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IN RE WORLDCOM

May 5, 2005.

IN RE WORLDCOM, INC. SECURITIES LITIGATION. This Document Relates to: ALL ACTIONS.


The opinion of the court was delivered by: DENISE COTE, District Judge

OPINION AND ORDER

Timothy J. Dolata ("Dolata") and Kathy M. Dolata seek an order affirming their purported request for exclusion from the class in this consolidated securities class action arising from the collapse of WorldCom, Inc. ("WorldCom"). In the alternative, the Dolatas request an extension of their time to request exclusion from the class. For the reasons described below, the Dolatas' motions are denied. Background

  The facts giving rise to the WorldCom consolidated class action are well known and have been described in many prior Opinions.*fn1 On August 15, 2002, WorldCom class actions were consolidated and the New York State Common Retirement Fund was designated Lead Plaintiff. The consolidated class action was certified on October 24, 2003. See In re WorldCom, Inc. Sec. Litig., 219 F.R.D. 267 (S.D.N.Y. 2003). The certified class consists of all persons and entities who purchased or otherwise acquired publicly traded securities of WorldCom during the period beginning April 29, 1999 through and including June 25, 2002, and who were injured thereby.

  Once the class was certified, class members received a December 11, 2003 Notice of Class Action (the "Notice"). A sample Request for Exclusion from the Class (the "Exclusion Form") accompanied each Notice. The Notice specified that the Exclusion Form "must be mailed by certified or overnight mail" to the address of the Garden City Group ("GCG"), the WorldCom class action claims administrator, by February 20, 2004. This date was the original deadline by which class members wishing to opt out of the class action were required to do so. On February 3, 2004, the Second Circuit extended the opt-out date until thirty days after it issued its ruling on an interlocutory appeal from a denial of remand motions made in some of the Individual Actions which had been consolidated for pretrial purposes with the class action. See In re WorldCom, Inc. Sec. Litig., 2004 WL 2591402, at *5 (S.D.N.Y. Nov. 12, 2004). Following affirmance of the remand decision, and pursuant to an Order of June 16, 2004, the opt-out period was rescheduled to close on September 1, 2004.

  Meanwhile, in May 2004, the Lead Plaintiff and the Citigroup Defendants*fn2 announced that they had reached a settlement for $2.575 billion (the "Citigroup Settlement"). After preliminary approval of this settlement, class members received an August 2, 2004 Notice of Proposed Settlement ("Settlement Notice"), which described the process for submitting proofs of claim and the proposed judgment and bar order. The Settlement Notice indicated that a Special Notice was being provided "to all persons who previously requested to be excluded from the Class, but who may now wish . . . to revoke their prior request for exclusion." It also noted that the opt-out date had been extended to September 1, 2004. The Special Notice was in fact sent to all class members who had already opted out of the class action.

  On November 12, 2004, the Citigroup Settlement received final approval by the Court. See WorldCom, 2004 WL 2591402. The Judgment issued pursuant to the settlement contains a bar on claims by class members against the Citigroup Defendants. The Judgment provides that "[c]lass members . . . are hereby permanently barred and enjoined from instituting, commencing or prosecuting . . . any Released Claims against any of the Released Parties." Released Parties are defined to include the Citigroup Defendants and their "present and former employees." Released claims include

 
all claims of every nature and description . . arising out of or relating to investments . . . in securities issued by WorldCom . . ., including without limitation all claims arising out of or relating to any analyst research reports or other statements made or issued by the Citigroup Defendants concerning WorldCom, any disclosures, registration statements or other statements by WorldCom, as well as all claims asserted by or that could have been asserted by Plaintiffs or any member of the Class in the Action against the Citigroup Releasees. . . .
The Dolatas' Claim to Have Opted Out of the Class Action

  The Dolatas wish to pursue their claims against the Citigroup Defendants in a National Association of Securities Dealers ("NASD") arbitration proceeding. They wish to opt out of the class because, as they concede, their arbitration claims against the Citigroup Defendants are barred by the November 12, 2004 Order issued pursuant to the Citigroup Settlement.

  Based on the submissions of the parties and the evidence taken at a February 24, 2005 hearing, the following constitutes the findings of facts concerning the Dolatas' petition. The Dolatas filed an arbitration action against SSB in June 2003. Their Amended Statement of Claim, dated December 19, 2003, contains securities law claims under federal and Wisconsin law, a breach of fiduciary duty claim, and other claims arising under state law. The Dolatas allege that SSB and Jack Grubman, an SSB analyst, exaggerated the financial strength of WorldCom and other telecommunications companies to attain lucrative investment banking assignments. The Dolatas lost a significant amount of money on WorldCom stock and other securities that they claim were given "unduly favorable ratings."

  The Dolatas received the class action Notice by mid-January 2004, along with nine Exclusion Forms. Dolata, an attorney, sent a letter on January 26, 2004 regarding the decision to opt out and the Exclusion Forms to the attorney representing the Dolatas in the arbitration proceeding, Sean Lanphier. Dolata discussed the matter with Lanphier the following day, asking him, among other things, whether it would be sufficient if he returned one Exclusion Form rather than all nine forms. Dolata and Lanphier agreed that Dolata would send back one Exclusion Form to opt out of the class. Despite his agreement with Lanphier and his desire to pursue his arbitration claim against SSB, Dolata has not shown that he in fact mailed the Exclusion Form.*fn3

  Dolata participated in an NASD mediation session with the Citigroup Defendants on August 12, 2004. Dolata was informed in January 2005 by counsel for the Citigroup Defendants that the Dolatas had not opted out of the class. Upon learning this, Dolata telephoned GCG, the claims administrator. He spoke with Dena DeFuria, an employee of GCG.*fn4 The next day, Dolata was contacted by Carline Mordan, another employee of GCG, who informed him that no record of a communication from Dolata could be located.*fn5 GCG has conducted a search, has not located any Exclusion Form for the Dolatas, and has no record that it received the Dolatas' Exclusion Form.

  On February 7, 2005, the Dolatas filed their motion requesting an Order affirming that they have in fact opted out of the class. In the alternative, they request that they be allowed to opt out of the class under Rule 6(b)(2), Fed.R.Civ.P., and the doctrine of excusable neglect. In opposition, the Citigroup Defendants argue that they would be prejudiced if the Court were to find that the Dolatas timely opted out, because numerous similarly situated arbitration claimants would be able to gain exclusion from the class "based only on their own unsupported statement that they submitted a request for exclusion." In a letter of February 22, 2005, the Lead Plaintiff also takes the position that the Dolatas' motion should be denied. The Dolatas have agreed to an adjournment of their arbitration proceeding pending this decision.

  Discussion

  The Dolatas make two requests. They petition for a finding that they did opt out of the class on a timely basis. Alternatively, they seek an extension of the time to opt out. ...


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