Avenue Capital Management II, LP et al v. Schaden et al

Filing 30

ORDER granting in part 12 Unopposed Motion to Consolidate Case and Stay. The portion of the parties' motion which seeks a stay is referred to Magistrate Judge Kristen L. Mix. It is further ORDERED that, pursuant to Fed. R. Civ. P. 42(a) and D.C.COLO.LCivR 42.1, Civil Action Nos. 14-cv-02031-PAB-KLM and 14-cv-02119-REB-MJW shall be consolidated for all purposes. It is further ORDERD that, as of the date of this Order, all future pleadings and other filings shall be filed in this case only. By Judge Philip A. Brimmer on 10/7/2014.(alowe)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 14-cv-02031-PAB-KLM
AVENUE CAPITAL MANAGEMENT II, L.P., a Delaware limited partnership,
AVENUE INTERNATIONAL MASTER, L.P., a Cayman Islands exempted limited
partnership,
AVENUE INVESTMENTS, L.P., a Delaware limited partnership,
AVENUE SPECIAL SITUATIONS FUND VI (MASTER), L.P., a Delaware limited
partnership,
MANAGED ACCOUNTS MASTER FUND SERVICES-MAP10, a sub-trust of an
umbrella unit trust constituted by a trust deed governed by the laws of Ireland,
AVENUE-CDP GLOBAL OPPORTUNITIES FUND, L.P., a Cayman Islands exempted
limited partnership,
AVENUE SPECIAL OPPORTUNITIES CO-INVESTMENT FUND I, L.P., a Delaware
limited partnership,
AVENUE SPECIAL OPPORTUNITIES FUND I, L.P., a Delaware limited partnership,
DRAWBRIDGE SPECIAL OPPORTUNITIES FUND L.P., a Delaware limited
partnership,
DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LTD, a Cayman Islands company,
FCI HOLDINGS I LTD, a Cayman Islands company,
FCI HOLDINGS II LTD, a Cayman Islands company,
FCOF II UB SECURITIES LLC, a Delaware limited liability company,
FCOF UB INVESTMENTS LLC, a Delaware limited liability company,
FTS SIP L.P., a Jersey limited partnership,
PANGAEA CLO 2007-1 LTD, a Cayman Islands company,
SARGAS CLO I LTD, a Cayman Islands company,
WORDEN MASTER FUND II L.P., a Cayman Islands exempted limited partnership,
and
WORDEN MASTER FUND L.P., a Cayman Islands exempted limited partnership,
Plaintiffs,
v.
RICHARD F. SCHADEN, an individual,
RICHARD E. SCHADEN, an individual,
FREDERICK H. SCHADEN, an individual,
GREG MACDONALD, an individual,
DENNIS `SMYTHE, an individual,
ANDREW R. LEE, an individual,
PATRICK E. MEYERS, an individual,
JOHN M. MOORE, an individual,
THOMAS RYAN, an individual, and

CONSUMER CAPITAL PARTNERS LLC a/k/a Cervantes Capital LLC, a Delaware
limited liability company,
Defendants.
_____________________________________________________________________
ORDER
_____________________________________________________________________
This matter is before the Court on the Unopposed Joint Motion to Consolidate
and Stay [Docket No. 12] filed jointly by the parties. The parties seek an order
consolidating this case with a related case, Schaden v. Avenue Capital Management II,
L.P. & Fortress Investment Group, LLC (Schaden), 14-cv-02119-REB-MJW, pending in
this district before Judge Robert E. Blackburn. Docket No. 12 at 2. The parties also
appear to request that Schaden be stayed. Id. After review of the pleadings in each of
these cases, the Court concludes that consolidation is appropriate under Federal Rule
of Civil Procedure 42(a).
I. BACKGROUND
On July 22, 2014, plaintiffs filed the complaint in this action. Docket No. 1.
Plaintiffs bring claims against defendants, including Richard F. Schaden, for violation of
the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and § 78t(a), in connection
with defendants’ management of QCE, LLC, a company that conducted business as
Quiznos. Id. at 3 n.1, 13.
In Schaden, plaintiff Richard F. Schaden seeks declaratory relief to enforce
mutual releases and covenants not to sue against Avenue Capital Management II, L.P.,
a plaintiff in the present case, and Fortress Investment Group, LLC, an affiliate of
plaintiffs in the present case. Docket No. 12 at 3, ¶ 2; see also Schaden, Docket No. 3
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at 1-2, 4.
II. MOTION TO CONSOLIDATE
The Court first turns to that portion of the parties’ motion that seeks
consolidation. Rule 42(a) of the Federal Rules of Civil Procedure provides that, “[i]f
actions before the court involve a common question of law or fact, the court may . . .
consolidate the actions.” Fed. R. Civ. P. 42(a)(2). Pursuant to Local Rule 42.1, the
judge assigned to the lowest numbered case decides whether consolidation is
warranted. D.C.COLO.LCivR 42.1. The decision whether to consolidate actions
involving common questions of law or fact is committed to the sound discretion of the
district court. Shump v. Balka, 574 F.2d 1341, 1344 (10th Cir. 1978). T he purpose of
Rule 42(a) is “to give the court broad discretion to decide how cases on its docket are to
be tried so that the business of the court may be dispatched with expedition and
economy while providing justice to the parties.” Breaux v. American Family Mut. Ins.
Co., 220 F.R.D. 366, 367 (D. Colo. 2004) (quoting 9 C. W RIGHT & A. MILLER, FEDERAL
PRACTICE & PROCEDURE § 2381 at 427 (2nd ed. 1995)). Therefore, the Court will
consider both judicial economy and fairness to the parties in exercising its discretion
under Rule 42(a). See Harris v. Illinois-California Express, Inc., 687 F.2d 1361, 1368
(10th Cir. 1982).
Both cases involve common questions of fact concerning Richard F. Schaden’s
and the other defendants’ management of QCE, LLC. The parties argue that the
mutual releases and covenants not to sue at issue in Schaden will also be at issue in
the present case. After reviewing the pleadings in both cases, the Court finds no

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reason to conclude otherwise. Moreover, the parties in Schaden are either parties in
this case or are affiliated with parties in this case. Thus, the Court finds that the cases
involve common question of law and fact. Avenue Capital Management II, L.P. et al. v.
Richard F. Schaden et al., No. 14-cv-02031-PAB-KLM, and Schaden v. Avenue Capital
Management II, L.P. & Fortress Investment Group, LLC, 14-cv-02119-REB-MJW, will
be consolidated.
III. MOTION TO STAY
Having determined that consolidation is appropriate, the Court will refer to the
magistrate judge that portion of the parties’ motion which seeks a stay.
IV. CONCLUSION
Accordingly, it is
ORDERED that the Unopposed Joint Motion to Consolidate and Stay [Docket
No. 12] is GRANTED in part as indicated in this order. It is further
ORDERED that the portion of the parties’ motion which seeks a stay is referred
to Magistrate Judge Kristen L. Mix. It is further
ORDERED that, pursuant to Fed. R. Civ. P. 42(a) and D.C.COLO.LCivR 42.1,
Civil Action Nos. 14-cv-02031-PAB-KLM and 14-cv-02119-REB-MJW shall be
consolidated for all purposes. It is further
ORDERED that, as of the date of this Order, all future pleadings and other filings
shall be filed in this case only and shall be captioned as shown below:

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Civil Action No. 14-cv-02031-PAB-KLM
(Consolidated with Civil Action No. 14-cv-02119-PAB-KLM)

AVENUE CAPITAL MANAGEMENT II, L.P., a Delaware limited partnership, et al.,
Plaintiffs,
v.
RICHARD F. SCHADEN, an individual, et al.,
Defendants.

RICHARD F. SCHADEN,
Plaintiff,
v.
AVENUE CAPITAL MANAGEMENT II, L.P., and
FORTRESS INVESTMENT GROUP, LLC,
Defendants.

DATED October 7, 2014.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

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