Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc.

4 F.3d 614, 1993 WL 330928
CourtCourt of Appeals for the Eighth Circuit
DecidedSeptember 2, 1993
DocketNo. 93-1794
StatusPublished
Cited by8 cases

This text of 4 F.3d 614 (Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc., 4 F.3d 614, 1993 WL 330928 (8th Cir. 1993).

Opinion

JOHN R. GIBSON, Circuit Judge.

The Kansas Public Employees Retirement System appeals from a district court1 order denying its motion to remand this action to a Shawnee County, Kansas, district court. KPERS argues that because the state court severed the original claiins from the third-party claims before the third-party defendant, the Resolution Trust Corporation, removed the case to federal court, only the third-party claims could be removed. KPERS also argues that the district court erred in holding that the third-party plaintiffs’ claim for indemnification against the RTC was not frivolous under 12 C.F.R. § 545.121 (1992). We affirm.

On June 5, 1991, KPERS filed suit in the District Court of Shawnee County, Kansas, to recover damages resulting from the purchase of Home Savings Association debentures for the Kansas Employees’ Retirement Fund. KPERS named Michael K. Russell (its former board chairman), Reimer & Ko-ger Associates (its former investment advis- or), Peat, Marwick, & Mitchell Company (its former accounting firm), Gage & Tucker (its former law firm), and the Home Savings Association’s officers and directors2 as defendants. Along with various allegations of fraud, breach of fiduciary duty, professional negligence, and gross negligence, KPERS claimed that the Home Savings directors violated the Kansas Securities Act, Kan.Stat. Ann. § 17-1268 (1983). In response, the Home Savings directors moved to dismiss KPERS’ claims as derivative of claims that belonged solely to the RTC, and argued that the RTC was a necessary párty.

Shortly thereafter, the RTC moved for leave to intervene in order to remove the action to federal court, where the RTC would attempt to have the case dismissed. On August 21, 1992, the Kansas district court denied the Home Savings directors’ motion to dismiss and held that KPERS’ claims were nonderivative. The Kansas ' court never ruled on the RTC’s motion requesting leave to intervene.

On October 2, 1992, the Home Savings directors filed a third-party petition against the RTC, claiming negligent mismanagement of Home Savings, which caused a loss of funds that could have been used to repay part of the KPERS investments, and seeking indemnification under 12 C.F.R. § 545.121. On October 8, 1992, at approximately 4:00 p.m., KPERS’ counsel contacted the Shawnee County district court clerk to discuss the filing of a motion to strike the third-party claims or sever them from the original claims. The clerk advised the lawyers that the office would remain open after the normal 5:00 p.m. closing to permit the filing of pleadings. KPERS’ counsel also contacted the chambers of the district judge handling the case, stating that KPERS “desired to present [a] severance motion to the ... court for ex parte consideration that day.” Opposing counsel were not notified.

At 5:26 p.m., KPERS’ counsel appeared ex parte before the Kansas district judge to present its motion to strike the third-party petition or, alternatively, sever the third-party claims from the original lawsuit. The Kansas district judge stated:

The Court is familiar with the history of this ease, [and] feels that under the circumstances the addition of the Resolution Trust Corporation ... by the third-party petition would subject this case to removal under the federal statutes---- [T]he Court [does] not feel that ... to maintain [the third-party claims] in the same case [as the principal claims] and subjecting [the entire] ease to removal would be in [617]*617the best interests of the advancement of the prineip[al] case____ I ... sign ex parte the order to sever and direct ... that the third party claim be severed and filed ... as a separate ease entirely from the previous [case]---- [T]he Court considers this matter on an emergency basis.

The judge also provided that any aggrieved party could file a motion for reconsideration and the court would consider such motions along with KPERS’ motion to dismiss the third-party claims.

None of the parties filed a motion for reconsideration. Instead, five days after the Kansas court entered the severance order, the RTC filed a notice of removal for the entire case — both the original and third-party claims. In response, KPERS asked the federal district court to remand the “original case” to the Kansas court because the RTC was no longer a party to that action. The district court held a hearing on KPERS’ motion for remand, and asked KPERS’ counsel about the motivation behind the severance and whether the defendants’ counsel had been called before the ex parte proceeding occurred:

THE COURT: [T]here was time to call the clerk’s office and make this arrangement, but there was not time to call any other lawyer and suggest, “Hey, you might want to get over here because we’re going to present this to the judge.” .
MR. DEACY: That’s so, as I understand it, Your Honor.
THE COURT: And there was an emergency.
MR. DEACY: It was an emergency.
THE COURT: What was the emergency?
MR. DEACY: The emergency was that so long as the cases were one case, the RTC could remove it all.
THE COURT; And they, could — had that right under federal law to do so.
MR. DEACY: They had the right under federal law so long as they were a party to the case.
THE COURT: Right. And so the emergency was to do something quickly to prevent the RTC from removing the case?
MR. DEACY: That’s right, Your Honor.

KPERS’ counsel also assured the district court that the Kansas judge severed the case specifically to prevent removal:

THE COURT: And it stated that the reason the judge is doing this is to, in essence, to prevent the RTC from removing the case.
MR. DEACY: No question about it.
THE COURT: ... [T]he only reason the judge gave for entering the severance order on an emergency basis was to prevent the RTC from removing the case, which everybody believed the RTC had the right to do at the instant before the judge signed this order.
MR. DEACY: Before the severance, yes, Your Honor. That’s right____
THE COURT: ... KPERS’ position, as I understand it, is that but for the order that the judge .entered, the case would have been removed by the RTC, KPERS and the judge did not want it removed by the RTC, and so this order was entered, ... not severing the third party petition or complaint for a separate trial, but severing it into another case.
MR. DEACY: That’s true, Your Honor.

Ruling from the bench, the district court emphasized that the Kansas court’s only stated reason for severing the action into two separate eases was to defeat the RTC’s ability to exercise its right to remove the entire action to federal court.

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Kansas Public Employees Retirement System v. Blackwell, Sanders, Matheny, Weary & Lombardi, L.C., a Law Partnership William H. Sanders, Sr., Individually and as the Representative of a Class, Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc., a Kansas Corporation Ronald Reimer, an Individual Kenneth H. Koger, an Individual Clifford W. Shinski, an Individual Brent Messick, an Individual Robert Crew, an Individual Sherman Dreiseszun, an Individual I.I. Ozar, an Individual Frank Sebree, an Individual Peat, Marwick, Mitchell & Co., an Accountancy Firm Kpmg Peat Marwick, an Accountancy Firm Robert Spence, an Individual Thomas S. Morgan, Co-Executor of the Estate of Frank S. Morgan Marilyn J., Co-Executor of the Estate of Frank Morgan, Shook, Hardy & Bacon, Through C. Patrick McLarney Acting as a Representative of an Agreed Upon Class of Partners in Shook, Hardy & Bacon, and for Shook, Hardy & Bacon P.C., Intervenor Kansas Public Employees Retirement System v. Blackwell, Sanders, Matheny, Weary & Lombardi, L.C., a Law Partnership William H. Sanders, Sr., Individually and as the Representative of a Class, Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc., a Kansas Corporation Ronald Reimer, an Individual Kenneth H. Koger, an Individual Clifford W. Shinski, an Individual Brent Messick, an Individual Robert Crew, an Individual Sherman Dreiseszun, an Individual I.I. Ozar, an Individual Frank Sebree, an Individual Peat, Marwick, Mitchell & Co., an Accountancy Firm, Kpmg Peat Marwick, an Accountancy Firm Robert Spence, an Individual, Thomas S. Morgan, Co-Executor of the Estate of Frank S. Morgan Marilyn J., Co-Executor of the Estate of Frank Morgan, Shook, Hardy & Bacon, Through C. Patrick McLarney Acting as a Representative of an Agreed Upon Class of Partners in Shook, Hardy & Bacon, and for Shook, Hardy & Bacon P.C., Intervenor
114 F.3d 679 (Eighth Circuit, 1997)
In Re: KPERS v.
Eighth Circuit, 1996

Cite This Page — Counsel Stack

Bluebook (online)
4 F.3d 614, 1993 WL 330928, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kansas-public-employees-retirement-system-v-reimer-koger-associates-ca8-1993.