Opinion ID: 731322
Heading Depth: 1
Heading Rank: 1

Heading: sources of this litigation

Text: 6 Following the collapse of Lincoln Savings, investors residing in many districts of the federal judicial system brought actions charging violations of federal securities laws and RICO. In due course, these cases were transferred to the District of Arizona, consolidated into MDL 834 (sometimes designated as Shields  or Lincoln Savings ) and assigned to Judge Richard Bilby. 7 As early as 1990, the consolidated plaintiff class, now represented by (among others) Milberg Weiss and Cotchett, sought to add Lexecon and Fischel as defendants by filing a fifth amended complaint. Judge Bilby denied their motion to do so without prejudice. In February 1991, Judge Bilby granted the class' motion to file a sixth amended complaint, which added only Lexecon as a defendant, and alleged that: 8 during 1987 and 1988 defendant Lexecon was engaged by ACC/Lincoln to perform services, including writing reports advocating the safeness of Lincoln's operations and the value of ACC/Lincoln's assets which were submitted to federal and state regulators in order to persuade them not to take regulatory action adverse to Lincoln. 9 Following a period of discovery, Lexecon's motion for summary judgment was denied. See In re American Continental Corp./Lincoln S & L Sec. Litig., 794 F.Supp. 1424, 1448-49 (D.Ariz.1992). Judge Bilby found there existed material issues as to whether Lexecon's reports were false and misleading, and whether Lexecon possessed reckless scienter as to Lincoln's fraudulent activities. In March 1992, the trial commenced. Almost four months later, and shortly before the close of evidence, Lexecon moved for a directed verdict. Judge Bilby denied the motion, again finding a jury question as to the level of Lexecon's knowledge of, and involvement in, Lincoln Savings' actions and practices. 10 On June 22, 1992, the class attorneys and Lexecon's counsel met in Judge Bilby's chambers to consider a means by which Lexecon's exposure to a jury verdict could be resolved without harmful consequences to its professional credibility and reputation. In furtherance of this end, Lexecon urged that any agreement that might be reached not be designated a settlement. To accommodate Lexecon's concern, the term resolution was adopted. The terms of the resolution provided: First, that the court would enter an order dismissing Lexecon without prejudice; second, that the parties would sign a stipulation dismissing Lexecon with prejudice, which stipulation would be held by Judge Bilby to be entered on the court's record only if a new suit was initiated against Lexecon on the same claims; and, third, that Lexecon would provide class services as a subcontractor to Touche Ross who, as another defendant in MDL 834, had settled its liability for $7.5 million. The resolution also placed restrictions on class counsel's ability to cross-examine Lexecon experts in future lawsuits about Lexecon's involvement in MDL 834. 11 This unusual arrangement was implemented, although because of disagreements between Lexecon and class counsel, Lexecon discharged its obligations by turning over to the class the approximately $700,000 it had received in professional fees from Lincoln Savings and American Continental, rather than performing the class services. This discharge was accomplished in October 1992. 12 Those who then thought that the concerns of Lexecon had been relieved were wrong. On November 25, 1992, Lexecon filed in the Northern District of Illinois (Lexecon's home state) the action now before us on appeal. The complaint set forth claims for malicious prosecution, abuse of process, tortious interference, defamation, and common law and statutory commercial disparagement. In June 1993, the JPML transferred the case to the District of Arizona for consolidation with MDL 834, and assigned it to Judge Roll because Judge Bilby had recused himself. 13 Judge Bilby's recusal obviously resulted in part from his reaction on learning of Lexecon's suit in Illinois. He arranged a telephonic hearing held on December 7, 1992, and therein charged Lexecon with what he viewed as its incorrect portrayal of the resolution of its role as a defendant in MDL 834. Following this hearing and the submission of letter briefs by the parties, Judge Bilby placed an order in the record of MDL 834 in which he found portions of Lexecon's Illinois complaint to be a false description of the conditions under which Lexecon was dismissed from this case. 2 The key portions of his order disputed Lexecon's characterization of its payment to the Lincoln Savings class as voluntary, and of the resolution as a termination of the litigation in Lexecon's favor: 14 The Class Plaintiffs/Lexecon resolution was a bargained-for exchange wherein consideration flowed both ways. 15 ... 16 Moreover, under no circumstances was the Class Plaintiffs/Lexecon compromise a resolution in favor of either party or, more importantly, an adjudication on the merits. Instead, it was a bargained-for resolution of a disputed matter from which both parties benefited. 17 Lexecon's attempt to appeal this order to this court failed because there was as yet no final judgment in MDL 834. Lexecon took no appeal from the final judgment subsequently entered in March 1994. 18 Meanwhile, Judge Roll had begun his work on the case. In November 1993 he dismissed Lexecon's malicious prosecution and abuse of process claims. In re American Continental Corp./Lincoln S & L Sec. Litig., 845 F.Supp. 1377, 1383-86 (D.Ariz.1993). All the defendants in this case then answered, and Milberg Weiss filed counterclaims for breach of contract, fraud, unjust enrichment, and promissory estoppel. Discovery proceeded, followed by the defendants' motions for summary judgment. 19 In March 1994, before Judge Roll resolved the summary judgment motions, final judgment was entered in MDL 834. Lexecon thereupon moved under 28 U.S.C. § 1407 for a remand of its case to the Northern District of Illinois. Judge Roll instructed Lexecon to renew this motion after the close of discovery, which Lexecon did in November 1994. In response, Milberg Weiss moved to make the transfer to Arizona permanent under 28 U.S.C. §§ 1404(a) and 1406, and additionally moved for preliminary and permanent injunctions against the pursuit of this action, as well as all other claims made by Lexecon. Judge Roll denied the latter motion, and Milberg Weiss appealed. No. 95-15759. 20 Prior to ruling on the remand and transfer motions, Judge Roll granted summary judgment against Lexecon on its claims of tortious interference, commercial disparagement, and defamation based on the dissemination of Milberg Weiss' sixth amended complaint. In re American Continental/Lincoln S & L Sec. Litig., 884 F.Supp. 1388 (D.Ariz.1995). Lexecon's defamation claim based on a sentence in a letter written by a Milberg Weiss partner, Kevin P. Roddy, to, and which appeared in, The National Law Journal, survived. Judge Roll also dismissed Milberg Weiss' counterclaims. Id. at 1397. Because the Cotchett defendants, who were never Lexecon's principal target in this litigation, had no part in the Roddy letter, Judge Roll entered a final judgment in their favor pursuant to Fed.R.Civ.P. 54(b). Lexecon timely appealed that judgment. No. 95-16403. 21 Thereafter, Judge Roll entered an order denying Lexecon's motion to return the case to the JPML for remand to the Northern District of Illinois, and granting the Milberg Weiss motion to make the transfer to the District of Arizona permanent. Lexecon appealed the remand and transfer decision to this court by means of a petition for writ of mandamus, which was denied without prejudice as to Lexecon's raising the issue on direct appeal. 22 The climactic event in Judge Roll's court occurred on July 25-28, 1995, when Lexecon's defamation claim based on the Roddy letter to The National Law Journal was tried to a jury. The jury verdict favored Milberg Weiss. Lexecon appealed the subsequently entered final judgment, in particular the district court's transfer order and its dismissal of Lexecon's malicious prosecution and abuse of process claims. No. 95-16595. Milberg Weiss cross-appealed the dismissal of its counterclaims. No. 95-16754. 23 The order in which this court will address the issues before us on this appeal is as follows: 24 1. The permanent transfer of Lexecon's case from the Northern District of Illinois to the District of Arizona. 25 2. The denial of Milberg Weiss' motion for preliminary and permanent injunctions against the pursuit by Lexecon of its claims against Milberg Weiss and Cotchett. 26 3. The dismissal of Lexecon's malicious prosecution and abuse of process claims. 27 4. The dismissal of Milberg Weiss' counterclaims.