered person; and 

(ii) by the settling covered person against any person, other

than a person whose liability has been extinguished by the settlement of the settling covered person. 

12Adopted in 1980, California Code of Civil Procedure section 877.6(c)

is a settlement bar statute. It provides: 

A determination by the court that the settlement was made in

good faith shall bar any other joint tortfeasor or co-obligor from

any further claims against the settling tortfeasor or co-obligor for

equitable comparative contribution, or partial or comparative

indemnity, based on comparative negligence or comparative

fault. 

IN RE: HERITAGE BOND LITIGATION 13967
ring future claims for contribution and indemnity as part of its

approval of a proposed settlement in a class action securities

fraud case, once it has found that the settlement satisfies the

requirements of Rule 23. See Resolution Trust, 51 F.3d at

197; Kaypro, 884 F.2d at 1231; In re First Alliance Mortgage

Co., 471 F.3d 977, 1004 (9th Cir. 2006) (“In Kaypro, this

court concluded under federal common law that a partial pretrial settlement in a securities case, pursuant to which nonsettling defendants’ rights to contribution are satisfied and

further contribution barred, may be approved under Rule 23

if the liability of non-settling defendants is limited to their

actual percentage of liability for the amount of total damages

determined at trial.”). We have not, however, previously

addressed the question of whether the bar order provisions of

section 877.6 and the PSLRA permit a district court, having

found a good faith settlement in accordance with section

877.6 and Rule 23, to issue bar orders barring future claims

other than those for contribution and indemnity. We address

each statute in turn. 

i. Private Securities Litigation Reform Act Section

4(f)(7)(A) 

As we have previously acknowledged, “Congress passed

the PSLRA [in 1995] because it was distressed with the proliferation and cost of allegedly meritless federal securities

class actions. The PSLRA sought to curb abusive and frivolous securities suits by imposing new procedural and substantive requirements.” U.S. Mortgage, Inc. v. Saxton, 494 F.3d

833, 841 (9th Cir. 2007); see also In re Silicon Graphics Inc.

Secs. Litig., 183 F.3d 970, 978 (9th Cir. 1999) (noting that

Congress enacted the PSLRA in part to prevent abusive securities fraud class actions designed “to impose costs so burdensome that it [was] often economical for the victimized party

to settle”). “Its provisions limit recoverable damages and

attorney’s fees, provide a ‘safe harbor’ for forward-looking

statements, impose new restrictions on the selection of (and

compensation awarded to) lead plaintiffs, mandate imposition

13968 IN RE: HERITAGE BOND LITIGATION
of sanctions for frivolous litigation, and authorize a stay of

discovery pending resolution of any motion to dismiss.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71,

81 (2006). 

In its effort to reform litigation and settlement of securities

fraud class actions, Congress also included the provision at

issue here, which makes the entry of a bar order against future

claims for contribution mandatory upon a court’s approval of

a settlement in such a case.13 15 U.S.C. § 78u-4(f)(7)(A). We

are asked to determine whether the scope of a bar order under

the PSLRA may also encompass independent claims, meaning

claims other than those for contribution and indemnity, and

we hold that it may not. In so holding, we adopt the federal

common law approach taken by the Second Circuit in Gerber,

329 F.3d 297, and apply it to bar orders issued pursuant to the

PSLRA. 

[4] Gerber was not decided under the PSLRA. Gerber, 329

F.3d at 309-10. Prior to adoption of the PSLRA, federal

courts determined the appropriate scope of bar orders issued

in partial settlements of class action cases by reference to federal common law evolving from Rule 23(e)(2). See Kaypro,

884 F.2d at 1228-29 (holding that federal common law should

govern the issue of contribution bars in securities class action

settlements). Under the federal common law rule, once a court

determined that a proposed settlement satisfied the requirements of Rule 23(e)(2), it could impose a bar order barring

non-settling defendants’ future claims for contribution and

indemnity. Kaypro, 884 F.2d at 1231. The contribution bar

provision of the PSLRA essentially codified this rule and

13We note that Congress gave no indication as to why the contribution

bar was included or whether it was intended to encompass related state

law claims. See S. Rep. No. 104-98, at p. 5-6, 104th Cong., 1st Sess.1995,

reprinted in 1995 U.S.C.C.A.N. 679; H.R. Conf. Rep. No. 104-369, 104th

Cong., 1st Sess.1995, reprinted in part at 1995 U.S.C.C.A.N. 730, 1995

WL 709276. 

IN RE: HERITAGE BOND LITIGATION 13969
made the imposition of a bar against future claims for contribution mandatory in securities fraud class action settlements.

15 U.S.C. § 78u-4(f)(7)(A). Because the text of the PSLRA,

which is geared to orders that bar “claims for contribution,”

id., does not speak to whether a court may issue an order that

bars independent claims, we look to the reasoning of cases

determining the appropriate scope of similar bar orders under

federal common law. 

Appellees urge us to affirm the district court’s application

of the approach taken by the Eleventh Circuit in In re U.S. Oil

& Gas Litigation, 967 F.2d 489 (11th Cir. 1992).14 In determining the scope of the challenged bar orders, the district

court relied upon the holding of In re U.S. Oil & Gas Litigation, as applied in Ruttenberg, 300 F. Supp. 2d at 1219, that

[t]he propriety of the settlement bar order should

turn upon the interrelatedness of the claims that it

precludes, not upon the labels which parties attach to

those claims. If the cross-claims that the district

court seeks to extinguish through the entry of a bar

order arise out of the same facts as those underlying

the litigation, then the district court may exercise its

discretion to bar such claims in reaching a fair and

equitable settlement. 

In re U.S. Oil & Gas Litigation, 967 F.2d at 496. 

However, the Eleventh Circuit called this “interrelatedness”

test and its opinion in In re U.S. Oil & Gas Litigation into

question with its decision in AAL High Yield Bond Fund v.

14In re U.S. Oil & Gas Litigation was decided under federal common

law, not the PSLRA, but courts have subsequently applied its “interrelatedness” test to PSLRA bar orders. See Ruttenberg, 300 F. Supp. 2d at

1216-17 (following In re U.S. Oil & Gas Litigation to hold that the

PSLRA “does not divest the court of the power to fashion bar orders extinguishing claims other than those for contribution in the settled case”). 

13970 IN RE: HERITAGE BOND LITIGATION
Deloitte & Touche, LLP, 361 F.3d 1305 (11th Cir. 2004). In

AAL, certain non-settling defendants in a securities fraud class

action suit challenged the district court’s bar orders as impermissibly broad under the PSLRA contribution bar when they

precluded the non-settling defendants from bringing future

claims against settling co-defendants. Id. The AAL court

explicitly distanced itself from In re U.S. Oil & Gas Litigation

by explaining that its holding in that case had narrow applicability because it had barred the cross-claims at issue there

only because they were disguised contribution and indemnity

claims, not truly independent claims. AAL, 361 F.3d at 1312

(noting that In re U.S. Oil & Gas Litigation “expressly

declined to address the issue of ‘truly independent claims’ ”).

The court also declined to consider Ruttenberg as persuasive

authority because of its reliance on In re U.S. Oil & Gas Litigation. Id. Because we find the reasoning of AAL persuasive,

we likewise decline Appellees’ invitation to adopt the federal

common law rule articulated in In re U.S. Oil & Gas Litigation to determine the appropriate scope of a bar order issued

pursuant to the PSLRA.15

[5] Instead, we hold that the correct standard for determining the appropriate scope of a bar order issued pursuant to the

PSLRA is the federal common law test articulated by the Second Circuit in Gerber, 329 F.3d 297, that asks whether a non15Rather than resolving the question of whether the PSLRA contribution

bar permits a district court to issue a bar order that precludes “truly independent claims,” the AAL court vacated and remanded the challenged

orders, in part because no allegedly independent claims had been brought

against any settling party at that point. AAL, 361 F.3d at 1312. In addition

to remanding for the district court to make findings of fact and articulate

its rationale for imposing a broad bar order, the court instructed the district

court to “address in the first instance whether the PSLRA mandates that

the bar order it requires is exclusive or whether the statute suggests caution with respect to broader bar orders.” Id.; see also AAL High Yield Bond

Fund v. Ruttenberg, No. 00-cv-1404, 2005 WL 5926936, at *3 (N.D. Ala.

June 2, 2005) (applying, on remand, the federal common law test articulated in Gerber to determine the appropriate scope of the contested bar

orders under the PSLRA). 

IN RE: HERITAGE BOND LITIGATION 13971
settling defendant’s claims are independent. Id. at 306. We are

persuaded that limiting bar orders issued pursuant to the

PSLRA to claims for contribution and indemnity accords with

the purpose and plain language of the statute and strikes an

appropriate balance between the judicial policies of encouraging settlements, on the one hand, and protecting the legal

rights of non-settling parties in class-action lawsuits, on the

other. See, e.g., Kaypro Corp., 884 F.2d at 1229-31 (identifying policy of encouraging settlements in support of allowing

contribution bars in partial settlements under federal common

law); New England Health Care Employees Pension Fund v.

Woodruff, 512 F.3d 1283, 1289 (10th Cir. 2008) (holding that

non-settling defendants had standing to challenge “Bar Orders

that eliminate certain independent claims” because they “palpably interfere with [the non-settling defendants’] preexisting

rights and potential legal claims”). Similarly, interpreting the

PSLRA to bar disguised claims for contribution and indemnity prevents non-settling defendants from engaging in an end

run around a settlement agreement and an accompanying contribution and indemnity bar, while allowing them to pursue

genuinely independent claims. See, e.g., In re Masters Mates

& Pilots Pension Plan & IRAP Litig., 957 F.2d 1020, 1026

(2d Cir. 1992). 

Like the instant case, Gerber addressed a challenge by certain non-settling defendants in a securities fraud class action

to the district court’s approval of a settlement bar order “extinguishing any claims against [certain co-defendants] relating

to or arising from the allegations of [the] litigation.” Gerber,

329 F.3d at 300. The parties did not contest the authority of

the district court to bar claims for contribution and indemnity

and conceded that “a ‘disguised’ contribution or indemnity

claim, such as a negligence claim where the injury to the nonsettling defendants was their liability to the plaintiffs, could

be barred.” Id. at 305. Instead, the appellants argued that the

district court’s bar order was impermissibly broad only insofar as it barred independent claims. Id. The Gerber court

determined under federal common law that if a non-settling

13972 IN RE: HERITAGE BOND LITIGATION
defendant is able “to prove that it sustained independent

reputational damages or losses relating to the cost of defense

arising out of a breached contractual or fiduciary relationship

with [the settling defendant], it has not been compensated for

those losses by the judgment credit, and any such claims

should not be extinguished [by the bar order].” Id. at 306. 

In addressing which claims should not be precluded, the

court explained that the only claims that could appropriately

be barred by such an order, in addition to those for contribution and indemnity, were “disguised” claims for contribution

or indemnity—those “in which the injury is the non-settling

defendant’s liability to the plaintiff,” or “where damages are

calculated based on the non-settling defendants’ liability to

the plaintiffs.” Id. at 305-06. This distinction turns not on the

presence of “independent ‘claims’ ” but on whether the

injured party can assert “independent ‘damages.’ ” Id. at 306-

07. Having determined that the bar order was impermissibly

broad, the court remanded to the district court with instructions to determine whether any such claims existed and to

modify the bar order to “ensure that the only claims that are

extinguished are claims where the injury is the non-settling

defendants’ liability to the plaintiffs.” Id. at 307. 

The reasoning in Gerber is particularly apt in the context

of this appeal. Like the appellants in Gerber, Talley does not

question the district court’s authority to issue bar orders that

bar claims for contribution or indemnity, or disguised claims

that seek such relief. He asserts precisely the same type of

allegedly independent claims raised by the non-settling defendants in Gerber, arguing that his state law claims are not

based on indemnity, contribution, or comparative fault with

respect to Appellees’ alleged liability. 

[6] We conclude that the reasoning of Gerber is persuasive

and that its holding regarding the permissible scope of bar

orders issued in securities fraud class action settlements

should be extended to apply to bar orders issued pursuant to

IN RE: HERITAGE BOND LITIGATION 13973
the PSLRA. We therefore hold that such bar orders may only

bar claims for contribution and indemnity and claims where

“the injury is the non-settling defendant’s liability to the

plaintiff.” Id. at 306. When we apply this standard to the bar

orders at issue in this appeal, it is clear that they are impermissibly broad insofar as they bar any genuinely independent

claims. See Masters Mates, 957 F.2d at 1033 (finding similar

bar order overly broad where it was impossible to predict state

law claims potentially arising from litigation because nonsettling defendant should not be forced to give up potential

state law claims without compensation). The district court

erred in relying upon the “interrelatedness” test to reject Talley’s challenge to the scope of the bar orders; whether the

allegedly independent claims arise from the same facts as the

settled ones is not determinative of whether a particular claim

is a disguised claim for contribution or indemnity. See TBG,

Inc. v. Bendis, 36 F.3d 916, 928-29 (10th Cir. 1994). Given

the broad language of the orders, “a modification to the bar

orders is necessary to ensure that the only claims that are

extinguished are claims where the injury is the non-settling

defendants’ liability to the plaintiffs.” Gerber, 329 F.3d at

307. The modified orders should also reflect that the Gerber

standard, rather than the “interrelatedness” test, defines the

appropriate scope of the bar orders. 

ii. California Code of Civil Procedure Section 877.6 

[7] By barring future claims for contribution and indemnity

arising out of a partial settlement, section 877.6 seeks to

encourage settlement and prevent settling and non-settling

parties from bearing more than their proportionate share of

liability. See Tech-Bilt, 698 P.2d 159 (explaining the rationale

behind the section 877.6 good faith hearing). However, the

bar orders adopted by the district court here went beyond both

the purpose and the plain language of this statute by barring

all claims “arising out of or related to . . . any of the transactions or occurrences alleged.” 

13974 IN RE: HERITAGE BOND LITIGATION
The California Supreme Court has held that, in making a

good faith determination, 

the intent and policies underlying section 877.6

require that a number of factors be taken into

account including a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate

liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a

recognition that a settlor should pay less in settlement than he would if he were found liable after a

trial. Other relevant considerations include the financial conditions and insurance policy limits of settling

defendants, as well as the existence of collusion,

fraud, or tortious conduct aimed to injure the interests of nonsettling defendants. 

Tech-Bilt, 698 P.2d at 166-67. The trial court’s determination

that the settlement is in good faith operates as a bar against

future claims for contribution and indemnity from the settling

defendants. Cal. Civ. Proc. Code § 877.6(c); see Far W. Fin.

Corp. v. D & S Co., 760 P.2d 399, 407 (Cal. 1988). 

In his challenge to the bar orders here, Talley does not

claim that the settlements were entered into in bad faith in

violation of section 877.6, and he concedes that the district

court has the authority to bar claims for contribution or

indemnity under this statute. Rather, he argues that the district

court exceeded the scope of the statutory settlement bar by

drafting the orders to bar claims other than those for contribution and indemnity. We agree. 

[8] A finding of good faith under section 877.6, under the

terms of the statute, bars only claims of “equitable comparative contribution, or partial or comparative indemnity based

on comparative negligence or comparative fault.” Cal. Civ.

Proc. Code § 877.6(c). California courts apply a test similar

to the one adopted in Gerber to determine the appropriate

IN RE: HERITAGE BOND LITIGATION 13975
scope of a bar order issued pursuant to section 877.6. A bar

order under section 877.6 may not bar claims other than those

for contribution and indemnity or artfully pled claims that

amount to claims for contribution and indemnity. Cal-Jones

Props. v. Evans Pac. Corp., 264 Cal. Rptr. 737, 739 (Cal. Ct.

App. 1989). 

As the California Court of Appeal explained in Cal-Jones:

If the claims between the joint tortfeasors are identical to those made by the plaintiffs or if the damages

sought by the joint tortfeasors are those that the court

would consider in determining the proportionate liability of the settling tortfeasor, then the claims are

indemnity claims regardless of whether one or more

of the claims are couched in affirmative language. A

claim by a joint tortfeasor seeking neither indemnity

nor contribution and which the trial court would not

contemplate in determining the proportionate liability of a settling tortfeasor is not a claim for indemnity and hence survives a good faith settlement under

section 877.6. If a claim is in fact one of indemnity,

then it is barred pursuant to section 877.6. 

Id. 

[9] Because the bar orders here extinguish claims other

than those for contribution and indemnity or artfully pled

claims that amount to claims for contribution and indemnity,

they do not pass muster under section 877.6 and must be modified in accordance with the standard set forth in Cal-Jones.

D. Proceedings on Remand

[10] We vacate the challenged bar orders and remand for

the district court to modify them in a manner consistent with

this opinion. Once the bar orders have been modified, Talley

13976 IN RE: HERITAGE BOND LITIGATION
will be able to pursue reinstatement of his claims in the superior court through the available procedures outlined above. 

[11] Talley argues that the superior court, rather than the

district court, should determine whether his state law claims

are truly independent.16 If at the time the district court is asked

to approve a settlement agreement, there is litigation pending

that raises related but allegedly independent claims, the court

should consider whether those claims are independent under

the standard set forth today. In that event, the party seeking

to pursue the claims would bear the burden of establishing

that they meet the independence standard established here.

When allegedly independent claims are brought after final

approval of the settlement, however, the question of independence should be decided by the court where the claims are

brought. Here, although Talley’s claims were pending when

the district court approved the settlements and issued the challenged bar orders, those claims have been dismissed and that

dismissal has been affirmed on appeal. See Talley, 2007 WL

2660059. In this unique circumstance, once the bar orders

have been modified and Talley obtains reinstatement of his

claims, the state court can make the independence determination. 

III. Conclusion

We vacate the five challenged bar orders and remand to the

district court to modify the bar orders in a manner consistent

16In an effort to demonstrate to this court that his state law claims are

independent, Talley included as Exhibit 4 of the Addendum to Appellant’s

Opening Brief a copy of his state court complaint. Appellees have moved

to strike this document because it is not part of the district court record.

Talley never filed an opposition to this motion, nor did he ever file a

request that this court take judicial notice of the complaint. Because the

document is not properly the subject of judicial notice and is not part of

the district court record, we grant Appellees’ motion and strike Exhibit 4

of the Addendum to Talley’s Opening Brief. See Fed. R. App. Proc. 10(a);

Fed. R. Evid. 201. 

IN RE: HERITAGE BOND LITIGATION 13977
with this opinion. 

VACATED and REMANDED.

13978 IN RE: HERITAGE BOND LITIGATION