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In re Cendant Corp. Securities Litigation

August 4, 2008

IN RE CENDANT CORPORATION SECURITIES LITIGATION


The opinion of the court was delivered by: Walls, Senior District Judge

FOR PUBLICATION

OPINION

Presently before the Court is whether Defendants Cendant Corporation and certain other Defendants ("Cendant"),*fn1 under the Stipulation of Settlement ("Stipulation") with Lead Plaintiffs California Public Employees' Retirement System, New York State Common Retirement Fund, and New York City Pension Funds ("Lead Plaintiffs"),*fn2 may petition the Court for reimbursement of certain fees and expenses arising out of its litigation with Ernst & Young LLP ("E&Y")*fn3 when any net recovery from that litigation is to be shared between Lead Plaintiffs and Cendant. This Court reviews de novo a recommendation and report by the Special Discovery Master Alvin Weiss ("SDM Weiss") finding that Cendant may apply for "reimbursement of its attorneys' fees and expenses" and that nothing in the Stipulation prohibits the Court from awarding some, none, or all of Cendant's legal fees. (SDM Weiss Decision 4.) SDM Weiss's recommendation is adopted.

FACTS AND PROCEDURAL BACKGROUND

On August 15, 2000, this Court approved the Stipulation between Lead Plaintiffs and Cendant. In consideration for Lead Plaintiffs' releasing their claims, Cendant agreed to provide two forms of monetary compensation and to make certain changes in corporate governance. The monetary compensation included a cash payment of $2,851,500,000, plus interest, and a share of any net recovery arising out of Cendant's suit against E&Y. After eight years of intensive litigation, E&Y agreed to pay Cendant $298,500,000 in full settlement of all claims by each party against the other. Counsel for Cendant informed counsel for Lead Plaintiffs that Cendant had settled with E&Y, that the proceeds of the settlement would be placed in an interest-bearing account, and that Cendant would seek reimbursement of certain fees and expenses incurred throughout its litigation with E&Y. Lead Plaintiffs dispute Cendant's right to apply for the reimbursement of fees and expenses.

LEGAL STANDARD

Under the Stipulation, New Jersey substantive law applies regardless of New Jersey's choice of law rules. (Pl.'s Initial Br. Ex. A ¶ 41.) Both parties and SDM Weiss agree that an effective statement of the relevant New Jersey law governing the interpretation of a settlement agreement can be found in Impink ex rel. Baldi v. Reynes:

"[A] settlement between parties to a lawsuit is a contract like any other contract, which may be freely entered into and which a court, absent a demonstration of fraud or other compelling circumstances, should honor and enforce as it does other contracts." Jennings v. Reed, 381 N.J. Super. 217, 227, 885 A.2d 482 (App. Div. 2005) (internal quotations and citations omitted). . . . In Karl's Sales & Serv., Inc. v. Gimbel Bros., Inc., 249 N.J. Super. 487, 493, 592 A.2d 647 (App. Div.), certif. denied, 127 N.J. 548, 606 A.2d 362 (1991), we stated that "where the terms of a contract are clear and unambiguous there is no room for interpretation or construction and the courts must enforce those terms as written. Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43, 161 A.2d 717 (1960); Levison v. Weintraub, 215 N.J. Super. 273, 276, 521 A.2d 909 (App. Div.1987), certif. denied, 107 N.J. 650, 527 A.2d 470 (1987). The court has no right 'to rewrite the contract merely because one might conclude that it might well have been functionally desirable to draft it differently.' Id.; Brick Twp. Mun. Util. Auth. v. Diversified R.B. & T., 171 N.J. Super. 397, 402, 409 A.2d 806 (App. Div. 1979). Nor may the courts remake a better contract for the parties than they themselves have seen fit to enter into, or to alter it for the benefit of one party and to the detriment of the other. James v. Federal Ins. Co., 5 N.J. 21, 24, 73 A.2d 720 (1950)." Ibid.

Furthermore, our Supreme Court has observed that "[i]t is of course not the province of the court to make a new contract or to supply any material stipulations or conditions which contravene the agreements of the parties." Marini v. Ireland, 56 N.J. 130, 143, 265 A.2d 526 (1970).

396 N.J. Super. 553, 559--60, 935 A.2d 808, 812 (App. Div. 2007).

ANALYSIS

Cendant expended a substantial amount of money to recover from E&Y. That recovery, currently in an interest-bearing account, will be partially shared with the Class. Before the Court is whether, under the Stipulation, Cendant may apply to recover certain attorneys' fees and other expenses incurred during its litigation with E&Y. The Court finds that the Stipulation allows for Cendant to petition for reimbursement of fees and costs. The amount of fees and costs to be reimbursed, if any, is not at issue at this time.

The Stipulation leaves the door open for Cendant to recover its expenses. Under the Stipulation, the "Net Settlement Fund" is what is ultimately distributed to the Class Members. (Pl.'s Initial Br. Ex. A ¶¶ 1(y), 2(g), 22(dd).) "Net Settlement Fund" is defined in the Stipulation as "the Settlement Fund less any attorneys' fees, expert fees, costs and expenses approved by the Court." (Id. ¶ 1(v).) "Settlement Fund" means "the sum of the Settlement Amount plus one-half of any net recovery obtained by Cendant . . . from E&Y." (Id. ¶ 1(dd).) The "Settlement Amount" is "Two Billion, Eight Hundred Fifty One Million, Five Hundred Thousand Dollars ($2,851,500,000) in cash." (Id. ¶ 1(c).) Substituting in the relevant portions of the latter definitions, "Net Settlement Fund" is defined as the sum of $2,851,500,000 in cash, plus one-half of any net recovery obtained by Cendant from E&Y, less any attorneys' fees, expert fees, costs and expenses approved by the Court. The Stipulation's clear and unambiguous term, "less any attorneys' fees, expert fees, costs and expenses approved by the Court" (emphasis added), allows Cendant to seek reimbursement from the Settlement Fund of the fees it incurred during its litigation with E&Y.

Lead Plaintiffs correctly admonish that "any" can have different meanings depending on the setting, but they never offer a constrictive reading of "any" that works in this context. (Pl.'s Reply Br. 6.) Among the cases they cite, only Nixon v. Missouri Municipal League employs a narrow reading of the word "any." 541 U.S. 125, 132--33 (2004). There, the Court found that taking a broad definition of "any" would lead to "strange and indeterminate results." Id. Reasoning that Congress could not have intended such results, the Court found that "any" did not mean "all" or "every" under the circumstances. Id. Here, however, the natural reading of "any" as "all" or "every" does not lead to "strange or indeterminate" results, is consistent with the entire Stipulation, and accords with the likely intentions of the parties (see infra pp. 5--8). "Any" is often synonymous with "either," "every," or "all." Black's Law Dictionary 94 (6th ed. 1990); see also United States v. Rosenwasser, 323 U.S. 360, 363 (1945) ("The use of the words 'each' and 'any' to modify 'employee,' which in turn is defined to include 'any' employed individual, leaves no doubt as to the Congressional intention to include allemployees within the scope of the [Fair Labor Standards] Act unless specifically excluded.") (emphasis added); In re Ordinance 04-75, 192 N.J. 446, 461, 931 A.2d. 595, 603 ...


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