Court Opinion

ID: 161491
Source: CourtListenerOpinion
Date Created: 2010-08-14 07:09:31+00
Date Added: 2024-06-11T09:42:30.484105
License: Public Domain

F I L E D
                                                      United States Court of Appeals
                                                              Tenth Circuit
                                 PUBLISH
                                                              AUG 21 2001
                  UNITED STATES COURT OF APPEALS
                                                            PATRICK FISHER
                                                                  Clerk
                              TENTH CIRCUIT

In re: INTEGRA REALTY
RESOURCES, INC.; INTEGRA -
A HOTEL AND RESTAURANT
COMPANY; BHC OF DENVER,
INC.,

      Debtors.

JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors’
Trust,

      Plaintiff - Appellee,

v.

FIDELITY CAPITAL
APPRECIATION FUND,

      Defendant - Appellee,
                                              No. 99-1344
AD HOC PROTECTIVE
COMMITTEE FOR SHOW BIZ
STOCKHOLDERS; RODNEY J.
AXTELL, individually and as
custodian for JONATHAN AXTELL;
MARY E. AXTELL; EUNICE H.
BECK; ROBERT R. BECK;
RICHARD H. BECK; ELEANOR S.
BECK; MICHAEL BENENSON;
KERRI BENESON, as Trustees;
JULIUS B. BINDER, as Trustee;
BINDERS’ BIG MEN’S STORE,
INC.; JAMES BOGEAZIS; JOSEPH
M. COCQUOYT; MAURICE
GARDLER; DAVID GARDNER;
MARTIN GREENBERG; LEON
GREDAHL; ROBERT J. HARRIS;
MICHAEL J. HAYES; EDWARD
HERZIG; RODNEY WILLIAM
KENNOW; RICHARD O.
JACOBSON; FERN LAZAR;
MURRAY LAZAR; KATHRYN L.
LUDGREN; JOSEPH
MASTRANGELO; CHARLES H.
MORIN; HERBERT NADLER;
ROCHELLE NADLER; FRANK
NICHOL; BARBARA NICHOL;
ROBERT V. PALAN, individually and
as custodian for David Barry;
CHARLES POTTER;
RACQUEL-DIVISION OF BINDER’S
BIG MEN’S STORE; GLADYS
RYAN; DONALD J. RESNICK;
RACHNALL SCHLAFSTEIN;
SYDELLE SCHECHTER; JOHN T.
SHEEHY; CARL SCHECHTER;
SEIDMAN & SEIDMAN, PC PROFIT
SHARING TRUST; JAMES R.
SHAPIRO; LEON D. SHELDAHL;
IRVING SIROTA; E. THOMAS
SPENGLER; HJALMAR J. SUNDIN,
as Trustee; FREDERICK K.
WATSON, JR.; BEN WONG, JR.;
BENJAMIN B. WONG; GRACE C.
WONG; VANCE E. VORHEES;
LAWRENCE ZUCKER, and any and
all additional parties who either have
joined or will join the said Committee,

      Defendants - Appellants.

                                          -2-
JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors’
Trust,

      Plaintiff - Appellee,

v.

FIDELITY CAPITAL
APPRECIATION FUND,

      Defendant - Appellee,

AD HOC PROTECTIVE
COMMITTEE FOR SHOW BIZ
STOCKHOLDERS; RODNEY J.
AXTELL, individually and as
custodian for JONATHAN AXTELL;
MARY E. AXTELL; KAMAL                        No. 99-1416
BARSOUM; EUNICE H. BECK;
ROBERT R. BECK; RICHARD H.
BECK; ELEANOR S. BECK;
MICHAEL BENENSON; KERRI
BENESON, as Trustees; JULIUS B.
BINDER, as Trustee; BINDERS' BIG
MEN'S STORE, INC.; JAMES
BOGEAZIS; JOSEPH M.
COCQUOYT; DARRELL H.
COOPER; ROBERT DOMINE;
MAURICE GARDLER; DAVID
GARDNER; MARTIN GREENBERG;
LEON GREDAHL; PERRY GREEN;
ROBERT J. HARRIS; MICHAEL J.
HAYES; EDWARD HERZIG;
RODNEY WILLIAM KENNOW;
FERN LAZAR; MURRAY LAZAR;

                                       -3-
KATHRYN L. LUDGREN; JOSEPH
MASTRANGELO; CHARLES H.
MORIN; HERBERT NADLER;
ROCHELLE NADLER; FRANK
NICHOL; BARBARA NICHOL;
NICOLE NEIMAN; ROBERT V.
PALAN, individually and as custodian
for David Barry; CHARLES POTTER;
RACQUEL-DIVISION OF BINDER’S
BIG MEN’S STORE; GLADYS
RYAN; DONALD J. RESNICK;
ELSIE V. ROSAMEN; SERITA
SERVER; RACHNALL
SCHLAFSTEIN; SYDELLE
SCHECHTER; JOHN T. SHEEHY;
CARL SCHECHTER; SEIDMAN &
SEIDMAN, PC PROFIT SHARING
TRUST; JAMES R. SHAPIRO; LEON
D. SHELDAHL; IRVING SIROTA;
HJALMAR J. SUNDIN, as Trustee;
FREDERICK K. WATSON, JR.; BEN
WONG, JR.; BENJAMIN B. WONG;
GRACE C. WONG; VANCE E.
VORHEES; JEROME YOUNGER;
MARCELLA YOUNER; LAWRENCE
ZUCKER,

      Defendants - Appellants.

JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors’
Trust,

      Plaintiff - Appellee,                  99-1468

v.

FIDELITY CAPITAL

                                       -4-
APPRECIATION FUND,

      Defendant - Appellee,

AD HOC PROTECTIVE
COMMITTEE FOR SHOW BIZ
STOCKHOLDERS; EUGENE SHINE;
and EDWARD C. CAFMEYER,

      Defendants - Appellants.

JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors’
Trust,

      Plaintiff - Appellee,

v.
                                             No. 99-1477
JOHN E. ANDERSON; JANE
ANDERSON,

      Defendants - Appellants.

JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors'
Trust,

      Plaintiff - Appellee,                  No. 99-1483

v.

VANGUARD GROUP, INC.,

                                       -5-
      Defendant - Appellant,

FIDELITY CAPITAL
APPRECIATION FUND,

      Intervenor.

JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors'
Trust,

      Plaintiff - Appellee,

v.

RUSSELL HAWLEY; GERALD
BUCKMAN; ROBERT
FRANKIEWICZ; BERNARD
NEUMAN, Custodian for Jordan Abba
Neuman UTMA IL; JORDAN
NEUMAN; JONATHAN NEUMAN;
JAMES S. SAUNORIS; SANDRA R.                 No. 99-1498
SAUNORIS; JAMES S. SAUNORIS
AND WAYNE HUMMER & CO.,
CUSTODIAN FBO JAMES S.
SAUNORIS IRA PLAN; KEITH J.
PEETZ; LOUIS BORY; GRACE
CHARLES, FBO Grace Charles IRA;
MICHAEL J. CONNELLY; RONALD
MANZI; BERNARD PACKER, FBO
Bernard Packer IRA and trustee(s)
thereof; JOSEPH REGAN; KENNETH
J. GREENBERG; SHERRIE
GREENBERG; EDWIN BLAIR
PLYLER; ELLEN PLYLER; JOHN J.
WILK,

                                       -6-
      Defendants - Appellants,

HARRIET YANG and AUTOMATED
ELECTRONICS CORPORATION,

      Defendants,

FIDELITY CAPITAL
APPRECIATION FUND,

      Intervenor.

JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors’
Trust,

      Plaintiff - Appellee,

v.

RALEIGH EMERY; CATHERINE
EMERY; ARNOLD CUTKOMP;
JOELLEN CUTKOMP, also known as               No. 99-1523
Ellen Cutkomp; MICHAEL
BERGANTINO; MICHAEL
BERGANTINO, TRUSTEE FBO
MICHAEL BERGANTINO IRA;
PEGGIE BERGANTINO; MELVIN
CHUROVICH; RUTH E.
CHUROVICH; G. JAMES
ZYSKOWSKI; MARILYN J.
ZYSKOWSKI; MARILYN J.
ZYSKOWSKI, CUSTODIAN FBO
JULIE ANNE ZYSKOWSKI UGMA
MN,

                                       -7-
      Defendants - Appellants,

CONCEPT FORMS, INC. PENSION
PLAN 12/21/83, AND TRUSTEE(S)
THEREOF,

      Defendants,

FIDELITY CAPITAL
APPRECIATION FUND,

      Intervenor.

JEFFREY A. WEINMAN, as Trustee
for the Integra Unsecured Creditors’
Trust,

      Plaintiff - Appellee,

v.
                                                   No. 99-1546
MICHAEL FRIEDMAN, MICHAEL
FRIEDMAN as custodian for
JONATHAN FRIEDMAN; HARRIET
FRIEDMAN; AD HOC PROTECTIVE
COMMITTEE FOR SHOW BIZ
STOCKHOLDERS,

      Defendants - Appellants.

                Appeal from the United States District Court
                         for the District of Colorado
                           (D.C. No. 94-WM-2581)

                                       -8-
I. Walton Bader, Bader and Bader, White Plains, New York, for the Defendants-
Appellants in case numbers 99-1344, 99-1416, 99-1477, 99-1468, and 99-1546.

James S. Dittmar, Hutchins, Wheeler & Dittmar, P.C., Boston, Massachusetts
(Tucker K. Trautman, Dorsey & Whitney, Denver, Colorado and Richard R.
Lavin, FMR Corp., Boston, Massachusetts, with him on the briefs), for
Defendant-Appellee Fidelity Capital Appreciation Fund.

John C. Smiley, Harold G. Morris, Jr., Patrick D. Frye of Lindquist, Vennum &
Christensen, P.L.L.P., Denver, Colorado, filed a brief on behalf of the Plaintiff-
Appellee Jeffrey A. Weinman.

Jeffrey J. Greenbaum, Sills Cummis Radin Tischman Epstein & Gross, P.A.,
Newark, N.J. (Steven J. Gorelick, Sills Cummis Radin Tischman Epstein & Gross,
P.A., Newark, N.J.; and Chesley K. Culp III and Dianne M. Kueck, Moye, Giles,
O’Keefe, Vermeire & Gorrell, LLP, Denver, Colorado, with him on briefs), for
Defendants-Appellants in case numbers 99-1483, 99-1498 and 99-1523.

Before EBEL and ANDERSON, Circuit Judges, and BRORBY, Senior Circuit
Judge.

EBEL, Circuit Judge.

      The defendant class action giving rise to the multiple appeals addressed in

this opinion was filed under the federal Bankruptcy Code, 11 U.S.C. §§ 105, 544,

550, 1123 and 1145, to recover the value of assets of a bankrupt corporation

which were spun off to shareholders prior to the bankruptcy. The events giving

rise to the action began in 1988, when Integra Realty Resources, Inc. (“Integra”),

a hotel and restaurant company, spun off its restaurant business to its shareholders

                                        -9-
to form ShowBiz Pizza Time, Inc. (“ShowBiz”), a separate corporation. At the

time, Integra was experiencing significant business losses, and it declared

bankruptcy in 1992. In 1994, Integra’s unsecured creditors filed suit against all

shareholders who received ShowBiz stock to recover the value of the shares for

Integra’s estate.

      The case was initially assigned to a bankruptcy court, which certified the

suit as a mandatory defendant class action pursuant to Rule 23(b)(1) and

designated seven representative defendants, including Fidelity Capital

Appreciation Fund (“Fidelity”), 1 Integra’s largest shareholder at the time of the

spinoff, to act on behalf of the class defendants. In addition, the court appointed

Fidelity’s counsel to act as sole counsel for the class in spite of objections that

Fidelity itself raised to serving as a class representative. Following the

certification of the class, the district court withdrew its reference of the case to

the bankruptcy court except for pretrial procedures. Fidelity filed an unsuccessful

motion to dismiss the suit, and then negotiated a settlement allowing individual

defendant shareholders either (1) to accept the agreement and pay damages; (2) to

accept the agreement and raise a limited number of individual defenses; or (3) to

opt out of the settlement and continue litigating the case before the district court.

      1
       Fidelity has intervened in each of the appeals consolidated in this opinion
in order to argue in favor of the adequacy of its representation of the class.

                                         - 10 -
The district court approved the settlement agreement, and the vast majority of

class defendants either accepted the settlement or entered into individual

settlement agreements with the unsecured creditors.

      Following entry of final judgment implementing the settlement by the

district court, several appeals were nonetheless filed challenging the court’s

approval of the settlement agreement and numerous underlying orders. Eight

separate appeals were consolidated into two appeals for the purposes of briefing

and oral argument under Rule 3(b)(2) of the Federal Rules of Appellate

Procedure. These two appeals have been further consolidated for disposition

within this opinion. 2 Appellants challenge, inter alia, the propriety of certifying

the suit to a bankruptcy judge for pretrial proceedings, the bankruptcy court’s

decision to certify a class under Rule 23(b)(1)(A) of the Federal Rules of Civil

Procedure, and Fidelity’s adequacy as a class representative. For reasons stated

herein, we DISMISS each of the appeals for lack of standing.

                                I. BACKGROUND

      A.     Integra/ShowBiz Spinoff

      2
       In the interest of simplicity, we will refer to all defendant class members
bringing appeals herein collectively as “the Appellants,” and we will refer to
specific case numbers where necessary to distinguish individual arguments and
case dispositions.

                                        - 11 -
      This appeal arises from Integra’s December 1988 spinoff of ShowBiz Pizza

Time, Inc. to its shareholders. Integra, which owned a ninety-percent stake in

ShowBiz, issued shareholders a dividend of 0.429 ShowBiz shares for each share

of Integra owned by the recipient. At the time of the spinoff, Integra was

controlled by the Hallwood Group Inc. (“Hallwood”), a merchant banking firm

that owned fourteen percent of Integra’s common stock and which appointed a

majority of Integra’s directors. See In re Integra Realty Resources, Inc., 198 B.R.

352, 354 (Bankr. D. Colo. 1996).

      ShowBiz began trading as a separate public corporation in January 1989 at

a price of $5.50 per share, traded for at least $5 per share throughout the relevant

period, and, adjusting for stock splits, eventually traded for as much as $53.75 per

share. Integra, on the other hand, consistently traded below $2 per share,

continually lost money after the spinoff, and filed for Chapter 11 bankruptcy in

the District of Colorado in 1992. In 1994, the bankruptcy court approved both

Integra’s Chapter 11 plan of reorganization (“Reorganization Plan”) and the

formation of a trust to act on behalf of unsecured creditors (“the Trust”).

Pursuant to the Reorganization Plan, the bankruptcy court assigned to the trust a

variety of potential claims that Integra had against Hallwood and its former

officers and directors, and Hallwood and the former directors paid $9 million to

settle these claims. In 1994, the bankruptcy court released the settling parties

                                        - 12 -
from further liability for Integra’s claims, which are defined as follows: “[A]ll

Core Claims and Claims . . . which Integra and the Bankruptcy Estate ever had or

now has or may have at the Effective Date, including without limitations Claims

held in Integra’s corporate capacity and Claims arising in or under Chapter 5 of

the Bankruptcy Code.” 3

      B.     Trustees’ Suit for Fraudulent Transfer or Unlawful Dividend

      Plaintiff Jeffrey A. Weinman (“Trustee”) filed the present suit in 1994, in

his capacity as Trustee for the unsecured creditors’ Trust, seeking to recover the

value of the ShowBiz shares for Integra’s estate in bankruptcy. The defendants

were all beneficial recipients of ShowBiz shares following the 1988 spinoff. The

      3
        The parties dispute whether the Hallwood Settlement affected Appellants
in the case at hand. Some of the Appellants (those appearing in case numbers 99-
1433, 99-1416, 99-1468, 99-1477, and 99-1546) allege that an injunction entered
pursuant to the Hallwood Settlement prejudiced their ability to seek
indemnification for damages in the case at bar from the Hallwood Group.
Following oral arguments, these Appellants filed a supplemental motion with the
court to vacate this portion of the Hallwood Settlement or to dismiss the
complaint in the present case in light of that injunction.
       Many of the Appellants raising this argument apparently opted out of the
class action settlement in this case and continued litigating their defenses before
the district court. As is discussed below, Appellants who opted out of the
settlement lack standing to participate in the appeal presently before the court.
The remaining Appellants did not raise this issue before the district court, and
accordingly the district court has not passed on the meaning of the settlement in
the first instance. Therefore, it is not properly before the court at this time and
we do not consider it in this opinion. Cf. Walker v. Mather, 959 F.2d 894, 896
(10th Cir. 1992) (in general, court will not consider issues on appeal that were
not raised before the district court).

                                        - 13 -
Trustee asserted a variety of claims, alleging that the spinoff constituted a

fraudulent transfer pursuant to the Texas Fraudulent Transfer Act, Texas Bus. &

Com. Code Ann. §§ 24.001-.012, and in addition sought relief pursuant to several

provisions of the United States Bankruptcy Code, 11 U.S.C. §§ 105, 544, 550,

1123, and 1145. The Trustee attempted service of the complaint on more than

800 known defendants by first-class mail, and he then filed a motion to have the

action certified as a defendant class action. After conducting a hearing to

consider objections from putative class members, the bankruptcy court certified a

defendant class of ShowBiz stock recipients under Rule 23(b)(1).

      In addition, the bankruptcy court designated seven representative

defendants. These representatives consisted of Fidelity, three other institutional

investors, two individual investors, and the Unofficial Protective Committee of

ShowBiz Stockholders (“Unofficial Committee”), 4 which is made up of clients

represented by attorney I. Walton Bader (“Bader”). The Unofficial Committee

appears in the caption in appeals numbered 99-1344, 99-1416, 99-1468, and 99-

      4
       On appeal, the Unofficial Committee has styled itself “The Ad Hoc
Protective Committee for ShowBiz Stockholders.” This name apparently refers
to substantially the same aggregation of members of the defendant class members
as the Unofficial Committee. The precise membership of the Unofficial
Committee is not defined in the briefs or in the record, but for the purposes of
this appeal we accept attorney Bader’s description in the captions to case number
99-1344.

                                        - 14 -
1546. 5 Although not listed elsewhere in the record, Bader alleges that the

Appellants in case number 99-1344 are members of the committee. The same

individuals appear in case number 99-1416.

      The bankruptcy court then ordered the class representatives to meet, discuss

the appointment of class counsel, and report their selection back to the court.

Further, the court designated procedures for notifying defendants of the action,

and approved a form of notice which was mailed in June 1995.

      5
        The Trustee does not challenge the status of the Unofficial Committee or
its members to act as representative parties on behalf of the class. However,
because we must satisfy ourselves that we have jurisdiction, we examine the issue
sua sponte. See Quest Communications Int’l v. FCC, 240 F.3d 886, 891 (10th
Cir. 2001). The Unofficial Committee itself was not a member of the class.
Thus, it is clear that the Unofficial Committee cannot act as a representative party
on behalf of the unnamed class members. See Fed. R. Civ. P. 23(a) (stating that
“[o]ne or more members of a class may sue or be sued as representative parties”
(emphasis added)). It is not alleged that the Unofficial Committee could
demonstrate associational standing. Cf. United Food Workers v. Brown Group,
517 U.S. 544, 553 (1996), and thus we do not consider that possibility.
However, we do observe that it does not appear that the Unofficial Committee
could satisfy the third prong required to show associational standing (that neither
the claim asserted nor the relief requested requires the participation in the lawsuit
of the individual members) in any event. Cf. id. at 554 (noting in dicta that
“precedents have been understood to preclude associational standing when an
organization seeks damages on behalf of its members”). Moreover, the
individual members of the Unofficial Committee, whom the bankruptcy court
never identified and failed individually to certify as adequate representatives,
cannot properly claim status as representative parties in this case. Thus, neither
the Unofficial Committee nor its individual members can be considered named
parties.

                                        - 15 -
      The class representatives were unable to agree on who should serve as class

counsel. Fidelity was the largest recipient of ShowBiz shares in the spinoff,

receiving 377,520 shares of ShowBiz stock, or approximately ten percent of the

total. Fidelity had initially requested to be excluded from serving as a

representative party out of concern that its duties to shareholders might conflict

with its responsibilities to the class members. In addition, Fidelity informed the

court that its exposure differed significantly from that of many of the other class

members, both because of the large number of shares it received and because it

sold its ShowBiz stock at the relatively high average price of $37.65 per share.

Nevertheless, the three remaining institutional investors ultimately nominated

Fidelity to act as the sole class representative to appear on behalf of the class. 6

Although Fidelity had opposed designation of the class, it told the court it would

vigorously protect its own interests, and that by doing so it believed it would

protect interests it had in common with other class members. However, Fidelity

disclaimed any acceptance of fiduciary duties to the members of the class.

      The Unofficial Committee proposed that a committee of attorneys

representing different groups of defendants appear on behalf of the class. Fidelity

objected to this arrangement, arguing it would be impossible for it to work

      Fidelity itself characterizes its appointment as “involuntary.” It may be
      6

more accurate to say Fidelity acquiesced to this role without specifically seeking
it.

                                          - 16 -
effectively with Bader and submitting seven reported cases detailing what it

believed to be questionable or unethical conduct by Bader. Fidelity stated that it

had no objections to sharing defense time so that Bader could appear before the

court on behalf of the Unofficial Committee, however.

      Ultimately, the bankruptcy court rejected the proposal for a committee of

class counsel. Bader then petitioned the court for the Unofficial Committee

members to be relieved from their status as representative defendants and to

proceed exclusively and independently under Bader’s representation, and the

court rejected this request as well. The court also denied Bader leave to file an

interlocutory appeal of his request to proceed independently from the class. 7

Following Fidelity’s designation as lead counsel, the district court withdrew the

suit from the bankruptcy court. The case was nevertheless remanded to the

bankruptcy court for pretrial matters.

      Fidelity began its defense of the class by filing a preliminary dispositive

motion raising the statute of limitations and other threshold defenses. See In re

      7
        Members of the Unofficial Committee have objected to the court’s
designation of Fidelity’s counsel as class counsel, asserting that they had an
absolute right to have Bader participate fully in the litigation pursuant to the Due
Process Clause of the Fifth Amendment and Rule 23(c) of the Federal Rules of
Civil Procedure. We reject this argument because Bader was allowed a full
opportunity to represent his clients in the motions below and on appeal, and these
members opted out of the settlement and thus cannot show injury in fact
sufficient to establish standing. See our discussion at III.A.1, infra.

                                         - 17 -
Integra, 198 B.R. at 353. The bankruptcy court denied the motion as well as a

subsequent motion for leave to appeal. See id. at 365. Fidelity then entered into

settlement negotiations. The parties eventually submitted a proposed settlement

to the court that would have held each class member liable for the lesser of either:

(1) $7.00 per share; or (2) the amount the class member received when and if they

sold the stock. The proposed settlement also established procedures for class

members to raise a limited number of individual defenses and to litigate issues

which were not common to class members.

      The district court approved a form notifying class members of the

settlement’s provisions and instructing them how to file objections. The vast

majority of defendants filed no objections. Many of those that did were

concerned by the absence of a right to opt out of the settlement. After additional

negotiation with Fidelity, the Trustee consented to modify the agreement to

provide for such rights. The district court did not order that class members be

notified of this new provision prior to approving the settlement, however.

      The district court conducted a fairness hearing pursuant to Fed. R. Civ. P.

23(e) in March 1998, and Bader appeared on behalf of his clients and objected

that the settlement was excessive and unfair. The remaining Appellants in this

case apparently did not appear to object to the settlement or otherwise seek to

intervene in the action to protect their rights. Despite Bader’s objections, the

                                        - 18 -
district court approved the settlement agreement, and entered individual

judgments against those class members who neither opted out of the settlement

nor raised individual defenses. The district court also entered a minute order

stating that Fidelity could take immediate possession of any settlement funds paid

by settling defendants. 8

      C.     Description of Appeals

      Because of the intricate rules governing standing to appeal from a class

action settlement, it is necessary to discuss each of the individual cases in some

detail before beginning our analysis of the case.

             1.     Case numbers 99-1344, 99-1416, 99-1468, and 99-1456

      The Trustee alleges that all of the appellants in cases numbered 99-1344

and 99-1416 opted out of the settlement and have pressed forward with their

defenses before the district court. Case numbers 99-1344 and 99-1416 were

brought by the Unofficial Committee and a number of individual defendants

represented by attorney Bader whom the Unofficial Committee claims as

members. The Trustee filed a motion with this court to dismiss 99-1416, arguing

      8
        The Unofficial Committee argues that this minute order gives standing to
appeal to class members who opted out of the settlement and who thus remain
parties to litigation before the district court. The parties do not cite and we could
not locate a copy of the order in the appendices. In any case, even assuming the
accuracy of Bader’s characterization of this order, we hold below, infra at
III.A.1, that it is insufficient to create standing to appeal the settlement for those
who opted out of its provisions.

                                        - 19 -
that the appellants in that case had opted out of the settlement and thus lacked

standing to bring an appeal objecting to the settlement. The trustee also asserts

that no final judgment existed as to those appellants. The Trustee repeated these

arguments in its answer brief to the court with respect to case number 99-1344.

      A few of the individual litigants involved in these cases have clearly opted

out of the settlement. 9 The record is less clear with respect to the majority of

those whom Bader claims as members of the Unofficial Committee. Bader filed

notice of appeal to the settlement on September 15, 1999. Rodney J. Axtell, a

member of the Unofficial Committee, and fifty-seven other Appellants, filed a

motion the following day purporting to “exclude” themselves from the class and

objecting to the requirement that they opt-out because of the pendency of their

appeal. The record, however, does not show whether the remaining members of

the Unofficial Committee formally opted out or whether judgments were entered

against them pursuant to the settlement. The Unofficial Committee is listed as a

party in case number 99-1546. Our analysis of the Unofficial Committee

members’ standing thus extends to these cases as well.

             2.    Case numbers 99-1477, 99-1546, 99-1483, 99-1498, and 99-
                   1523

      9
        The district court docket in this case establishes that Jonathan Axtell,
Mary E. Axtell Binder’s Big Men’s Store, Inc., Rodney William Kennow,
Richard O. Jacobson and Hjalmar J. Sundin opted out of the settlement. Each is
listed as an appellant in the case numbers set forth above.

                                        - 20 -
      Case numbers 99-1468, 99-1477 and 99-1546 also include appeals by

individual Appellants represented by Bader. Although these appeals were

consolidated with the appeals by the Unofficial Committee, there is no allegation

that these individuals are members of the Committee themselves, and therefore

we do not treat them as such. 10

      The remaining appeals are brought by Vanguard Group, Inc. and a number

of individual recipients of ShowBiz stock. All of these Appellants appear as

unnamed 11 class members who accepted the settlement and had judgments entered

against them by the district court according to its terms. 12

      10
        The individual Appellants in case number 99-1468 are Eugene Shine and
Edward C. Cafmeyer. Although the amount of the judgments entered against
Shine and Cafmeyer does not appear in the record, the District Court Docket
shows that both Shine and Cafmeyer had judgments entered against them
pursuant to the Settlement Agreement. Appellants in case number 99-1477, John
E. Anderson and Jane Anderson, sustained judgments of $504 and $91,
respectively, on Sept. 29, 1999, and they filed notice of appeal of the judgment
on October 18, 1999. Appellants in case number 99-1546, Harriet Friedman and
Michael Friedman, both in his individual capacity and in his capacity as trustee
for Jonathan Friedman, sustained judgments totaling $574 on November 8, 1999.
They appealed their judgments on November 26, 1999.
      11
         Following common terminology, we refer to representative parties as
“named parties,” and to all other members of the defendant class as “unnamed
parties.”
      12
        Vanguard Group, Inc., the Appellant in case number 99-1483, sustained a
judgment of $73,192 under the settlement on September 23, 1999, and filed
notice of appeal on October 25, 1999. The Appellants in case number 99-1498
consist mostly of individual investors and custodians of Individual Retirement
                                                                     (continued...)

                                        - 21 -
                                  II. DISCUSSION

A.    Jurisdiction and Standing

      The district court exercised jurisdiction pursuant to 28 U.S.C. § 1334(b).

We have statutory authority to review final decisions in bankruptcy matters

pursuant to 28 U.S.C. § 158(d) and 28 U.S.C. § 1291. The trustee has challenged

the timeliness of the notices of appeals filed by Appellants, which we address

below.

      Before we can reach this issue, however, we must first determine whether a

live case or controversy exists upon which we can constitutionally exercise

judicial authority. See U.S. Const. art III § 2; Schaffer v. Clinton, 240 F.3d 878,

882 (10th Cir. 2001) (“The judicial power of federal courts extends only to actual

cases and controversies.”). As was discussed above, it appears from the docket

that some of the appellants in the appeals numbered 99-1344 and 99-1416 opted

out of the settlement and have continued to litigate their cases before the district

court, and that the status of the remaining parties is unclear from the record.

      12
        (...continued)
Accounts. All of these class members sustained individual judgments against
them under the settlement between September 29, 1999 and October 13, 1999.
The parties collectively filed notice of appeal on October 29, 1999. The
appellants in case number 99-1523 also consist of individual investors and
trustees for IRA accounts, who sustained judgments during the same time period,
and who filed notice of appeal on November 12, 1999.

                                        - 22 -
      The Trustee’s assertion that the members of the Unofficial Committee

opted out of the settlement and are now litigating their cases before the district

court raises troubling questions concerning the standing of those parties to bring

this appeal. It is well settled that, in order to show standing necessary to invoke

federal court jurisdiction, a party must demonstrate three things:

      (1) “injury in fact,” by which we mean an invasion of a legally
      protected interest that is “(a) concrete and particularized, and (b)
      actual or imminent, not conjectural or hypothetical”; (2) a causal
      relationship between the injury and the challenged conduct, by which
      we mean that the injury “fairly can be traced to the challenged action
      of the defendant,” and has not resulted “from the independent action
      of some third party not before the court”; and (3) a likelihood that
      the injury will be redressed by a favorable decision, by which we
      mean that the “prospect of obtaining relief from the injury as a result
      of a favorable ruling” is not “too speculative.”

Northeastern Fla. Chapter of the Associated Gen. Contractors v. City of

Jacksonville, 508 U.S. 656, 663-64 (1993) (citations omitted). “The federal

courts are under an independent obligation to examine their own jurisdiction, and

standing ‘is perhaps the most important of [the jurisdictional] doctrines.’”

FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990) (quoting Allen v.

Wright, 468 U.S. 737, 750 (1984)). “The party invoking federal jurisdiction bears

the burden of establishing th[is] element[].” Lujan v. Defenders of Wildlife, 504

U.S. 555, 561 (1992).

             1.     Standing of the Opt-out Appellants

                                        - 23 -
         The Trustee asserts that all of the Appellants in case numbers 99-1344 and

99-1416 – that is, the members of the Unofficial Committee – opted out of the

settlement. Thus, the Trustee argues that they lack standing to bring the present

appeal. Although not expressly stated in the briefs, we interpret the Trustee’s

argument to be that these appellants lack any legally protected interest that could

support the “injury in fact” element necessary to demonstrate standing. The

Unofficial Committee members do not challenge the Trustee’s assertion that they

opted out, and therefore we treat that assertion as true. Cf. Lujan, 504 U.S. at 561

(holding that the party invoking federal jurisdiction has the burden of proof with

respect to standing); FW/PBS, Inc., 493 U.S. at 231 (same). Rather, Appellants

contend they can establish injury in fact because after the district court approved

the settlement, it entered a minute order allowing payments made pursuant to the

settlement to be immediately disbursed to the Trustee. Specifically, Appellants

contend that this order enables the Trustee to generate a war chest of funds which

will inevitably make it more difficult for the opt-out appellants to defend their

cases.

         However, this contention does not constitute a legally protected interest in

the settlement. “[N]on-settling defendants generally have no standing to

complain about a settlement, since they are not members of the settling class.”

Transamerican Refining Corp. v. Dravo Corp., 952 F.2d 898, 900 (5th Cir. 1992);

                                          - 24 -
see also In re Beef Indus. Antitrust Litig., 607 F.2d 167, 172 (5th Cir. 1979);

Darrow v. Southdown, Inc., 574 F.2d 1333, 1336 n.3 (5th Cir. 1978)); In re

Vitamins Antitrust Class Actions, 215 F.3d 26, 29 (D.C. Cir. 2000); Mayfield v.

Barr, 985 F.2d 1090, 1092-93 (D.C. Cir. 1993). “This rule advances the policy of

encouraging the voluntary settlement of lawsuits.” Waller v. Fin. Corp., 828 F.2d

579, 583 (9th Cir. 1987). Thus, “[w]hen the partial settlement reflects settlement

by some defendants, appeals by nonsettling defendants have been dismissed, on

grounds that mingle concerns of standing with finality concerns.” 15B Charles

Alan Wright et al., Federal Practice & Procedure § 3914.19 (2d ed. 1991 & 2001

Supp.) (footnote omitted).

      Courts have recognized a limited exception to this rule where nonsettling

parties can demonstrate they are “prejudiced” by a settlement. See Mayfield, 985

F.2d at 1093, Agretti v. ANR Freight Sys., 982 F.2d 242, 246 (7th Cir. 1992); In

re Sch. Asbestos Litig., 921 F.2d 1330, 1332 (3d Cir. 1990). However, it is not

sufficient for Appellants to show merely the loss of some practical or strategic

advantage in litigating their case. See Mayfield, 985 F.2d at 1093. “‘[P]rejudice’

in this context means ‘plain legal prejudice,’ as when ‘the settlement strips the

party of a legal claim or cause of action.’” Id. (quoting Agretti, 982 F.2d at 247);

accord, e.g., Eichenholtz v. Brennan, 52 F.3d 478, 482-83 (3d Cir. 1995); Zupnick

v. Fogel, 989 F.2d 93, 98 (2d Cir. 1993); Alumax Mill Prods. v. Congress Fin.

                                        - 25 -
Corp., 912 F.2d 996, 1001-02 (8th Cir. 1990); Waller, 828 F.2d at 583; In re Beef

Indus. Litig., 607 F.2d at 172.

      As the Seventh Circuit has explained,

      Plain legal prejudice [sufficient to confer standing upon a non-
      settling litigant in a class action] has been found to include any
      interference with a party’s contract rights or a party’s ability to seek
      contribution or indemnification. A party also suffers plain legal
      prejudice if the settlement strips the party of a legal claim or cause of
      action, such as a cross-claim or the right to present relevant evidence
      at trial.
              On the other hand, courts have repeatedly held that a
      settlement which does not prevent the later assertion of a non-settling
      party’s claims, although it may force a second lawsuit against the
      dismissed parties, does not cause plain legal prejudice to the non-
      settling party. Mere allegations of injury in fact or tactical
      disadvantage as a result of a settlement simply do not rise to the level
      of plain legal prejudice.

Agretti, 982 F.2d at 247 (citations omitted, emphasis added); see also Herbert B.

Newberg & Alba Conte, 2 Newberg on Class Actions § 11.55 (3d ed. 1992)

(“[N]onsettling defendants in a multiple defendant litigation context have no

standing to object to the fairness or adequacy of a settlement by other defendants,

but they may object to any terms that preclude them from seeking indemnification

from the settling defendants. Nonsettling defendants also have standing to object

if they can show some formal legal prejudice to them, apart from the loss of

contribution or indemnity rights.”).

      At most, the Appellants who opted out of the settlement have alleged the

court’s minute order allowing for immediate recovery of settlement funds has

                                        - 26 -
placed them at a tactical disadvantage. As such, they have not alleged legal

prejudice. We therefore hold that Appellants who opted out of the settlement lack

standing to appeal.

             2.       Standing of the Class Members Who Have Had Final Orders
                      Entered Against Them Pursuant to the Settlement Agreement,
                      But Who Were Not Themselves Class Representatives or
                      Intervenors.

      Although the remaining Appellants all accepted the settlement and had

judgments entered against them pursuant to its terms, the Trustee nonetheless

argues that we should dismiss their appeals for lack of standing as well.

Specifically, the Trustee contends that these Appellants lack standing because

they were not representative (named) parties and they did not move to intervene in

the class action. The Trustee’s argument includes all those Appellants who have

appealed in cases numbered 99-1483, 99-1498, 99-1523 and 99-1477, as well as

the individually named appellants in case numbered 99-1546 and 99-1468, who

are not claimed as members of the Unofficial Committee.

      While some conflict exists among the federal courts of appeals concerning

whether an unnamed class member has standing to appeal a judgment entered

pursuant to a settlement of a class action, the rule in the Tenth Circuit was settled

by Gottlieb v. Wiles, 11 F.3d 1004, 1009 (10th Cir. 1993). “[F]ormal intervention

is a prerequisite to an unnamed class member’s standing to appeal, at least in the

absence of any violations of the Rule 23 procedures intended to protect the rights

                                        - 27 -
of those unnamed class members.” Id.; see also In re Brand Name Prescription

Drugs Antitrust Litig., 115 F.3d 456, 457 (7th Cir. 1997) (holding that unnamed

class members in a plaintiff class action may not appeal entry of summary

judgment for defendants, and expressly rejecting prior authority in light of Marino

v. Ortiz, 484 U.S. 301, 304 (1988) (per curiam) 13); Shults v. Champion Int’l

Corp., 35 F.3d 1056, 1061 (6th Cir. 1994) (holding that unnamed class members

have standing to appeal a settlement order only if they have formally intervened

in the action or if a district court erroneously denied a motion to intervene in the

action); Croyden Assocs. v. Alleco, Inc., 969 F.2d 675, 680 (8th Cir. 1992)

(dismissing appeal of settlement by unnamed members of a plaintiff class who

failed formally to intervene in the action); Walker v. City of Mesquite, 858 F.2d

      13
         Marino held that a group of white New York City police officers who
claimed they were adversely affected by a settlement to a Title VII class action to
which they were not parties, and in which they did not intervene, lacked standing
to appeal the settlement. The Supreme Court reasoned:
       The rule that only parties to a lawsuit, or those that properly become
       parties, may appeal an adverse judgment is well settled. The Court
       of Appeals suggested that there may be exceptions to this general
       rule, primarily ‘when the nonparty has an interest that is affected by
       the trial court’s judgment.’ We think the better practice is for such a
       nonparty to seek intervention for purposes of appeal; denials of such
       motions are, of course, appealable.
Id. at 304 (citations omitted).
       Although we did not specifically rely on Marino in Gottlieb, two of the
cases that we cited as persuasive authority did. See Croyden Assocs. v. Alleco,
Inc., 969 F.2d 675, 679 (8th Cir. 1992); Walker v. City of Mesquite, 858 F.2d
1071, 1074 (5th Cir. 1988).

                                        - 28 -
1071, 1074 (5th Cir. 1988) (“[W]e conclude that the better practice in the instant

case is for nonnamed class members to file a motion to intervene and then, upon

the denial of that motion, appeal to this Court.”); Guthrie v. Evans, 815 F.2d 626,

627 (11th Cir. 1987) (class member who was not named representative plaintiff in

class action lacked standing to appeal a settlement of that action). But see Bell

Atlantic Corp. v. Bolger, 2 F.3d 1304, 1309 (3d Cir. 1993) (member of a plaintiff

class who attended hearing to determine the fairness and adequacy of a class

action settlement and voice their concerns before the district court had standing to

appeal the settlement).

        In Gottlieb, we recognized three policy grounds in favor of our rule

requiring intervention as a prerequisite for unnamed class members to appeal.

First, we noted that unnamed class members cannot act in a representative

capacity pursuant to Rule 23(a) absent an affirmative finding by the district court

that their claims are typical of those of the class as a whole and that they will

fairly and adequately represent the interests of the class members. See 11 F.3d at

1008.

        Permitting unnamed class members to pursue an appeal contrary to
        the wishes of the named class representatives would effectively
        substitute the unnamed members for the certified class
        representatives. Such a rule would undermine class action suits by
        allowing any and all unnamed class members to relitigate the suit
        without any indication that the named plaintiffs were improperly
        certified.

                                        - 29 -
Id.; 14 see also Guthrie, 815 F.2d at 628 (unnamed, individual class members

“cannot represent a class in federal litigation until the district court makes certain

findings, including that they will fairly and adequately protect the interests of the

class”); Croyden Assoc., 969 F.2d at 678 (citing Guthrie with approval); Walker,

858 F.2d at 1073 (same).

      Second, it is not necessary to allow unnamed class members who did not

intervene the right to appeal in order to protect their rights to due process either

during the course of litigation or to a fair and adequate judgment at the end of the

process. See 11 F.3d at 1008-09. In Gottlieb, we noted that Rule 23 itself

contemplates that aggrieved class members can move to intervene under Rule

24(a) of the Federal Rules of Civil Procedure, and that the denial of a motion to

intervene is appealable. Id. (“Intervention to protect the rights of unnamed class

members was explicitly contemplated by the Advisory Committee in adopting

Rule 24.” (citing Notes of Advisory Committee on Rules to the 1966 Amendment

      14
         In this case, Appellants in case numbers 99-1483, 99-1498, and 99-1523
asserted without explanation at oral arguments that they are “named” parties. We
infer, however, that Appellants are referring to the fact that they were named
individually among the more than 800 defendants in the amended complaint that
gave rise to this litigation. Given Gottlieb’s emphasis on the distinction between
representative versus represented parties, it would appear the court’s real concern
was the due process implication of allowing appeal by parties who have not been
certified to be adequate. See 11 F.3d at 1008. Despite having been named in the
complaint, Appellants nonetheless appear now as unnamed class members,
because the district court certified the case as a class action and designated
representative defendants who did not include these Appellants.

                                        - 30 -
to Fed R. Civ. P. 24, 28 U.S.C. App. at 607 (1988))). Intervention by an unnamed

class member is appropriate even after the approval of a settlement or entry of

judgment where it appears that a heretofore adequate representative abandons the

unnamed class members in favor of its own self-interests. See United Airlines v.

McDonald, 432 U.S. 385, 394 (1977); Baker v. Wade, 769 F.2d 289, 292 (5th Cir.

1985).

         Third, we reasoned that:

         Rule 23 class actions were designed to unify and render manageable
         litigation involving numerous members of a homogenous class who
         would otherwise each have access to the courts through individual
         lawsuits. If individual appeals without formal intervention were to
         be permitted, the class action would break down under the burden of
         unpredictable and unlimited individual actions. Such a result would
         directly conflict with the goals of Rule 23 and would eviscerate the
         utility of the class action suit.

Gottlieb, 11 F.3d at 1009; see also In re Brand Name Prescription Drugs, 115

F.3d at 457 (“[T]o allow [unnamed class members] to appeal would be an even

worse affront to intelligent judicial administration because it would fragment

control of the class action.”); Walker, 858 F.2d at 1074-75; Guthrie, 815 F.2d at

629.

         Appellants argue, without citation to any authority, that the cases cited

above are inapplicable in the context of defendant class actions. It is true that

Gottlieb involved a plaintiff class action, as did most of the authorities cited

                                          - 31 -
above. Moreover, we agree with the appellants that defendant class actions create

a special need to be attentive to the due process rights of absent parties.

      [T]here is a significant difference in liability and monetary exposure
      between a plaintiff and a defendant class when an unfavorable class
      judgment is involved. Moreover, an unwilling representative for a
      defendant class (which is the usual situation), creates a potential
      question concerning whether this involuntary representative will
      vigorously defend the lawsuit on behalf of the class. These
      circumstances also create a spillover need to examine carefully
      satisfaction of typicality, common questions, and notice
      requirements. There is little doubt that a defendant class requires
      closer scrutiny of Rule 23 tests to assure fairness to absent members
      based on long-standing due process protections. . . . As a result, due
      process considerations put greater limits on the use of defendant
      classes than plaintiff classes.

1 Newberg on Class Actions, supra, § 4.47.

      Nevertheless, it does not follow that there is a due process right for

unnamed defendant class members to appeal a settlement in situations in which an

unnamed plaintiff class member would lack standing. First, our rule in Gottlieb

allows for a review of precisely the due process protections discussed above.

Second, none of the cases above hinted at any distinction between the standing

requirements for members of plaintiff classes and defendant classes. To the

contrary, the Seventh Circuit initially set forth relatively lenient standards for

appeal in the context of a defendant class action, and then explicitly overturned

them in favor of a rule similar to our own in a case involving a plaintiff class

action. Compare Research Corp. v. Asgrow Seed Co., 425 F.2d 1059, 1060 (7th

                                         - 32 -
Cir. 1970) (stating in dicta that members of mandatory defendant class would

have had standing to appeal a class settlement if they had objected to the terms of

the agreement during a hearing before the district court, even without formal

intervention), with Felzen v. Andreas, 134 F.3d 873, 875 (7th Cir. 1998)

(dismissing appeals of unnamed members of plaintiff class and “formally

overrul[ing] Asgrow Seed and any other case in this circuit . . . that permits non-

parties to appeal from a decision of any kind in a class action”), aff’d sub nom.

Calif. Pub. Employees’ Ret. Sys. v. Felzen, 525 U.S. 315 (1999) (per curiam by

equally divided Court). The court placed no weight on the adversarial postures of

the class members in doing so, and thus it would appear the Seventh Circuit

requires intervention by members of plaintiff and defendant class actions alike.

      Furthermore, a rule allowing for direct appeal by unnamed class members

from a class settlement without intervention is unnecessary. Gottlieb itself sets

forth a clear rule in favor of intervention that is easy both for courts and litigants

to apply, and aggrieved unnamed class members have several additional options

available to help them to protect their rights up to and even after the district

court’s approval of the settlement. For example, class members can petition the

district court to designate a subclass of litigants with a separate representative

party. See Fed. R. Civ. P. 23(c)(4) (“When appropriate . . . a class may be

divided into subclasses and each subclass treated as a class, and the provisions of

                                         - 33 -
this rule shall then be construed and applied accordingly.”); In Re Brand Name

Prescription Drugs, 115 F.3d at 457-58 (same). Furthermore, aggrieved class

members can file a collateral suit before the district court challenging the

adequacy of representation, notice, and other due process protections which, if

successful, renders the judgment void as to those unnamed class members. See In

re Four Seasons Sec. Laws Litig., 502 F.2d 834, 840, 842 (10th Cir. 1974);

Shults, 35 F.3d at 1058-59; Walker, 858 F.2d at 1074; Guthrie, 815 F.2d at 628.

      In addition, as we noted in Gottlieb, in class actions brought under Rule

23(b)(3), class members have an absolute right to opt out of the class. Although

this class was certified pursuant to Rule 23(b)(1), which does not automatically

carry opt-out rights, the settlement itself entitled any party to opt out and to be

treated as an individual litigant in ongoing proceedings before the district court.

Thus, to the extent that the appellants here object to the terms of the settlement,

class certification, or the adequacy of Fidelity’s representation, they could have

achieved precisely the relief they now seek simply by taking advantage of the opt-

out provision provided within its terms.

      We are cognizant of the fact that, in some cases, “the option to join [or opt-

out of a class action] is in reality no option at all,” Ace Heating & Plumbing Co.

v. Crane Co., 453 F.2d 30, 33 (3d Cir. 1971), because the amounts at stake in the

action could be far outweighed by the costs of litigation. This is a legitimate

                                         - 34 -
concern, and one that might well force absent class members to make hard choices

weighing the cost of litigation against the risk of an adverse judgment. Such

choices, however, are an inescapable feature of our adversarial system in general

and the intervention requirement of Gottlieb in particular. However, in some

respects this practical concern works to the defendants’ advantage because the

plaintiff may decide it is not economically worthwhile to pursue small claims

against individual defendants.

      In sum, this is not a case in which Appellants lack a mechanism that would

have enabled them to protect their due process rights. To the contrary, this is a

case in which Appellants failed to take the procedural steps necessary to allow

them to do so.

      This holding does not dispose of all of the issues in the case, however. Our

opinion in Gottlieb contained an important qualification that even unnamed class

members may be entitled to a narrow appeal asserting they were denied the due

process afforded by procedural provisions offered by Rule 23. See 11 F.3d at

1009. Thus, we must still consider whether Fidelity provided adequate

representation for the class members, and whether notice afforded to the

appellants was adequate to satisfy the dictates of the Due Process Clause. See id.

(citing Silber v. Mabon , 957 F.2d 697, 700 (9th Cir. 1992) (unnamed class

members could appeal adequacy of notice);    Sertic v. Carpenters Dist. Council   ,

                                        - 35 -
459 F.2d 579, 581 (6th Cir. 1972) (unnamed class members could appeal

adequacy of notice and opportunity to object to proposed class settlement);     Phila.

Hous. Auth. v. Am. Radiator & Standard Sanitary Corp.       , 322 F. Supp. 834, aff’d

sub nom. Ace Heating & Plumbing Co. v. Crane Co.        , 453 F.2d 30 (3d Cir. 1971)

(unnamed class members could appeal adequacy of representation and

opportunities to object to settlement in class action)).

             3.     Timeliness of appeals

      Before reaching the merits of these questions, however, we must consider

the Trustee’s assertion that none of the appeals in this case are timely. The

district court certified its settlement approval order as final for purposes of appeal

on July 7, 1999. See Fed. R. Civ. P. 54(b). 15 Because Rule 4(a) of the Federal

Rules of Appellate Procedure requires a notice of appeal to be filed within thirty

      15
        Rule 54(b) states, in relevant part:
      When more than one claim for relief is presented in an action . . . or
      when multiple parties are involved, the court may direct the entry of
      a final judgment as to one or more but fewer than all of the claims or
      parties only upon an express determination that there is no just
      reason for delay and upon an express direction for the entry of
      judgment. In the absence of such determination and direction, any
      order or other form of decision, however designated, which
      adjudicates fewer than all the claims or the rights and liabilities of
      fewer than all the parties shall not terminate the action as to any of
      the claims or parties, and the order or other form of decision is
      subject to revision at any time before the entry of judgment
      adjudicating all the claims and the rights and liabilities of all the
      parties.

                                          - 36 -
days after a final judgment, the Trustee contends the time to appeal the settlement

would have run on August 6, 1999. The Trustee therefore challenges the

timeliness of all appeals that were filed after that date, including the appeals

numbered 99-1468, 99-1477, 99-1546, 99-1483, 99-1498, and 99-1523.

      The Trustee is correct that a district court’s proper certification of an order

under Rule 54(b) ordinarily starts the clock running for purposes of filing notice

of appeal. See England v. Hendricks, 880 F.2d 281, 284-85 (10th Cir. 1989).

This observation does not end our inquiry, however. “Despite its apparently

broad scope, Rule 54(b) may be invoked only in a relatively select group of cases

and applied to an even more limited category of decisions.” 10 Charles Alan

Wright et al., Federal Practice & Procedure § 2656 (3d ed. 1998). An essential

prerequisite for invoking Rule 54(b) “is that at least one claim or the rights and

liabilities of at least one party must be finally decided.” Id.; see also, e.g.,

Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 7 (1980); Armijo v. Atchison,

Topeka & Santa Fe Ry. Co., 19 F.3d 547, 552 (10th Cir. 1994); Wheeler Mach.

Co. v. Mountain States Mineral Enter., 696 F.2d 787, 789 (10th Cir. 1983).

“Finality is judged by the standards applicable to determining jurisdiction under

28 U.S.C. § 1291 . . . . ‘The District Court cannot, in the exercise of its

discretion, treat as “final” that which is not “final” within the meaning of . . . §

1291.’” Id. (quoting Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 437 (1956)

                                          - 37 -
(emphasis in original)). We review the certification of an order under Rule 54(b)

for purposes of appeal for abuse of discretion. See United Bank v. Hartford

Accident & Indem. Co., 529 F.2d 490, 492 (10th Cir. 1976).

      In this case, the district court’s certification of its settlement approval order

as a final judgment constituted an abuse of discretion. The district court’s order

decided only that the agreement reached between Fidelity and the Trustee was fair

and that it could be submitted to the class members for them to accept or reject.

By its expressed terms, class members had until September 15, 1998 to either: (1)

accept the agreement and pay the Trustee according to its terms; (2) accept it and

raise a limited number of individual defenses; or (3) opt out of the settlement

entirely and litigate the case individually before the district court. It is true that

the settlement would for all practical purposes completely resolve the case for

those class members who chose to accept the agreement and pay the Trustee

pursuant to its terms. However, the August 6 deadline for filing an appeal

suggested by the Trustee would have required even those class members to file

their notice of appeal more than a month before the September 15, 1998, deadline

for deciding whether to accept the settlement terms or to opt out.

      Accordingly, we find the district court’s approval of the settlement

agreement was not a final order, and that the district court’s attempt to certify its

order for appeal pursuant to Rule 54(b) was an abuse of discretion. We measure

                                          - 38 -
the timeliness of the appeals from the dates on which final judgments were

entered against Appellants, and we find that the aforementioned appeals are

timely. We now proceed to consider the merits of those issues which Appellants

have standing to raise.

      B.     Rule 23 Class Protections

      Although Appellants lack standing to challenge the substance of the

bankruptcy court’s orders, they are entitled to appeal if they can prove they were

denied “the Rule 23 procedures intended to protect the rights of those unnamed

class members.” Gottlieb, 11 F.3d at 1009. Gottlieb does not, however, create a

broad right of appeal. Appeal of the substantive rulings of the district court must

be predicated on a showing that an unnamed class member was denied

protections necessary to safeguard the due process rights to which they are

entitled as members of the class. Thus, we address Appellants arguments that

Fidelity was not an adequate representative for the class, and that notice provided

to the class members was inadequate to protect the due process rights of the class

members. With respect to the issue of notice, we consider three distinct

arguments: (1) in case numbers 99-1468, 99-1477, and 99-1546, Appellants

contend that the bankruptcy court abused its discretion by certifying the class

because some class members did not receive actual notice of the action prior to

certification;(2) in case numbers 99-1483, 99-1498, and 99-1523, Appellants

                                         - 39 -
similarly contend that individual, actual notice is required to bind each member

of a defendant class action; and (3) Appellants in case numbers 99-1468, 99-

1477, and 99-1546 contend they were denied due process because class members

were not notified of a last-minute change to the agreement providing class

members with a right to opt out prior to a hearing to determine whether the

agreement was fair to class members. Finally, all Appellants challenge Fidelity’s

adequacy to serve as a class representative. We address each argument in turn.

             1.     Pre-Certification Notice

      Appellants in case numbers 99-1468, 99-1477, and 99-1546 first argue that

class certification was improper because, in a Rule 23(b)(1) class, putative

members are not able to opt out of the class, and therefore class members are

disadvantaged if they cannot voice their objections before the district court rules

on the issue of certification.

      Within the bounds of due process, the decision of whether to order such

notice and the form that such notice is to take is left to the discretion of the

district court. See, e.g., Zimmer Paper Prods. v. Berger & Montague, P.C., 758

F.2d 86, 90 (3d Cir. 1985); Shelton v. Pargo, Inc., 582 F.2d 1298, 1309 (4th Cir.

1978). Since none of the Appellants in these cases allege that they themselves

lacked awareness of the certification proceedings, the true question presented

here is whether the district court’s failure to issue pre-certification notice to each

                                         - 40 -
putative class member constituted a violation of the Appellate class members’

due process rights and thus constituted an abuse of discretion under Rule

23(d)(2).

      Although some individual members of the putative class may have lacked

actual notice of the pending class certification, the Trustee served copies of the

motion to certify a class and his supporting brief on all members of the class that

were known at that time. Moreover, Appellants’ counsel Bader appeared at the

certification hearing and argued strenuously against class certification.

Appellants have not alleged any specific argument that Bader could not raise or

other prejudice that Bader suffered in defending his clients because some other

putative class members did not receive actual notice. 16 After certifying the class,

the district court ordered that class-wide notice be sent by first-class mail to all

class members whose names were then known or could be identified through

reasonable effort. We hold that the notice that was provided satisfied the

demands of due process, and that the bankruptcy court did not abuse its

discretion in certifying the class under these circumstances. 17

       Bader does not allege that Appellants in these cases were among those
      16

who did not receive actual notice.
      17
         Appellants cite In re Temple, 851 F.2d 1269, 1272 (11th Cir. 1988), for
the proposition that due process always requires notice to absent class members
prior to certification of a mandatory class action. In Temple, the Eleventh Circuit
granted the appellants’ request for a writ of mandamus ordering the district court
                                                                      (continued...)

                                        - 41 -
             2.     Actual Notice in Defendant Class Actions

      Similarly, Appellants in case numbers 99-1483, 99-1498, and 99-1523

contend that the notice was insufficient to satisfy the requirements of the Due

Process Clause because, in a defendant class action, all of the members of the

defendant class are entitled to actual notice before they can be bound to a

judgment. Appellant Vanguard Group, Inc., specifically alleged that it did not

receive notice of the final judgment entered against it in the case, although it has

not alleged whether or not it received prior notices mailed in the case.

      Although Rule 23 expressly contemplates defendant class actions, see Fed.

R. Civ. P. 23(a) (“One or more members of a class may sue or be sued as

      17
         (...continued)
to vacate its order of class certification because it had not issued pre-certification
notice to members of the putative class. Id. Temple is distinguishable, however.
In that case, none of the putative class members were apprised of the certification
proceedings, and the decision to certify a Rule 23(b)(1)(B) class was made in
essentially a non-adversarial setting in which no forceful arguments against
certification were presented, the district court’s determination that the
requirements of Rule 23(b)(1)(B) were met was held to be speculative, and
defendants who were already participating in related litigation suffered prejudice
as their cases were stayed and were “essentially move[d] . . . back to square one.”
Id. at 1271-72. No similar circumstances are present in the case at hand.
       Likewise, we reject Appellants’ invitation to reverse because actual, pre-
certification notice may be required in defendant class actions even though it is
not required for plaintiff class actions. Assuming without deciding that actual
notice is required by the Due Process Clause before members of a defendant class
action can be bound by a judgment for money damages and that such notice must
be given before class certification, in this case Appellants do not allege that they
themselves lacked actual notice of the proceedings either prior to certification or
during the pendency of the class action.

                                        - 42 -
representative parties . . . .” (emphasis added)), Rule 23 imposes no special

procedural requirements to protect the interests of unnamed defendant class

members vis-à-vis plaintiff class members. The Bankruptcy Court’s certification

order nevertheless required that the members of the class be notified of the action

itself, and the Trustee sent class members a second form of notice informing class

members of the settlement fairness hearing. Of the 6,423 notices of the

settlement hearing that were mailed, 4,968 were actually received by the class

members. Based on these results, Appellants contend that due process was not

satisfied because, “[w]hile the best notice practicable may satisfy due process

with respect to plaintiff class members, it is submitted that defendant class

members must be given actual notice.”

      Appellants have cited no cases discussing a court’s duty to provide

adequate notice to absent defendant class members. It is true, however, that the

Supreme Court has held that while “[m]any controversies have raged about the

cryptic and abstract words of the Due Process Clause . . . there can be no doubt

that at a minimum they require that deprivation of life, liberty or property by

adjudication be preceded by notice and opportunity for hearing appropriate to the

case.” Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 313 (1950).

Nevertheless, the standard governing this due process right is not actual notice to

each party intended to be bound by the adjudication of a representative action.

                                        - 43 -
See id. at 313-14 (“A construction of the Due Process Clause which would place

impossible or impracticable obstacles in the way could not be justified.”).

Rather, the Court has held that notice must be “reasonably calculated, under all

the circumstance, to apprise interested parties of the pendency of the action and

afford them an opportunity to present their objections.” Id. at 314; see also Eisen

v. Carlisle & Jacquelin, 417 U.S. 156, 173 (1974). As such, in a class action

brought under Rule 23(b)(3), the Supreme Court has stated that absent class

members’ procedural and due process rights are satisfied by “the best notice

practicable under the circumstances including individual notice to all members

who can be identified through reasonable effort.” Id. (citing Mullane, 417 U.S.

at 174).

      In this case, despite Appellants’ observation that many defendant class

members indeed did not actually receive the notices that were sent to them,

Appellants have made no showing that the notice was not reasonably calculated

to apprise the absent class members of the action, or that some better method of

notification offered a practicable means of notifying the class. Accordingly, we

reject Appellants’ contention that the notice provided was insufficient to satisfy

                                        - 44 -
the dictates of due process. Hence, it follows that Appellants cannot establish a

right to challenge the lower courts’ substantive decisions on that basis. 18

             3.     Notice of Class Settlement

      In addition, although Appellants do not allege that notice informing class

members of the settlement agreement was defective at the time it was given,

Appellants in case numbers 99-1468, 99-1477, and 99-1546 allege that new

notice should have been provided after the Trustee agreed to the class

representative’s demand for the inclusion of opt-out rights for class members

who wished to reject the settlement in its entirety.

      Rule 23(e) provides, “notice of the proposed dismissal or compromise shall

be given to all members of the class in such manner as the court directs.” “While

due process and Rule 23(e) require notice of a settlement to be given, the content

and form of that notice are left to the court’s discretion. The standard for the

settlement notice under Rule 23(e) is that it must ‘fairly apprise’ the class

members of the terms of the proposed settlement and of their options.” Gottlieb,

11 F.3d at 1013.

      18
        We express no view, however, as to whether individual members of the
defendant class might be able to establish a lapse in due process because they
lacked actual notice of the action, such that they might successfully challenge the
binding effect of the settlement as to themselves in a collateral action.

                                        - 45 -
      Although the provision for opt-out rights was clearly important to the

defendant class members, we hold that the notice was sufficient to protect the

rights of class members under Rule 23(e) and the Due Process Clause. Rule

23(e) “provides a check against settlement dynamics that may ‘lead the

negotiating parties – even those with the best intentions – to give insufficient

weight to the interests of at least some class members.” In re Vitamins Antitrust

Class Actions, 215 F.3d 26, 30 (D.C. Cir. 2000) (quoting Fed. Judicial Ctr.,

Manual for Complex Litigation § 30.42, at 238-40 (3d ed. 1995)). “Class

members must be given an opportunity to convince the court that the settlement

proposed would not be fair, adequate, or reasonable.” Mayfield v. Barr, 985 F.2d

1090, 1092 (D.C. Cir. 1993). In this case, the addition of opt-out rights merely

expanded the rights of class members and gave members the right to opt out after

they saw all of the terms of the settlement. Therefore, we see no way that the

court’s failure to provide new notice of the opt-out rights prior to accepting the

settlement gave rise to a risk that unfavorable terms would be forced upon some

class members or otherwise diminished class members’ ability to bring objections

before the court. Accordingly, we hold the district court did not abuse its

discretion by failing to notify class members of their opt-out rights prior to

conducting a fairness hearing of the settlement’s terms.

             4.    Adequacy of Representation

                                        - 46 -
      Finally, Appellants contend that Fidelity was not an adequate

representative for the class, both because its interests were not typical of those of

the absent class members, and because Fidelity failed to move for dismissal or

summary judgment on grounds which Appellants believed would have been

successful. 19 Even if Fidelity was an appropriate representative at the

commencement of the proceedings, Appellants contend that the settlement

agreement’s provision for attorney’s fees created a conflict of interest that

rendered Fidelity inadequate for the purposes of evaluating the settlement itself.

      “A party seeking to certify a class is required to show under a strict burden

of proof, that all the requirements of Fed. R. Civ. P. 23(a) are clearly met,” Reed

v. Bowen, 849 F.2d 1307, 1309 (10th Cir. 1988) (quotation marks and alterations

omitted), including that the class is adequately represented by a named party.

Once the decision to certify a class has been made, the court remains under a

continuing duty to monitor the adequacy of representation to ensure that class

counsel provides zealous, competent representation through the proceedings and

to address conflicts of interests if they develop. See, e.g., Key v. Gillette Co.,

      19
        Specifically, Appellants contend that Fidelity erred by failing to move for
dismissal or summary judgment on grounds that the Integra Reorganization Plan
and settlement with the Hallwood Group acts to bar Integra’s creditors from
seeking recovery from the shareholders. In the alternative, Appellants contend
that Fidelity should have moved to vacate the injunction so that class members
could seek indemnification from the Hallwood Group for any damages recovered
against them.

                                        - 47 -
782 F.2d 5, 7 (1st Cir. 1986); In re Fine Paper Antitrust Litig., 617 F.2d 22, 27

(3d Cir. 1980).

      Fidelity’s purported conflicts did not render it inadequate to represent the

class either at the beginning of the proceedings or at any later stage of the

litigation. Although we recognize that Fidelity’s potential liability far exceeded

that of any other class member, its interests were aligned with those of the other

class members in that all concerned wished to limit their liability to the lowest

possible amount. Moreover, Fidelity’s ownership of a large block of shares

would have created a greater incentive to bring the per-share costs of settlement

down to the lowest possible level. For similar reasons, although Fidelity had

fiduciary duties to its shareholders in addition to its responsibilities to the class,

we do not believe those duties were in conflict because Fidelity’s duty to each

was vigorously to litigate the class issues and to reduce the class liability as much

as possible.

      Likewise, the settlement agreement’s provision for partial payment of

Fidelity’s expenses in litigating the suit, while potentially troubling, does not in

and of itself render Fidelity inadequate. Cf. Fed. Judicial Ctr., Manual for

Complex Litigation, § 30.42, at 239 (3d ed. 1995) (noting “the simultaneous

negotiation of class relief and attorneys’ fees creates a potential for conflict”).

Rather than imposing a per se ban on simultaneous negotiations on the merits of

                                         - 48 -
an action and provisions for attorneys’ fees, courts have instead focused on the

results of such negotiations and their overall fairness to the parties. See Strong

v. Bellsouth Telecomms., 137 F.3d 844, 849 (5th Cir. 1998); Weinberger v. Great

N. Nekoosa Corp., 925 F.2d 518, 524 (1st Cir. 1991). In this case, the district

court did not abuse its discretion in concluding that Fidelity remained an

adequate representative notwithstanding that the settlement agreement created a

pool to offset some of their litigation costs. Therefore, we do not hold that the

provision for attorneys fees in the settlement agreement, without more, rendered

Fidelity an inadequate representative. We see nothing in this fee arrangement

that rendered Fidelity conflicted or unfit to serve as a representative party or its

attorneys to serve as class counsel.

      Finally, we reject Appellants’ contention that Fidelity’s failure to rely on

the terms of the Hallwood Settlement in its dispositive motion or to attempt to

join the Hallwood Group as a third-party defendant rendered it inadequate.

Fidelity conducted extensive discovery on behalf of the class, filed a motion for

dismissal or summary judgment, conducted extended negotiations with the trustee

after that motion failed, and filed slightly fewer than 400 pages of legal analysis

and factual support for its recommendation that the district court accept the

settlement. This analysis specifically outlined the risk of liability, weighed the

possibility of successful affirmative defenses, and considered both the exposure

                                         - 49 -
to damages that each of the defendants would face in the event of an

unsuccessful trial and the expense and delay that would accompany continued

litigation. In light of this record, Appellants’ naked assertion that failure to

present these isolated arguments rendered Fidelity inadequate is not persuasive.

                                III. CONCLUSION

      We hold that each of the appellants in each of the listed appeals lack

standing to bring these appeals. Accordingly, we DISMISS appeals numbered

99-1344, 99-1416, 99-1468, 99-1477, 99-1483, 99-1498, 99-1523, and 99-1546.

                                         - 50 -