Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Cendant Corp. Securities Litigation

July 18, 2006; as amended August 30, 2006

IN RE: CENDANT CORPORATION SECURITIES LITIGATION, SHELDON DANUFF, SKAT CAPITAL LP AND JOEL D. ZYCHICK, APPELLANTS


On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 98-cv-01664).

The opinion of the court was delivered by: Ambro, Circuit Judge

PRECEDENTIAL

District Judge: Honorable William H. Walls

Argued March 9, 2006

Before: AMBRO and BECKER,*fn1 Circuit Judges, and STAGG,*fn2 District Judge.

OPINION OF THE COURT

Sheldon Danuff, SKAT Capital, and Joel Zychick (collectively, "Appellants") challenge a District Court order rejecting their claims for compensation under a plan of allocation for a class action settlement. At the threshold, this case requires us to decide whether Appellants' notice of appeal was timely filed. Under the rules of civil and appellate procedure, the notice was timely filed only if the District Court's order ruling against Appellants was not a "separate document" within the meaning of Federal Rule of Civil Procedure 58. To determine whether the order satisfied the separate-document requirement, we must resolve two subsidiary questions: (1) whether Rule 58 mandates that a district court issue two distinct documents when disposing of a case, and (2) whether a lengthy recitation of facts and procedural history prevents an order from complying with the separate-document requirement.

While we reject the contention that the separate-document rule requires two separate documents, we hold that a lengthy discussion of facts and procedural history precludes an order from complying with Rule 58. Because the final order in this case was not a separate document that triggered the typical 30-day appeal period, Appellants' seemingly late notice of appeal fits in the safe harbor Rule 58 and Federal Rule of Appellate Procedure 4(a)(7) provide, and was timely filed; we thus have jurisdiction over the case.

As to the merits, we determine that Appellants are not entitled to compensation under the terms of the allocation plan. Accordingly, we affirm.

I. Factual and Procedural Background

The relevant facts are undisputed. Appellants held common stock in Getko Group, which was acquired by CUC International ("CUC"); CUC then merged with another company, HFS Incorporated, to form Cendant Corporation ("Cendant"). As a result of these combinations, Appellants received stock in Cendant in exchange for their stock in Getko.

CUC's accounting irregularities spawned a securities class action suit, filed on behalf of all persons or entities who purchased or otherwise acquired publicly traded securities of Cendant and CUC and who were injured thereby. A Plan of Allocation of Net Settlement Fund (the "Plan"), which was previously approved by this Court, In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001), was crafted to resolve all potential claims. As members of the plaintiff class certified by the District Court, Appellants were entitled to seek compensation from the Net Settlement Fund under the terms of the Plan for losses sustained by holding Cendant (previously CUC) stock during the period from May 31, 1995, to August 28, 1998 (the "Class Period"). This case arises from the claims administrator's determination that Appellants were not entitled to any compensation.

At issue is the Plan's so-called "netting provision," which ensures that claimants only recover for net losses. All three Appellants sold a substantial share of their Cendant holdings during the Class Period-but before the public disclosure of Cendant's accounting irregularities-when the stock price was artificially inflated due to the accounting irregularities; they also sustained considerable losses on securities held after those irregularities were disclosed. Each Appellant, with the possible exception of SKAT, made a net gain; and SKAT reaped a net gain unless its losses are computed on the basis of the date on which its shares became freely tradeable (September 6, 1995) rather than the date on which its shares were acquired (June 27, 1995). Processing Appellants' claims on the basis of the date of acquisition, the claims administrator found that Appellants did not merit compensation under the Plan because the profits they made by selling stock at artificially inflated prices cancelled out any losses they suffered on stock held after the irregularities were disclosed.

The District Court held a hearing to consider the objections of class members whose claims had been rejected. At the hearing, Appellants argued that the netting provision should not have been applied to their claims because the part of the Plan that governs their compensation does not provide for losses to be offset by gains. The District Court rejected this contention, noting that Appellants' argument was at odds with the commonsense principle embedded in the Plan: "If there were a net impact of the fraud upon [a] claimant's holding as a benefit[,] then there is little reason to compensate . . . [such claimant] for any losses." App. 30.

On August 19, 2003, the District Court issued an order granting the class lead plaintiffs' motion to adopt the claims administrator's recommendation to reject all disputed claims (the "Order"). It was entered on the docket on August 21, 2003. Appellants thought that the District Court had not satisfied the separate-document requirement of Rule 58, and were apparently under the impression that they could not appeal the Order until a complementary judgment was separately entered.*fn3 Hence, on January 14, 2004, Appellants filed a motion for entry of judgment on the Order. Appellants now claim that this motion was rendered moot on January 19, 2004, when they say entry of judgment was effected by operation of law pursuant to Federal Rule of Civil Procedure 58(b)(2)(B), and they appealed within 30 days thereafter (February 13, 2004).

We address two questions. First, we determine whether Appellants filed a timely notice of appeal. As noted above, this requires us to decide whether the District Court's Order satisfied the separate-document rule. Second, assuming Appellants' notice of appeal was timely filed, we determine whether Appellants are entitled to compensation under the Plan.

II. Jurisdiction: Separate-Document Rule

A. Background

Federal Rule of Appellate Procedure ("FRAP") 4-in conjunction with Federal Rule of Civil Procedure 58-sets out the mechanism for determining when the time to appeal begins. FRAP 4(a)(1)(A) requires (with exceptions irrelevant here) that notices of appeal be filed "within 30 days after the . . . order appealed from is entered." Thus, Appellants typically would have had 30 days from the entry of the Order to appeal. Under FRAP 4(a)(7)(A)(ii), however, "if Federal Rule of Civil Procedure 58(a)(1) requires a separate document" to put the parties on notice that the time to appeal has started, the appeal period begins on the earlier of (1) when that separate document is entered or (2) when 150 days have run from the entry of the Order in the docket.

Because certain exceptions in Rule 58 do not apply here, the general requirement of Rule 58 governed: "[e]very judgment*fn4 . . . must be set forth on a separate document," Fed. R. Civ. P. 58(a)(1). To know whether Appellants' appeal was timely, we must determine which date in Rule 4(a)(7)(A)(ii) applies to begin the appeal period: August 21, 2003, or January 19, 2004. If the former, Appellants' appeal-filed on February 13, 2004-was too late; if the latter, the appeal was timely. The answer depends on whether the District Court's Order qualifies as a separate document.

Both Rule 58 and Rule 4 were amended in 2002. Before 2002, if a district court did not enter a separate judgment, the appeal period never started-and thus theoretically never ended. After the amendments, the lack of a separate document only gives the potential appellant another 150 days. The situation for potential appellants is now more certain, but the touchstone of the separate-document requirement remains: a judgment separate from an opinion or decision.

We face the question whether the Order issued by the District Court (after an oral ruling) meets the separate-document requirement, as it contains an extensive factual and procedural background discussion.

B. Analysis

Appellants assert that the Order was not a separate document in the way required by Rule 58(a)(1). Instead, they claim that judgment was entered by operation of law on January 19, 2004, pursuant to Rule 58(b)(2)(B) (providing that a judgment entered in the civil docket and subject to Rule 58(a)(1), but not set forth in a separate document, will be deemed "entered . . . when 150 days have run from entry in the civil docket . . . [August 21, 2003]"). (One hundred fifty days from August 21, 2003, is January 19, 2004.) Appellants filed their notice of appeal almost six months after the Order was entered but less than 30 days from the date on which Appellants claim the judgment was entered by operation of law. Whether their notice of appeal was timely ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.