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Cromeans v. Morgan Keegan & Co.

United States Court of Appeals, Eighth Circuit

June 12, 2017

John W. Cromeans, Individually and in behalf of all others similarly situated; Elkton Bank and Trust Company; Robert Benisch Plaintiffs-Appellants
v.
Morgan Keegan & Company; Armstrong Teasdale, LLP Defendants-Appellees

          Submitted: March 7, 2017

         Appeal from United States District Court for the Western District of Missouri - Jefferson City

          Before RILEY, Chief Judge, [1] GRUENDER, Circuit Judge, and GRITZNER, District Judge. [2]

          GRITZNER, District Judge.

         Plaintiffs John W. Cromeans, Robert Benisch, and Elkton Bank and Trust Company (collectively, "Plaintiffs"), class representatives, appeal the district court's[3]denial of their motion to enforce the settlement agreement in a securities class action, as well as the district court's denial of a subsequent motion to alter or amend. Defendants Morgan Keegan and Company ("Morgan Keegan") and Armstrong Teasdale LLP (collectively, "Defendants") move to dismiss Plaintiffs' appeal. For the reasons stated below, we affirm the district court and deny Defendants' motion to dismiss.

         I. BACKGROUND

         This appeal arises out of litigation involving Defendants' alleged violations of the Missouri Securities Act relating to a failed bond issue (the Bonds) by the City of Moberly, Missouri. Morgan Keegan served as underwriter of the Bonds, and the bonds were sold on the secondary market by Morgan Keegan and by other broker-dealers.

         Plaintiffs, proceeding as a class action, defined the class as all persons nationwide who purchased the Bonds between the date of the first offering and the date Morgan Keegan reduced the price of the bonds. Defendants resisted class certification, arguing that other than those who originally purchased from Morgan Keegan, it would be impossible to identify bondholders who had purchased the Bonds in the secondary market from other broker-dealers or from those who purchased the bonds on the secondary market and later sold them. The district court certified the class in September 2014. By the end of the opt-out period, class members whose aggregate Bond holdings represented most of the par value of the Bonds had retained separate counsel and opted out. The remaining members of the class had purchased or held Bonds with a total par value of $8, 455, 000. On January 14, 2015, the case settled after the jury had been impaneled for trial but prior to opening statements.

         That day, the parties announced their settlement agreement on the record before the district court. That discussion proceeded as follows, in relevant part:

MR. HATFIELD [Attorney for Defendant Morgan Keegan]: Your Honor, the only thing I would add is, just to make sure we get it all on the table, defendants do intend to propose that for some people, that if they don't make a claim or - well, let me back up.
So there are people that have - own the bonds today, easily, identifiable. Some of them are still Morgan Keegan clients. Those people are really easy to deal with and to handle.
THE COURT: Right.
MR. HATFIELD: There are some of these other people that I may have erroneously named yesterday who bought from others who are a little hard to find that we talked about yesterday.
We do anticipate proposing a process for those people in which, if they do not submit claims, Morgan Keegan could receive some of the pot back, but that would be for a defined set of the class.
THE COURT: What is predicted as to the size?
MR. SUTER [Attorney for Defendant Morgan Keegan]: Your Honor, one of the conditions that wasn't mentioned is that the bonds be tendered back and Morgan Keegan will become the owner of the bonds. So in exchange for the pro rata amount of settlement funds that are available after attorneys' fees, those folks who actually submit the claims and who give us their bonds will, in exchange, get their pro rata share of the settlement proceeds.
To the extent that we don't know who those folks are - - and it's about a third of the class, we don't know who they are, which is why we've made these arguments all along - - if those folks don't make a claim, we get that money back because we're not getting their bonds in return.
Separately - - separate and apart from that, there are nine of the known Morgan Keegan clients who have bought and sold their bonds. They have a defined amount of money that they lost, and we've calculated that, and we've shared that with the plaintiffs. Those folks would also be settling class members who would get their proportionate share out of what's left after attorneys' fees. So it would be all-inclusive of all of the folks that are Morgan Keegan clients, and it would be all-inclusive of the folks who we do not know who make claims and give us their bonds in exchange for the pro rata share of what Your Honor may approve.
THE COURT: Now, I know there's been a discussion about being able to identify that group, and I guess - -
MR. FRANCIS [Attorney for Plaintiffs]: When there's money on the table, they'll come out .....

         Appellants' App. 84-86. Later, when discussing the claims process for bondholders, an attorney for Defendants stated that the dollar amount of the settlement was to be "[a]ll-inclusive of the unknown folks." Appellants' App. 88.

         Eight weeks later, on March 11, 2015, the parties filed a Stipulation of Settlement (the Stipulation) memorializing their agreement. The Stipulation released Defendants from all claims relating to the Bonds and included an appellate waiver binding on Plaintiffs and Defendants, which covered both appeals of the district court's judgment as well as post-judgment proceedings. The ...


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