Present: SEITZ, Chief Judge, and VAN DUSEN, ALDISERT, ADAMS, GIBBONS, ROSENN, HUNTER and WEIS, Circuit Judges.
The petition for rehearing filed by Plaintiffs-Appellees in the above entitled case having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied.
ADAMS, Circuit Judge, Dissenting Sur Denial of Petition for Rehearing.
I respectfully dissent from the order denying rehearing in this case, because I believe that the petition presents a serious question regarding "notice" in connection with proposed settlements of class actions. Also, it addresses important problems relating to standing and the nature of relief when notice is deemed by an appellate court to be inadequate.
The settlement here was reached by the named plaintiffs and Villager. It provided that 660,000 shares of Villager stock was to be made available for distribution to those who had purchased Villager stock in 1968 and 1969, the period during which fraudulent statements regarding the company were allegedly made.
Plaintiffs had sought to have the matter declared a class action under Rule 23(c) on November 13, 1970, an early stage of the litigation, but the district court deferred making the necessary determination. When the proposed settlement developed, the plaintiffs again requested the district court to declare the matter a class action. Although in their petition for class determination plaintiffs had offered to send individual notices, predicated on an appropriate list being prepared and submitted by Villager, the district court entered an order on June 7, 1972, providing that notice by publication would be sufficient under Rule 23(c)(2). Also, the class was to consist of "purchasers" during 1968 and 1969. Publication appeared on June 23 and June 30, 1972, in both the Philadelphia Evening Bulletin and Wall Street Journal. It provided for a cut-off date of August 1st for the filing of all claims or the filing of an election to be excluded from the class, or for filing objection to the settlement; and for a hearing on August 31, 1972, to determine whether the settlement was fair and reasonable and should be approved. The August 1st deadline was later extended to August 23, 1972.
On August 31, 1972, Burnham & Co. and duPont Glore Forgan, two large and widely-known brokerage firms, presented a rule to adjourn the hearing in order to permit additional time to solicit and file claims on behalf of individual customers of these firms who may have purchased Villager stock during 1968 and 1969, but kept such stock in street name. Specifically, Burnham and duPont sought extensions of time until the end of September, 1972, to file claims on behalf of their customers. At the hearing it was made clear that duPont and Burnham had learned of the proposed class settlement by the latter part of July. No explanation was given by them as to why they did not request an extension, at that time, before the deadline fixed by the court. They did explain that it would take a number of weeks to ascertain the names of their customers who may have bought Villager stock in 1968 and 1969. An affidavit filed by Burnham on August 31, 1972, stated that "because of an error in a computer rum and because of the number of customers and transactions involved" it had taken several weeks to obtain the information. DuPont did not file an affidavit, but at the hearing on August 31, 1972, its counsel stated that there had been a delay caused because of recent mergers and the fact the material was in a warehouse.
Claims representing 11,000,000 shares of Villager stock had apparently been filed by the deadline. Also, customers of Burnham had sent in a substantial number of verified claims within the time designated by the district judge.
There was no suggestion at the hearing before the district court that the settlement had been influenced by fraud or collusion, that it was not fair, or that it was unreasonable. Indeed, on August 31, 1972, the day the district judge approved the settlement in open court, counsel for duPont and Burnham were present in the courtroom and did not object to the settlement.
The notices of appeal filed by Burnham and duPont indicate that these companies were appealing primarily from the failure of the district court to extend the period of time for filing claims for their customers, or opting out of the settlement.
After the appeals were filed, Burnham and duPont sought a stay of the distribution of the Villager stock. This was denied by the district court on October 4, 1972. Burnham and duPont did not apply to this Court for a stay of the distribution.
Under the circumstances, there would seem to be considerable question whether Burnham and duPont have standing to assert claims regarding the nature of the notice of the class action settlement or regarding the order of the trial judge in refusing to grant additional time for filing notice of claims or for opting out. The real injury caused by the nature of the notice or the failure to extend the time, is suffered by their customers. And in any event, Burnham and duPont would not appear to have standing to complain on this appeal about the nature of the notice since the specific complaint pressed by them before the ...