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Boothe v. Northstar Realty Finance Corp., Inc.

United States District Court, D. Maryland

February 12, 2019

JACK BOOTHE, individually and on behalf of all others similarly situated, Plaintiff,



         This case involved the merger between Colony Capital, Inc., NorthStar Asset Management Group, Inc., and NorthStar Really Financial Corp. ("Defendants"). A number of public shareholders-including Jack Boothe ("Plaintiff'), a shareholder in NorthStar Realty Finance Corp. ("NRF")-challenged the merger. In November 2017, Plaintiff and Defendants agreed to a settlement, terminating the case. Now, four former NRF shareholders move to intervene in the closed case, seeking relief from the judgment so that they can proceed on their own claims against Defendants. The motions have been fully briefed, and no hearing is required. See Local Rule 105.6 (D. Md. 2018). For the reasons set forth below, the Court will deny the motion to intervene and for relief from the final order and judgment.

         Procedural Background

         In June 2016, Defendants entered into a planned merger agreement. (See 11/18/16 S'holder Ltr., ECF No. 36-7.) Defendants notified their shareholders of the proposed merger and requested their votes. (Id.) Over the course of the next few months, several shareholders sued Defendants for violating § 14(a) and § 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78n(a), 78t(a), and Securities Exchange Commission ("SEC") Rule 14a-9, 17 C.F.R. §240.14a-9. Plaintiff filed his complaint on November 18, 2016. (Compl. at 1, ECF No. 1.) Plaintiff alleged that the joint proxy statement, circulated to the shareholders, "contain[ed] materially incomplete and misleading information concerning: (1) the financial projections for [Defendants], which were relied upon by the board in assessing the fairness of the Merger Consideration and by the Company's financial advisor, ... and (ii) certain information regarding the valuation analyses [the financial advisor] performed in support of its fairness opinion." (Id. at 2-3.) Plaintiff sought class certification and an injunction against the merger. (Id. at 18.)

         News of Plaintiff s complaint became public immediately. On November 18, Law360 published an article, stating, "A [NRF] investor on Friday blasted the proposed three-way merger ... contending in Maryland federal court that the 'unfair' deal shortchanges investors." (Law360 Article, ECF No. 43-9.) The article named Jack Boothe as that investor. (Id.) News of the proposed settlement also promptly became public. On December 9, the parties filed the proposed settlement with the SEC and noted the "customary release of claims relating to the Mergers." (12/9/16 Form 8-K at 2, ECF No. 43-8.) One week later, The DI Wire reported on the proposed settlement, noting "in exchange for making the disclosures, defendants will be released from claims relating to the merger, upon court approval." (The DI Wire Article, ECF No. 43-10.)

         Plaintiff and Defendants agreed to the proposed settlement in June 2017. (Joint Prop. Settlement, ECF No. 10-2.) The proposed settlement moved the Court to certify a non-opt out class of all NRF shareholders, preliminarily approve the terms of the settlement, approve the means of notifying the class of the settlement, and schedule a fairness hearing. (Id. at 7.) The Court granted preliminary approval. (Order, ECF No. 11.) Plaintiffs and Defendants hired a legal administrative services company to mail notice of the proposed class action settlement to all class members who could be identified. (Fraga Affidavit, ECF No. 22-1.)

         This Court held a fairness hearing. (Tr., ECF No. 26.) The Court heard from two objectors: Lawrence Dvores and Howard Hoffman. Collectively, the objectors argued that counsel had conflicting interests; that Plaintiff failed to pursue certain claims; that notice to shareholders was inadequate; and that the scope of the release was too broad. (Id. at 19, 23, 30-31.) The Court considered all these objections, inquiring into each issue. (Id. at 6:21-25, 19:17-20:4, 17:20-19:12, 23-40.) The Court determined that the settlement was fair and reasonable and, accordingly, approved it on November 30, 2017. (Judgment, ECF No. 30.) The settlement dismissed all claims against Defendants, and Plaintiff agreed to a broad release such that "all Class Members"-that is, all NRF shareholders-were deemed to have forever released completely claims of any kind that related to the merger. (Judgment at 4-6.) Dvores appealed.

         Michael Bumgardner, William Pennington, John Wood, and Marjorie Wood ("Intervenors") seek to intervene in this case. (Mot. Intervene, ECF No. 36.) In July 2018, Intervenors filed complaints in California courts, alleging that Defendants violated different provisions of the Securities Exchange Act. See 15 U.S.C. §§ 77k, 771(a)(2), 77o. (Cal. Compls., ECF No. 36-4, 36-5, 36-6.) At the end of July, Intervenors filed an amicus brief in Dvores's appeal, but Dvores settled in September. (Notice Dismissal, ECF No. 43-7.) On November 13, Intervenors moved to intervene, asserting that, as former NRF shareholders, they were members of the non-opt out class certified by this Court and, as such, their claims were released by Plaintiffs settlement agreement. (Mot. Intervene Mem. at 2, ECF No, 36-1.) To this Court, Intervenors argue that the judgment must be vacated or amended because Plaintiff (1) failed to investigate claims that were subsequently released; (2) misrepresented to the Court the nature of the claims being released; (3) made misstatements in the Registration Statement; and (4) did not comply with the Private Securities Litigation Reform Act ("PSLRA"). (Id. at 12-20.)

         II. Legal Analysis

         The Court addresses the motion to intervene first. See In re Corneal, JFM-00-3536, 2001 WL 34388125, at *3 n.2 (D. Md. Oct. 1, 2001). "[W]hether one may intervene logically precedes whether one may do so to reopen a judgment." Bunge Agribusiness Singapore Pte. Ltd. v. Dalian HualiangEnter. Grp., 581 Fed.Appx. 548, 551 (7th Cir, 2014). Because absent class members are generally treated as non-parties to a class action, "it has long been the general rule that some form of participation in the litigation is necessary before an unnamed class member can seek relief under Rule 60(b)." Adelson v. Ocwen Fin. Corp., 621 Fed.Appx. 348, 351 (7th Cir. 2015); cf. Devlin v. Scardelletti, 536 U.S. 1, 14 (2005) (holding nonnamed class members who object to approval of a class action settlement at the fairness hearing have the power to appeal without moving to intervene). Intervenors are unnamed class members, who have not objected to the settlement until now; therefore, they must first prevail on intervention before claiming relief from the judgment.

         A. Motion to Intervene

         District courts have broad discretion to grant or deny intervention. Stuart v. Huff, 706 F.3d 345, 350 (4th Cir. 2013) ("Rule 24's requirements are based on dynamics that develop in the trial court and ... the court is accordingly in the best position to evaluate [them]."). Liberal intervention is desirable to involve as many concerned individuals and dispose of as much of the controversy as comports with efficiency and due process. Feller v. Brock, 802 F.2d 722, 729 (4th Cir. 1986). But, courts are reluctant to grant intervention where the intervenor appears to have known of the litigation and delayed unduly in seeking to intervene. Mary Kay Kane, 7C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1916 (3d ed. 2018).

         Intervenors seek intervention of right or, alternatively, permissive intervention. A court must permit anyone to intervene who, on "timely motion," "claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest." Fed.R.Civ.P. 24(a)(2). A court may permit anyone to intervene, who, on "timely motion," "has a claim or defense that shares with the main action a common question of law or fact." Fed.R.Civ.P. 24(b)(1)(B), Regardless of whether intervention is claimed of right or permissively, the claim must be timely; therefore, the court, in which the motion to intervene is pending, must first be satisfied that the motion is timely." Nat'l Ass'n for Advancement of Colored People v. New York, 413 U.S. 345, 365-66 (1973) [hereinafter NAACP] ("If it is untimely, intervention must be denied.").

         1. Timeliness

         Intervenors assert that their motion is timely because they acted diligently. The standard for determining timeliness depends on the type of intervention sought. For intervention of right, "the timeliness requirement of Rule 24 should not be as strictly enforced as in a case where intervention is only permissive." Brink v. Dalesio, 667 F.2d 420, 428 (4th Cir. 1981); see also Gottlieb v. Lincoln Nat'l Life Ins. Co., 388 F.Supp.2d 574, 578 (D. Md. 2005) (granting intervention of right because "delay in seeking to intervene is minor and has not prejudiced [existing parties] as this matter is in its early stages"). The Court concludes that Intervenors have not established timeliness for intervention of right.

         To determine the timeliness of a motion to intervene of right, a court must assess: (1) "how far the underlying suit has progressed"; (2) "why the movant was tardy in filing its motion"; and (3) "the prejudice any resulting delay, might cause the other parties." Alt v. U.S. Env 't Prot. Agency, 758 F.3d 588, 591 (4th Cir. 2014); see also NAACP, 413 U.S. at 366 ("Timeliness is to be determined from all the circumstances."). "A district court has wide discretion in determining what is timely." Bond v. Cricket Commc'ns, LLC, Civ. No. MJG-15-923, 2017 WL 4838754, at *5(D. Md. Oct. 26, 2017).

         Intervenors filed their motion to intervene late in the underlying proceedings: after the preliminary settlement, judgment, and termination of the case. See Scott v. Bond, 734 Fed.Appx. 188, 191 (4th Cir. 2018) ("A settlement in principle raises a strong interest in finality."). "A motion to intervene filed after judgment must make a 'strong showing' to overcome the presumption that it is untimely." Sewell v. Int'l Longshoremen's Ass'n, Local No. 333, Civ. No. SKG-12-44, 2013 WL 6992150, at *2 (D. Md. Oct. 29, 2013) (quoting Houston Gen. Ins. Co. v. Moore, 193 F.3d 838, 840 (4th Cir. 1999)). The underlying suit has progressed to completion, and Intervenors move at the latest stage in the proceeding. See Scott, 734 Fed.Appx. at 191 ("[I]n relation to the stage of the proceedings, the timeliness requirement is intended to prevent an intervenor from 'derailing a lawsuit within sight of the terminal.'" (quoting Alt, 758 F.3d at 591)).

         Intervenors not only file late in the proceedings; they also appear to have been on notice of the lawsuit from the beginning. See, e.g., Reaching Hearts Int'l, Inc. v. Prince George's Cnty., Civ. No. RWT-11-1959, 2011 WL 4459095, at *3 (D. Md. Sept. 23, 2011) (denying post-judgment motion to intervene where "intervenors were fully cognizant of the ongoing litigation"). In December 2016, the proposed settlement was filed with the SEC. (12/9/16 Form 8-K at 2.) After Plaintiff and Defendants received the Court's preliminary approval of the settlement, they hired a legal administrative services company to mail notice of the proposed class action settlement to all class members who could be identified. (Fraga Affidavit.) The company has since confirmed that notice was mailed to two Intervenors and was not returned to sender. (Amin-Gwiner Decl. ¶ 7, ECF No. 42-3.) This Court spent a large portion of the fairness hearing investigating the sufficiency of the notice provided to shareholders. (Tr. at 23-40.) Even though Intervenors must establish the timeliness of their motion, they offer nothing but an assertion that they were unaware of the class action settlement to rebut the evidence that they had notice of the settlement as early as December 2016. (See Mot. Intervene Mem. at 22.) Because Intervenors file late in the proceedings and were on notice of the settlement, the first factor weighs against intervention.

         As for the reason for this delay, Intervenors argue that they acted as diligently as they could and that, upon learning the truth about the merger, they filed securities complaints, an amicus brief for Dvores's appeal, and the motion to intervene. (Id.) "[A] rnovant seeking intervention must provide a plausible justification for a tardy motion to intervene." Scott, 734 Fed.Appx. at 192. Plausible justifications include never receiving notice of a class action or a substantial change in circumstances in the case. Id; see also Gould v. Alleco, Inc., 883 F.2d 281, 287 (4th Cir. 1989) (concluding health problems did not justify tardy intervention where intervenor was capable of filing motions and was doing so in other cases). Intervenors argue that, until March 2018, "they were not on notice that valuable claims had been released by the Order." (Reply at 12, ECF No 48.[1] According to the undisputed evidence, however, Intervenors were on notice of the release starting in December 2016. (Fraga ...

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