United States District Court, D. New Jersey
August 16, 2005.
MARVIN SIMON, as Authroized Representative for the Marvin Simon Trust, as amended, for Palm Investors, LLC and for the Jeffrey Markman 1993 Irrevocable Trust, MARILYN SIMON, CLAUDE HARRIS, ANN HARRIS, BEN SIMON, HEIDI SIMON, BRITT SIMON, KIM FINK, ANDREW FINK, AMY GOLDBERG, STEFAN RESSING, Individually and as Trustee of the S. Ressing 1999 Trust, FITZROY VENTURES, LLC, MICHAEL LE, Individually and as Trustee of the ML Le 1999 Trust, and MacKENZIE VENTURES LLC, Plaintiffs,
KPMG LLP and SIDLEY AUSTIN BROWN & WOOD LLP, f/k/a BROWN & WOOD, LLP, Defendants.
The opinion of the court was delivered by: DENNIS CAVANAUGH, District Judge
[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] OPINION
This matter comes before the Court upon motion by Thomas
Becnel, the Becnel Family Trust, CST Trust, BCTS LLC, and Jardine
Ventures LLC (the "Arkansas Plaintiffs") to intervene in this
case and to stay the action until resolution of an emergency
motion in a similar action pending before the United States
District Court for the Western District of Arkansas. No oral argument was heard pursuant to Rule 78 of the Federal Rules of
Civil Procedure. After carefully considering the submissions of
all parties, it is the finding of this Court that the Arkansas
Plaintiffs' motion to intervene is granted and their motion to
stay is denied as moot.
This proposed class action was filed by Plaintiffs Marvin
Simon, Marilyn Simon, Claude Harris, Ann Harris, Ben Simon, Heidi
Simon, Britt Simon, Kim Fink, Andrew Fink, Amy Goldberg, Stefan
Ressing (Individually and as Trustee of the S. Ressing 1999
Trust), Fitzroy Ventures LLC, Michael Le (Individually and as
Trustee of the ML Lee 1999 Trust), and Mackenzie Ventures LLC
("Plaintiffs") on June 24, 2005, against Defendants KPMG LLP and
Sidley Austin Brown & Wood LLP ("Defendants"). The Complaint
alleges that Defendants, along with other non-party actors,
engaged in a scheme to defraud Plaintiffs and others who
purchased tax products which were sold under the names Offshore
Portfolio Investment Strategy ("OPIS") and Bond-Linked Issue
Premium Structure ("BLIPS").
On June 29, 2005, the Arkansas Plaintiffs filed the instant
motion to intervene and stay the action pending resolution of a
previously filed emergency motion in a related action proceeding
before the U.S. District Court for the Western District of
Arkansas. The Arkansas Plaintiffs have asserted substantially
similar claims in this related action and argue that Plaintiffs
and Defendants have colluded to settle the claims outside of the
jurisdiction of the District Court in Arkansas. Plaintiffs and
Defendants all oppose the Arkansas Plaintiffs' motion.
A. Motion to Intervene
Intervention is governed by Federal Rule of Civil Procedure 24.
Pursuant to the Rule, a party seeking to intervene in an action may do so either by right
or by permission. Rule 24(a) provides in pertinent part: "upon
timely application anyone shall be permitted to intervene in an
action: . . . (2) when the applicant claims an interest relating
to the property or transaction which is the subject of the action
and the applicant is so situated that the disposition of the
action may as a practical matter impair or impede the applicant's
ability to protect that interest, unless the applicant's interest
is adequately represented by existing parties." Rule 24(b) states
in pertinent part: "upon timely application anyone may be
permitted to intervene in an action: . . . (2) when an
applicant's claim or defense and the main action have a question
of law or fact in common. . . . In exercising its discretion the
court shall consider whether the intervention will unduly delay
or prejudice the adjudication of the rights of the original
The Arkansas Plaintiffs assert that intervention under either
section is appropriate in this case. However, the Court disagrees
that the Arkansas Plaintiffs have met the standards to grant
intervention by right pursuant to Rule 24(a). A review of the
submissions of all parties in connection with this motion offers
no evidence that the Arkansas Plaintiffs' interests are not
adequately represented by existing parties.
However, permissive intervention pursuant to Rule 24(b) is
warranted if the Arkansas Plaintiffs are able to demonstrate that
their claims have questions of law and fact in common with the
main action. The Court finds that the Arkansas Plaintiffs have
made a timely motion to intervene and have asserted substantially
the same claims relating to OPIS and BLIPS as Plaintiffs have
asserted in the instant action. Additionally, at this early stage
in the litigation, the Court finds no undue prejudice or delay
will affect the rights of the existing parties. Accordingly, the
motion to intervene is granted. B. Motion to Stay
On August 9, 2005, the District Court for the Western District
of Arkansas (Dawson, U.S.D.J.) denied the Arkansas Plaintiffs'
emergency motion. As such, both Plaintiffs and Defendants argue
that the Arkansas Plaintiffs' motion for a stay of this action
pending resolution of the emergency motion is now moot. However,
the Arkansas Plaintiffs assert that they intend to file a motion
for reconsideration before the Arkansas District Court, and
beyond that an interlocutory appeal pursuant to Federal Rule of
Civil Procedure 23(f). The Arkansas Plaintiffs contend that this
action should be stayed pending a final resolution of their
emergency motion. The Court agrees that the motion to stay is now
moot, but in an abundance of caution will examine the merits of
staying the action.
"There is no question that this court has the inherent power,
in the exercise of a sound discretion, to stay an action pending
before it." Groves v. Insurance Co. of North America,
433 F.Supp. 877, 885 (E.D.Pa. 1977) (quoting Landis v. North
American Company, 299 U.S. 248 (1936)). However, "this does not
mean that a party to a suit should be entitled to a stay in the
proceeding merely because he is facing substantially identical
litigation in another forum. There must be a pressing need or a
clear case of hardship or inequity, before a court should stay
proceedings before it so that litigation elsewhere may proceed to
judgment." Groves, 433 F.Supp. at 885 (quoting 3 B. Moore's
Federal Practice § 23.93 (1975)). The party seeking the stay
carries the burden to show that such an order is justified. Id.
Factors which bear on the determination whether a stay should
be granted are: 1) whether the substantive and procedural rights
of the non-moving party will be impaired if the stay is granted; 2) the extent to which identical issues and parties are
involved; 3) the relative ease of access to sources of proof; 4)
the likelihood that one of the actions will reach an earlier
conclusion; and 5) the comparative status of the dockets in the
competing forums. Groves, 433 F.Supp. at 885 (citing Moore,
supra, at § 23.93).
In examining the facts surrounding both this action and the
Arkansas action, it appears that granting a stay would impair the
rights of both Plaintiffs and Defendants to proceed expeditiously
with the action pending before this Court. Despite the Arkansas
Plaintiffs' assertions to the contrary, they have cited no legal
precedent to this Court that would prohibit or even discourage
allowing the instant action to proceed. While they are quite
vocal in expressing their displeasure with settlement
negotiations between Plaintiffs and Defendants, as well as with
the adequacy of representation by Plaintiffs' counsel, the
Arkansas Plaintiffs have ignored the fact that any potential
settlement will of course be reviewed by this Court on the issue
of fairness pursuant to Federal Rule of Civil Procedure 23. As
such, any concerns about the adequacy of the settlement and/or
representation by Plaintiffs' counsel may be addressed and dealt
with by this Court without need for entry of a stay.
Additionally, though the Arkansas Plaintiffs contend
"principles of comity, the promotion of judicial economy, the
conservation of judicial resources and the avoidance of
duplication and inconsistent judgments all weigh heavily in favor
of a stay," this vague argument turns upon the imminent ruling of
the Arkansas District Court. (Movant's Rep. Br. at 8.) As that
ruling has already been issued, the argument has little merit.
Indeed, in light of the fact that the Arkansas Plaintiffs are
filing a motion to reconsider and/or an appeal of Judge Dawson's
Order denying their emergency motion, the Arkansas Plaintiffs cannot reasonably
contend that the Arkansas action will likely reach an earlier
In short, although it is clear that many identical issues and
parties are involved in both actions, this Court sees no reason
to stay the action pending the reconsideration and/or appeal of
Judge Dawson's Order. The Arkansas Plaintiffs have failed to meet
their burden for entry of a stay, namely that there exists a
"pressing need or a clear case of hardship or inequity."
Accordingly, the motion to stay is denied.
For the reasons stated, it is the finding of this Court that
the Arkansas Plaintiffs' motion to intervene is granted.
Additionally, their motion to stay this action is denied. An
appropriate Order accompanies this Opinion.
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