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IN RE CRAZY EDDIE SECS. LITIG.

August 11, 1995

IN RE CRAZY EDDIE SECURITIES LITIGATION


The opinion of the court was delivered by: GO

REPORT AND RECOMMENDATION REGARDING LATE CLAIMS

 GO, United States Magistrate Judge:

 All remaining matters in this consolidated class action have been referred to me for supervision of post-settlement issues or, in the case of dispositive matters, to report and recommend. The class plaintiffs have moved for an order allowing the claimants who failed to file timely proofs of claim to participate in the distribution of settlement funds pursuant to a settlement approved by this Court on June 13, 1993. For the following reasons, I respectfully recommend that all of the late claims be allowed or rejected, as specified in the schedule of Allowed and Rejected Late Claims annexed hereto.

 BACKGROUND

 Many of the facts pertinent to this motion are set forth in the decision of the Honorable Eugene H. Nickerson dated June 11, 1993 approving the Stipulation of Settlement dated March 22, 1993, as amended on June 7, 1993, (the "Settlement") settling all the claims of the class action plaintiffs against all defendants, except Eddie Antar. In re Crazy Eddie Securities Litigation, 824 F. Supp. 320 (E.D.N.Y. 1993). Familiarity with this decision and prior decisions in this action is assumed.

 Under the terms of the Settlement, the settling defendants agreed to establish a fund of $ 42 million for payment of class claims, attorneys' fees and expenses. Class members of the submitting class would receive approximately 6% of the amount of their losses, a percentage which would vary depending on the amount of claims made and attorneys' fees award. Id. at 323. Any amount not distributed would revert to the settling defendants. Settlement, P 18(f).

 Paragraph 21(b) of the Settlement required that all proofs of claim must be filed by a date specified in a notice of the proposed settlement of class actions, unless extended by agreement of the Plaintiffs' Executive Committee and counsel for the Settling Defendants. By order dated March 30, 1993, Judge Nickerson scheduled a hearing to determine the fairness of the Settlement and directed, inter alia, that the deadline for submitting proofs of claim be 90 days after the hearing. The actual notice of the proposed settlement (the "Notice") and form proof of claim sent to class members established August 25, 1993 as the deadline for submitting proofs of claim, requiring all mailed proofs of claim to be postmarked no later than August 25, 1993. See Exhibit B attached to the affidavit of Joseph T. McLaughlin dated November 21, 1994 ("McLaughlin Aff.") in opposition to the instant motion.

 The Notice and form proof of claim were mailed to class members by April 30, 1993. In re Crazy Eddie, 824 F. Supp. at 324. Besides widespread media coverage of the Settlement, class members were notified of the agreement by notices published in the national editions of the New York Times and Wall Street Journal advising them of the deadlines for objecting to the Settlement and filing proofs of claim. Id. After the court approved the settlement on June 11, 1993, the Plaintiffs' Executive Committee apparently sent a further notice advising class members of the approval. See Exh. E to McLaughlin Aff.

 The Claims Administrator received over 13,000 proofs of claim, of which 257 valid claims were postmarked after the August 25, 1993 deadline ("late claims"). See Affidavit of Brad Heffler dated October 28, 1994 ("Heffler Aff.") at P 4 attached as Exhibit A to the affidavit of Howard Sirota dated October 31, 1994 submitted in support of the instant motion. The amount of "recognized losses", as defined by the Settlement, declared in valid and timely proofs of claim totaled $ 231,212,431.41 and the valid late claims included recognized losses of $ 9,890,000. Id.

 Copies of the letters of the late claimants explaining why they did not file their claims on time are attached as exhibits to the Heffler Aff. Defendants agreed on the record at oral argument to accept the veracity of the explanations contained in these letters.

 By letter dated December 16, 1994, plaintiffs' counsel, Howard Sirota, Esq., submitted a list containing the names of all claimants with valid late claims and the postmark date of their submissions. The vast majority of the claims (187) were submitted within two months after the filing deadline, 60% (158) of which were submitted within the first month.

 DISCUSSION

 The determination of whether to allow the participation of late claimants in a class action settlement is essentially an equitable decision within the discretion of the court. See Zients v. LaMorte, 459 F.2d 628, 629-30 (2d Cir. 1972); In re "Agent Orange" Prod. Liab. Litig., 611 F. Supp. 1396, 1417 (E.D.N.Y. 1985). As the Second Circuit explained in Zients, "a court supervising the distribution of a trust fund has the inherent power and duty to protect unnamed, but interested persons." 459 F.2d at 630. See also Alexander v. Chicago Park Dist., 927 F.2d 1014 (7th Cir. 1991), cert. denied, 503 U.S. 905, 117 L. Ed. 2d 491, 112 S. Ct. 1262 (1992); In re Gypsum Antitrust Cases, 565 F.2d 1123, 1127 (9th Cir. 1977).

 Accordingly, this court must make its determination after "taking account of all relevant circumstances surrounding the party's omissions." Pioneer Inv. Services v. Brunswick Associates, 507 U.S. 380, 123 L. Ed. 2d 74, 113 S. Ct. 1489, 1498 (1993). The Supreme Court in Pioneer observed that such an equitable inquiry cannot be limited to consideration of the movant's culpability and reasons for delay. 113 S. Ct. at 1498, n.13. Thus, any strict requirement that a late claimant must demonstrate "good cause" for delay in filing a proof of claim in a class action settlement, see In re Gypsum, 565 F.2d at 1127, ...


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