Third Circuit disposition — 002185a-pdf

Volume 1 of 2
Filed May 9, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-2185
IN RE: CENDANT CORPORATION LITIGATION
JANICE G. DAVIDSON; ROBERT M. DA VIDSON, in his
capacity as trustee of Robert M. Davidson Charitable
Remainder Unitrust, and as co-trustee of Elizabeth A.
Davidson Irrevocable Trust, Emilie A. Davidson Irrevocable
Trust, John R. Davidson Irrevocable T rust, Emilie A.
Davidson Charitable Remainder Unitrust and John R.
Davidson Charitable Remainder Unitrust,
Appellants
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 98-cv-01664)
District Judge: Honorable William H. W alls
Argued: November 16, 2000
Before: SLOVITER, AMBRO, and GARTH, Circuit Judges
(Filed: May 9, 2001)
GERALD W. PALMER, ESQUIRE
(Argued)
RICKY L. SHACKELFORD, ESQUIRE
EUGENIA L. CASTRUCCIO,
ESQUIRE
Jones, Day, Reavis & Pogue
555 West Fifth Street, Suite 4600
Los Angeles, California 90013
Counsel for Appellants

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SAMUEL KADET, ESQUIRE (Argued)
JOSEPH N. SACCA, ESQUIRE
KAREN CACACE, ESQUIRE
Skadden, Arps, Slate, Meagher &
Flom LLP
Four Times Square
New York, New York 10036
Counsel for Appellee Cendant
Corporation
LEONARD BARRACK, ESQUIRE
GERALD J. RODOS, ESQUIRE
JEFFREY W. GOLAN, ESQUIRE
Barrack, Rodos & Bacine
3300 Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19103
MAX W. BERGER, ESQUIRE
DANIEL L. BERGER, ESQUIRE
JEFFREY N. LEIBELL, ESQUIRE
Bernstein Litowitz Berger &
Grossmann LLP
1285 Avenue of the Americas
New York, New York 10019
Counsel for Appellees California
Public Employees' Retirement System,
New York State Common Retirement
Fund, and New York City Pension
Funds
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OPINION OF THE COURT
AMBRO, Circuit Judge:
Janice G. Davidson and Robert M. Davidson, in their
individual capacities and as trustees of certain trusts
(collectively, the "Appellants"),1 appeal from a final decision
of the United States District Court for the District of New
Jersey (the "District Court"). That decision, involving a
securities class action lawsuit (the "class action"), held that
Appellants, as a result of their failur e to opt out of the
class, were subject to the class settlement, and could not
further pursue arbitration in California of claims they
brought against Appellee Cendant Corporation ("Cendant").
Appellants have presented this Court with thr ee issues
on appeal. First, they assert that the District Court erred in
holding that the class included them. Second, Appellants
argue that the District Court abused its discr etion in failing
to grant them an extension of time to opt out of the class.
Finally, they contend that the District Court err ed in
enjoining their arbitration claims and, in doing so, violated
the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "FAA").
After considering these arguments, we hold that the District
Court did not err in finding that Appellants wer e members
of the class and did not abuse its discretion in refusing to
grant them an extension of time to opt out of the class.
However, we hold that the District Court did err in
enjoining, in its entirety, Appellants' arbitration. While
Appellants are subject to the class settlement, and
therefore are enjoined from pursuing any claims that fall
within that settlement, they are not enjoined from
pursuing, in arbitration, any claims that fall outside the
settlement's scope.
I. Facts and Procedural History
In 1982, Janice Davidson founded Davidson &
_________________________________________________________________
1. Janice G. Davidson and Robert M. Davidson, solely in their individual
capacities, are collectively referr ed to as the "Davidsons."
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Associates, Inc. ("DAI"), an entity later incorporated in
California in 1984. From 1984 until 1996, the Davidsons
were officers and directors of DAI. In that capacity, they led
the company as it developed, manufactured, published, and
distributed educational and entertainment softwar e
products for home and school use. The company derived its
revenues from sales to software distributors, specialty
software stores, computer superstor es and mass
merchandisers in international markets, international
catalog sales to schools and teachers, and thr ough
technology licensing and software manufacturing.
In April 1993, DAI issued an initial public of fering ("IPO"),
selling 200 million shares of common stock at $13 per
share. Thereafter, DAI listed its stock on NASDAQ. After the
IPO, the Davidsons controlled approximately 70% of DAI's
outstanding common stock, with a majority of that stock in
various charitable and irrevocable trusts contr olled by the
Davidsons as trustees.2
Following the IPO, DAI received a number of unsolicited
inquiries with respect to possible mergers, acquisitions,
joint ventures, and direct investments. No initial inquiry
resulted in a transaction. However, in June 1995, the
Davidsons were approached by CUC Inter national, Inc.
("CUC") in connection with its possible acquisition of DAI.
Although the first round of negotiations ended without an
agreement, the negotiations were r esumed in December
1995 and continued until July 1996, when CUC acquir ed
DAI through a merger and DAI became a subsidiary of
CUC.
In connection with the merger, DAI shar eholders received
85/100 of a CUC share in exchange for each DAI share, as
negotiated in part based on the market price of each
company's shares. As a result, the Davidsons received
1,259,634 shares of CUC common stock, and the trusts
controlled by the Davidsons received 31,245,465 shares of
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2. The Davidsons claim to have controlled 78% of DAI's outstanding
shares immediately after the IPO. Cendant alleges that, at the time DAI
merged with CUC International, Inc. (later Cendant), the Davidsons
controlled 71.3% of the outstanding DAI common shares (1.4% in each
person's individual capacity and 68.5% in the various trusts).
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CUC common stock. The merger agreement also contained
an arbitration provision3 and a "bust out" provision.4
Following the merger, the Davidsons became directors of
CUC and officers and directors of CUC's DAI subsidiary. In
addition, the DAI shares owned by the public were
exchanged for common shares of CUC that could be
immediately traded over the New York Stock Exchange
("NYSE"). Appellants' shares, however , could not be
immediately traded. Due to the number of shar es
Appellants received, they were deemed affiliates of CUC and
could not publicly trade their stock on the NYSE unless
their shares were subsequently made part of a registered
public offering separate from the DAI/CUC merger.5
In January 1997, following several months of acrimony
between CUC senior management and the Davidsons, CUC
terminated them as corporate officers though they
remained directors. In March 1997, Appellants served CUC
with a demand for arbitration, asserting claims in
connection with the DAI/CUC merger agr eement and
specifically as to the Davidsons' employment
responsibilities with CUC. In May 1997, Appellants and
_________________________________________________________________
3. The arbitration provision provided:
Any controversy, dispute or claim arising out of or relating to this
Agreement or the breach hereof which cannot be settled by mutual
agreement . . . shall be finally settled by arbitration . . . . The parties
agree that this clause has been included to rapidly and
inexpensively resolve any disputes between them with respect to this
Agreement, and that this clause shall be gr ounds for dismissal of
any court action commenced by either party with r espect to this
Agreement, other than post-arbitration actions seeking to enforce an
arbitration award.
4. The "bust out" provision per mitted DAI to terminate the merger
agreement if CUC's average share price fell below $29 per share in a
defined period in order to protect the bargained-for value to be received
by the DAI shareholders.
5. As discussed below, Appellants' shares were restricted pursuant to the
Securities Act of 1933. See 17 C.F.R.§ 230.145; infra note 16 and
accompanying text. However, the restrictions could be easily
circumvented. In fact, just four months after the merger, in October
1996, Appellants sold more than twenty million of the shares they
received in the DAI/CUC merger.
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CUC entered into a settlement agreement (the "Settlement
Agreement"), which provided, inter alia, for the Davidsons
to receive options to purchase 1.6 million shares of CUC
common stock6 in exchange for a r elease by Appellants and
the Davidsons' resignation from all r emaining positions
with CUC. The Settlement Agreement also contained an
arbitration provision.7
Thereafter, on December 18, 1997, CUC and HFS, Inc.
("HFS") merged, with CUC as the surviving company. Upon
completion of the merger the company became known as
Cendant.
After the close of the stock market on April 15, 1998,
Cendant publicly disclosed that accounting and
bookkeeping irregularities had occurred at CUC and that it
would restate its earnings for 1997. This caused its stock
value to plummet 46% and triggered several class action
lawsuits on behalf of investors who purchased CUC or
Cendant stock during 1997. In late August 1998, Cendant
further disclosed that the irregular accounting activity
dated back to 1995, and that in addition to the 1997
restatement, new earnings would be r eleased for 1995 and
1996. This second disclosure triggered several more
lawsuits involving purchases of CUC securities during the
_________________________________________________________________
6. Interestingly, at oral argument Cendant conceded that these 1.6
million options are not, and have never been, considered part of the
class action.
7. That provision stated:
Notwithstanding anything to the contrary contained in this
Agreement or the Surviving Agreements and Rights, any
controversy, dispute or claim arising out of or relating to this
Agreement or any of the Surviving Agreements and Rights or the
breach hereof or thereof which cannot be settled by mutual
agreement shall be finally settled by binding arbitration in
accordance with the Federal Arbitration Act . .. . The parties agree
that this Section has been included to rapidly and inexpensively
resolve any disputes between them with r espect to this Agreement
or any of the Surviving Agreements and Rights, and that this
Section shall be grounds for dismissal of any court action
commenced by any party with respect to this Agr eement or any of
the Surviving Agreements and Rights, other than post-arbitration
actions seeking to enforce an arbitration awar d.
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broader period of alleged fraud. This new time frame
presumably included the time during which Appellants
engaged in the merger transaction with CUC. In total,
Cendant restated and reduced its pr e-tax operating income
for the relevant periods by approximately $500 million.
Between April and August 1998, at least sixty-four
purported securities fraud class action lawsuits wer e filed
as a result of the April 1998 disclosur e. By order of the
Judicial Panel on Multidistrict Litigation (the"MDL Panel"),
all Cendant cases relating to the accounting irregularities
were transferred to the District of New Jersey. During the
process to consolidate the class actions in the District of
New Jersey, fifteen motions were filed for appointment as
the lead plaintiff. On May 29, 1998, the District Court
consolidated all of the accounting irregularity actions
pending against Cendant under the caption In r e Cendant
Corporation Securities Litigation.8 On September 8, 1998,
the District Court appointed the California Public
Employees' Retirement System, the New Y ork State
Common Retirement Fund, and the New York City Pension
Funds, all public investment funds, as lead plaintif fs
(collectively, the "Lead Plaintiffs").
Following a case management conference, the Lead
Plaintiffs on December 14, 1998, filed their Amended and
Consolidated Class Action Complaint (the "Complaint").
That Complaint defined the class repr esented as
[a]ll persons and entities who purchased or otherwise
acquired publicly traded securities . . . either of
Cendant or CUC during the period beginning May 31,
1995 through and including August 28, 1998 and who
were injured thereby, including all persons or entities
who exchanged shares of HFS common stock for
shares of CUC stock pursuant to the Registration
_________________________________________________________________
8. While this Court has heard arguments on and issued decisions in
other Cendant cases involving different subject matters, see, e.g., In re
Cendant Corp. Prides Litig., 233 F.3d 188 (3d Cir. 2000) (hereinafter
Cendant Prides I); In re Cendant Corp. Prides Litig., 235 F.3d 176 (3d Cir.
2000) (hereinafter Cendant Prides II); In re Cendant Corp. Prides Litig.,
243 F.3d 722 (3d Cir. 2001), those decisions do not affect the outcome
of this case.
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Statement . . . . Excluded from the Class ar e: (i)
defendants; (ii) members of the family of each
individual defendant; (iii) any entity in which any
defendant has a controlling interest; (iv) officers and
directors of Cendant and its subsidiaries and affiliates;
and (iv) [sic] the legal representatives, heirs, successors
or assigns of any such excluded party.
Also on December 14, 1998, the Lead Plaintif fs filed a
motion for class certification. That motion defined the class
as
all persons and entities who purchased or acquired
Cendant Corporation ("Cendant" or the "Company") or
CUC International, Inc. ("CUC") publicly traded
securities during the period May 31, 1995 thr ough
August 28, 1998, inclusive (the "Class Period"), and
were injured thereby, including but not limited to all
persons who exchanged their HFS Incorporated ("HFS")
common stock for common stock of CUC pursuant to
a Registration Statement and Joint Proxy
Statement/Prospectus dated August 28, 1997.
Excluded from the Class are defendants her ein,
members of the immediate family of each of the
Individual Defendants, officers and directors of
Cendant, parents, subsidiaries and affiliates of the
Company, and the legal representatives, heirs,
successors or assigns of any such excluded party. . . .
Lead Plaintiffs asserted they would be adequate class
representatives because they "allege a continuing course of
conduct that affected all Class members, whether they
bought early or late in the Class Period, or whether they
bought Cendant securities on the open market or pursuant
to the Registration Statement and Joint Prospectus in the
Merger."
Three days later, on December 17, 1998, Appellants
initiated arbitration in California against Cendant, seeking
rescission of the Settlement Agreement and damages
resulting from receipt of the overvalued CUC shares in
connection with the DAI/CUC merger. In response, on
January 21, 1999, Cendant filed suit in the United States
District Court for the Central District of Califor nia (the
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"California Central District") seeking to enjoin the
arbitration. Cendant's complaint alleged violations of its
rights under the FAA and did not interpose the existence of
the class action as a ground for seeking injunctive relief
from the arbitration.
Meanwhile, on January 27, 1999, the District Court
granted Lead Plaintiffs' motion for class certification.
Without restating or affirmatively announcing the class
definition, the District Court ordered the certified class to
represent "all purchasers or acquirers of Cendant
Corporation or CUC International, Inc. publicly traded
securities between May 31, 1995 and August 28, 1998 who
were injured thereby."
In response to Cendant's motion to enjoin pr eliminarily
the California arbitration and Appellants' motion for
summary judgment to dismiss Cendant's complaint,filed
on February 17, 1999, the California Central District, on
April 14, 1999, found in favor of Appellants. It ruled that
Appellants were entitled to summary judgment because
"the evidence indicates that claims for r escission of the
agreement are covered by the br oad arbitration provision."
The California Central District entered afinal order
dismissing Cendant's injunction action, though it did not
explicitly compel arbitration. Cendant appealed that order.9
In an exercise of caution, Appellants, on April 14, 1999,
filed a "placeholder" action in the Califor nia Central
District. They did so to ensure that, in the event a court
determined that some or all of their claims were not
arbitrable, they nonetheless would comply with the one
year statute of limitations applicable to their claims. That
complaint expressly stated that they wer e not waiving their
right to arbitrate.10
_________________________________________________________________
9. That appeal, Cendant Corp. v. Davidson, J., et al., No. 99-55788, is
currently pending before the United States Court of Appeals for the
Ninth Circuit. The parties agreed to stay further proceedings in the
arbitration until the Ninth Circuit rules on Cendant's appeal.
10. "[T]his Complaint is filed in or der to ensure that plaintiffs have
brought an action with respect to the claims asserted herein within any
applicable statute of limitation, . . . in the event that any of plaintiffs'
claims are determined not to be arbitrable . . . . By bringing this action,
however, plaintiffs do not intend to waive, and are not waiving, their
rights under various agreements to arbitrate all or any of the claims
asserted herein."
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Meanwhile, the District Court, on August 6, 1999,
approved the form, and order ed dissemination, of the notice
to be sent in the class action. In that order , the District
Court required that Cendant make available to Lead
Plaintiffs the stock transfer recor ds reflecting the names
and addresses of Cendant's and CUC's shar eholders. The
District Court further required Lead Plaintiffs to mail notice
to all record holders of Cendant and CUC stock and to all
brokers in the transfer records, and to publish notice of the
class action on three different days in The Wall Street
Journal, The New York T imes (National Edition), and the
Dow Jones Business Newswire. The District Court
determined that this notice "constitute[d] the best notice
practicable under the circumstances to members of the
Class, and will satisfy the requirements of constitutional
due process and Rule 23 of the Federal Rules of Civil
Procedure."
Thereafter, Cendant petitioned the MDL Panel to transfer
Appellants' placeholder action pending in the California
Central District. On August 12, 1999, the MDL Panel
transferred that action from the Califor nia Central District
to the District of New Jersey pursuant to 28 U.S.C.§ 1407.
On October 8, 1999, the accounting firm of Heffler,
Radetich & Saitta LLP, the Class Administrator, mailed the
class notice to all known potential class members, as well
as 239 brokerage firms and 141 banks and other
institutions. Initially, 19,069 notices were sent via first
class mail. Then, through November 29, 1999, the Class
Administrator mailed notice to numerous other potential
plaintiffs based on written requests, telephone requests,
names supplied by nominees, and bulk requests by
nominees. In all the Class Administrator sent 261,224
notices.
Of these notices, at least ten were mailed to Appellants at
three separate addresses -- two in Palos Verdes, California
and one in Torrance, California. The notices mailed to the
Palos Verdes addresses were all returned to the Class
Administrator by the United States Postal Service as
undeliverable, with no forwarding address. The notice sent
to the Torrance address was not r eturned. However, the
Davidsons claim never to have received the individual
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notice because they had moved to Incline Village, Nevada
and did not inform Cendant of their change of address. The
Davidsons also claim to have missed the published notice.
Both the individually mailed notices and the published
notice included the definition of the class as stated in the
Complaint. Further, in accordance with an order of the
District Court, the class notice warned potential class
members that if they failed to follow the specific exclusion
procedures, they would be deemed class members and
would be bound by any settlement or judgment. The
individual notice stated:
15. If you are a member of the Class . .. and you
wish to remain a member of the Class, you need not
take any further action at this time. . . .
16. As a Class member (unless you request to be
excluded from the Class), you will be bound by any
judgment, whether favorable or unfavorable, enter ed in
this Action. . . .
. . .
19. How To Be Excluded From The Class: YOU WILL
BE EXCLUDED FROM THE CLASS ONLY UPON
SPECIFIC REQUEST AS DESCRIBED BELOW. If you
request to be excluded, you will not be entitled to share
in the proceeds of a recovery obtained by settlement or
favorable judgment in the litigation, if any. Y ou also
will not be bound by a judgment, if any, in favor of
either the Class or defendants.
20. If you wish to be excluded from the Class, you
must so indicate by filing a written Request for
Exclusion, POSTMARKED ON OR BEFORE December
27, 1999 . . . .
The published notice similarly warned:
IF YOU PURCHASED OR ACQUIRED THE PUBLICL Y
TRADED SECURITIES . . . OF CENDANT OR CUC AS
DESCRIBED ABOVE, AND YOU DO NOT REQUEST
EXCLUSION FROM THE CLASS, YOUR RIGHTS WILL
BE AFFECTED BY THIS LITIGATION. . . .
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If you wish to be excluded from the Class, you must,
in accordance with the instructions contained in the
Notice, submit a written request for exclusion . . . .
Additionally, the class action received considerable media
coverage independent from the published notices.
On December 7, 1999, almost three weeks befor e the
final opt-out date, Cendant announced a pr oposed
settlement that would require it to pay $2.85 billion to the
class members (the "Class Action Settlement"). 11 On
December 27, 1999, pursuant to the class notice, the opt-
out period closed. The Appellants never filed a written opt-
out, as required by the District Court and the class notice.
In February 2000, Appellants claim that Cendant
indicated, for the first time, that it would take the position
that they were class members. On March 17, 2000,
Cendant and the Lead Plaintiffs submitted settlement
documents to the District Court, including a Plan of
Allocation for the distribution of settlement pr oceeds among
class members. Then, on March 29, 2000, the District
Court preliminarily approved the Class Action Settlement12
and enjoined all actions or claims that were contemplated
by it. Pursuant to the order containing that approval, the
Class Administrator on April 7, 2000, mailed notice of the
Class Action Settlement and proof of claim for m packages
to Appellants at their new Nevada address. This package
included Lead Plaintiffs' Plan of Allocation of the settlement
funds.
The Plan of Allocation provided that any losses class
members suffered from their transactions in CUC and
Cendant securities would be offset by any gains they
received through transactions in CUC and Cendant
securities prior to Cendant's April 15, 1998 disclosure of
the alleged accounting fraud. Thus, any damages
Appellants suffered as a result of the DAI/CUC merger
would be offset by the substantial gains they received in the
_________________________________________________________________
11. It is interesting to note that the Davidsons never claim that they were
unaware of this announcement.
12. Formal approval of the Class Action Settlement occurred on August
15, 2000.
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sale of over twenty million shares of the artificially-inflated
stock before the disclosure.
On April 27, 2000, possibly after learning of their
discounted recovery under the Class Action Settlement and
Plan of Allocation, Appellants filed a motion seeking
clarification of the class definition, or in the alternative an
extension of the time period to opt out of the class. Cendant
opposed Appellants' motion, and cross-moved to enforce the
injunction against other proceedings. The Lead Plaintiffs
filed a brief responding to Appellants' motion, asserting that
they did not represent the interests of Appellants in
prosecuting their claims.13
Finally, on June 20, 2000, the District Court ruled that
Appellants were within the class, denied them an extension
of time to opt out, and enjoined them from arbitrating their
claims in California. See In re Cendant Corp. Sec. Litig., 194
_________________________________________________________________
13. The Lead Plaintiffs stated:
Lead Plaintiffs agree that the Davidsons are excluded from the
Class. The Davidsons were officers and dir ectors of CUC and its DAI
subsidiary during the Class Period. CUC was the surviving entity in
the merger of HFS into CUC; the name was simply changed to
Cendant after the merger. Thus, while it was necessary to make it
clear to Class Members in the Notice of Pendency that whether they
purchased Cendant or CUC publicly-traded securities, they were all
part of the same Class, the exclusion of Cendant's officers and
directors applied to all such officers and directors, whether before or
after the name change. Indeed, it would make no sense to exclude
only officers and directors of Cendant after the merger, when it was
CUC's fraudulent financial statements -- issued by the officers and
directors of the company before the mer ger (when the company was
named CUC) -- that formed the heart of this Action. Lead Plaintiffs
did not prosecute this class action to pr otect the interests of
Cendant's officers and directors, whether they served before or after
the CUC/HFS merger, and such officers and directors should not be
allowed to participate in the distribution of the Settlement Funds
that have now been recovered.
As a result, the Davidsons are, and should be, excluded from the
Class.
At oral argument before the District Court the Lead Plaintiffs took the
position that the trust shares were included in the class.
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F.R.D. 158, 165-66 (D.N.J. 2000). First, the District Court
held that Appellants were within the class because their
shares were publicly traded within the meaning of the class
definition. See id. at 164. Second, it looked to the class
exclusions and determined that, despite the exclusion of
officers and directors of Cendant, the Davidsons, as former
officers and directors of CUC, were not excluded from the
class. See id. Further, it found that Appellants did not meet
their burden of showing excusable neglect for an extension
of time to opt out of the class pursuant to Federal Rule of
Civil Procedure 6(b), and therefor e denied their request. See
id. at 165. Finally, the District Court held that it had the
authority to enjoin the ongoing California arbitration
between Appellants and Cendant in order to implement the
proposed Class Action Settlement, and thus it enjoined that
arbitration. See id. at 165-66.
On July 19, 2000, Appellants filed a timely notice of
appeal.
II. Discussion
A. Class Membership
Appellants claim initially that the District Court erred in
holding that they were class members. The District Court
concluded that their shares were publicly traded, and thus
were within the class definition.14 See Cendant Sec. Litig.,
194 F.R.D. at 163-64. It further found that the Davidsons
were not "officers and directors of Cendant and its
subsidiaries and affiliates," and concluded that they did not
qualify for exclusion from the class on those grounds. See
id. at 164.
We accord a District Court's interpr etation of its own
orders "particular deference." In re Fine Paper Antitrust
Litig., 695 F.2d 494, 498 (3d Cir . 1982). The District Court,
in determining whether Appellants were class members,
interpreted its own orders, the or der certifying the class
_________________________________________________________________
14. As previously noted, the class definition included "all persons and
entities who purchased or acquired Cendant. . . or CUC . . . publicly
traded securities during the period May 31, 1995 thr ough August 28,
1998," and excluded "officers and dir ectors of Cendant."
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and the order approving the class notice, both of which
contained the class definition. Therefor e, its interpretation
of the class definition in those orders is entitled to
"particular deference."15
1. The Class Definition
The class definition begins: "[A]ll persons and entities
who purchased or acquired" stock. Appellants received their
shares through the DAI/CUC merger . This Court has
defined "purchasers" of stock to include those who buy on
an open market and those who exchange stock in one
company for stock in another company pursuant to a
merger between the two companies or an acquisition of one
company by the other. See In re Penn Cent. Sec. Litig., 494
F.2d 528, 533 (3d Cir. 1974) (citing SEC v. Nat'l Sec. Inc.,
393 U.S. 453, 467 (1969)). By virtue of the DAI/CUC
merger, Appellants "purchased" stock.
The class definition then requires that the purchaser or
acquirer obtained "Cendant . . . or CUC . . . publicly traded
securities." As a result of the DAI/CUC mer ger Appellants
received a total of 32,505,099 shares of CUC stock. The
question that we must address is whether that stock was
"publicly traded" so as to fall within the class definition.
Appellants argue the District Court err ed in holding that
their shares were publicly traded securities because the
Court did not give the term "publicly traded" its commonly-
used definition. They assert that "publicly traded" means
_________________________________________________________________
15. Appellants' attempt to distinguish Fine Paper by relying on Pittsburgh
Terminal Corp. v. Baltimore & Ohio R.R. Co., 824 F.2d 249, 254 (3d Cir.
1987), is unfounded as the Pittsburgh T erminal court itself distinguished
its case from Fine Paper as well as the current situation. Pittsburgh
Terminal did not involve a court interpreting its own order, but instead
dealt with the court interpreting a stipulation by the parties. "There is no
basis for extending this principle [of "particular deference" articulated in
Fine Paper] to demand similar deference in the present case to the
district court's interpretation of a stipulation underlying a previous order
. . . ." Id. Moreover, "Fine Paper is further distinguishable because it was
a class action and because it involved distribution of a single fund." Id.
at 254 n.5. Just as in Fine Paper, this case is a class action where the
District Court is interpreting its own or ders and ultimately distributing
a single fund of $2.85 billion.
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tradeable on the public markets. Because the shar es they
received were newly issued, had not been traded on any
market, and were precluded when issued fr om being traded
on those markets, Appellants argue that these shares could
not, in the plain sense of the term, have been"publicly
traded." In essence, they contend that because their shares
were not immediately tradeable publicly, they could not be
deemed "publicly traded" within the meaning of the class
definition. We believe the publicly traded/publicly tradeable
argument to be a distinction without a dif ference and agree
with the District Court that Appellants' shar es were indeed
"publicly traded" securities.
At the outset, Appellants' argument does not paint the
picture fully. While it is true that their shar es differed from
the shares issued to other public investors as a result of
the DAI/CUC merger (the difference being that Appellants'
shares were not immediately tradeable), that difference was
not due to the quality of the shares received. Appellants
received exactly the same type of shares of common stock
as all other DAI shareholders, specifically a class of CUC
security that was publicly traded on the NYSE.
The restriction on sale of the CUC stock held by
Appellants emanated solely from the quantity of shares
they received as a result of the mer ger, not in any way from
the type of security they received. Due to the number of
shares Appellants received, they wer e deemed to be
affiliates of CUC and their ability immediately to resell
these shares was subject to the limitations of the Securities
Act of 1933,16 as well as the ter ms of affiliate agreements
signed by the Davidsons in connection with the DAI/CUC
merger agreement.17
_________________________________________________________________
16. While Cendant alleges that the restriction is based on Rule 144A, it
seems that Appellants were restricted fr om immediately selling their
shares pursuant to Rule 145. See Cendant Sec. Litig., 194 F.R.D. at 163.
That rule deems Appellants to be affiliates for Rule 145 purposes and
thus subjects them to the registration r equirements for sale of those
securities pursuant to the Securities Act of 1933. See 17 C.F.R.
§ 230.145.
17. The affiliate agreements, signed by the Davidsons, provided in part,
"I understand that I may be deemed to be an `affiliate' of the Company,
as such term is defined for purposes of Rule 145 . . . promulgated under
the Securities Act of 1933 . . . and that the transferability of the shares
of common stock . . . is restricted."
16

-- 16 of 40 --

These restrictions could be avoided entir ely, however, if
Appellants were to sell shares of CUC stock under any
subsequent registration statement. Noticing the burden
placed on Appellants, CUC granted Appellants liberal rights
to demand a second registration statement that would allow
them to "piggyback" their shares and ther efore remove any
sales restriction from the securities. In fact, Appellants did
just that, selling more that twenty million shares just four
months after the transfer. In all, by January 16, 1998,
Appellants had disposed of more than twenty-five million of
their thirty-two and a half million CUC shar es for proceeds
totaling more than $635 million. This exposes a logical
disconnect in Appellants' argument. Having traded publicly
tens of millions of shares of CUC common stock so soon
after the DAI merger, and then to claim that they are not
"publicly traded" securities within the class definition, is a
non sequitur. Thus, despite the restriction on immediate
resale, Appellants did receive "publicly traded" securities
within the meaning of the class definition.
The class definition sets the relevant period of trading as
"May 31, 1995 through and including August 28, 1998."
The DAI/CUC merger, in which Appellants"purchased"
their shares, took place in July 1996. This clearly places
Appellants within the relevant period under the class
definition.
The relevant part of the class definition concludes: "and
who were injured thereby." Appellants' alleged injury is
shown by the fact that they pursued their claims against
Cendant. Yet they posit that the class did not adequately
represent them in redressing the injury they actually
received, as the class relied on the fraud on the market
theory. Appellants proffer that the claims pursued by the
Lead Plaintiffs on behalf of the class r elating to the
accounting irregularities affected those who purchased CUC
and/or Cendant stock on the open market. However , they
argue that the only way the fraud on the market theory
could have affected the DAI/CUC merger was to keep CUC's
price inflated so that the "bust out" pr ovision that could
have terminated that merger was not triggered. Because
Appellants did not purchase their securities on the open
market, but instead acquired them through individual
17

-- 17 of 40 --

negotiations with CUC, they argue that the fraud on the
market theory is not applicable to them.
We find this argument unavailing. First, the fraud on the
market theory did affect the DAI/CUC mer ger because,
during the negotiations between DAI and CUC, the
purchase price was determined by "r eference to, among
other factors, the range of prices at which CUC stock was
trading." This demonstrates that Appellants' Rule 10(b)(5)
claim rests, at least in part, on the same fraud on the
market theory pursued by the class, as the mer ger
negotiations were based on artificial market prices. In fact,
Cendant points out that membership in the class actually
gave Appellants an advantage in their Rule 10(b) claim by
lessening their burden of proof because in a typical Rule
10(b) claim a plaintiff must show individual r eliance on a
material misstatement, whereas under the fraud on the
market theory reliance is presumed. See In re Apple
Computer Sec. Litig., 886 F.2d 1109, 1113-14 (9th Cir.
1989).
Cendant further points this Court to In r e Discovery Zone
Securities Litigation, 181 F.R.D. 582 (N.D. Ill. 1998), to
show that Appellants' fraud on the market ar gument is
incorrect. In that case, the court consider ed whether an
entity that acquired newly-issued shares of common stock
through a merger that were not immediately tradeable (just
as Appellants' shares were not) was a member of a class
proceeding under a fraud on the market theory. See id. at
590-92. The court concluded that the fact that the
acquiring entity's claims were based on its individual
negotiations with the defendant, rather than on pur chases
in the open market, did not exclude it from a"fraud-on-the-
market class" given that its claims and the claims of open
market purchasers were based on the same"overall
scenario" of conduct by the defendants. See id. at 591-92;
see also In re Scorpion Techs., Inc. Sec. Litig., No. C 93-
20333, 1994 WL 774029, at *5 (N.D. Cal. Aug. 10, 1994);
In re Nat'l Student Mktg. Litig., M.D.L. Docket No. 105, 1973
WL 431, at *5 (D.D.C. Oct. 2, 1973).
Appellants cannot argue that their claims ar e based on a
qualitatively different "overall scenario" from the claims
raised in the class action. Under Discovery Zone ,
18

-- 18 of 40 --

Appellants' claims would be properly included in the class
despite their individual negotiations with CUC that shape
their particular fraud claim. Accordingly, we believe that
Appellants' injuries fit within the class definition.
2. Class Exclusions
Having concluded that Appellants are within the class
because they purchased or acquired CUC publicly traded
securities during the relevant class period and allege they
were injured thereby, we must next determine whether they
fall within any of the exclusions. The only exclusion
possible is that the Davidsons are excepted fr om the class
as "officers and directors of Cendant." The District Court
determined that, pursuant to the plain meaning of the class
definition, the exclusion only disqualified officers and
directors of Cendant, and did not exclude for mer officers
and directors of CUC. See Cendant Sec. Litig., 194 F.R.D. at
164.
The Davidsons submit that Cendant, as the surviving
entity of the CUC/HFS merger, is mer ely a continuation of
CUC and therefore the exclusion includes all officers and
directors of CUC and Cendant. Most important, the
Davidsons point to the Lead Plaintiffs' belief that they did
not represent the interests of the Davidsons, as Lead
Plaintiffs believed that the Davidsons wer e excluded from
the class due to their former positions as officers and
directors of CUC. See supra note 13.
Again, we accord "particular deference" to the District
Court's interpretation of its own orders. See Fine Paper,
695 F.2d at 498. While we find the Lead Plaintiffs'
statement to be of interest, we do not believe that the
District Court erred in finding that the officer and director
exception did not apply to the Davidsons. In fact, the plain
meaning rule, as well as other canons of construction,
require such a finding.
When the language of an instrument is plain, we look no
further than the words of that document itself to determine
its meaning. See Tamarind Resort Assocs. v. Govt. of V.I.,
138 F.3d 107, 110 (3d Cir. 1998) ("It is axiomatic that
where the language of a contract is clear and unambiguous,
it must be given its plain meaning."); Mellon Bank v. Aetna
19

-- 19 of 40 --

Bus. Credit, Inc., 619 F.2d 1001, 1010 (3d Cir. 1980) ("A
court is not authorized to construe a contract in such a
way as to modify the plain meaning of its wor ds, under the
guise of interpretation.") (internal quotations omitted); see
also Richard A. Lord, 11 Williston on Contracts § 32:3, at
408 (4th ed. 1999).
Further, we look by analogy to canons of interpretation
for statutes. One is that "[w]e presume that [Congress's]
clear use of different terminology within a body of
legislation is evidence of an intentional dif ferentiation."
Lankford v. Law Enforcement Assistance Admin., 620 F.2d
35, 36 (4th Cir. 1980); accord Russello v. United States, 464
U.S. 16, 23 (1983) ("[W]here Congr ess includes particular
language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate
inclusion or exclusion.") (internal quotations omitted);
Barmes v. United States, 199 F.3d 386, 389 (7th Cir. 1999)
("Different language in [a] separate clause in a statute
indicates Congress intended distinct meanings."); Cabell
Huntington Hosp. v. Shalala, 101 F.3d 984, 988 (4th Cir.
1996) ("Where Congress has chosen dif ferent language in
proximate subsections of the same statute, courts are
obligated to give that choice effect.") (internal quotations
omitted); Fla. Public Telecomms. Assoc., Inc. v. FCC, 54 F.3d
857, 860 (D.C. Cir. 1995) (stating that when Congress uses
different language in differ ent sections of statute, it does so
intentionally). Cf. Booth v. Churner, 206 F.3d 289, 294 (3d
Cir. 2000) ("[It is the] normal rule of statutory construction
that identical words used in differ ent parts of the same act
are intended to have the same meaning.") (internal
quotations omitted). Thus, the choice of dif ferent words to
address analogous or related issues signifies different
meanings. See E. Allan Farnsworth, 2 Farnsworth on
Contracts § 7.11, at 284 & n.12 (2d ed. 1998).
Similarly, we look to the canon expressio unius est
exclusio alterius (the expression of one thing is the
exclusion of another) for the proposition that when parties
list specific items, without any more general or inclusive
term, they intend to exclude unlisted items, even though
they are similar to listed items. See id. at 281. Finally, this
20

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Court has stated that we "must give full cr edit to the
language the parties have chosen to include -- or not
include -- in their agreement." Orlando v. Interstate
Container Corp., 100 F.3d 296, 301 (3d Cir. 1996).
Applying these rules of interpretation to the language of
the class definition, we find that the District Court correctly
interpreted the class exclusion to include only officers and
directors of Cendant and not any of its pr edecessors in
interest, including pre-merger officers and directors of CUC.
The language used in the class definition clearly excludes
only Cendant's officers and directors. Because the
Davidsons were never officers and dir ectors of Cendant, the
plain language excludes them.
Looking to the class definition as a whole supports the
conclusion that the intention was only to exclude Cendant's
officers and directors. We need not look further than the
first sentence of the class definition to confirm this view. It
begins by stating that the class intends to cover all
purchasers of Cendant or CUC securities. This indicates
that the drafter, as well as the adopting court, intended to
include purchasers of either company's stock. However, the
language of the class exclusion only excludes officers and
directors of Cendant. Following the canons of construction,
the choice of different words --"Cendant or CUC" as
opposed to "Cendant" -- indicates that the two clauses
have different meanings. To conclude otherwise is
counterintuitive.
Further, we look to the canon of expr essio unius est
exclusio alterius for the proposition that when parties list
specific items, without a term of general inclusion, they
intend to exclude unlisted items. Here the class definition's
language indicates that it intentionally excluded CUC from
the class exception. Because we must give ef fect to the
language included, as well as not included, we conclude
that the District Court was correct in holding that the
Davidsons were not excluded from the class as former
officers and directors of pre-mer ger CUC.
3. Opt-Out by Implication
After finding that Appellants fit within the class
definition, and that the Davidsons are not excluded under
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the exceptions, we must determine if Appellants opted out
of the class. At oral argument and thr oughout their briefs,
Appellants concede that they did not follow the for mal opt-
out procedure provided in the class notice, but appear to
argue that they impliedly opted out of the class. They
contend that the purpose of an opt-out requir ement is to
force a party to take a position in or out of a class so that,
in attempting to resolve claims against it, a defendant
knows the exposure it faces, both to the class and to the
opt-outs. Appellants further argue that they clearly took a
position outside the class by filing the Califor nia arbitration
and by reaffirming their unequivocal desire to arbitrate in
the placeholder action. They cite In re Piper Funds, Inc.,
Institutional Government Income Portfolio Litigation, 71 F.3d
298 (8th Cir. 1995), for the proposition that a formal opt-
out is not always necessary. See id. at 304.
However, we find Piper Funds distinguishable from this
case. In Piper Funds, the appellant attempted to opt out of
the class by formally advising the district court through a
letter of its intention and desire to opt out before an opt-out
period and procedure had been developed by the court.
Although the district court denied that request, the Eighth
Circuit reversed, stating that it did not dispute the normal
rule forbidding an opt-out until after a Rule 23 notice, but
believed that in some cases there must be an exception. It
found that the exception applies when a party with an
immediate right to arbitrate attempts to opt out before the
Rule 23 procedure is initiated but is denied that request.
See id. Here Appellants never infor med the District Court of
their intention to opt out, neither before nor after the Rule
23 class notice was distributed. Thus, Piper Funds does not
advance their argument.
Moreover, numerous courts have held that the mere
pendency of an individual litigation or arbitration does not
relieve a plaintiff of the obligation to opt out of a class
action. See, e.g., In re Prudential Sec. Inc. Ltd. P'ship Litig.,
164 F.R.D. 362, 370 (S.D.N.Y. 1996) ("It is well-established
that pendency of an individual action does not excuse a
class member from filing a valid request for exclusion.")
(internal quotations omitted); In r e Prudential-Bache Energy
Income P'ship Sec. Litig., No. MDL-0888, 1995 WL 20613, at
22

-- 22 of 40 --

*2 (E.D. La. Jan. 6, 1995) (rejecting class member's claim
that pending arbitration proceeding was sufficient notice of
intent to opt out); Supermarkets Gen. Corp. v. Grinnell
Corp., 59 F.R.D. 512, 513 (S.D.N.Y . 1973) ("[T]he existence
of [the individual] action did not automatically exclude
plaintiffs as potential members of the class. The exclusion
could only be effected by compliance with the provisions of
Rule 23(c)(2)(B)."). In this context, Appellants cannot
succeed in their argument that Cendant's knowledge of the
arbitration was sufficient notice for their opting out, and
thus Appellants did not opt out of the class impliedly.
* * * * *
In sum, Appellants fall within the class definition
because they purchased or acquired CUC or Cendant
publicly traded securities. The Davidsons wer e not excluded
from the class as former officers and directors of pre-
merger CUC because the exception only excluded officers
and directors of Cendant. Furthermor e, we conclude that
Appellants failed to opt out of the class and thus are bound
by the class settlement. We therefor e affirm the District
Court's finding that Appellants are within the class.
B. Extension of the Opt-Out Deadline
Appellants further allege that the District Court erred in
refusing to grant them an extension of time to opt out of
the class. They maintain that if they are enjoined from
pursuing the arbitration and are found to be within the
class definition, they should still not be included as class
members because the District Court abused its discr etion
in failing to extend the time for them to opt out of the class.
Federal Rule of Civil Procedure 6(b) pr ovides:
When by these rules or by a notice given ther eunder or
by order of court an act is requir ed or allowed to be
done at or within a specified time, the court for cause
shown may at any time in its discretion . . . (2) upon
motion made after the expiration of the specified period
permit the act to be done where the failure to act was
the result of excusable neglect . . . .
Fed. R. Civ. P. 6(b). The definition of"excusable neglect"
recently has been discussed in a related litigation, In re
23

-- 23 of 40 --

Cendant Corp. Prides Litigation. There, the United States
District Court for the District of New Jersey, District Judge
Walls (the same District Judge as in this case), stated:
The Supreme Court has decreed that the determination
of whether one party's neglect to adhere to a deadline
is excusable should take into account all relevant
circumstances surrounding the delay. See Pioneer
Invest. Servs. Co. v. Brunswick Assoc. Ltd. Partnership,
507 U.S. 380, 395 (1993). Relevant factors include"the
danger of prejudice to the [nonmovant], the length of
the delay and its potential impact on judicial
proceedings, the reason for the delay, including
whether it was within the reasonable contr ol of the
movant, and whether the movant acted in good faith."
Id. at 395. To this roster, the Third Circuit has added
"(1) whether the inadvertence reflected pr ofessional
incompetence such as ignorance of the rules of
procedure, (2) whether an asserted inadvertence
reflects an easily manufactured excuse incapable of
verification by the court, and, (3) a complete lack of
diligence." Dominic v. Hess Oil V.I. Corp., 841 F.2d 513,
517 (3d Cir. 1988).
In re Cendant Corp. Prides Litig., 189 F.R.D. 321, 324
(D.N.J. 1999), aff 'd, 233 F .3d 188, 196-97 (3d Cir. 2000)
(alteration in original).
This Court reviews a District Court's findings concerning
excusable neglect for abuse of discretion. See Cendant
Prides I, 233 F.3d at 189, 197; Jones v. Chemetron Corp.,
212 F.3d 199, 205 (3d Cir. 2000); see also In re
PaineWebber Ltd. P'ship Litig., 147 F .3d 132, 135 (2d Cir.
1998); Silber v. Mabon, 18 F.3d 1449, 1453 (9th Cir. 1994).
An abuse of discretion occurs when the action of the
District Court is clearly contrary to reason and not justified
by the evidence. See Springfield Crusher , Inc. v.
Transcontinental Ins. Co., 372 F.2d 125, 126 (3d Cir. 1967).
A District Court also abuses its discretion if it is influenced
by erroneous legal conclusions or applies the wrong legal
standards. See Cendant Prides I, 233 F .3d at 192 (holding
that an abuse of discretion occurs when the District Court's
decision "rests upon a clearly erroneous finding of fact, an
errant conclusion of law or an improper application of law
24

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to fact.") (internal quotations omitted); Oddi v. Ford Motor
Co., 234 F.3d 136, 146 (3d Cir. 2000); Hanover Potato
Prods., Inc. v. Shalala, 989 F.2d 123, 127 (3d Cir. 1993);
see also Corley v. Rosewood Care Ctr., Inc., 142 F.3d 1041,
1052 (7th Cir. 1998). In addition, we have stated that "[a]n
abuse of discretion can occur when no r easonable person
would adopt the district court's view." Rode v. Dellarciprete,
892 F.2d 1177, 1182 (3d Cir. 1990).
Here the District Court found that Appellants' alleged
failure to receive notice did not warrant an extension of the
opt-out deadline. See Cendant Sec. Litig., 194 F.R.D. at
165; In re NASDAQ Market-Makers Antitrust Litig., No. 94-
3996, 1999 WL 395407, at *2 (S.D.N.Y. June 15, 1999);
Gross v. Barnett Banks, Inc., 934 F . Supp. 1340, 1345
(M.D. Fla. 1995) (finding that no extension was warranted
where the class notice was sent to a potential class
member's old address despite having been advised of the
change of address). The District Court found unconvincing
Appellants' argument that Cendant had not tr eated them as
class members until after the class opt-out deadline had
passed. It found that Appellants did not become class
members until they failed to opt out before the deadline.
Consequently, Cendant had no reason to tr eat Appellants
as class members or inform them of their potential class
status. Finally, the District Court did not accept Appellants'
explanation of their delay as warranting an extension of
time to opt out. See Cendant Sec. Litig., 194 F.R.D. at 165.
We hold that the District Court did not abuse its
discretion in refusing to allow Appellants an extension of
time to opt out of the class. As stated above, we will not
find an abuse of discretion unless the decision is clearly
contrary to reason and not justified by the evidence or
prevailing law. Here the District Court found that
Appellants did not meet the excusable neglect standard
simply because they allegedly did not receive notice and
because Cendant (the defendant) did not infor m potential
plaintiffs (Appellants) of their rights and duties. See In re
Prudential Ins. Co. of Am. Sales Practices Litig. , 177 F.R.D.
216, 231 (D.N.J. 1997) ("[D]ue process does not require
that every class member receive actual notice so long as the
court reasonably selected a means likely to apprise
25

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interested parties."). The District Court pointed to the
individually mailed notice, the published notice, and the
press coverage that the initiation of the class action and the
proposed settlement received in holding that Appellants
should have been aware of the class action and the
potential it had to affect their inter ests. See Cendant Sec.
Litig., 194 F.R.D. at 165.
In addition to the District Court's reasoning, Appellants
do not qualify for the excusable neglect exception because
their actions cause prejudice to Cendant and may not
comport with the good faith requirement. 18 See Cendant
Prides I, 233 F.3d at 195. While Appellants argue that
_________________________________________________________________
18. The dissent argues that "the majority's attempt to cure the
deficiencies of the District Court's analysis[is in]consistent with our
jurisprudence which requires the District Court to explain its excusable
neglect reasoning." It points out that our most recent articulation of this
principle is in In re Orthopedic Bone Scr ew Products Liability Litigation,
No. 99-2054, wherein we assert that we " `have imposed a duty of
explanation on District Courts when they conduct"excusable neglect"
analysis.' " Id. at 13 (quoting Cendant Prides I, 233 F.3d at 196). From
these statements the dissent makes the leap of logic that the duty to
explain the rationale for excusable neglect deter minations means that all
Pioneer factors must be explicitly consider ed by the District Court. While
a consideration of all relevant Pioneer factors is optimal, this best
practice is not our law. Our law is that " `it is a salutary practice [for a
court] to give the litigants, either orally or in writing, at least a minimum
articulation of the reasons for its decision.' " Orthopedic Bone Screw, No.
99-2054, at 13 (quoting Interpace Corp. v. City of Philadelphia, 438 F.2d
401, 404 (3d Cir. 1971)). What the District Court did in this case, unlike
in Orthopedic Bone Screw in which no explanation was given, meets the
minimum articulation threshold.
The dissent then castigates our opinion for noting additional reasons
not to find excusable neglect in this appeal. Y et we are merely following
precisely what we did in one of the Cendant opinions the dissent cites to
support its position. In Cendant Prides II, 235 F.3d 176 (3d Cir. 2000),
this Court, after holding that the District Court abused its discretion by
failing to analyze the Pioneer excusable neglect factors, went on to
analyze those factors, including prejudice and bad faith, the same
factors the dissent finds us in error for analyzing. After determining that
any delay or neglect on the part of appellant was excusable neglect, the
Cendant Prides II Court remanded "solely for inclusion in settlement
proceedings," not for analysis of the excusable neglect factors, as the
dissent seems to imply is required. See id. at 182, 183-84.
26

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Cendant will not be prejudiced by excluding them from the
class because Cendant knew of their claims befor e it
reached the class settlement, their argument is
unpersuasive. Reliance by Appellants on Mars Steel Corp. v.
Continental Illinois National Bank & Trust Co. of Chicago,
120 F.R.D. 51 (N.D. Ill. 1988), In r e Del-Val Financial Corp.
Securities Litigation, 154 F.R.D. 95 (S.D.N.Y. 1994), and
Dominic v. Hess Oil V.I. Corp., 841 F .2d 513 (3d Cir. 1988),
is unavailing, as those cases are easily distinguishable on
the prejudice issue. In Mars Steel, the court granted an
extension of time to opt out because the defendant did not
even argue that it would suffer pr ejudice. See Mars Steel,
120 F.R.D. at 53. Similarly, in Del-V al, the court extended
the time to opt out of the class action because the party
seeking exclusion intended to proceed with arbitration
against a non-settling defendant, and therefor e the settling
defendant would not be prejudiced by the extension. See
Del-Val, 154 F.R.D. at 97 n.2. Finally, Dominic did not even
involve a class action. In that individual pr oducts liability
action, the District Court granted plaintiff an extension of
_________________________________________________________________
The dissent argues as pungently as possible that the procedural
posture of the Cendant Prides II case makes its excusable neglect
analysis unavailable for support by the majority her e in analyzing
whether the District Court correctly denied Appellants' motion to extend
the time for them to opt out of the class. Cendant Prides II made a de
novo determination with respect to the excusable neglect factors not
applied by the District Court in that case afterfinding that the District
Court abused its discretion by failing to apply the Pioneer factors in
denying the late filing of a proof of claim in a class action. Cendant
Prides II, 235 F.3d at 183. Here we conclude that the District Court did
not abuse its discretion in denying the motion to extend the time for
Appellants to opt out of the class. In so doing, we apply the same
standard of review (abuse of discr etion) as our Court applied in Cendant
Prides II. While we also discuss other Pioneer factors supporting our
affirmance, this discussion is not necessary to our decision to affirm.
But in Cendant Prides II the analysis of Pioneer factors was necessary to
the decision and thus required de novo consideration.
In this context, we find the dissent's characterization of our excusable
neglect analysis as "[in]consistent with[this Court's] jurisprudence" to be
unsupported. Moreover, for the dissent to conclude that a duty of
explanation meeting a minimum articulation thr eshold equals full blown
articulation is fallacious.
27

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time to serve notice and the complaint on a thir d party
defendant who was already subject to personal jurisdiction
of the court. See Dominic, 841 F.2d at 516. This Court
affirmed, finding no prejudice to the third-party defendant
because it was already a party to the suit and knew of all
the claims and specific allegations.
Here Cendant, the settling defendant, would clearly be
prejudiced by a finding that Appellants ar e not within the
class. Appellants' substantial holdings could subject
Cendant to additional liabilities for the accounting fraud
allegations that they settled in the class action vis-a-vis all
eligible persons who did not opt out of the class. Permitting
Appellants to opt out now will deprive Cendant of the
finality it sought in settling the class action, r egardless
whether the March 24, 2000 letter from Appellants'
counsel, see infra note 21, put it on notice of Appellants'
claims and specific allegations before the District Court
formally approved the settlement.19 Cf. Prudential Sales
Practices Litig., 164 F.R.D. at 371-72 ("Defendants would be
loath to offer substantial sums of money in compromise
settlements of class actions unless they can r ely on the
notice provision of Rule 23 to bind class members.").
Finally, it is plausible to argue that Appellants do not
meet the excusable neglect standard because the record
draws into question whether they may have failed to
comport with the good faith requirement. See Mars Steel,
120 F.R.D. at 52 (holding that a party's tar diness designed
to gain a tactical advantage violates the good faith
requirement). Appellants, in their brief to this Court, claim
that "[t]hey did not wait strategically to see what kind of
settlement was proposed before communicating their intent
to arbitrate their claims." Yet it is possible to infer they did
_________________________________________________________________
19. One could argue that because Cendant pr oposed a settlement before
the opt-out period passed it could not have known whether Appellants
later would opt out. While it is true that Cendant proposed a settlement
on December 7, 1999, three weeks before the final opt-out date,
December 27, 1999, that settlement was not appr oved until March 29,
2000, three months after the final opt-out date. Therefore, because the
Appellants did not opt out, it is fair to say that Cendant was bargaining
for finality as to the Appellants' claims when its settlement was
approved.
28

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just that, seemingly seeking a strategic advantage in not
filing a formal opt-out, and in the timing of their motion for
clarification of the class or in the alter native for an
extension of time to opt out of the class.
From the time of the initial disclosure of the accounting
irregularities through the present, Appellants have acted
with abundant caution. First, they filed a placeholder suit
in the California Central District to ensur e that they
complied with the statute of limitations in the event that
the Ninth Circuit ruled against them (thus for eclosing their
opportunity to arbitrate). In addition, Appellantsfiled
objections to the Class Action Settlement and Plan of
Allocation, just in case this Court, as we have, determines
that they are class members subject to the ter ms of the
settlement.20 However, even though they were aware of the
existence of the class action before the opt-out date passed,
Appellants never filed a protective opt-out to ensure that
their claims would be arbitrated. With sophisticated
investors such as the Davidsons, who were assisted by
exceptional counsel, it is not a leap of faith to make the
logical inference that their failure tofile a formal opt-out
was a strategic decision.
Additionally, as previously mentioned, the opt-out period
closed on December 27, 1999. Appellants contend in their
brief to this Court that they learned in February 2000 that
Cendant considered them class members. Y et, they took no
court action until after they received the Plan of Allocation
mailed on April 7, 2000.21 Only after they discovered that
their recovery under the Class Action Settlement was
significantly less than expected did they file, on April 27,
2000, a motion for clarification of the class definition, or in
the alternative for an extension of time to opt out of the
class. This tardiness again points to Appellants attempting
to gain a tactical advantage and counsels against extending
the opt-out period.
_________________________________________________________________
20. That case is currently pending befor e this Court, No. 00-2709.
21. While Appellants' counsel did send Cendant's counsel a letter on
March 24, 2000, indicating that Appellants did not consider themselves
to be part of the class, they took no formal action to ensure this position
until three weeks after the Class Administrator provided them with the
Plan of Allocation.
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As a result, we find that the District Court did not abuse
its discretion in refusing to grant Appellants an extension
of time to opt out. We agree with the District Court that
Appellants did not qualify for the excusable neglect
exception and therefore affirm its holding.
C. Enjoining of the California Arbitration
Finally, Appellants and the dissent argue that the District
Court erred in enjoining the ongoing Califor nia arbitration.
They specifically contend that it violated the F AA by
enjoining the arbitration mandated by the Califor nia
Central District as well as several agreements among the
Appellants, DAI, and CUC/Cendant calling for , inter alia,
arbitration of disputes.22
_________________________________________________________________
22. Conversely, Appellants and the dissent ar gue that the District Court
should have been res judicata bound by the decision of the California
Central District with respect to its decision to deny Cendant's motion to
enjoin the arbitration. In other words, they allege that the District Court
should have given preclusive effect to the California Central District's
decision that the Appellants' claims were arbitrable and, under the
doctrine of res judicata, referred their claims back to arbitration in
California. The fatal flaw of this contention is acknowledged by the
dissent. The parties before the Califor nia Central District Court did not
brief, and that Court in its three and one-half page decision did not
mention, whether any of the Appellants were putative class members.
Without even acknowledgment of the class action, it is spurious to
suggest that res judicata precludes the District Court from deciding
whether Appellants' claims could be decided in the class action, i.e.,
whether they were class members. See Hopewell Township Citizens I-95
Comm. v. Volpe, 482 F.2d 376, 381 (3d Cir. 1973) (finding res judicata
does not apply where "at least much of the subject matter of the present
lawsuit has not been and could not have been ar gued in the previous
actions"); see also Sid Richardson Carbon & Gasoline Co. v. Interenergy
Res., Ltd., 99 F.3d 746, 756 (5th Cir . 1996) (holding that res judicata did
not apply on the basis that it "is axiomatic that a claim that has not yet
accrued is not ripe for adjudication, and hence it is not a claim that
`could have been litigated' in a previous lawsuit").
Here the California Central District"was not, and could not have been,
presented with -- and thus did not, and could not, decide -- the issue
of whether the Davidsons and the Trusts ar e Class Members." The
California Central District issued its or der on April 14, 1999, over eight
months before the final opt-out date for the class action in New Jersey
30

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The District Court's authority to enter such an injunction
derives from the All Writs Act, 28 U.S.C. § 1651. Under that
Act, "[t]he Supreme Court and all courts established by Act
of Congress may issue all writs necessary or appropriate in
aid of their respective jurisdictions and agr eeable to the
usages and principles of law." When a federal court has
jurisdiction over a case, the All Writs Act grants it ancillary
jurisdiction to issue all writs "necessary or appropriate in
aid of " that jurisdiction. See In r e Baldwin-United Corp.,
770 F.2d 328, 335 (2d Cir. 1985). Ther e is an analogous
provision in the Anti-Injunction Act. 28 U.S.C.§ 2283 ("A
court of the United States may not grant an injunction to
stay proceedings in a State court except as expressly
authorized by Act of Congress, or where necessary in aid of
its jurisdiction, or to protect or effectuate its judgments.").
The power given to federal courts under the All W rits Act
and the Anti-Injunction Act allows them to enjoin state
court proceedings when necessary to protect federal court
judgments. See Kelly v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 985 F.2d 1067, 1068-69 (11th Cir. 1993). "Such
`federal injunctive relief may be necessary to prevent a state
court from so interfering with a federal court's
consideration or disposition of a case as to seriously impair
the federal court's flexibility and authority to decide that
case.' " Baldwin-United, 770 F .2d at 335 (quoting Atlantic
Coast Line R.R. Co. v. Bhd. of Locomotive Eng'rs, 398 U.S.
281, 295 (1970)). In class actions, this power allows federal
courts to protect settlement efforts and to prevent
"inconsistent and inequitable results." In re Joint E. & S.
Dist. Asbestos Litig., 134 F.R.D. 32, 38 (S.D.N.Y. 1990).
Further, "the All-Writs Act per mits courts to certify a
national class action and to stay pending federal and state
cases brought on behalf of class members." Id. at 37.
_________________________________________________________________
-- December 27, 1999. Consequently, at the time the California Central
District issued its ruling, Appellants were no more than potential class
members, with every right to opt out of the class to pursue their
arbitration claims. Cendant could not have asked the California Central
District to declare Appellants class members given their unilateral right
to opt out of the class up until December 27, 1999. Because the issue
of whether Appellants were class members could not have been argued
in the previous action, res judicata is inapplicable.
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The All Writs Act and the Anti-Injunction Act also give
the federal courts the power to enjoin arbitrations. See
Kelly, 985 F.2d at 1069; PaineW ebber P'ship Litig., 1996 WL
374162, at *4 ("[A] Court may enjoin arbitration -- even
before judgment has been entered in this action -- where
that injunction would be `in aid of its jurisdiction' within
the terms of the Baldwin-United line of cases."). The District
Court, in finding that it had the authority to enjoin the
continued prosecution of class members' claims, relied on
PaineWebber for the proposition that a district court has
the ability to enjoin an ongoing arbitration in or der to give
effect to a class settlement. See PaineW ebber, 1996 WL
374162. In that case, the court denied fifteen plaintiffs'
attempts to arbitrate claims covered by a class action where
they all failed to opt out of the class befor e the deadline.
See id. at *4-5.
We agree that, notwithstanding the federal courts' power
to enjoin other proceedings, there ar e strong policies that
support giving effect to agreements to arbitrate. "The FAA
was enacted to reverse centuries of judicial hostility to
arbitration agreements by placing arbitration agreements
upon the same footing as other contracts." Pritzker v. Merrill
Lynch, Fenner & Smith, Inc., 7 F.3d 1110, 1113 (3d Cir.
1993) (internal quotations omitted). Put another way, the
FAA seeks "to assure those who desir ed arbitration and
whose contracts related to interstate commer ce that their
expectations would not be undermined by federal judges."
Southland Corp. v. Keating, 465 U.S. 1, 13 (1984). In
particular, our Court recognizes that"federal law
presumptively favors the enforcement of arbitration
agreements." Harris v. Green T ree Fin. Corp., 183 F.3d 173,
178 (3d Cir. 1999).
We also recognize that the Supreme Court requires that
arbitrable claims be arbitrated, "even wher e the result
would be the possible inefficient maintenance of separate
proceedings in different forums." Dean Witter Reynolds, Inc.
v. Byrd, 470 U.S. 213, 217 (1985); accord Piper Funds, 71
F.3d at 303. In fact, the FAA "r equires piecemeal resolution
when necessary to give effect to an arbitration agreement."
Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460
U.S. 1, 20 (1983) (emphasis omitted). Securities lawsuits
32

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often may require bifurcated pr oceedings in order to give
effect to arbitration agreements. See Dean Witter, 470 U.S.
at 218 n.5.
In the same vein, the mere existence of a parallel
proceeding that seeks to adjudicate the same in personam
cause of action does not in itself provide sufficient grounds
for an injunction against a state action or arbitration in
favor of a pending federal action. See Carlough v. Amchem
Prods., Inc., 10 F.3d 189, 202 (3d Cir. 1993); see also
Baldwin-United, 770 F.2d at 336 (citing Vendo Co. v. Lektro-
Vend Corp., 433 U.S. 623, 642 (1977) ("We have never
viewed parallel in personam actions as inter fering with the
jurisdiction of either court.")); PaineW ebber, 1996 WL
374162, at *3. Even actions derived from the same cause
against the same defendants may be maintained
simultaneously in federal and state courts. See Carlough,
10 F.3d at 202; see also Westinghouse Elec. Corp. v.
Newman & Holtzinger, P.C., 992 F .2d 932, 937 (9th Cir.
1993) (refusing to apply the All Writs Act because the state
complaint alleged a contract breach independent of the
District Court's protective order, and thus the state court
adjudication would not affect interpretation or enforcement
of the order). "Any doubts as to the pr opriety of a federal
injunction against state court proceedings should be
resolved in favor of permitting the state courts to proceed
in an orderly fashion . . . ." Atlantic Coast Line R.R., 398
U.S. at 297.
Moreover, an injunction may only be issued under the
Anti-Injunction Act when there is a "r eal or potential
conflict [that] threatens the very authority of the federal
court." Vernitron Corp. v. Benjamin, 440 F.2d 105, 108 (2d
Cir. 1971). For an injunction to be "necessary . . . in aid of
. . . jurisdiction" "it is not enough that the requested
injunction is related to that jurisdiction, but it must be
necessary in aid of that jurisdiction." Carlough, 10 F.3d at
202 (internal quotations and emphasis omitted). That is, an
injunction will only be "necessary" "to pr event a state court
[or arbitrator] from so interfering with a federal court's
consideration or disposition of a case as to seriously impair
the federal court's flexibility and authority to decide that
case." Id.
33

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Yet a class action calls for distinct rules in connection
with the need to have as many common issues as possible
disposed of in a single proceeding. See Coopers & Lybrand
v. Livesay, 437 U.S. 463, 470 (1978) ("Ther e are special
rules relating to class actions and, to that extent, they are
a special kind of litigation."); Henry v. City of Detroit
Manpower Dept., 763 F.2d 757, 763 (6th Cir. 1985) (same);
Avila v. Van Ru Credit Corp., No. 94-c-3234, 1995 WL
41425, at * 9 (N.D. Ill. Jan. 31, 1995) ("[C]lass actions
involve complex litigation and special rules."); Coca-Cola
Bottling Co. of Elizabethtown, Inc. v. Coca-Cola Co. , 98
F.R.D. 254, 271 (D. Del. 1983) ("[C]ommon issues should be
resolved in one class proceeding."); Fed. R. Civ. P. 23 (b)(3)
(stating that a class action is maintainable when"questions
of law or fact common to the members of the class
predominate over any questions affecting only individual
members, and that a class action is superior to other
available methods for the fair and efficient adjudication of
the controversy"). For example, in multidistrict class
actions consolidated in a single district court, sound
authority exists to enjoin other parties, even states, from
bringing actions that would affect the rights of any
plaintiffs or class members. In Baldwin-United, the Second
Circuit found that the existence of multiple and harassing
state actions could only frustrate the district court's effort
to craft a settlement because the success of any federal
settlement depended on the parties agreeing to release "any
and all related civil claims the plaintif fs had against the
settling defendants based on the same facts." See Baldwin-
United, 770 F.2d at 337. The court concluded "that the
existence of actions in state court would jeopar dize [the
district court's] ability to rule on the settlements, would
substantially increase the cost of litigation,[and] would
create a risk of conflicting results . .. . Under the
circumstances we conclude that the injunction .. . was
unquestionably `necessary or appropriate in aid of ' the
federal court's jurisdiction." Id. at 333, 338. Similarly, in
Asbestos Litigation, the court's injunction was necessary to
implement the settlement covering "all pr esent and future
persons injured by asbestos-containing pr oducts." Asbestos
Litig., 134 F.R.D. at 38.
34

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In deciding whether to enter the injunction that Cendant
sought enjoining the California arbitration, the District
Court here had to reconcile two seemingly conflicting lines
of authority and policies: the one giving it authority to issue
all orders to maintain and preserve its jurisdiction over the
consolidated multidistrict litigation cases in this Cendant
group of actions, and the public policy favoring giving effect
to arbitration agreements such as those enter ed between
Cendant and Appellants.
Appellants and the dissent rely on the Eighth Circuit's
decision in Piper Funds, 71 F.3d 298, in support of their
argument that the District Court violated the FAA by
enjoining the California arbitration. Despite their assertions
to the contrary, Piper Funds is of little help to Appellants.
Although the Eighth Circuit did find that the district court
there should not have enjoined the arbitration, it did so
under circumstances far different fr om ours. It found that
because the appellant clearly, in writing, expr essed its
desire to opt out of a class before the class notice and opt-
out procedure were even developed, the injunction violated
the FAA and appellant's immediate right to arbitrate by
enjoining the arbitration pending a formal opt-out. See
Piper Funds, 71 F.3d at 303-04; see also VMS Sec. Litig, 21
F.3d 139, 141-42 (7th Cir. 1994) (holding that where class
members had not opted out of class action, they wer e
bound by class action settlement which released their
claims against the defendant even though they had
obtained an award in the arbitration filed before resolution
of the class action).
In Piper Funds, the Eighth Circuit stated:
[P]roper regard for the F AA required that the court
promptly take one of three actions: it could stay the
class action while [the potential class member's] claim
is arbitrated; it could deny the request to opt out (for
example, because [the potential class member's]
arbitration claim is not arbitrable or its r equest to opt
out was too late); or it could grant the r equest to opt
out.
71 F.3d at 304 (emphasis added). Its acknowledgment that
proper regard for the FAA allows a court to deny a request
35

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to opt out, because that request came too late, concedes
the merits of the situation we have here, a point the dissent
glosses over. Where a party who desir es arbitration fails
timely to opt out of the class, the FAA does not preclude a
district court from denying a class member's r equest to
pursue arbitration. Thus, Piper Funds is, by its own words,
unavailing where Appellants fail to opt out of the class. See
PaineWebber, 1996 WL 374162, at *5 (finding that case
inapposite to Piper Funds where the plaintiffs did not
immediately express their position that they would opt out
but instead waited until after the opt-out deadline had
passed); Prudential P'ship Litig., 158 F .R.D. at 304 ("Class
members who wish to opt out in order to . . . seek
arbitration in a forum in existence at the time of the
original opt-out deadline have no excuse for their neglect to
opt out; they are simply seeking to escape consequences
known to them at the time they chose to remain in the
class.").
Appellants and the dissent cite no case law holding that
the FAA trumps, and thereby forgives, Appellants' failure to
opt out. This presages that the District Court did not
violate the policies of the FAA when it enjoined Appellants
from proceeding with their arbitration after they did not opt
out of the class. See, e.g., VMS Sec. Litig., 21 F.3d at 141-
42.
As for the enjoining of the California arbitration in its
entirety, we review the terms of an injunction for abuse of
discretion. John F. Harkins Co. v. W aldinger Corp., 796 F.2d
657, 658 (3d Cir. 1986). Any finding that is a prerequisite
to the issuance of an injunction (here whether Appellants
were subject to the class action, e.g., were members of the
class and were properly denied an extension of time to opt
out) is reviewed according to the standar d applicable to
that particular determination, and we willfind an abuse of
discretion vis-a-vis the injunction if the District Court's
prerequisite finding was in error under the applicable
standard of review. See id.
We note, however, that the District Court could enjoin
only claims in arbitration that were resolved by the Class
Action Settlement. Conversely, the District Court could not
enjoin the arbitration with respect to any claims that were
36

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not covered by the Class Action Settlement. In its June 20,
2000 Order, the District Court granted Cendant's cross-
motion to enforce the March 29, 2000 injunction against
continued prosecution by Appellants of their arbitration
proceeding against Cendant. To the extent that their prior
agreements to arbitrate covered claims not disposed of or
released in the Class Action Settlement, the District Court
was without the authority to enjoin those pr oceedings
because its action was not "necessary or appr opriate in aid
of [its] . . . jurisdiction." The arbitration of issues outside
the scope of the class action, e.g., possibly the 1.6 million
stock options that Cendant concedes were beyond the
scope of the class action, does not interfer e with the
District Court's disposition and does not seriously impair
its flexibility and authority to decide the class action.
Further, arbitration of issues outside the bounds of the
class action issues cannot lead to inconsistent and
inequitable results, as that arbitration pr esents no "real or
potential conflict that threatens the very authority of the
federal court." Vernitron Corp., 440 F.2d at 108. These
"parallel" actions can be maintained without conflict. See
Carlough, 10 F.3d at 202.
Unlike Baldwin-United and Asbestos Litigation, where the
proposed settlements called for enjoining all claims, as they
would have affected the settlement and pr ovided for
inconsistent holdings, the settlement in this case only
requires that the class members release claims dealing with
"publicly traded securities."23 The arbitration of peripheral
claims, possibly including the 1.6 million options, cannot
affect the District Court's ability or authority to settle the
class claims dealing with publicly traded securities. An
injunction preventing the arbitration of those claims is
clearly not necessary in aid of the District Court's
jurisdiction in the class action. Therefor e, we find the
District Court abused its discretion in enjoining, in its
entirety, the California arbitration, as it did not have the
_________________________________________________________________
23. "Each Class Member shall release all`Released Claims,' which
include any and all claims . . . that are based upon, related to, arise
from, or are connected with the pur chase, acquisition, sale or disposition
of CUC, HFS, or Cendant publicly-traded securities .. . during the Class
Period . . . ."
37

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authority, under the All Writs Act, to enjoin those actions or
proceedings that were outside the scope of the class action
and could not have had any effect on its flexibility and
authority to decide and settle the class action. 24
It must be noted that through this opinion we take no
position on whether any issues remain for r esolution in
arbitration. It is entirely possible that all of the issues
before the arbitrator have been settled and/or released by
the class action. We make no determination on this issue
because we believe it is for the arbitrator, not the District
Court, to determine whether a claim befor e him was
decided in the class action. See, e.g., Great Western
Mortgage Corp. v. Peacock, 110 F.3d 222, 232 (3d Cir. 1997)
("[A] court compelling arbitration should pr eserve the
remaining disputed issues for the arbitrator to decide.").
Respecting the principles of the FAA, as well as the opt-
out requirement of class actions, we will allow the
California arbitration to proceed, subject to affirmance by
the Court of Appeals for the Ninth Circuit, but only to the
extent of arbitrating claims that were not settled and
released in the class action. We further hold that it is for
the arbitrator to determine whether the claims Appellants
are pursuing in the California arbitration were disposed of
in the Class Action Settlement. To the extent that the
claims were not included in the class action, the arbitrator
has the power to decide those issues. He is only pr ecluded
from deciding any issues that were r esolved (either through
a court decision or release of claims) as part of the class
action. See PaineWebber, 1996 WL 374162, at *4 ("[T]he
Court has the ability to enjoin further litigation by class
members involving the subject matter of this class action,
pursuant to the reasoning of Baldwin-United and its
progeny.").
_________________________________________________________________
24. Strangely, the dissent gives the strong impression that we approve
and are not reversing the District Court's order enjoining the arbitration.
As review of this opinion shows, that is misleading. What the dissent
really argues is that, in limiting our r eversal to only those issues outside
the scope of the class action, we are not r eversing the District Court
enough. In our view, the dissent's position -- that reversal of the
injunction is called for as to all issues included as well as not included
in the class action -- simply goes too far .
38

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We close with a general comment on the well-crafted
dissent of Judge Garth challenging, inter alia , our holding
that the District Court can enjoin those claims in the
arbitration resolved in the Class Action Settlement.
Hyperbole aside, the dissent's theme is implicitly as follows.
The FAA trumps the All Writs Act. If arbitration is elected
as a means to resolve a dispute, a subsequent injunction,
the dissent argues, "can never be appr opriate in a case
such as this one." Because arbitration was elected by
Appellants the month prior to class certification, and
because the California District Court ruled over Cendant's
objection that the California arbitration should not be
enjoined, the New Jersey District Court in a class action is
shorn of the ability to enjoin any aspect of Appellants'
claims in that arbitration.
The dissent's theme is counterposed by our theme:
Appellants -- who concededly knew of the class action, filed
their arbitration complaint after the class action was
begun, knew that there was an opt-out r equirement in that
action (though they claim not to have received notice of the
precise date), and did not request an extension of time to
opt out until no less than two months after they learned of
the opt-out deadline -- can no longer seek to arbitrate
claims already decided in the class action. Appellants (and
no one else) controlled whether they wer e in or out of the
class. They could have opted out of the class at any time
during the opt out period, covering almost a full year after
they sought arbitration, but never did so. Had they done so,
they could have arbitrated their claims en toto .25
This theme, juxtaposed against that of the dissent,
follows a reasoning tailored to the specific facts of each case
rather than a certitude generalized to exclude all
consideration of when class action determinations prevail
over arbitration. We leave for another day that issue. Also
not before us is whether the claims of Appellants are
enforceable under the FAA. They ar e. But not always! As
noted in Piper Funds, in quoting § 12(d) of the National
Association of Security Dealers' Code with r espect to
_________________________________________________________________
25. Thus, we disclaim the dissent's Rabelaisian r emark that enjoining an
arbitration in this case "can never be appr opriate."
39

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arbitration as a means of resolving disputes in the
securities industry, " `such claims shall be eligible for
arbitration . . . pursuant to the parties' contractual
agreement, if any, if a claimant demonstrates that it has
elected not to participate in the putative or certified class
action or, if applicable, has complied with any conditions
for withdrawing from the class prescribed by the court.' "
Piper Funds, 71 F.3d at 302. Here Appellants failed to
demonstrate that they affirmatively elected not to
participate in the putative or certified class and did not
comply with any conditions for withdrawing fr om that class.
They are left with the consequences of their failure to act.
III. Conclusion
For the foregoing reasons, we affir m the District Court's
rulings as to the inclusion of Appellants in the class as well
as its refusing to grant them an extension of time to opt
out. However, we reverse the District Court's enjoining of
the entire arbitration and will allow that arbitration to
proceed, though only as to issues not r esolved as part of
the class action. We further hold that it is for the arbitrator,
not the District Court, to determine which, if any, of
Appellants' claims are ripe for decision in accordance with
this Opinion and the Class Action Settlement.
40

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