Firefighters Pension & Relief Fund of the City of New Orleans v. Bulmahn et al

Filing 195

ORDER AND REASONS denying 130 Motion to Sever. Signed by Chief Judge Sarah S. Vance on 9/26/2014. (Reference: ALL CASES)(caa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
FIREFIGHTERS PENSION & RELIEF
FUND OF THE CITY OF NEW
ORLEANS, Individually and on
Behalf of All Others Similarly
Situated

CIVIL ACTION

VERSUS

NO: 13-3935, c/w
13-6083, 13-6084,
13-6233

T. PAUL BULMAHN, ET AL.

SECTION: R

ORDER AND REASONS
Before the Court is Lead Plaintiff Firefighters Pension &
Relief Fund's motion to sever the Section 11 action from the
Section 10(b) actions.

Because the Court finds that the interests

of judicial economy outweighs any potential prejudice to the
Section 11 plaintiffs, the motion for severance is DENIED.

I.

BACKGROUND
This is a consolidated action alleging violations of the

federal securities laws under Sections 11, 12(a) and 15 of the
Securities

Act

of

1933

and

Sections

Securities Exchange Act of 1934.

10(b)

and

20(a)

of

the

The consolidated action involves

two main plaintiff groups: the Section 11 plaintiffs and the
Section 10(b) plaintiffs.

Both plaintiff groups allege that ATP

Oil & Gas, through its directors and/or officers ("Defendants"),
"made false and misleading statements in an October 12, 2010

registration statement filed with the U.S. Securities and Exchange
Commission."1

The

Section

10(b)

plaintiffs

contend

that

"Defendants issued false and misleading statements subsequent to
the Registration Statement as well."2
contend

that

defendants

made

Both groups of plaintiffs

material

misrepresentations

or

omissions with regard to the effect of the United States Department
of Interior's drilling moratoria on ATP's liquidity and future
business prospects in the wake of the BP oil spill.
The Section 11 plaintiffs now move the Court to sever the
Section 11 action from the Section 10(b) actions.

They argue that

the Section 11 action arises from a different "transaction or
occurrence" than the Section 10(b) actions, and that continued
consolidation will unduly prejudice the Section 11 plaintiffs.
Defendants do not oppose the severance "so long as steps are taken
to

efficiently

coordinate

potential

discovery

and

other

case

management issues."3

II.

LEGAL STANDARD
The rules regarding consolidation are contained in Rule 42 of

the Federal Rules of Civil Procedure.

Rule 42(a) provides that a

court may order consolidation when "actions before the court

1

R. Doc. 130-1 at 5.

2

Civ. A. No. 13-06083, R. Doc. 1 at 3.

3

R. Doc. 148 at 1.
2

involve a common question of law or fact."

Fed. R. Civ. P. 42(a).

If that threshold requirement is met, then whether to consolidate
the actions is within the broad discretion of the court.

Alley v.

Chrysler Credit Corp., 767 F.2d 138, 140 (5th Cir. 1985).

In

exercising its discretion,
the court must balance the risk of prejudice and possible
confusion against the risk of inconsistent adjudications
of common factual and legal issues, the burden on the
parties and witnesses, the length of time required to
conclude multiple lawsuits as against a single one, and
the relative expense to all concerned of the single-trial
and multiple-trial alternatives.
A.F.I.K.

Holding

SPRL

v.

Faas,

2003)(internal citations omitted).

216

F.R.D.

567,

570

(D.N.J.

Rule 42 is a codification of a

trial court's inherent managerial power "to control the disposition
of the causes on its docket with economy of time and effort for
itself, for counsel, and for litigants."

In re Air Crash Disaster

at Fla. Everglades, 549 F.2d 1006, 1012 (5th Cir. 1977)(citations
omitted).

Accordingly,

the

court's

precedence over the desires of counsel."

determination

can

"take

Id. at 1014.

III. DISCUSSION
In their motion to sever, the Section 11 plaintiffs argue that
the actions should be severed because (1) the actions arose out of
different transactions; (2) the actions present different questions
of law; (3) the consolidated action will not promote judicial
economy; and (4) the Section 11 action "will likely" be ready for
3

trial before the Section 10(b) actions.4

The Section 11 plaintiffs

thus contend that severance is warranted under Federal Rule of
Civil Procedure 21.
The Section 11 plaintiffs' reliance on Rule 21 is misguided.
A Rule 21 motion to sever is the appropriate remedy when parties or
claims are "misjoined" under Rules 18, 19 or 20.
21.

Fed. R. Civ. P.

Thus, a motion to sever under Rule 21 is an inappropriate

mechanism to challenge a court's decision to consolidate.
Charles

Alan

Wright

&

Arthur

R.

Miller,

Federal

See 9A

Practice

&

Procedure § 2382 (3d ed. 2008) ("[I]t would be a mistake to assume
that the standard for consolidation is the same as that governing
the original joinder of parties or claims."). Here, the Section 11
action and the Section 10(b) actions were consolidated under Rule
42(a), not joined under Rules 18, 19 or 20.

Accordingly, Rule 21

is inapplicable. See Iskowitz v. Cessna Aircraft Co., CIV. A. Nos.
07-968, 07-971, 07-1087, 08-2437, 2009 WL 1151956, at *1 (D. Colo.
Apr. 27, 2009)("Of course, the Winston case is already separate
from the Coffman and Iskowitz case, although all three cases have
been consolidated.

Because Winston is already a separate case, I

conclude that severance under Rule 21 is not the proper procedural
mechanism to accomplish the separation of the Winston case as
sought by Coffman and Iskowitz.").
Moreover, the Court finds that the Section 11 plaintiffs have

4

R. Doc. 130-1 at 10-14.
4

failed to demonstrate that the Section 11 and Section 10(b) claims
were improperly consolidated, and finds continued consolidation
more conducive to judicial economy than separation.

The crux of

the Section 11 plaintiffs' argument is that the Section 11 action
arises from a "different transaction or occurrence" than the
Section 10(b) actions.5

Even if the Court were to accept the

Section 11 plaintiffs' characterization, Rule 42 does not apply the
"transaction or occurrence" test.

See State of Ohio ex rel.

Montgomery v. Louis Trauth Dairy, Inc., 163 F.R.D. 500, 503 (S.D.
Ohio

1995)("Even

when

actions

are

improperly

joined,

it

is

sometimes proper to consolidate them."); 9A Charles Alan Wright &
Arthur R. Miller, Federal Practice & Procedure § 2382 (3d ed.
2008)("[M]ore than one party can be joined on a side under Rule
20(b) only if there is asserted on behalf or against all of them
one or more claims for relief arising out of the same transaction
or occurrence . . . . But the common question itself is enough to
permit consolidation, even if the claims arise out of independent
transactions.").

Instead,

Rule

42

merely

requires

a

common

question of law or fact, and the Section 11 and Section 10(b)
actions share questions of both law and fact.

For example, the

falsity of ATP's statements in its prospectus is central to both
actions, and the Section 11 plaintiffs readily admit that "the
actions

5

all

involve

allegations

R. Doc. 130-1 at 10-11.
5

related

to

ATP's

deep

water

drilling operations in 2010."6

Moreover, as defendants point out

in their responsive briefing, "[m]uch of the underlying factual
predicate

for

the

Section

11

and

Section

10(b)

actions

is

identical, and will require the production of identical documents
and depositions of the same individuals."7 Finally, although there
are differences in the legal standards applicable to Section 11 and
10(b) claims, there are nevertheless some common questions of law,
such as in the application of Item 303 of Regulation S-K.

See also

Kapps v. Torch Offshore, Inc., 379 F.3d 207, 215 (5th Cir. 2004)
("While it is true that scienter is not required [for a Section 11
claim], many cases say that 'materiality,' as it is used in Section
11,

in

effect

means

the

same

thing

as

it

does

in

Section

10(b).")(compiling cases).
Having found that the Section 11 and Section 10(b) actions
share common questions of law and fact, "it is for the court to
weigh the saving of time and effort that consolidation would
produce against any inconvenience, delay, or expense that it would
cause."

Daybrook Fisheries, Inc. v. Am. Marine Const., CIV. A No.

98-1438, 1998 WL 748586, at *2 (E.D. La. Oct. 19, 1998)(quoting 9
Wright & Miller, Federal Practice and Procedure § 2383 (2d ed.
1995)).

Here, given the significant factual overlap between the

Section

11

and

Section

10(b)

6

R. Doc. 130-1 at 13.

7

actions,

R. Doc. 148 at 2.
6

the

Court

finds

that

continued consolidation will save significant time and effort,
especially with regard to discovery.
that

any

delay,

inconvenience

or

Moreover, the Court finds
additional

cost

caused

by

continued consolidation will be negligible. Indeed, the Section 11
plaintiffs' contention that consolidation comes at the expense of
the Section 11 action because it "will almost certainly be ready
for

trial

conjecture.8

long

before

the

Section

10(b)

Action"

is

mere

The Section 11 plaintiffs can move the Court to

reconsider this order if and when such delay becomes a reality.
In sum, the Court finds that consolidation, not separation,
best serves the interest of judicial economy.

The Court further

finds that the Section 11 plaintiffs will not suffer any prejudice
if the actions remained consolidated.

Accordingly, the Court

denies the Section 11 plaintiffs' motion to sever the Section 11
and Section 10(b) actions.

8

Cf. Fed. R. Civ. P. 42(b).

R. Doc. 130-1 at 14.
7

III. CONCLUSION
For the reasons given above, the Court finds that the most
efficient and economic route to the resolution of these actions is
via continued consolidation.

Accordingly, plaintiffs' motion for

severance is DENIED.

New Orleans, Louisiana, this

26th

day of September, 2014.

SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

8