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Cendant Litigation Spawns More Litigation

IN RE CENDANT CORP. SECURITIES LITIGATION, Civ. No. 98-1664(WHW) (D.N.J., 6/20/00): The 1998 disclosure of accounting irregularities at Cendant Corp. have spawned numerous litigations, but this particular decision in a central class action deals with an ancillary arbitration commenced by a husband and wife who sold their business to a Cendant predecessor for shares that subsequently plummeted in value.

At an arbitration scheduling conference just days before the end of the opt-out period in the class action, they learned of Cendant’s position that the arbitration was foreclosed by the settlement (the CalPERS settlement) of the class action.

Janice and Robert Davidson sold Davidson & Assoc. in exchange for CUC stock in July 1996. The class period covered all persons who acquired publicly traded securities of Cendant or CUC from May 31, 1995 through August 28, 1998. The shares obtained by the Davidsons were restricted, but were included in a registration statement in October 1996.

The Court rules that the Davidson’s shares fall into the “publicly traded” definition and that they are not otherwise excluded from the class. A motion to extend the opt-out deadline for excusable neglect is denied and the Court enjoins the pending arbitration.

It finds jurisdiction over the Davidsons as class members and, in aid of implementing the proposed settlement, it enjoins the ongoing arbitration.

That a federal court ordered the arbitration does not bar this Court from intervening; the issue of the Davidsons as class members was not presented in the earlier case. (ed: While class action courts are supposed to guard against splinter actions and fragmentation of the class, it is hard to understand what public policy was served by forcing these unique plaintiffs into the Cendant Class definition. It dilutes the settlement pool and compels unwilling purchasers, clearly atypical of the others, to participate in the Class.) (SAC Ref. No. 00-27-003)


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