In re Petrobras Sec. Litig.

363 F. Supp. 3d 426
CourtDistrict Court, S.D. Illinois
DecidedMarch 5, 2019
Docket14-cv-9662 (JSR)
StatusPublished
Cited by1 cases

This text of 363 F. Supp. 3d 426 (In re Petrobras Sec. Litig.) is published on Counsel Stack Legal Research, covering District Court, S.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Petrobras Sec. Litig., 363 F. Supp. 3d 426 (S.D. Ill. 2019).

Opinion

JED S. RAKOFF, U.S.D.J.

Courts play a critical role in ensuring the fairness of class action settlements. One important component of this role is monitoring the intervention of "objectors," members of the class who file objections to a proposed settlement prior to the Court's determination of whether or not to finally approve the settlement. Objectors - when acting in good faith - can help safeguard the interests of absent class members. See, e.g., White v. Auerbach, 500 F.2d 822, 828 (2d Cir. 1974).1 Others, however, file objections and appeals in a bad-faith attempt to line their own pockets, single-handedly holding up distribution of class funds until the class is cornered into paying them to dismiss their frivolous appeals. Courts must strike a balance between protecting class interests by preserving the role of legitimate objectors and protecting the class from a second victimization by unscrupulous, extortionate objectors.2

The case at hand presents the difficulty of this balancing act - and the high stakes attached. On June 22, 2018, the Court approved a $ 3 billion settlement of this case, one of the largest class settlements in recent years. See Opinion and Order dated June 22, 2018 ("Settlement Op."), Dkt. 834. However, more than seven months later, the injured class members have received no compensation whatsoever. Class Plaintiffs admit that most of the delay up to this point should be attributed, not to the pendency of the objectors' appeals, but to the claims administration process. See Declaration of the Claims Administrator Regarding Readiness to Distribute ("Claims Dec"), Ex. H, ¶¶ 3-5, Declaration of Jeremy A. Lieberman in Support of Plaintiffs' Renewed Motion for Sanctions Against the Gielata Objectors and to Increase Appeal Bond ("Lieberman Dec"), Dkt. 910. However, Class Plaintiffs assert that $ 1 billion dollars is now ready for distribution, were it not for the pendency of the sole remaining appeal, filed by objectors Joseph, Richard, and Emelina Gielata (collectively, "the Gielatas"). See Claims Dec. ¶ 8. As distribution becomes further delayed, it is estimated that additional administration fees will mount at a rate of approximately $ 155,000 per month. See Claims Dec. ¶ 13. If the Gielatas' appeal is a legitimate one, filed in good faith, such continued delay in distribution is warranted. If it is a bad-faith attempt to hold class funds hostage to extract a personal payoff, then it represents a grave abuse of the objections process at the cost of the absent class members.

By Opinion and Order dated September 19, 2018 ("Op."), Dkt. 896, the Court denied *429Class Plaintiffs' previous motion for sanctions in an abundance of care for protecting the important role of good-faith objectors, despite finding significant indications of bad faith in the Gielatas' behavior over the course of the litigation thus far. It did, however, require the Gielatas to post a $ 50,000 appeal bond.

On February 14, 2019, the Court issued a bottom-line order denying Class Plaintiffs' second motion for sanctions against the Gielatas, as well as all parties' motions for a change in the previously-set appeal bond. Dkt. 913. The reasons for this decision are set forth below. In brief, while the Gielatas' behavior on appeal only strengthens the Court's concerns that they are acting in bad faith, the Court does not find that enough has changed to warrant reversing its prior determination as to sanctions at this time, especially as, since the Court's prior decision on sanctions, a relevant amendment to Rule 23 of the Federal Rules of Civil Procedure has come into effect. This amendment requires judicial approval of any monetary settlements to objectors and offers another avenue, aside from sanctions, for courts to monitor potentially abusive behavior.

I. Background

The Court here assumes full familiarity with the long history of this litigation and the underlying facts, which are more fully laid out in the Court's opinion approving the settlement, see Settlement Op., and in the Court's prior decision on sanctions, see Op. As relevant here, the Court, on June 22, 2018, approved a $ 3 billion settlement in the instant class action, in the process addressing and rejecting objections filed by various objectors including Richard and Emelina Gielata (whose objections were drafted by their son, Joseph Gielata). At that time, the Court declined to reach Class Plaintiffs' allegations that Richard and Emelina Gielata were acting with "improper motives including...seeking to extort personal payments through the device of frivolous appeals." Id. at 4 n.5. However, the Court expressly retained jurisdiction to address any past or future objector efforts at extortion. See Order dated May 22, 2018, at 2, Dkt. 818 ("[O]bjectors were reminded that by filing their objections to the class settlement, they and their counsel were subject to the continuing jurisdiction of the Court and that, if appropriate, the Court would retain jurisdiction to inquire into their compliance with Rule 11 and analogous provisions of federal law"); see also June 4, 2018 Hr'g Tr. at 55:23-56:6 ("I have expressly retained jurisdiction in this case over the objectors even after I issue my final rulings on the matters before me today.").

Richard, Emelina, and Joseph Gielata subsequently filed a notice of appeal of the Court's approval of the settlement. See Dkt. 849. Class Plaintiffs then filed a motion for sanctions and for the posting of appeal bonds, motions made against the Gielatas and against another objector who had filed an appeal at that time (but has since withdrawn it). See Dkt. 852.

As to the Gielatas, the Court denied the motion on the ground that "at least one or more of the objections raised by the Gielatas had an arguably colorable basis" and "their behavior in pursuing these objections, while less than ideal, did not exhibit total bad faith and has not materially prejudiced Class Plaintiffs." Op. at 26. However, the Court found itself "deeply troubled by some of the Gielatas' conduct," Op. at 22, and, accordingly, "retain[ed] the right to revisit this conclusion in the future," noting that the Gielatas' behavior on appeal already suggested the potential for continuing "gamesmanship." Op. at 25-26.

The Court did, however, grant Class Plaintiffs' motion for sanctions against Joshua R. Furman, Esq. ("Furman"), attorney for objector Spencer Bueno ("Bueno").

*430As noted, Bueno subsequently withdrew his appeal. See Dkt. 903.

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Bluebook (online)
363 F. Supp. 3d 426, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-petrobras-sec-litig-ilsd-2019.