Featured Chrome Extensions:

Casey IRACs are produced by an AI that analyzes the opinion’s content to construct its analysis. While we strive for accuracy, the output may not be flawless. For a complete and precise understanding, please refer to the linked opinions above.

Keywords

lawsuitsettlementplaintiffdamageslitigationattorneydiscoveryappealcorporationclass actionobjection
settlementplaintiffdefendantappealcorporationobjection

Related Cases

Koen Book Distributors, Inc. v. Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C., 212 F.R.D. 283
View Case »
Wiesmueller v. Kosobucki, 513 F.3d 784
View Case »
Huskinson & Brown v. Wolf, 32 Cal.4th 453, 84 P.3d 379, 9 Cal.Rptr.3d 693, 04 Cal. Daily Op. Serv. 1473, 2004 Daily Journal D.A.R. 2254
View Case »
United States v. Mount Sinai Hospital, 185 F.Supp.3d 383, 94 Fed.R.Serv.3d 1340, 94 Fed.R.Serv.3d 1360
View Case »
Christeson v. Roper, 574 U.S. 373, 135 S.Ct. 891, 190 L.Ed.2d 763, 83 USLW 4071, 15 Cal. Daily Op. Serv. 582, 2015 Daily Journal D.A.R. 753, 25 Fla. L. Weekly Fed. S 56
View Case »
Justia Law Link
LexisNexis Link
Westlaw Link
CourtListener Link
Oyez Link

In re Cendant Corp. Litigation, 264 F.3d 201, Fed. Sec. L. Rep. P 91,521, 50 Fed.R.Serv.3d 1058

Facts

Cendant Corporation, formed by a merger in 1997, faced allegations of accounting irregularities that led to a significant drop in its stock price and resulted in over $20 billion in losses for shareholders. Following the discovery of these irregularities, numerous class action lawsuits were filed against Cendant and its auditors, Ernst & Young. The District Court consolidated these cases and appointed a lead plaintiff and lead counsel, ultimately approving a settlement that included substantial cash payments and corporate governance changes.

Cendant Corporation, the main defendant, was formed by a December 17, 1997 merger of CUC International, Inc. (CUC) and HFS Incorporated (HFS).

Issue

The main legal issues included whether the District Court abused its discretion in approving the settlement and the plan for allocation of damages, and whether the auction process used to select lead counsel was consistent with the Private Securities Litigation Reform Act.

The most important question presented by these appeals is whether this decision was compatible with the PSLRA.

Rule

The court applied the Private Securities Litigation Reform Act, which requires the appointment of a lead plaintiff with the largest financial interest and allows that plaintiff to select counsel, subject to court approval.

Under the Reform Act, one of a district court's first tasks is to select a lead plaintiff.

Analysis

The court found that the District Court did not abuse its discretion in approving the settlement based on the Girsh factors, which weigh the fairness and adequacy of class action settlements. The court also determined that the auction process for selecting lead counsel was inconsistent with the PSLRA, which confers the right to select counsel to the lead plaintiff.

Although we think that the question of the fairness of the settlement under the Girsh factors is closer than the District Court made it out to be, our application of those factors supports the conclusion that the District Court did not abuse its discretion in approving the Cendant settlement.

Conclusion

The Court of Appeals affirmed the District Court's approval of the settlement but vacated the attorney fee award, remanding the case for further proceedings regarding the fee application.

We conclude that the court's decision to hold an auction to select lead counsel was inconsistent with the Reform Act.

Who won?

Cendant Corporation and Ernst & Young prevailed in the approval of the settlement, as the court found the settlement to be fair and reasonable despite objections from stockholders.

Cendant and Ernst & Young prevailed in the approval of the settlement, as the court found the settlement to be fair and reasonable despite objections from stockholders.

You must be