In Re Petrobras SEC. Litig. ( 2019 )

18-2270 (Con)
In re Petrobras Sec. Litig.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
New York, on the 30th day of August, two thousand nineteen.
PRESENT:
PETER W. HALL,
DEBRA ANN LIVINGSTON,
Circuit Judges,
JANE A. RESTANI
Judge.*
_____________________________________
In Re: Petrobras Securities Litigation
_____________________________________
Universities Superannuation Scheme Limited
Employees Retirement System of the State of
Hawaii, North Carolina Department of State
Treasurer,
Plaintiffs-Appellees,
Aura Capital Ltd., Dimensional Emerging
Markets Value Fund, DFA Investment
Dimensions Group Inc., on behalf of its series
Emerging Markets Core Equity Portfolio,
Emerging Markets Social Core Equity Portfolio
and T.A. World ex U.S. Core Equity Portfolio,
DFA Investment Trust Company, on behalf of its
series The Emerging Markets Series, DFA
* Judge Jane A. Restani, of the United States Court of International Trade, sitting by designation.
Austria Limited, solely in its capacity as
responsible entity for the Dimensional Emerging
Markets Trust, DFA International Core Equity
Fund, and DFA International Vector Equity
Fund by Dimensional Fund Advisors Canada
ULC solely in its capacity as Trustee, Dimensional
Funds plc, on behalf of its sub-fund Emerging
Markets Value Fund, Dimensional Funds ICVC,
on behalf of its sub-fund Emerging Markets Core
Equity Fund, SKAGEN AS, Danske Invest
Management A/S, Danske Invest Management
Company, New York City Employees'
Retirement System, New York City Police
Pension Fund, Board of Education Retirement
System of the City of New York, Teachers'
Retirement System of the City of New York, New
York City Fire Department Pension Fund, New
York City Deferred Compensation Plan, Forsta
AP-fonden, Transamerica Income Shares, Inc.,
Transamerica Funds, Transamerica Series Trust,
Transamerica Partners Portfolios, John Hancock
Variable Insurance Trust, John Hancock Funds
II, John Hancock Sovereign Bond Fund, John
Hancock Bond Trust, John Hancock Strategic
Series, John Hancock Investment Trust, JHF
Income Securities Trust, JHF Investors Trust,
JHF Hedged Equity & Income Fund, Aberdeen
Emerging Markets Equity Fund, Aberdeen
Global Equity & Income Fund, Aberdeen Global
Natural Resources Fund, Aberdeen International
Equity Fund, each a series of Aberdeen Funds;
Aberdeen Canada Emerging Markets Fund,
Aberdeen Canada Socially Responsible Global
Fund, Aberdeen Canada Socially Responsible
International Fund, Aberdeen Canada Funds
EAFE Plus Equity Fund and Aberdeen Canada
Funds Global Equity Fund, each a series of
Aberdeen Canada Funds, Aberdeen EAFE Plus
Ethical Fund, Aberdeen EAFE Plus Fund,
Aberdeeen EAFF Plus SRI Fund, Aberdeeen
Emerging Markets Equity Fund, and Aberdeen
Global Equity Fund, each a series of Aberdeen
Intitutional C, Aberdeen Fully Hedged
International Equities Fund, Aberdeen
2
International Equity Fund, Aberdeen Global
Ethical World Equity Fund, Aberdeen Global
Responsible World Equity Fund, Aberdeen
Global World Equity Dividend Fund, Aberdeen
Global World Equity Fund, Aberdeen Global
World Resources Equity Fund, Aberdeen
Emerging Markets Equity Fund, Aberdeen
Ethical World Equity Fund, Aberdeen Multi-
Asset Fund, Aberdeen World Equity Fund,
Aberdeen World Equity In, Aberdeen Latin
America Equity Fund, Inc., Aberdeen Latin
America Equity Fund, Inc., AAAID Equity
Portfolio, Alberta Teachers Retirement Fund,
Aon Hewitt Investment Consulting, Inc., Aurion
International Daily Equity Fund, Bell Aliant
Regional Communications Inc., BMO Global
Equity Class, City of Albany Pension Plan,
Desjardins Dividend Income Fund, Desjardins
Emerging Markets Fund, Desjardins Emerging
Markets Fund, Desjardins Global All Capital
Equity Fund, Desjardins Overseas Equity Value
Fund, Devon County Council Global Emerging
Market Fund, Devon County Council Global
Equity Fund, DGIA Emerging Markets Equity
Fund L.P., Erie Insurance Exchange, First Trust
/ Aberdeen Emerging Opportunity Fund, GE UK
Pension Common Investment Fund, Hampshire
County Council Global Equity Portfolio, London
Borough of Hounslow Supperannuation Fund,
MacKenzie Universal Sustainable Opportunities
Class, Marshfield Clinic, Mother Theresa Care
and Mission Trust, MTR Corporation Limited
Retirement Scheme, Myria Asset Managment
Emergence, M, National Pension Service, and
NPS Trust Active 14, Ohio Public Employees
Retirement System, Washington State Investment
Board, Aberdeen Latin American Income Fund
Limited, Aberdeen Global ex Japan Pension Fund
ppit, FS International Equity Mother Fund, NN
Investment Partners B.V., acting in the capacity
of management, NN Investment Partners B.V.,
acting in the capacity of management company of
the mutual fund NN Global Equity Fund, NN
Investment Partners B.V., acting in the capacity
3
of management company of the muitual fund NN
Hoog Dividend Aandelen Fonds, NN Investment
Partners B.V., acting in the capacity of
management copmany of the mutual fund NN
Institutioneel Dividend Aandelen, NN Investment
Partners Luxembourg S.A., acting in the capacity
of management company SICAV and its Sub-
Funds, and NN (L) SICA, for and on behalf of NN
(L) Emerging Markets High Dividend, NN (L)
First, Aura Capital Ltd., WGI Emerging Markets
Fund, LLC, Bill and Melinda Gates Foundation
Trust, Board of Regents of the University of Texas
System, Trustees of the Estate of Bernice Pauahi
Bishop, DBA Kamehameha Schools, Louis
Kennedy, individually and on behalf of all others
similarly situated, Ken Ngo, individually and on
behalf of all other similarly situated, City of
Providence, individually and on behalf of all other
similarly situated, Handelsbanken Fonder AB,
Public Employee Retirement System of Idaho,
Peter Kaltman, individually and on behalf of all
others similarly situated, Union Asset
Management Holding AG, Jonathan Messing,
individually and on behalf of all other similarly
situated,
Plaintiffs, 18-2120 (L),
18-2270 (Con),
v. 18-2276 (Con),
18-2324 (XAP)
Spencer Bueno, Mathis B. Bishop, Catherine O.
Bishop, Joseph Gielata, Richard Gielata, Emelina
Gielata,
Objectors-Appellants,
v.
Petroleo Brasileiro S.A. Petrobras,
PricewaterhouseCoopers Auditores
Independentes, BB Securities Ltd., Theodore
Marshall Helms, Petrobras Global Finance B.V.,
Petrobras America Inc., Mitsubishi UFJ
Securities (USA), Inc., HSBC Securities (USA)
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Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Standard Chartered Bank, Bank of
China (Hong Kong) Limited, Banco Bradesco
BBI S.A., Banca IMI, S.p.A., Scotia Capital (USA)
Inc., Citigroup Global Markets Inc., Itau BBA
USA Securities, Inc., JP Morgan Securities LLC,
Morgan Stanley & Co. LLC,
Defendants-Appellees,
Mariangela Mointeiro Tizatto, Josue Christiano
Gome Da Silva, Daniel Lima De Oliveira,
Santander Investment Securities Inc., Banco
Votorantin Nassau Branch, Gustavo Tardin
Barbosa, Jose Sergio Gabrielli, Silvio Sinedino
Pinheiro, Paulo Roberto Costa, Jose Carlos
Cosenza, Renato de Souza Duque, Guillherme de
Oliveira Estrella, Jose Miranda Formigl Filho,
Maria Das Gracas Silva Foster, Almir Guilherme
Barbassa, Jose Raimundo Branda Pereira, Servio
Tulio Da Rosa Tinoco, Paulo Jose Alves,
Alexandre Quintao Fernandes, Marcos Antonio
Zacarias, Cornelis Franciscus Joze Looman,
Defendants.
_____________________________________
FOR OBJECTORS-APPELLANTS: Joseph Gielata, pro se, La Jolla, CA;
Richard Gielata, Emelina Gielata, pro se,
Coraopolis, PA.
FOR PLAINTIFFS-APPELLEES: Jeremy Lieberman, Emma Gilmore, Brenda
F. Szydlo, Jennifer B. Sobers, Pomerantz
LLP, New York, NY.
FOR DEFENDANTS-APPELLEES: Lewis J. Liman, Jared Gerber, Joon H. Kim,
Cleary Gottlieb Steen & Hamilton, New
York, NY.
Appeal from a judgment of the United States District Court for the Southern District of New
York (Rakoff, J.).
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UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.
This case concerns objections to a roughly three-billion-dollar settlement agreement in a
securities class action against Petróleo Brasileiro S.A. (“Petrobras”). Two purchasers of Petrobras
shares, Richard and Emelina Gielata, objected to the proposed settlement, arguing that the
settlement class should have excluded claims based on foreign purchases of securities (which were
likely meritless under U.S. securities law). The district court approved the proposed settlement
and determined that the Gielatas’s objections were without merit, reasoning that the defendants are
permitted to settle meritless claims. See In re Petrobras Sec. Litig., 317 F. Supp. 3d 858, 866–67
(S.D.N.Y. 2018). On appeal, the Gielatas assigned a portion of their claim to their son, Joseph
Gielata, a retired attorney who had drafted his parents’ original objection in the district court.1 All
three Gielatas, proceeding pro se under a single brief written by Joseph Gielata, now argue that
there is a conflict between shareholder claims and claims based on purchases of debt securities
(“noteholder claims”) because the noteholder claims included the foreign-purchaser group, which
were “weaker,” and the district court should have created subclasses with independent
representation for each group. We assume the parties’ familiarity with the underlying facts, the
procedural history of the case, and the issues on appeal.2
1
The appellees noted in their brief that they intended to move for sanctions against Joseph Gielata
for unauthorized practice of law. They have not so moved.
2
The consolidated appeals by objectors Catherine O. and Mathis B. Bishop, No. 18-2120, and
Spencer Bueno, No. 18-2276, as well as the cross-appeal by class counsel Pomerantz LLP, No. 18-
2324, have all been dismissed.
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The parties dispute the appropriate standard of review in this case. The appellees urge the
application of an abuse of discretion standard, see In re Literary Works in Elec. Databases
Copyright Litig., 654 F.3d 242, 249 (2d Cir. 2011) (“Literary Works”), whereas the Gielatas insist
that a de novo standard is more appropriate because the adequacy of class representation is a due
process issue and less deference is given to the district court’s decision when a class is certified
simultaneously with the approval of a class settlement. However, even in cases where this Court
addressed the adequacy of class representation, we have still applied an abuse of discretion
standard. See id. Accordingly, we apply an abuse of discretion standard here.
The appellees insist that the Gielatas’ subclass arguments are waived on appeal because the
Gielatas failed to raise them in the district court. The Gielatas reply that they asserted a conflict
between subgroups in the settlement class, albeit not this exact conflict, and that another objector
raised the subclasses issue, which the district court then fully addressed. “Generally, ‘a federal
appellate court does not consider an issue not passed upon below.’” Amalgamated Clothing &
Textile Workers Union v. Wal-Mart Stores, Inc., 54 F.3d 69, 73 (2d Cir. 1995) (quoting Singleton
v. Wulff, 428 U.S. 106, 120 (1976)). “This general rule may be overcome only when necessary to
avoid manifest injustice, or where there is some extraordinary need . . . to consider [the]
appellant[’s] claim[.]” Id. (ellipsis in original) (internal quotation marks and citation omitted).
We agree with the appellees. The Gielatas did not assert their appellate arguments in the
district court. Although their objection referenced the relevant caselaw related to subclasses in
class action settlements, they asserted a conflict between shareholders and noteholders who could
meet the domesticity requirement, on the one hand, and noteholders who could not meet the
domesticity requirement, on the other; they did not make arguments about conflict between
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shareholders and all noteholders, as they do on appeal. The thrust of their arguments was to
exclude foreign claims from the settlement class and appoint independent counsel to assist the
settlement administrator to sort and remove the foreign claims. They did not argue for the creation
of subclasses based on shareholders and noteholders or for appointment of class representatives for
those subclasses, nor did they adopt the objections filed by others. Barring manifest injustice or
an extraordinary need, then, we will not consider those arguments because the Gielatas waived (or
at least forfeited) the arguments they now raise on appeal. Cf. Literary Works, 654 F.3d at 255 n.8
(declining to consider objector’s other argument concerning a fundamental conflict between
subclasses because it was not raised before the district court).
The Gielatas make two primary arguments challenging this analysis. First, they assert that
there is no surprise to the appellees because the district court addressed the subclass issue in its
order approving the settlement and the appellees had an opportunity to respond in the district court.
But this is meritless. Although the district court addressed the subclass issue, it did so because of
objections raised by two other parties. One of those objectors did not appeal, and the other
withdrew his appeal. The appellees therefore would be surprised that the Gielatas are raising the
subclasses issue when they did not do so in the district court, and their argument that the issue has
been waived suggests that they are in fact surprised.
Nor can the Gielatas argue that the appellees had an opportunity to respond to the new
objection; the new objection is not identical to or an extension of the subclass issue asserted by the
other objectors. The two other objectors argued for subclasses consisting of domestic purchasers
and foreign purchasers and for class representatives of the two subclasses. The district court
addressed only these potential subgroups. By contrast, the Gielatas argue for subclasses for
8
shareholders and noteholders, and independent class representatives and counsel for those two
groups. The appellees have had no opportunity to litigate either issue.
Second, the Gielatas argue that the waiver rule is not applied rigidly and is especially relaxed
in class actions, primarily relying on Yee v. City of Escondido, Cal., 503 U.S. 519 (1992), in which
the Supreme Court stated that “[o]nce a federal claim is properly presented, a party can make any
argument in support of that claim; parties are not limited to the precise arguments they made
below.” Id. at 534. But Yee does not permit a party to raise an entirely new claim on appeal.
Rather, it permits appellate courts to “entertain additional support that a party provides for a
proposition presented below.” Eastman Kodak Co. v. STWB, Inc., 452 F.3d 215, 221 (2d Cir.
2006) (citing Yee, 503 U.S. at 534); see also In re Air Cargo Shipping Servs. Antitrust Litig., 697
F.3d 154, 161 n.3 (2d Cir. 2012). As discussed above, the Gielatas are not merely citing additional
support for the objections they argued in the district court. They raise an entirely different claim:
that there is a conflict between the shareholders and noteholders subgroups, rather than the domestic
and foreign purchasers. This is not an objection they (or any other objector) made in the district
court. See United States v. Braunig, 553 F.2d 777, 780 (2d Cir. 1977) (“The law in this Circuit is
clear that where a party has shifted his position on appeal and advances arguments available but not
pressed below, and where that party has had ample opportunity to make the point in the trial court
in a timely manner, waiver will bar raising the issue on appeal.” (internal citations omitted)).
Further, the Gielatas cite no binding caselaw to support their contention that the waiver rule
is relaxed in class actions, and we have previously applied the waiver rule against objectors who
raise new arguments on appeal concerning potential internal class conflicts. See Literary Works,
654 F. 3d at 255 n.8 (argument concerning conflict between class member claims waived). We
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have also applied the waiver rule against objectors in other contexts. See Wal-Mart Stores, Inc. v.
Visa U.S.A., Inc., 396 F.3d 96, 124 n.29 (2d Cir. 2005) (argument challenging class counsel’s fee
waived); In re Elec. Books Antitrust Litig., 639 F. App’x 724, 727 (2d Cir. 2016) (summary order)
(argument challenging settlement as premature waived).
The Gielatas have waived their arguments on appeal by failing to raise them in the district
court despite ample opportunity. They elected not to argue in the district court for any subclasses,
and they identified the chief conflict as being between domestic purchasers, which included both
shareholders and noteholders, and foreign purchasers. The Gielatas have thereby waived their
challenge to the district court’s class certification and approval of the settlement, and we see no
manifest injustice or extraordinary need to exercise our discretion to nonetheless entertain the
challenge.
We have reviewed the remainder of the Gielatas’s arguments and find them to be without
merit. For the foregoing reasons, the judgment of the district court is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
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