Hall et al v. The Variable Annuity Life Insurance Company et al

MOTION to Consolidate Cases

D. Ariz.April 29, 2011

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 HAGENS BERMAN SOBOL SHAPIRO LLP Robert B. Carey #011186 Leonard W. Aragon #020977 11 West Jefferson Street, Suite 1000 Phoenix, Arizona 85003 Telephone: (602) 840-5900 Facsimile: (602) 840-3012 E-Mail: rob@hbsslaw.com leonard@hbsslaw.com GRANT WOODS, P.C. J. Grant Woods #006106 1726 North Seventh Street Phoenix, Arizona 85006 Telephone: (602) 258-2599 Facsimile: (602) 258-5070 E-mail: gw@grantwoodspc.net Attorneys for Plaintiffs Hall [Additional counsel listed on signature page] IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA JOHN HALL and BRENDA HALL, on behalf of themselves and all others similarly situated, Plaintiffs, vs. THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, et al. Defendants. No. 4:09-cv-712-AWT MOTION TO CONSOLIDATE CASE WITH BOBBITT V. MILBERG, LLP, et al. PHILIP BOBBITT and JOHN SAMPSON, Individually and on behalf of all others similarly situated, Plaintiffs, vs. MILBERG, LLP, et al. Defendants. No. 4:09-cv-00629-FRZ Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 1 of 13 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Pursuant to Rule 42(a), FED. R. CIV. P., Plaintiffs John Hall and Brenda Hall move this Court to consolidate this case with Bobbitt v. Milberg, LLP, et al., Case No. 4:09-cv- 00629-FRZ. The two cases share common issues of law and fact, and consolidation will ensure consistency of results and promote judicial economy. INTRODUCTION This motion asks the Court to consolidate two cases that both arise from the same underlying litigation, Drnek v. Variable Annuity Life Ins. Co. (“VALIC”), No. 4:01-cv- 00242-CKJ. Drnek was a securities class action that had been certified as a class action, but after plaintiffs’ counsel missed an expert disclosure deadline, the district court vacated the certification and granted summary judgment for defendant VALIC. After the Ninth Circuit affirmed, two cases were filed asserting different theories of recovery for the Drnek class. The Hall case seeks relief for the same class as certified in Drnek and asserts the same claims against VALIC as the Drnek class; the Hall plaintiffs contend that the statute of limitations has not passed and that the Drnek claims may be timely re-asserted in a second class action. In Bobbitt, in contrast, plaintiffs seek relief for the same class as certified in Drnek, but seek recovery from Drnek’s attorneys for legal malpractice, claiming the statute of limitations has passed and that the class may no longer timely assert claims against VALIC. In other words, whether the Hall case or the Bobbitt case should move forward depends on a single critical issue: the statute of limitations. In the motion to dismiss briefing in Bobbitt, the attorney defendants asserted that plaintiffs could not show injury (or a loss of a right or remedy) because the statute of limitations had not passed, and that plaintiffs could assert their claims in the Hall case. This Court ruled against the attorney defendants, stating the statute of limitations had not been tolled during the pendency of the appeal in Drnek and that any claim against VALIC had expired. This ruling directly affects the Hall case, and consolidation would avoid entirely separate litigation in a different court on a case where the parties argue mutually exclusive theories. The Halls fully expect VALIC to assert the statute of limitations as a Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 2 of 13 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 defense and to cite to this Court’s ruling in Bobbitt as support. The Halls ask the Court to consolidate their case with Bobbitt; the Halls will then seek a ruling on the statute of limitations issue from this Court. As discussed in detail below, a single court should resolve this issue for reasons of judicial economy, fairness to the parties, and consistency of results. BACKGROUND A. The Three Related Cases On November 2, 2009, plaintiff Philip Bobbitt filed a class action complaint (“the Bobbitt Lawsuit”) against Milberg, LLP (formerly known as Milberg Weiss LLP) and others, alleging legal malpractice. Bobbitt alleged that he was a member of a class that had been certified on January 21, 2004, in a lawsuit captioned Drnek v. Variable Annuity Life Ins. Co. (“VALIC”), No. 4:01-cv-00242-CKJ (the “Underlying Litigation”). In Drnek, the plaintiffs had alleged that VALIC violated federal securities laws by marketing and selling deferred annuity products to investors that were not suitable for those investors. Bobbitt alleged malpractice because the Drnek case had not ended well. In Drnek, the Court had certified the class. Plaintiffs then disclosed expert Steve Largent in early March, 2004, and produced his report and witness list on June 3, 2004. The discovery cut-off, however, was February 13, 2004, and the expert disclosure deadline was January 22, 2004. VALIC moved to strike the expert witness, and the Court granted the motion. Based on that ruling, the Court found that the class in Drnek could not prove damages, and vacated class certification on that basis, presumably due to the plaintiffs’ inability to put on evidence for the class as a whole. On August 17, 2004, the Court ruled: “[T]he Court finds that Plaintiffs cannot prove a class-wide measure of damages. This conclusion leads to conclusion that the class certification granted by the Court should be vacated.” The court granted VALIC’s motion for summary judgment. On August 16, 2005, the Drnek plaintiffs appealed. On December 21, 2007, the Ninth Circuit upheld the district court’s ruling. Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 3 of 13 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 On December 21, 2009, two years after the Ninth Circuit upheld the district court’s ruling, the Hall plaintiffs filed a complaint against VALIC. Plaintiffs brought the same securities claims against VALIC that had been brought in Drnek. The Hall plaintiffs contend that the class still has a right to recover on its claims against VALIC and that the action is timely. The Hall Complaint was initially assigned to the Honorable John Roll; it is now pending before the Honorable A. Wallace Tashima. The Bobbitt plaintiffs took a different route. Instead of suing VALIC, the plaintiffs alleged that the Milberg defendants had committed malpractice by missing deadlines, resulting in vacatur of the class certification and summary judgment in VALIC’s favor. Bobbitt alleges that as a result of the Milberg defendants’ negligence, the class lost its right to recover against VALIC because the statute of limitations had passed. (Bobbitt Compl. ¶¶ 3-4.) The Bobbitt Complaint was assigned to the Honorable Frank Zapata. B. The Bobbitt Lawsuit Has Already Decided Issues That Affect the Hall Plaintiffs This Court has already ruled on a motion to dismiss in Bobbitt, and this ruling affects the Hall case. In Bobbitt, the Milberg defendants filed a motion to dismiss the second amended complaint and argued in part that plaintiffs could not show injury, or loss of a “right, remedy or interest” for their malpractice claim, because the statute of limitations had not passed. Milberg argued that tolling for the class claims had continued during the pendency of the appeal of the court’s vacatur of the class certification. As a result, the Milberg defendants argued, the Bobbitt plaintiffs could still assert their claims in the Hall case. On November 4, 2010, Magistrate Judge Guerin issued a Report and Recommendation that granted in part and denied in part Milberg’s motion to dismiss. Magistrate Judge Guerin held that the statute of limitations was tolled only until August 17, 2004, “when class certification was denied,” referring to the vacatur of class certification. The judge rejected Milberg’s argument that tolling had continued pending Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 4 of 13 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the appeal, claiming that when a class action is denied, tolling does not continue during the subsequent appeal. The judge found that the district court’s ruling “was the equivalent of a determination that, absent a class-wide measure of damages, plaintiffs had not met the Rule 23 requirement that a class action be ‘superior’….” (11/4/2010 Rep. at 9.) The magistrate continued, “After August 17, 2004, ‘the putative class members had no reason to assume that their rights were being protected. Stated differently, they were notified that they were no longer parties to the suit and they should have realized they were obliged to file individual suits or intervene in the class action.” Id. Thus, the magistrate rejected Milberg’s argument that the statute of limitations had not passed. On December 23, 2010, this Court adopted Magistrate Judge Guerin’s Report and Recommendation, denying in part and granting in part Defendants’ motion to dismiss. (12/23/2010 Order.) This Court’s ruling directly impacts the Hall case, because if another court adopts the ruling that the statute of limitations has expired, then the Hall complaint is untimely. If the statute of limitations was tolled during the pendency of the appeal, then the complaint would be timely, but the Magistrate’s Report, adopted by this Court, found specifically that there was no tolling. C. Hall’s Prior Motion To Relate The Cases On January 20, 2010, the Halls filed a motion to transfer the Hall case to this Court on grounds the Hall case was related to Bobbitt. VALIC then filed a motion to transfer the Hall action to Texas, even though the Drnek action had been litigated in federal court in Tucson. This Court denied the motion to relate the cases pending a ruling on the motion to transfer. (3/10/10 Order.) To date, the motion to transfer has not been ruled upon. Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 5 of 13 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ARGUMENT A. The Cases Involve Common Questions Of Law And Fact When actions before the Court involve a common question of law or fact, the Court may consolidate the actions. FED. R. CIV. P. 42(a). Here, the two actions arise out of identical facts—both arose out of the same underlying lawsuit, Drnek. See Owen v. Labor Ready, Inc., 2005 U.S. App. LEXIS 17848, *4 (9th Cir. July 12, 2005) (when two class action lawsuits were filed by different employees against same employer, it was “undisputed” that the two actions “involve[d] common legal and/or factual questions”). Even more critically, the outcome of both lawsuits hangs on the outcome of the statute of limitations. The statute of limitations is critical to both cases. If it expired, then the original Drnek class may only recover through a malpractice claim, as the Bobbitt plaintiffs assert. If not, then the Drnek class may still pursue their claims through a second class action in Hall. The Milberg defendants raised this issue in their motion to dismiss, in arguing that because the limitations period had not passed, the Bobbitt plaintiffs could not show the loss of a right or remedy. The Court ruled against defendants on this issue and held the statute of limitations had not been tolled during the appeal. (12/23/10 Order; 11/4/2010 Rep. at 9.) The identical issue is certain to arise in Hall’s lawsuit against VALIC. VALIC will defend the lawsuit on limitations grounds, and no doubt cite to this Court’s ruling in Bobbitt that there was no tolling during the pendency of the appeal. Beyond the threshold statute of limitations issue, the two cases will require determination of substantially the same questions of law. The Bobbitt case is a malpractice lawsuit, which requires proof of the case-within-a-case—i.e., that the class would have recovered in the Drnek litigation but for the malpractice. See, e.g., Cecala v. Newman, 532 F. Supp. 2d 1118, 1136 (D. Ariz. 2007) (“When the malpractice sounds in negligence, the plaintiff must prove that but for the attorney’s negligence, he would have been successful in the prosecution or defense of the original suit.”) (internal quotation omitted). Here, the Hall plaintiffs are attempting to prove the identical inquiry—that the Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 6 of 13 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 class is entitled to recover against VALIC in a lawsuit asserting the very claims that were asserted in Drnek. Put differently, Hall is the case-within-a-case that Bobbitt must prove. Other issues of law are substantially the same, including: (a) class certification issues, and whether the Bobbitt and Hall classes are identical; (b) determination of the effect of the trial court’s orders in Drnek on the Hall and Bobbitt lawsuits; and (c) damages issues, including whether the Hall case affects Bobbitt’s putative class’s right to recovery. B. The Cases Should Be Consolidated Federal judges consolidate cases primarily to avoid inconsistent results, to conserve resources, and to promote the interests of justice. “[C]onsolidation is used to combine actions so as to avoid producing inconsistent or conflicting results. The danger of such results and the inequitable treatment they foster when parties are truly similarly situated have led courts, in a range of cases, to consolidate proceedings.” 8 MOORE’S FEDERAL PRACTICE § 42.10 (2011). Here, there is an obvious risk of inconsistent results. If another court decides that the statute of limitations was tolled during the Drnek appeal, then the Hall case will move forward. The same class will then proceed on two different tracks—the Hall class will seek recovery from VALIC, and the Bobbitt class will seek the recovery it should have gotten from VALIC in Drnek from Drnek’s attorneys. The better course is for one judge to decide the issue consistently for the parties. “The purpose of consolidation is to enhance court efficiency (i.e., to avoid unnecessary duplication of evidence and procedures) and to avoid substantial danger of inconsistent adjudications (i.e., different results because tried before different juries or judges).” Hill v. England, 2006 U.S. Dist. LEXIS 37732, *4 (E.D. Cal. May 24, 2006). Here, if the Court does not consolidate, the same issue will be decided by two courts on two different time tracks. Moreover, VALIC’s motion to transfer, if granted, would result in two different judges deciding the same issue—in two different circuits. It is conceivable that, on appeal, review of the tolling issue could result in a circuit split. Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 7 of 13 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In Waste Distillation Tech., Inc. v. Pan Am. Resources, Inc., 775 F. Supp. 759, 761 (D. Del. 1991), the district court held “that the administration of justice in the two pending cases would be best served by consolidation” when “[b]oth suits involve the same plaintiff, an identical factual setting, the same witnesses, documents, and exhibits. The two actions also assert identical legal issues.” Id. at 761. Here, likewise, both cases involve the same parties, the same factual background, and many of the same witnesses, documents, exhibits, and legal issues. The same court explained the advantages of consolidation under these circumstances: “Consolidation will encourage orderly pretrial discovery, save witness time and expense, avoid duplicitous filings, and eliminate the risk of inconsistent results between two proceedings. Not only will resolution of separate actions waste time, energy and money but nothing has been presented to indicate that any inconvenience, delay or expense will result from simultaneous disposition.” Id. When considering whether to consolidate, courts are also concerned about consistent results. “One of the primary objectives of consolidation is to prevent separate actions from producing conflicting results.” Int’l Paving Sys., Inc. v. Van-Tulco, Inc., 806 F. Supp. 17 (E.D.N.Y. 1992) (quoting Bank of Montreal v. Eagle Assoc., 117 F.R.D. 530, 533 (S.D.N.Y. 1987)). In that case, two cases involved the same issue: which party was responsible for cracking of concrete. The court found a risk of inconsistent results between the two lawsuits—one suit could find one defendant responsible, but the other suit could find the other defendant at least partly responsible. “This would cause the very inconsistent verdicts that consolidation aims to avoid and would be an inefficient use of judicial resources.” Id. at 22. Here, likewise, the two cases are—or should be, if handled appropriately by the legal system—mutually exclusive: if one party is right, the other is wrong. If the two cases are not consolidated, then there is a real risk of inconsistent results: this Court found the statute of limitations was not tolled, but another court might find that the Hall case should go forward. Then two different cases will proceed—one against VALIC, and Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 8 of 13 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 one against the attorneys on the basis that any recovery against VALIC has been foreclosed. This inefficient, illogical result can be avoided by consolidation. Consolidation also conserves resources. Rather than having two judges decide the statute of limitations issue—and, possible, the identical issues in the Hall case that will be litigated as the case-within-a-case in Bobbitt—one judge should decide the identical issues in both cases. Because both cases are at an early stage—the Bobbitt case is still briefing Milberg’s motion to dismiss, and VALIC has not yet responded to the Halls’ complaint— there is no prejudice in consolidation. See Hill, 2006 U.S. Dist. LEXIS 37732, *4 (“A court must balance the savings of time and effort gained through consolidation against the inconvenience, delay or expense that might result from simultaneous disposition of the separate actions.”) (internal quotation omitted). There is no risk of delay, extra expense, or inconvenience to any party from having these two cases, which are on essentially the same track, decided together. C. The Case Should Be Assigned To Judge Zapata Local Rule 42.1(d) provides factors to be considered when assigning a case: “(1) whether substantive matters have been considered in a case; (2) which Judge has the most familiarity with the issues involved in the cases; (3) whether a case is reasonably viewed as the lead or principal case; or (4) any other factor serving the interest of judicial economy.” LRCiv 42.1(d). Here, Bobbitt was filed before Hall. The Bobbitt case was assigned to Judge Zapata. Judge Zapata has already ruled on substantive motions, including the Milberg defendants’ motion to dismiss. On the other hand, in Hall, plaintiffs filed their complaint on December 21, 2009, and no other action has taken place on the case other than briefing on the motion to transfer. Judge Tashima has not yet ruled on that motion. Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 9 of 13 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. The Court Should Consolidate The Cases And Then Rule On The Motion To Transfer Although this Court previously ruled that the motion to transfer should be ruled upon before the Court would consider the motion to relate the cases, Plaintiffs respectfully request that this Court first consolidate and then rule on the motion to transfer. In Waste Distillation, the court faced the same issue: the parties sought both consolidation of two cases and transfer to another court. The court first considered the factors supporting consolidation and held that it was warranted for consistency of results, judicial economy, and due to the similarity of facts and legal issues presented. Only then did the court consider the motion to transfer: “Thus, even though this Court holds that consolidation is appropriate, each action must be reviewed separately on the question of transfer based upon the facts and circumstances existing at the time of the commencement of the respective action.” Waste Distillation, 775 F. Supp. at 761. In that case, the court held that transfer was not warranted. The Halls have fully briefed the motion to transfer, and will not re-urge their arguments in this motion to consolidate. Given this Court’s familiarity with the facts and issues presented in the Hall case and their close interrelationship with the Bobbitt case, however, the Halls respectfully suggest that this Court is the appropriate Court to determine the appropriate venue for the Hall case, which it can do after consolidation. CONCLUSION For the foregoing reasons, Plaintiffs respectfully request that their case be transferred to Judge Zapata and consolidated with the Bobbitt case. /// /// Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 10 of 13 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESPECTFULLY SUBMITTED this 29th day of April, 2011. HAGENS BERMAN SOBOL SHAPIRO LLP By s/ Robert B. Carey Robert B. Carey Leonard W. Aragon 11 West Jefferson Street, Suite 1000 Phoenix, Arizona 85003 J. Grant Woods GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Austin Tighe FEAZELL & TIGHE LLP 6618 Sitio Del Rio Boulevard Building C-101 Austin, Texas 78730 Telephone: (512) 372-8100 Facsimile: (512) 372-8140 Email: austin@feazell-tighe.com Attorneys for Plaintiffs Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 11 of 13 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATION OF SERVICE I hereby certify that on April 29, 2011, I electronically transmitted the attached document to the Clerk’s office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrant(s): Peter Akmajian, pakmajian@udalllaw.com, ECF@udalllaw.com Joseph F. Brophy, joeb@hts-law.com, amyb@hts-law.com Roger James George, Jr., rjgeorge@georgeandbrothers.com, receptionist@georgeandbrothers.com, fjordan@georgeandbrothers.com Thomas Andrew Gilson, tgilson@lrlaw.com, mlivings@lrlaw.com Guy M. Hohmann, guyh@hts-law.com, cindyf@hts-law.com Gregory P. Joseph, gjoseph@josephnyc.com Steven Douglas Leach, sleach@jshfirm.com, mcreed@jshfirm.com Gary L. Lewis, glewis@georgeandbrothers.com, receptionist@georgeandbrothers.com, kseabolt@georgeandbrothers.com Robert H. McKirgan, rmckirgan@lrlaw.com, dgarrett@lrlaw.com Donald L. Myles, Jr., dmyles@jshfirm.com, elopezbanks@jshfirm.com Douglas J. Pepe, dpepe@josephnyc.com Ryan T. Shelton, ryans@hts-law.com Michele Guy Thompson, mthompson@udalllaw.com, ecf@udalllaw.com Ashley Grace Villaverde, avillaverde@jshfirm.com, josborn@jshfirm.com Jeffrey H. Zaiger, jzaiger@josephnyc.com Leonard W. Aragon, leonard@hbsslaw.com, amyn@hbsslaw.com, ecfphx@hbsslaw.com Andrew Martin Jacobs, AJacobs@swlaw.com, Docket_TUX@swlaw.com, NWhitney@swlaw.com Daniel McNeel Lane, Jr., nlane@akingump.com, kanson@akingump.com, jdelgado@akingump.com, gmturner@akingump.com Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 12 of 13 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Matthew E. Pepping, mpepping@akingump.com Austin Tighe, austin@feazell-tighe.com Ashley B. Vinson, avinson@akingump.com, kerickson@akingump.com Amy Marie Wilkins, amyw@hbsslaw.com, ecfphx@hbsslaw.com, laurenb@hbsslaw.com Joel Grant Woods, gw@grantwoodspc.net, sharonb@grantwoodspc.net s/ Amy Nolan Case 4:09-cv-00712-AWT Document 26 Filed 04/29/11 Page 13 of 13