Welch & Forbes, Inc. v. Cendant Corp.

233 F.3d 188
CourtCourt of Appeals for the Third Circuit
DecidedNovember 22, 2000
DocketNo. 00-5199
StatusPublished
Cited by5 cases

This text of 233 F.3d 188 (Welch & Forbes, Inc. v. Cendant Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Welch & Forbes, Inc. v. Cendant Corp., 233 F.3d 188 (3d Cir. 2000).

Opinion

OPINION OF THE COURT

MANSMANN, Circuit Judge.

Cendant Corporation and Cendant Capital I (“Cendant”) appeal the District Court’s orders permitting certain late claims and late cures to participate in an agreed-upon settlement of a securities class action suit. Cendant claims that the District Court erred in failing to enforce the settlement agreement as written, and instead, in effect, imposed upon the parties a settlement other than the one to which they agreed. Further, Cendant claims that the District Court erred by applying the “excusable neglect” standard to permit class members who submitted untimely claims to participate in the settlement. Finally, Cendant argues in the alternative that even if the “excusable neglect” standard were applicable here, the District Court erred by allowing certain claimants to participate in the settlement since those claimants failed to demonstrate “excusable neglect.” The PRIDES Class defends the District Court’s conclusions.

With respect to the claim that the District Court failed to enforce the settlement agreement as written, we must determine, first, whether the District Court had the power to extend the deadlines it had inserted into the Settlement at the request of the parties and had retained the discretion to allow the late-filed and late-cured claims, and second, if so, whether the District Court in applying the “excusable neglect” standard, did so appropriately. We conclude as to the first question that the court-ordered deadline for submitting claims was not part of Cendant’s bargain and thus the date was not forever unalterable. On the contrary, we agree with the District Court that under both its inherent equitable powers, and under the specific terms of Fed.R.Civ.P. 6(b)(2), the District Court retained the power to modify the Stipulation terms. As to the second question, we agree, too, with the District Court, that the appropriate standard under which requests to allow tardy proofs of claim or requests to cure is “excusable neglect.” Finally, we find that the District Court did not abuse its discretion in concluding that the late claimants successfully demonstrated that “excusable neglect” caused the delays. We will, therefore, affirm.

Because this litigation is already the subject of at least three published opinions, each exhaustively setting forth the procedural and factual background, we will not do so here, but instead refer interested [190]*190parties to these prior dispositions.1 We set forth only those facts crucial to a resolution of the disputes here.2

I.

On March 17, 1999, the parties presented a proposed settlement agreement between Cendant and the class of persons who purchased Income or Growth Prides (“PRIDES”) during the period February 24,1998 through April 15, 1998.

The draft Stipulation of Agreement of Settlement and Compromise (the “Stipulation”) and the draft Order Regarding Proposed Class Action Settlement, Settlement Hearing and Notice of Proposed Settlement (the “Settlement Hearing Order”) jointly submitted by the parties to the District Court in connection with the March 17, 1999 hearing, did not contain any reference to a specific date as the deadline for submission of Proofs of Claim. The Settlement Hearing Order contained a blank space for the date, to be selected and inserted by the District Court: “The deadline for submitting Proofs of Claim (the “Deadline”) shall be _, 1999.” The Stipulation defined the Deadline only as the date to be identified as the deadline in the notice to be sent to class members. At the hearing, the District Court selected and then wrote in, by hand, the date of “June 18, 1999” in the blank that had been left by the parties for the Deadline in the draft Hearing Order. The District Court also filled in other dates that had been left blank by the parties in the Draft Hearing Order, the determination of which followed from the selection of June 18, 1999. The District Court approved the Prides Settlement by an order dated June 15,1999.

Under the terms of the Stipulation, Cen-dant agreed to distribute one Right, with a theoretical value of $11.71, for each PRIDES owned as of the close of business on April 15, 1998. See also In re Cendant Corp. Prides Litig., 51 F.Supp.2d at 539-40.3 To collect the Rights each PRIDES owner was required to submit a valid proof of claim by June 18, 1999, the deadline selected by the District Court at the hearing and inserted into the Hearing Order. Under the terms of the Settlement Hearing Order, a settlement administrator, Valley Forge Administrative Services, was to verify the proofs of claim. If the administrator rejected a claim, each claimant would be given twenty days after the administrator mailed a request to cure its claim. Further, the administrator was required to send a final notice of disallowance to claimants within 60 days of the deadline for the submission of proofs of claim, i.e., within 60 days of June 18, 1999. The deadlines were provided in both individual and published class notices. In short, the deadlines respecting the submission of proofs of claim and cures of proofs of claim had not been negotiated by the parties, but rather these deadlines had been supplied by the District Court in the order preliminarily approving the settlement.

Accordingly, claims were submitted and during July 1999, the claims administrator issued requests to cure, and on August 17, 1999, rejection letters. In addition, although not obligated to do so, on August 5, 1999, the administrator mailed a second request to cure to most institutional [191]*191clients, and although not obliged to do so, on August 27, 1999, mailed another letter urging claimants whose claims or cures were being attacked as being untimely to provide explanation to the District Court by September 7,1999.

On September 7, 1999, Cendant filed a motion to disallow late and purportedly deficient proofs of claim. Cendant objected to fifty-four claims filed after the June 18, 1999 deadline, one hundred and forty-one claims accepted by the administrator after the twenty-day time-to-cure period had expired, and twelve claims that Cen-dant asserted were supported by insufficient documentation. Claims for approximately 20.7 million Rights had not been disputed.

The PRIDES Class, in response, submitted a brief and supporting papers on behalf of class members whose claims were being disputed generally, and in particular on behalf of certain class members. The PRIDES Class also filed a cross-motion to extend the time for filing proofs of claim and to extend the time to respond to the administrator’s requests to cure. The PRIDES Class asserted that those claims should be allowed that either were set in motion toward the administrator by June 18, 1999 or were cured by August 17, 1999, or were accompanied by an explanation for tardiness; and were completed and substantiated to the reasonable satisfaction of the administrator. At a hearing held on October 6, 1999, the District Court described its role as follows:

I select the date which is subject to change. And you [Cendant] and everyone else involved in this case knows that that date was subject to change based upon cause.

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Bluebook (online)
233 F.3d 188, Counsel Stack Legal Research, https://law.counselstack.com/opinion/welch-forbes-inc-v-cendant-corp-ca3-2000.