998 F. Supp. 2d 145
S.D.N.Y.2014Background
- This case concerns an objection by Clarke Hampe, a pro se objector, to a GE securities settlement and an ensuing motion to compel him to post an appeal bond of $54,700.
- The GE class action began March 3, 2009, alleging violations of the Exchange Act based on allegedly false statements about GE’s financial health and its dividend.
- The action was consolidated with related actions; the Lead Plaintiff was State Universities Retirement System of Illinois, with Lead Counsel approved, and later concentrated on a Second Consolidated Class Action Complaint.
- The settlement approved in May 2013 was $40 million; objections were filed, including by Hampe, and the case proceeded to a fairness hearing in September 2013, with Hampe filing a timely notice of appeal on October 1, 2013.
- The core legal question is whether settlement administration expenses can be included in a Rule 7 Bond to secure potential costs of an appeal, and whether Hampe may be required to post such a bond given his appeal is deemed frivolous and in bad faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether settlement administration expenses may be included in a Rule 7 Bond | Hampe argues no; such expenses are not costs under Rule 7. | Lead Plaintiff argues yes; administration costs fall within Rule 7 damages allowed under Adsani. | Yes; administration expenses may be included in a Rule 7 Bond. |
| Whether the district court may impose a Rule 7 Bond in this case | Hampe contends bond is inappropriate or unnecessary. | Lead Plaintiff shows Hampe is able to post, appeal is frivolous, and bad-faith conduct justifies a bond. | Yes; bond for $54,700 imposed. |
| Whether Hampe's appeal is frivolous and brought in bad faith | Hampe’s objections are meritless and constitute a frivolous appeal. | Lead Plaintiff demonstrates frivolous grounds, lack of merit, and vexatious conduct by Hampe and Bandas. | Yes; the appeal is frivolous and brought in bad faith. |
Key Cases Cited
- Adsani v. Miller, 139 F.3d 67 (2d Cir. 1998) (broad authority to award Rule 38 damages and its relation to Rule 7 costs)
- Marek v. Chesny, 473 U.S. 1 (U.S. 1985) (discussion of costs and fees analogized to Rule 7 scope)
- Beekman Paper Co. v. National Paper Prods., 909 F.2d 67 (2d Cir. 1990) (affirmative authority to award damages under Rule 38 to appellee)
- Sckolnick v. Harlow, 820 F.2d 13 (1st Cir. 1987) (per curiam on Rule 38 damages and implications for Rule 7)
- Goldberger v. Integrated Resources, Inc., 209 F.3d 43 (2d Cir. 2000) (six factors for evaluating attorney’s fees awards in GA damages context)
- Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) (nine Grinnell factors for evaluating reasonableness of settlement in class actions)
- In re Cardizem CD Antitrust Litig., 391 F.3d 812 (6th Cir. 2004) (authority cited regarding damages and cost considerations in Rule 7 context)