In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 04-4316

JOHN DANIELS, MANUEL SANCHEZ,

TIMOTHY HOFFMAN, et al.,

Plaintiffs-Appellees,

v.

WAYNE BURSEY, MELLON TRUST OF

NEW YORK, PRUDENTIAL INSURANCE

COMPANY OF AMERICA, et al.,

Defendants-Appellees.

APPEAL OF:

JOHN J. KORESKO, V.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 03 C 1550—Matthew F. Kennelly, Judge.

____________

ARGUED SEPTEMBER 28, 2005—DECIDED NOVEMBER 29, 2005

____________

Before FLAUM,Chief Judge, andMANION andEVANS, Circuit

Judges.

MANION, Circuit Judge. Sanchez & Daniels, a Chicago

law firm, along with several of its partners and employees filed a putative class action suit against administrators and insurers of a benefit fund, alleging that defen-
2 No. 04-4316

dants fraudulently marketed and administered the fund.

Before a class was certified, the parties agreed to a settlement. John J. Koresko, an attorney for plaintiffs, filed

an appeal on his own behalf and on behalf of putative

class members, objecting to the settlement and challenging certain rulings by the district court. Because we conclude that Koresko and the putative class members are

not parties to this litigation, thus lacking the capacity to

appeal, we dismiss the appeal.

I.

Sanchez & Daniels enrolled in a “severance trust executive

program” (“STEP”) in 1995 to provide benefits for its

employees. In the complaint, Sanchez & Daniels named

more than twenty defendants that were involved in marketing, administering, or insuring the STEP plan. Various

defendants allegedly promoted the STEP plan as a tax

deductible program, which would provide participants with

death, disability, and severance benefits, while keeping the

funds safe from creditors. These attributes were designed to

attract and benefit high income owner-employees.

In 1997, the Internal Revenue Service audited another

STEP plan participant, Costal Neurological Surgery Medical

Group, that had taken deductions for its contributions to the

plan. The audit resulted in proceedings before the United

States Tax Court. On February 6, 2001, contrary to the

marketing of the plan, the Tax Court accepted a stipulation

by Costal admitting that the plan was not tax deductible

and disallowing approximately 75 percent of the deductions.

After the Tax Court’s ruling, on March 28, 2001, Sanchez

& Daniels attempted to withdraw from the plan. Responding to concerns from a number of plan participants, includ-
No. 04-4316 3

1 Before this case was filed, the plan administrators sued Sanchez

& Daniels and Koresko, as an individual, in the District of

Connecticut, claiming that the firm had forfeited its plan assets

and that Koresko had defamed the plan. Sanchez & Daniels,

individually and on behalf of similarly situated participants, filed

complaints against plan administrators and plan insurers in

Pennsylvania state court, which was removed to the Eastern

District of Pennsylvania before being voluntarily dismissed so the

parties could proceed in Chicago. This case was then filed in

Circuit Court of Cook County, and then removed to the Northern

District of Illinois.

ing Sanchez & Daniels, the STEP plan administrator wrote

to all the employers who were participating in 2002. The

letter described the only two options for withdrawal from

the plan: participants could terminate affiliation with the

plan by forfeiting twenty percent of the plan assets, or

participants could forfeit ten percent of the plan assets if

they transferred the assets into a particular new plan that

provided only death benefits. Sanchez & Daniels rejected

both options. Instead, the firm’s attorney, John J. Koresko,

demanded that the firm’s plan assets be transferred to a

new, independent plan.

Litigation soon commenced, culminating in proceedings

in the Northern District of Illinois.1

 In this case, Sanchez &

Daniels alleged that defendants, through the financial

structuring, marketing, and administration of the STEP

plan, violated the Employee Retirement Income Security

Act, the Racketeer Influenced and Corrupt Organizations

Act, as well as various state statutes and common law.

Koresko filed a motion for leave to appear pro hac vice in

the Northern District of Illinois on behalf of plaintiffs, which

the plan administrative defendants opposed. Defendants
4 No. 04-4316

claimed that because Koresko served as the Chief Executive

Officer of Penn-Mont Benefit Services, Incorporated, he was

a competitor of the plans. As a competitor, defendants

argued, Koresko should not be given access to records

through the litigation that Koresko could use to his advantage in the marketplace. The district court permitted

Koresko’s appearance, although the court noted that

Koresko’s “status as a competitor” may warrant limiting his

access to discovery materials. Along with Koresko, plaintiffs

were also represented by other counsel.

As the case developed, plaintiffs and defendants began to

discuss settlement with the assistance of a magistrate judge.

While settlement negotiations were proceeding, Koresko

filed a motion to withdraw, claiming a conflict of interest

with plaintiffs. Plaintiffs opposed his withdrawal. Because

of his pending motion to withdraw, Koresko chose not to

participate in the settlement discussions and endeavored

unsuccessfully to delay the negotiations until after the

resolution of his motion.

On September 8, 2004, the named plaintiffs and defendants reached a settlement. As part of the settlement,

plaintiffs moved to amend their complaint to eliminate

all class claims. Koresko, apparently representing the uncertified class members and his own interests, objected to the

withdrawal of the class claims and to the settlement. He also

moved for a preliminary injunction, appointment of a

receiver, and expedited discovery, and filed an appearance

on behalf of putative class members, Robert Schmier and

Schmier and Feurring Properties, Incorporated (collectively

“Schmier”). Plaintiffs disavowed Koresko’s motions. After

a hearing, the district court permitted the amendment to

eliminate the class claims and denied as moot the motion for

class certification. Since the settlement did not encompass
No. 04-4316 5

any class claim, the district court determined that court

approval of the settlement was not necessary. The district

court therefore granted the motions by both parties to

voluntarily dismiss their claims and entered judgment on

October 26, 2004. Koresko filed this appeal on his own

behalf and on behalf of the putative class, including

Schmier.

II.

As a threshold issue, we must determine whether Koresko

and the putative class have the capacity to bring this appeal.

Although the parties have framed this issue as one of

standing, the preliminary question is whether appellants

Koresko and Schmier are parties to the litigation. Devlin v.

Scardelletti, 536 U.S. 1, 7 (2002) (“What is at issue, instead [of

standing], is whether petitioner should be considered a

‘party’ for the purposes of appealing the approval of the

settlement.”); see also Korczak v. Sedeman, 427 F.3d 419, 422

(7th Cir. 2005); Churchill Vill. v. Gen. Elec., 361 F.3d 566, 572

(9th Cir. 2004) (“the issue is not precisely one of standing. . . . Instead, the inquiry is best characterized as concerning the definition of a ‘party’ for purposes of appeal.” (citing

Devlin, 536 U.S. at 7)). A party has the capacity to bring an

appeal, but a nonparty does not. Marino v. Ortiz, 484 U.S.

301, 304 (1988) (“[t]he rule that only parties to a lawsuit, or

those that properly become parties, may appeal an adverse

judgment, is well settled.”) (citation omitted); Fed. R. App.

P. 3(c) (“The notice of appeal must [ ] specify the party or

parties taking the appeal . . .”)). Neither Koresko nor

Schmier was named as a party in the litigation, nor did

either move to intervene before the district court. Furthermore, the district court never certified a class, so they are

not members of a certified class. Thus, at least in the

traditional sense, appellants are not parties.
6 No. 04-4316

Nonetheless, in limited circumstance Koresko and

Schmier may be treated as “parties,” and therefore have

the capacity to appeal, even if they are not formally recognized as such. Devlin, 536 U.S. at 7 (noting that the Supreme

Court has “never . . . restricted the right to appeal to named

parties to the litigation” (emphasis added)). The Supreme

Court instructed that “[w]hat is most important” to determining whether individuals are “parties” to an action is

“the sense of being bound by the settlement.” Id. at 10.

Because the class was not certified, Koresko and Schmier

have no capacity to appeal just because they are members of

a putative class. They may, however, still have the capacity

to appeal if the settlement agreement binds them. To

determine that possibility, we consider the settlement

agreement, which has been filed under seal. See Karaha Bodas

Co. v. Perusahaan Pertambangan Minyak, 313 F.3d 70, 81-82

(2d Cir. 2002) (“To determine who may appeal, courts must

ascertain whether putative appellants are ‘bound by the

order from which they were seeking to appeal.’ ” (citing

Devlin, 536 U.S. at 8)). Without disturbing the confidentiality

of the settlement, we note the following. The settlement

agreement is between only the named plaintiffs and defendants. No class claims are resolved by the settlement. While

the language suggests that the parties considered and

anticipated actions that Koresko might take, Koresko is not

bound by the agreement. Addressing contingencies is

distinct from binding a third party. Koresko remains free to

file a class action or his own claim. In fact, Koresko is

currently litigating a fee dispute in a separate action that is

pending before the district court. See Sanchez & Daniels v.

Koresko, No. 04-5183 (N.D. Ill. filed Aug. 5, 2004).

Because no settlement agreement binds Koresko or the

putative class, Koresko and Schmier are not in the same
No. 04-4316 7

circumstances as the unnamed certified class member

who was permitted to appeal in Devlin. Since a class

was never certified, appellants were not members of a class,

and therefore could not be bound. See AAL High Yield Bond

Fund v. Deloitte & Touche LLP, 361 F.3d 1305, 1310 (11th Cir.

2004) (“Persons who are not class members are not bound

at all.”). Even the dissent in Devlin noted that, “[n]ot even

petitioner, however, is willing to advance the novel and

surely erroneous argument that a nonnamed class member

is a party to the class-action litigation before the class is

certified.” Id. at 16 n.1 (Scalia, J. dissenting). Thus, Devlin

does not extend to the appellants in this case.

Koresko attempts to create a theory under ERISA by

inviting this court to determine that an attorney for a

putative class has a fiduciary duty that elevates his status to

that of a party. Koresko cites to Culver v. City of Milwaukee,

277 F.3d 908, 910 (7th Cir. 2002), for the proposition that a

class action lawyer is the “real plaintiff in interest.” In

Culver, however, this statement was made in the context of

illustrating “the danger that the lawyer will sell out the class

in exchange for the defendant’s tacit agreement not to

challenge the lawyer’s fee request.” Culver, 277 F.3d at 910

(citations omitted). The Culver case does not hold that a

class action attorney is a party; rather, Culver suggests the

precarious nature of such a proposition and notes that “the

courts and Congress have balked” at considering a class

lawyer as “the true plaintiff.” Id. at 913. Accordingly, we

decline to equate an attorney’s role as a fiduciary of a class

to that of a party.

III.

Since Koresko and Schmier are not bound by the settlement agreement, they do not qualify as parties to the
8 No. 04-4316

litigation. Accordingly, appellants lack the capacity to

appeal, and we therefore DISMISS the appeal.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—11-29-05