Bhatia v. Piedrahita
2014 U.S. App. LEXIS 12225
| 2d Cir. | 2014Background
- Investor Plaintiffs sued Fairfield Greenwich and related defendants after losses from the Madoff Ponzi scheme; claims included federal securities and state-law causes of action and sought restitution, consequential/punitive damages, and disgorgement.
- Plaintiffs and the Fairfield Greenwich Defendants negotiated a settlement resolving claims between those parties; a Settlement Class was provisionally defined and members could submit proofs of claim or opt out.
- The preliminary approval order initially contained a jurisdictional provision; it was amended to state that class members who submit proofs of claim submit to the district court’s jurisdiction only "with respect only to the subject matter of such Proof of Claim" and not to U.S. courts for other matters.
- Non-Settling Defendants (PricewaterhouseCoopers and Citco) objected, arguing the amended clause improperly insulated settling class members from personal jurisdictional consequences and would prejudice their defenses in parallel foreign litigation (e.g., Dutch proceedings).
- The district court overruled the objections and entered a final order and partial final judgment including the limited-jurisdiction clause; Non-Settling Defendants appealed.
- The Second Circuit dismissed the appeal for lack of standing, holding the Non-Settling Defendants failed to show the settlement caused the kind of "formal legal prejudice" necessary to challenge a settlement as non-parties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to appeal settlement by non-settling defendants | Non-Settling Defs lack standing because they are not parties to the settlement and are not formally bound | Non-Settling Defs will suffer legal prejudice: clause undercuts preclusion/defenses and limits their ability to assert claims in other fora | Held: Non-Settling Defs lack standing; they failed to show "formal legal prejudice" (only practical/strategic disadvantage) |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires concrete, particularized, actual or imminent injury)
- Warth v. Seldin, 422 U.S. 490 (standing is threshold to judicial intervention)
- Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167 (standing ensures parties have a concrete stake)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (restating standing/constitutional minimum principles)
- Denney v. Deutsche Bank AG, 443 F.3d 253 (2d Cir.) (non-settling party standing reviewed de novo; formal prejudice standard)
- Zupnick v. Fogel, 989 F.2d 93 (2d Cir.) (non-settling defendants generally lack standing to object to class settlement absent formal legal prejudice)
- Agretti v. ANR Freight Sys., Inc., 982 F.2d 242 (7th Cir.) (practical burdens from settlements do not necessarily establish formal prejudice)