Opinion ID: 154940
Heading Depth: 2
Heading Rank: 3

Heading: Resolution of AHI bankruptcy proceedings

Text: AHI filed its Chapter 11 bankruptcy petition on December 11, 1991. AHI filed its second amended plan of reorganization on May 6, 1993. Contained in the second amended plan of reorganization was AHI’s broad release of all claims and potential claims against Wilmington. On June 24, 1993, the bankruptcy court confirmed AHI’s -6- Chapter 11 reorganization plan, finding the AHI bankruptcy petition had been filed in good faith. By confirming the reorganization plan, the bankruptcy court also affirmed the portions of the plan in which AHI released the Hillman Group from any and all liability, thereby eliminating any and all potential derivative causes of action that could be filed against the Hillman Group for harm done to AHI. D. Partial settlement of consolidated class action cases In 1993, a settlement between the proposed class of plaintiffs (including plaintiffs from the other consolidated lawsuits) and a number of defendants was achieved in conjunction with a reorganization plan for AHI and its related entities that was eventually approved by the bankruptcy court. The settlement, valued in excess of $50 million, was funded substantially by the Hillman Group, Coopers & Lybrand, and Otten, Johnson. Barnard was not among the settling defendants. One section of the settlement agreement is relevant for purposes of this appeal. Specifically, a section entitled Protection of Settling Defendants against Claims over from Non-Settling Defendants and/or Third Parties provided the class plaintiffs and the settling defendants would jointly apply to the district court for a bar order prohibiting, among other things, cross-claims made by non-settling defendants against settling defendants. On June 9, 1993, following notice to the class and to the non-settling defendants, the district court conducted a hearing on the fairness of the proposed settlement and on issues raised in motions filed by the parties concerning the proposed bar order. On June 22, 1993, the court approved the settlement agreement. The settlement agreement, in -7- conjunction with the order of approval, enjoined the non-settling defendants (including Barnard) from filing contribution and/or indemnity claims, except for claims based upon a specific written agreement of indemnity. The court also approved the proportionate bar order proposed by the settling defendants. Under that bar order, all claims for contribution and/or indemnity that could be asserted by the non-settling defendants (e.g., Barnard) against any of the settling defendants were extinguished, discharged, satisfied, barred and/or otherwise unenforceable and the future filing of such claims [was] enjoined. Append. 2 at 154. Finally, in its June 23 order, the district court declared that it intended to retain continuing jurisdiction over implementation of the settlement, as well as continuing jurisdiction over the parties to the action. On November 22, 1994, approximately seventeen months after the court approved the agreement, Barnard filed a motion to set aside the settlement agreement, arguing certain sections of the agreement were contrary to public policy and the agreement was therefore void. On August 31, 1995, the magistrate judge denied Barnard's motion to set aside the agreement, emphasizing Barnard could not rely on Fed. R. Civ. P. 60(b)(6) to relieve [him] of [his] voluntary decision not to enter into the settlement agreement and not to appeal the settlement agreement. Append. 5 at 1296. Barnard subsequently appealed and we affirmed the magistrate's decision in Hillman. E. The AC case AC, a California limited partnership, filed suit against Barnard and his wife in California state court on February 5, 1993. AC's complaint arose out of its alleged purchase of $200,000 of AHI stock from Barnard and his wife in November 1990. The -8- complaint asserted claims against Barnard and his wife for fraud, negligent misrepresentation, breach of contract, securities fraud, and rescission. On December 6, 1993, Barnard filed a first amended cross-complaint in the AC case, asserting crossclaims against a number of cross-claim defendants, including Coopers & Lybrand and the Hillman Group.1 On January 7, 1994, the Hillman Group and Coopers & Lybrand filed a joint motion with the district court (i.e., the federal district court in Colorado) asking that it enforce the bar order it had previously issued. In their motion, the Hillman Group and Coopers & Lybrand asserted the cross-claims filed against them by Barnard in the AC case were in fact claims for indemnification or contribution. The motion was subsequently joined by Frank Savage. On March 17, 1994, the federal district court in Colorado issued an order granting in part and denying in part the motion to enforce bar order. The court found the first two causes of action asserted in Barnard’s cross-complaint were claims for indemnification and thus fell within the scope of the bar order. As for the remaining twelve cross-claims (four of which involved Coopers & Lybrand), the court was unable to determine whether they were independent claims or disguised requests for indemnification and contribution. Append. 2 at 184. More specifically, the court held: [I]t is unclear whether the third through fourteenth causes of action are independent claims or disguised requests for indemnification and contribution. Until further factual information is provided, the court is unable to determine 1 According to the parties, Barnard's claims against Coopers & Lybrand were classified as cross-claims under California civil procedure. Although such claims are properly characterized as third-party claims under Fed. R. Civ. P. 14, we will continue to refer to them as cross-claims for purposes of clarity. -9- whether the substantive damage claims fall within the Bar Order. However, the Court will rule that, to the extent that the indemnification claims are incorporated by reference into the third through fourteenth causes of action, and to the extent that the compensatory damages claimed in those causes of action may include contribution or indemnification, those claims and damages are barred. Upon a later appropriate motion, the Court will review the applicability of the Bar Order to the remaining claims. Append. 2 at 358. On March 24, 1994, based on the district court's order, the California state court dismissed Barnard's claims for indemnification and contribution and stayed his remaining cross-claims as to all cross-defendants until such time, if ever, as the Colorado [Federal] District Court stays its proceedings on the identical claims. Append. 2 at 502. The California state court also stayed AC's complaint for sixty days pending a ruling by the federal district court as to whether it would accept pendent jurisdiction over AC's claims. On April 11, 1994, after the statutory period for removal had passed, Barnard filed a motion asking the federal district court in Colorado to assert jurisdiction over AC's claims. Barnard argued AC was a class member in the multidistrict litigation, that it filed a proof of claim, and that it collected monies as a result of the settlement. Barnard further argued AC's claims in the California litigation were in fact a part of the multidistrict litigation. On June 10, 1994, the magistrate judge recommended that the AC case be transferred to Colorado and consolidated with the multidistrict litigation for coordinated pretrial and discovery proceedings. The district court adopted the magistrate's recommendation on August 16, 1994, and ordered that the AC case be transferred to and consolidated with the multidistrict litigation in Colorado. On September 23, 1994, the district court ordered that the AC case be coordinated with all other cases assigned Master Docket No. 92-Z-9150. Append. 2 at 514. -10- On October 18, 1994, Barnard filed a motion for clarification, stating the district court's September 23, 1994, order could be construed to transfer the entire AC action to Master docket No. 92-Z-9150. Append. 2 at 517. However, Barnard noted that [n]one of the non-MDL cross-claimants were notified of the [September 23, 1994] Order. Id. Accordingly, Barnard requested an order clarifying whether it had asserted jurisdiction over the cross-claims in AC. On August 31, 1995, the magistrate issued an order purporting to rule on three pending motions, including Barnard's motion to set aside the stipulation and settlement agreements and Coopers & Lybrand's motion to enforce bar order. The magistrate rejected the motion to set aside the agreements and, without discussion, granted the motion to enforce bar order. Barnard filed written objections to the magistrate's order on September 13, 1995. Although not included in the record on appeal, AC filed a motion to dismiss its claims against Barnard and his wife, which was granted by the district court on September 15, 1995. In that order, the court ruled on Barnard's pending motion for clarification, holding that all claims in AC, et al. v. Glen Barnard, et al., Case No. 94927, Superior Court of the State of California for the County of San Francisco, have been transferred to this Court. Append. 3 at 675 (emphasis in original). On September 27, 1995, the district court overruled Barnard's objections to the magistrate's recommendation to grant the motion to enforce bar order.2 On October 30, 1995, Barnard filed a motion asking for remand of his cross-claims against Coopers & Lybrand to California state court, and asking the district court to The order is confusing because it appears to refer to the magistrate's initial 2 recommendation of March 17, 1993, rather than the magistrate's August 31, 1995, order. -11- clarify its September 27, 1995, order. On January 12, 1996, Coopers & Lybrand filed a motion for summary judgment on Barnard's cross-claims, arguing the cross-claims for negligent misrepresentation, negligence, and civil conspiracy were derivative claims and thus barred by the confirmed plan of reorganization entered by the bankruptcy court. Coopers & Lybrand also argued that, with respect to Barnard's claim for accountant malpractice, he had no accountant-client relationship with Coopers & Lybrand and thus had no standing to assert the claim. On April 9, 1996, the district court issued a minute order denying Barnard's motion to remand his cross-claims against Coopers & Lybrand to California state court. On April 26, 1996, the court heard Coopers & Lybrand's motion for summary judgment. In ruling in favor of Coopers & Lybrand, the court stated: Well, I have no question at all about how this motion is to be decided. I wish by way of hindsight that perhaps I had been a little bit more clear in my rulings, which might have forestalled such a motion as this. There is no question that the magistrate judge, Judge Abram, who is a very experienced judge, was a state judge for many years before he was a magistrate judge, did give these matters detailed consideration. And indeed on his August 31[, 1995] order, the settlement had been worked out and was going to not be effective if these bar orders were not in effect.