Opposition Brief — Toland v. Prudential Securities Inc.

Nos. 96-1731, 96-1732 |

) wae20 |

IN THE

:

Supreme Court ot the United St | CLERK

OCTOBER TERM, 1996

aos

LESLIE AND DOROTHY BISHOFBERGER,

Petitioners,

—against—

IN RE: PRUDENTIAL SECURITIES INCORPORATED LIMITED

PARTNERSHIP LITIGATION, MDL DOCKET No. 1005,

Respondent.

ate

MACDANIEL JACKSON and MIRIAM JACKSON,

Petitioners,

—against—

IN RE: PRUDENTIAL SECURITIES INCORPORATED LIMITED

PARTNERSHIP LITIGATION, MDL DOCKET NO. 1005,

Respondent.

ON PETITIONS FOR WRITS OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF OF RESPONDENT PRUDENTIAL SECURITIES

INCORPORATED IN OPPOSITION TO PETITIONS

FOR WRITS OF CERTIORARI

THOMAS J. KAVALER

80 Pine Street

Of Counsel: New York, New York 10005

(212) 701-3000

MATHIAS E. MONE

JOHN M. MCSHERRY Counsel of Record

CAHILL GORDON & REINDEL

(a partnership including a

professional corporation)

New York, New York

QUESTIONS PRESENTED

By the Bishofberger Petitioners

Where an absent class member admittedly received the

mailed notice of a class action settlement over one month

prior to the opt-out deadline but inexplicably failed to take

any steps to opt out, was the court below correct in affirming

the district court’s discretionary denial of that class member’s

request belatedly to opt out of the class under Rule 60(b)?

By the Jackson Petitioners

Where notice of a class action settlement was mailed to an

absent class member prior to the expiration of the opt-out

period and the class member did not carry his burden of

establishing that he did not receive it, was the court below

correct in affirming the district court’s discretionary denial of

that class member’s request belatedly to opt out of the class

under Rules 6(b) and 60(b)?

li

TABLE OF CONTENTS

PAGE

QUES TRONS PRS Ble a nc skcnccccecccnsecsapavees i

TAREE CP AUPE CRERMEEE cokes kevinccies cavaxaduencs iii

COUNTER-STATEMENT OF THE CASE............. 2

OURS os is ins isscceeccdesacnbisabbaceenente 3

Petitioners’ Post-Judgment Motions

Leslie and Dorothy Bishofberger............ +

MacDaniel and Miriam Jackson ............. 6

The Decisions of the Court of Appeals ........... 7

SUMMARY OF ARGUBEEINE onc seccecaiciestesavesase 8

REASONS FOR DENYING THE WRITS

I. THE BISHOFBERGERS’ PETITION IS

UTS RES 3s. ccuxtsesersshabnseealinians 10

II. NEITHER PETITION RAISES ANY ISSUE

WORTHY OF THIS COURT’S

tas Renney Sra poe 1]

CASUAL USI <0 cnsnikonsassancisasders eee 15

APE GMa s 2 vs0uncinsssinccuentpeaeeeabeals la

ill

TABLE OF AUTHORITIES

Cases PAGE

Browder v. Director, Department of Correction, 434

De OPED iin 5 55 Abn s ddd dav ead exes ccennywenes 14

Department of Banking v. Pink, 317 U.S. 264 (1942) .. 11

Eisen v. Carlisle & Jacquelin, 417 U.S. 156

(2 MORETTI Tear Onto Se NOP ee Se eS aaa 12, 14, 14n

FCC v. League of Women Voters, 468 U.S. 364 (1984). 1]

FTC v. Minneapolis-Honeywell Regulator Co., 344

Sees EOE ivi ce sun capo deeds caiedsseaweness 11

Greene v. Lindsey, 456 U.S. 444 (1982)............... 13

Gross v. Barnett Banks, Inc., 934 F. Supp. 1340

Eas biictneceaeb ed icahsnunsgiewises 13, 13n

Grunin v. International House of Pancakes, 513 F.2d

114 (8th Cir.), cert. denied, 423 U.S. 864(1975) . 14n

Lujan v. National Wildlife Federation, 497 U.S.

FA RNEE RSe BaS Ags oe De or Ewe ye ere yD 14

Mennonite Board of Missions v. Adams, 462 U.S.

oo pao es Uae re sek baie d Reaie nt clientes 12-13

‘ Missouri v. Jenkins, 495 U.S. 33 (1990)............... 11

Mullane v. Central Hanover Bank & Trust

Ce. 359 OS. SOG FIGS) sic cccccscess 12, 13n, 14, 14n

Peters v. National Railroad Passenger Corp., 966

Pee Se CE oe SED Shek se vedndeeeed ove eses 13

Phillips Petroleum Co. v. Shutts, 472 U.S. 797

ME ls oe ae ud ela paaped bse ke canes bhAad ees 13n

iV

PAGE

Rules:

Fed. R. Civ. P.

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U.S. Sup. Ct. Rules

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1996

Nos. 96-1731, 96-1732

-—

LESLIE AND DOROTHY BISHOFBERGER,

Petitioners,

—against—

IN RE: PRUDENTIAL SECURITIES INCORPORATED LIMITED

PARTNERSHIP LITIGATION, MDL DOCKET No. 1005,

Respondent.

hie

MACDANIEL JACKSON and MIRIAM JACKSON,

Petitioners,

—against—

IN RE: PRUDENTIAL SECURITIES INCORPORATED LIMITED

PARTNERSHIP LITIGATION, MDL DOCKET No. 1005,

Respondent.

ON PETITIONS FOR WRITS OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

el

BRIEF OF RESPONDENT PRUDENTIAL

SECURITIES INCORPORATED IN OPPOSITION

TO PETITIONS FOR WRITS OF CERTIORARI

a

Respondent Prudential Securities Incorporated (“PSI”)'

respectfully submits that writs of certiorari to review the deci-

sions of the United States Court of Appeals for the Second

Circuit should not issue because these decisions do not con-

flict—nor are they even said by either Petitioner to conflict—

with that of any other circuit, because no question worthy of

the exercise of this Court’s certiorari jurisdiction is presented

and because, in any event, the decisions below are in all

respects correct.

———

Se eee ee

~~ oe

COUNTER-STATEMENT OF THE CASE

The factual statements in the petitions contain numerous

misstatements and omissions which necessitate this counter-

statement pursuant to Supreme Court Rule 15.2.

These Petitions are related to a pending Petition filed by

John D. and Christal Toland (“the Tolands”), Docket No. 96-

1538. All three petitions arise out of the $110 million partial

settlement in a multi-districted class action styled /n re Pru-

dential Securities Incorporated Limited Partnerships Liti-

gation, MDL No. 1005 (“MDL 1005”). Like the Tolands,

Petitioners Leslie and Dorothy Bishofberger (“the Bishof-

bergers”) and MacDaniel and Miriam Jackson (“the Jack-

sons”) are members of the Class certified by the Final

Judgment entered by Senior United States District Judge Mil-

ton Pollack of the Southern District of New York. Because

they neglected to exclude themselves from the Class by opt-

ing out prior to the court-imposed deadline, Petitioners are

now bound by the Final Judgment, including its provision

enjoining the continued prosecution of Settled Claims against

ill et ti i te

Pursuant to Supreme Court Rule 29.6, PSI advises the Court that

neither it nor its ultimate parent, The Prudential Insurance Company of

America, a mutual insurance company, nor any subsidiary or affiliate has

issued shares to the public.

a

PSI and other Released Parties.? Like the Tolands, Petitioners

seek the issuance by this Court of writs of certiorari to review

the parochial and inherently fact-specific issues of whether

the Court of Appeals properly affirmed Judge Pollack’s denial

of their respective motions, pursuant to Rules 6(b) and 60(b)

of the Federal Rules of Civil Procedure, for extraordinary

relief from the Final Judgment and permission belatedly to

opt out of the Class in order to prosecute claims against PSI

which are barred and enjoined by the Final Judgment.

Background

The factual background of MDL 1005, the terms of the Set-

tlement (including the court-ordered procedures for the dis-

semination of the Notice) and the course of the proceedings in

the District Court to confirm the Settlement leading up to and

including the entry of the Final Judgment—all of which are

fundamental to an understanding of the issues raised by these

Petitions and yet are only cursorily (and even then, often inac-

curately) mentioned therein—are described in detail in PSI’s

Brief in Opposition to the Tolands’ Petition (“Br. Opp.”). To

avoid needless repetition, PSI respectfully refers the Court

thereto (Br. Opp. at 3-9), and sets forth below only those facts

relevant to the individual circumstances of Petitioners Bishof-

berger and Jackson, respectively.

: Capitalized terms have the same meaning ascribed to them in the

Settlement Agreement found in the Appendix filed with the Court of

Appeals at A65-A73. In addition, references herein to the Petitions are

designated as “[name of petitioner] Pet. at ___.” References herein to the

Appendices annexed thereto are designated as “[name of petitioner]

Pet. App. at___”). References to the Appendix hereto are designated as

“App at ___”. References to “A ___” are to the Appendices filed by

Appellants in the Court of Appeals for the Second Circuit on their appeal

below.

4

Petitioners’ Post-Judgment Motions

Leslie and Dorothy Bishofberger

Although the Bishofbergers acknowledged that they

received the Class Notice in “late September” 1995—over one

month prior to the October 30, 1995 deadline set by the court

for filing exclusions from the Class (A1541)—they argued

that they had no reason to believe it applied to them because

they erroneously thought that they fell within an exclusion to

the Class definition for investors who had executed timely

submission agreements and agreed to be bound by the Expe-

dited Dispute Arbitration Procedure (“EDAP”) under the SEC

Fund.’ However, through their own neglect, the Bishofberg-

ers’ submission agreement to EDAP was in fact not filed with

the SEC Claims Administrator until October 19, 1995 (over

three months after the July 6, 1995 deadline for doing so

(A1559-60)) and thus their request to participate in EDAP

was denied in that forum.

In support of their Rule 60(b) motion, the Bishofbergers

contended that “(t]he SEC Claims Administrator can hear our

? Prior to the consolidation in MDL 1005 of the various private

actions filed against PSI, PSI and the Securities Exchange Commission

(“SEC”) entered into a consent decree under which PSI agreed to provide

reparations to settle claims arising out of the same limited partnership

failures at issue in MDL 1005 (the “SEC Fund”). (A607) The SEC Fund

was under the general supervision of the United States District Court for

the District of Columbia (Greene, J.) and was presided over by a Court-

approved Claims Administrator, former SEC Commissioner Irving Pol-

lack. (A607) The SEC Fund’s Claims Resolution Process required PSI to

mail notices to all eligible investors informing them of the SEC Fund.

Eligible investors were then required to submit claims directly to PSI.

PSI was obligated either to offer the claimant a monetary settlement or

reject the claim. Investors who were dissatisfied-with PSI’s monetary

offer, or whose claims PSI rejected, could either pursue their claims in

other fora or enter EDAP. (A607-08) Investors who wished to participate

in EDAP were required to complete and timeiy file a submission agree-

ment. (A608) The database of investors created to comply with the SEC

Fund requirements was later utilized to send the Class Notices in MDL

1005.

5

request for excusable neglect to allow us back into the SEC

process. However, he can only hear this if we are exciuded

from this class action.” (A1583) Thus, the Bishofbergers

needed to demonstrate excusable neglect before Judge Pollack

in order to argue additional excusable neglect before the SEC

Claims Administrator—a request Judge Pollack politely

deemed “highly irregular.” (A1584)

Moreover, the Bishofbergers’ moving papers admitted that,

aside from their professed confusion over their status vis-

a-vis the SEC EDAP proceedings, by October 12, 1995—

over two weeks prior to the opt-out deadline set by Judge

Pollack—they were aware that they had not filed a submission

agreement in accordance with EDAP and that the deadline for

doing so had long passed. (A1541-42) The Bishofbergers,

then, were fully aware on October 12, 1995 that they were

Class Members bound by the Settlement unless they opted out

by October 30, 1995. Despite this knowledge and this 18-day

window, the Bishofbergers neither timely opted out nor ini-

tiated contact with the SEC Claims Administrator to deter-

mine if they were still eligible to participate in that Fund, nor

initiated contact with Lead Class Counsel (whose names,

addresses and telephone numbers were listed on the Notice

that they received in September 1995) for guidance about the

consequences of failing to opt out in a timely manner.

The Bishofbergers maintained that their startling neglect in

connection with both the SEC Fund and the Class Settlement

proceedings was excusable due to the illness of their “finan-

cial advisor” and former broker. (A1540) They claim to have

relied on this lay advisor, who never submitted an affidavit,

for advice in filling out forms and to assure that deadlines

were met. (A1534) His illness apparently lasted several

months (although he was fit to counsel them in late Septem-

ber 1995 when they received the Notice (A1542)) and

throughout that time they never took any action to inquire as

to their status in either the SEC Fund or the Class Settlement.

This, however, was not the end of their lethargy, for despite

having received notification on November 11, 1995 that their

request for submission to EDAP was rejected for tardiness

(A1548), the Bishofbergers neither attended the Novem-

ber 17, 1995 Fairness Hearing nor raised any timely objection

to the Settlement.

Judge Pollack denied the Bishofbergers’ motion for extraor-

dinary relief (A1610) and they thereafter appealed to the

Court of Appeals.*

MacDaniel and Miriam Jackson

The Jacksons moved pursuant to Rules 6(b) and 60(b) to be

excluded from the Class in order to proceed with the prose-

cution of their pending arbitration against PSI. (A745) The

Jacksons premised their motion on their alleged untimely

receipt of the Class Notice. The Jacksons do not dispute that

the Class Notice was mailed to them, nor that they received it.

The Claims Administrator confirmed that in fact two Notices,

one for Mr. Jackson personally and one for his IRA account,

were mailed to him on September 11, 1995. (A805c) Never-

theless, Mr. Jackson, a former PSI employee and industry

insider, asserted that he did not receive the Class Notice until

(and first learned of the widely publicized Settlement on)

December 7, 1995 because it was sent to his former PSI office

address, which was the last address shown for him on the PSI

database utilized by the Claims Administrator for mailing the

Class Notice.

The Jacksons argued that PSI’s failure to provide the

Claims Administrator with their current address, which led to

’ The Bishofbergers’ and their counsel's campaign of apathy con-

tinues in this Court. The Bishofbergers did not file their Petition until

April 28, 1997—122 days after the Court of Appeals’ entry of the Sum-

mary Order affirming the District Court’s denial of their motion. To cir-

cumvent their violation of Supreme Court Rule 13.1, the Bishofbergers

attempt to piggy-back onto the Jacksons’ petit‘on for rehearing below—

in which they did not join. As set forth, infra, the Bishofbergers’ Petition

is untimely and should be denied on that ground alone.

SR emer

OF iy lel ae Stop yi Dy Rel PES SE

at te

PR eae ne Se en ae

the purported delay in their receipt of the Class Notice, con-

stitutes sufficient grounds for extraordinary relief. (A748)

Pretermitting the legal irrelevance of this argument, PSI sub-

mitted an affidavit from Joseph Nottolo, the Operations Man-

ager at the PSI branch where Mr. Jackson was formerly

employed. (A805d) Mr. Nottolo attested that in the ordinary

course of business any mail addressed to Mr. Jackson was

routinely “forward[ed] . . . to Mr. Jackson on the day it [was]

received or, at the very latest, one day after its receipt” at the

branch. (A805e) In addition, Mr. Nottolo specifically denied

the Jacksons’ unsupported speculation that he had delayed

forwarding the Class Notice to Mr. Jackson. (A805e)

Judge Pollack was skeptical of the Jacksons’ contention

that they did not receive the Class Notice until the same day

that their lawyer called them to inquire as to its receipt and

denied the Jacksons’ motion as well as their subsequent

motion for reconsideration. The Jacksons thereafter filed sev-

eral notices of appeal.°

The Decisions of the Court of Appeals

The Bishofbergers’ and Jacksons’ appeals were consoli-

dated in the Court of Appeals with four other appeals (includ-

ing the Tolands’) from Judge Pollack’s orders denying

requests for permission belatedly to opt out of the Class. On

December 27, 1996, the Court of Appeals unanimously and

summarily affirmed each of those orders appealed from.

With respect to the Bishofbergers, the Court of Appeals

held that given their admitted timely receipt of the Notice,

; The Jacksons were the only members of this 100,000-plus mem-

ber Class to purport to appeal from the Final Judgment approving the Set-

tlement—notwithstanding the untimeliness of their appeal and their

dubious assumption of standing to do so. On PSI’s motion, the Court of

Appeals dismissed as untimely that part of the Jacksons’ appeal which

purported to be from the Final Judgment. They do not challenge that

dismissal in this Court.

their knowledge that their EDAP form had not been timely

filed and their failure to heed the Notice’s warning that they

should consult an attorney regarding any questions, Judge

Pollack did not abuse his discretion in denying their motion.

(Toland Pet. App. at 23) This purported abuse of discretion by

the District Court is what the Bishofbergers presently seek to

have reviewed by this Court.

As for the Jacksons, the Court of Appeals noted that as the

movants they had the burden of proof to demonstrate suffi-

cient grounds for extraordinary relief. (Toland Pet. App. at

11) The Court of Appeals held that the District Court’s deter-

mination that the Jacksons had failed to meet their burden and

the court’s “skepticism” concerning Mr. Jackson’s claim that

he did not receive the two Notices until after the opt-out

deadline were not abuses of discretion. Jd. The Jacksons

thereafter petitioned the Court of Appeals for rehearing,

which was denied on January 27, 1997. (Jackson Pet. at 10)

SUMMARY OF ARGUMENT

The instant Petitions seek writs of certiorari to review the

myriad and fact-specific excuses offered by Petitioners (and

rejected by the courts below) for their failures to opt out of

the Class in a timely manner. The facial “uncertworthiness”

of these Petitions is perhaps best described by the Bishof-

bergers themselves who candidly acknowledge that the “nar-

row issue before this court [sic] is whether the district court

abused its discretion in denying the Bishofbergers the right to

opt out of the class after the initial deadline had passed.”

(Bishofberger Pet. at 4) We are hard pressed better to artic-

ulate why this Court—which is not in the business of curing

putative abuses of discretion, vel non—should deny their

Petition.

The Jacksons, whose credibility the District Court ques-

tioned, attempt to obfuscate the parochial nature of their Peti-

tion and instead urge that the garden-variety, prototypical

9

notice procedures adopted by the District Court failed to sat-

isfy due process because they did not guarantee that the Jack-

sons would receive the Notice in a timely manner. This Court

has now been presented with three Petitions in this matter, all

of which challenge the propriety of the Notice procedures.

And yet, interestingly, none of the Petitioners before this

Court established that they failed to receive some notice of

ithe Class proceedings prior to the expiration of the opt-out

period. The Tolands, for example, admitted (Toland Pet. at 9)

that they were on actual notice of the Class Settlement nearly

two weeks before the expiration of the opt-out period. The

Bishofbergers likewise admit (Bishofberger Pet. at 3) that

they received the Notice over one month prior to the opt-out

deadline. The Jacksons failed to persuade the District Court

that they did not receive in a timely manner the two Notices

mailed to them notwithstanding their ambiguous assertions to

the contrary. These facts, coupled with the overwhelming

response of this 100,000-member Class to the mailed notice

program (Br. Opp. at 23 n23), render unavailing Petitioners’

individual and collective efforts to fashion a grievance of con-

stitutional magnitude.

In short, these Petitions represent nothing more than yet

another effort by disappointed litigants to reargue the merits

of their motions which were fully and fairly litigated in both

courts below. Like the Tolands, Petitioners do not identify,

nor does there exist, any ground upon which writs of certio-

rari should be granted. None of the questions purportedly

raised by the Petitions presents either a conflict among the

circuits, a conflict between the ruling of the Court of Appeals

and any ruling of this Court, or any otherwise important and

unresolved federal question of general and widespread appli-

cability. To say they are fact-specific is an understatement.

10

REASONS FOR DENYING THE WRITS

I. THE BISHOFBERGERS’ PETITION IS UNTIMELY

At the outset, the Court should deny the Bishofbergers’

Petition because it is untimely under Supreme Court Rule

13.1, which provides that a petition for a writ of certiorari

must be filed within ninety days after entry of the judgment

of the court below. Although the Court of Appeals entered its

judgment on the Bishofbergers’ appeal on December 27, 1996

(Toland Pet. App. at 1), they did not file their Petition until

April 28, 1997, well over ninety days later.

The Bishofbergers attempt to avoid the consequences of

their latest procedural gaffe by noting that their Petition was

filed within ninety days of the Court of Appeals’ order deny-

ing rehearing to the Jacksons. (Bishofberger Pet. at 1) The

Bishofbergers, however, never filed a petition for rehearing

in the Court of Appeals; the petition to which they refer was

filed solely by the Jacksons and not joined in by the Bishof-

bergers and is therefore irrelevant to the timeliness of the

Bishofbergers’ Petition for certiorari. The Jacksons’ petition

for rehearing (which the Bishofbergers did not even bother to

append) sought relief particular to the Jacksons alone. Their

petition entitled “Petition for Rehearing by Plaintiffs-Appel-

lants MacDaniel Jackson and Miriam Jackson,” states explic-

itly that “[i]n this Petition for Rehearing,the Jacksons do not

seek rehearing as to any Appellants other than the Jacksons,

nor as to any appeal other than the Jacksons’ appeal.” (App.

at 2a) Indeed, the fact that the Bishofbergers felt the need to

file this very Petition for certiorari in addition to the Tolands’

and the Jacksons’ filings indicates their own recognition that

any relief granted by this Court to any other petitioners would

not encompass the Bishofbergers’ claims absent a separate fil-

ing of the type they failed to make in the Court of Appeals.

Although Supreme Court Rule 13.3 states that a timely

motion for rehearing tolls “for all parties” the running of the

three months’ period in which a petition for certiorari may be

11

presented to this Court, this rule benefits only those peti-

tioners for whom the motion for rehearing “actually seeks an

‘alteration of the rights adjudicated’ in the lower court’s first

judgment.” FCC v. League of Women Voters, 468 U.S. 364,

373 n.10 (1984) (quoting Department of Banking v. Pink, 317

U.S. 264, 266 (1942)). As the Jacksons’ petition for rehearing

could have had no effect on the Court of Appeals’ adjudica-

tion of the Bishofbergers’ rights, the Jacksons’ petition did

not toll the running of the filing period for the Bishofbergers.°

See FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S.

206, 212 (1952) (dismissing petition for certiorari as untimely

because lower court’s subsequent order did not “disturb[ ] or

revise[ ] legal rights and obligations which, by its prior judg-

ment, had been plainly and properly settled with finality”);

Department of Banking, 317 US. at 266 (holding that petition

for certiorari was untimely where motion to amend below did

not seek an alteration of the rights adjudicated and therefore

the finality of the lower court’s prior order was never sus-

pended). As this Court has held that the ninety-day limit for

filing a petition for certiorari in a civil action is mandatory

and jurisdictional, see Missouri v. Jenkins, 495 U.S. 33, 45

(1990), the Bishofbergers’ Petition should be denied as

untimely.

Il. NEITHER PETITION RAISES ANY ISSUE WOR-

THY OF THIS COURT’S CONSIDERATION

Wholly apart from their failure to file a timely petition, the

Bishofbergers do not even attempt to identify any legal

authority (much less any intercircuit controversy) in support

of their Petition. Stymied by their admitted receipt of the

Class Notice over one month prior to the opt-out deadline and

° The Bishofbergers were in no way a “party” to the Jacksons’

appeal to the Court of Appeals, as is evident on the faces of the separate

Notices of Appeal they filed. (A1681; A1684) The appeals were

consolidated for briefing and argument purely as a matter of judicial

economy.

12

their failure to act on such Notice, the Bishofbergers instead

embark upon a lengthy diatribe in which they accuse PSI,

Class Plaintiffs, Lead Class Counsel and the District Court of

conspiring to create a “Kafkaesque proceeding.” (Bishof-

berger Pet. at 8) While the Bishofbergers’ paranoid conspir-

acy theory might make for an entertaining Oliver Stone

production, it simply does not implicate any issue worthy of

this Court’s consideration.

Similarly, the issues sought to be raised by the Jacksons’

Petition amount to nothing more than yet another request for

error-correction which, even if meritorious, would not warrant

the exercise of this Court’s certiorari jurisdiction. See

Supreme Court Rule 10. Their contentions, which repeat the

same tired arguments heard and rejected by the courts below,

are wholly without merit. The Jacksons follow the Tolands’

lead in contending that the notice procedures did not comply

with this Court’s rulings in Mullane v. Central Hanover Bank

& Trust Co., 339 U.S. 306 (1950), and Eisen v. Carlisle &

Jacquelin, 417 U.S. 156 (1974), because they failed to ensure

that each Class Member actually received the Notice at the

proper address. As discussed in PSI’s brief opposing the

Tolands’ Petition, however, there is no support for the propo-

sition that due process requires actual receipt by every absent

class member of a mailed notice of a proposed class settle-

ment. (See Br. Opp. at 22-24) Rather, what is required is that

notice procedures be “reasonably calculated, under all the cir-

cumstances, to apprise interested parties of the pendency of

the action and afford them an opportunity to present their

objections.” Mullane, 339 U.S. at 314.

The plethora of cases cited by the Jacksons in their Petition

(many of which were not cited to the Court of Appeals) do

not dictate a different result. Instead, the legal authority relied

on by the Jacksons only underscores the holding of the court

below, consistent with Mullane and Eisen, that due process

requires not perfect notice but the “best notice practicable

under the circumstances.” See, e.g., Mennonite Board of Mis-

13

sions v. Adams, 462 U.S. 791, 800 (1983) (holding that notice

by mail “or other means as certain to ensure actual notice” is

required to satisfy due process); Greene v. Lindsey, 456 U.S.

444, 454 (1982) (noting that “reasonableness of the notice

provided must be tested with reference to the existence of

‘feasible and customary’ alternatives and supplements to the

form of notice chosen”) (quoting Mullane, 339 U.S. at 315).’

In essence, the Jacksons argue that each and every one of

the 100,000-plus addresses on the PSI database specifically

created to provide a list of affected investors for the SEC

Fund should have been verified and re-verified to guarantee

100% accuracy before the Notices were mailed. There is sim-

ply no support for this Jacksonian view of the requirements of

due process. See, e.g., Peters v. National Railroad Passenger

Corp., 966 F.2d 1483 (D.C. Cir. 1992) (no due process vio-

lation where address on mailing list was inaccurate); Gross v.

Barnett Banks, Inc., 934 F. Supp. 1340, 1345 (M.D. Fla.

1995) (verification of addresses on mailing list not required

to satisfy due process).

Finally, to support their contention that the District Court

incorrectly judged the adequacy of the Notice by the more

lenient standards of Rule 23(e) (Jackson Pet. at 20-22), the

Jacksons distort the District Court’s Opinion. The Jacksons

assert that the District Court relied exclusively on Rule 23(e)

. The Jacksons also cite this Court’s decision in Phillips

- Petroleum Co. v. Shutts, 472 U.S. 797 (1985), as authority for their ill-

conceived argument that due process requires actual receipt of a mailed

notice. Shurts, however, is factually inapposite to the present case as it

addresses the question of a court's exercise of personal jurisdiction over

out-of-state class plaintiffs. Moreover, in relying on Mullane, Shutts actu-

ally reinforces the District Court’s holding that notice to absent ciass

members need only be “reasonably calculated, under all the circum-

stances, to apprise interested parties of the pendency of the action and

afford them an opportunity to present their objections.” /d. at 811 (quot-

ing Mullane, 339 U.S. at 314-15). See also Gross v. Barnett Banks, Inc.,

934 F. Supp. 1340, 1344 (M.D. Fla. 1995) (citing Shutts for holding that

actual receipt of mailed notice not required to satisfy due process).

14

cases. A plain reading of the Opinion which expressly relies

on Mullane and Eisen, however, demolishes this contention.

(Jackson Pet. App. at 53)°

Equally unpersuasive is the Jacksons’ attempt in Part III of

their Petition to manufacture an issue regarding the standard

of review. The Jacksons contend that the Court of Appeals

erroneously applied an abuse of discretion standard and failed

to conduct a de novo review of the District Court’s denial of

their Rule 60(b)(4) motion. (Jackson Pet. at 25-26) First, this

argument ignores that the Jacksons moved for relief on

numerous grounds, including Rules 60(b) and 6(b). (Jackson

Pet. App. at 69-71) In reviewing the District Court’s denial of

the Jacksons’ motions under these rules—including the Dis-

trict Court’s determination that the Jacksons had failed to sat-

isfy their burden of demonstrating excusable neglect—

the Court of Appeals properly applied an abuse of discretio:

standard. Browder v. Director, Department of Corrections,

434 U.S. 257, 263 n.7 (1978) (appeals from denials of Rule

60(b) motions reviewed “only for abuse of discretion”); Lujan

v. National Wildlife Federation, 497 U.S. 871, 895-96 (1990)

(Rule 6(b) confers discretionary standard). Second, as to the

Jacksons’ Rule 60(b)(4) motion, the Court of Appeals did in

fact conduct a de novo review of the Notice procedures.’ That

. The Jacksons blatantly and inexcusably ignore that part of the

District Court’s opinion which discussed Mullane and Eisen and instead

point to the court’s citation to Grunin v. International House of Pan-

cakes, 513 F.2d 114 (8th Cir.), cert. denied, 423 U.S. 864 (1975), as evi-

dence of its putative error. Although Grunin involved Rule 23(e) notice,

the Eighth Circuit cited Eisen for the proposition that due process does

not guarantee receipt of class notice—a proposition that is nowhere

refuted in any case cited by the Jacksons (or, for that matter, the

Tolands).

° A review of the transcript of the oral argument of these con-

solidated appeals (which the Jacksons’ Supreme Court counsel did not

attend) will reveal that the Court of Appeals, through its vigorous

questioning of PSI’s counsel regarding the adequacy of the notice pro-

15

the Court of Appeals, which heard six consolidated appeals of

multiple appellants, did not explicitly enumerate its approval

of the notice procedures in its opinion does not warrant the

inference that it did not conduct the proper inquiry.

CONCLUSION

The Petitions for writs of certiorari should be denied.

Dated: New York, New York

May 28, 1997

Respectfully submitted,

THOMAS J. KAVALER

80 Pine Street

New York, New York 10005

(212) 701-3000

Counsel of Record

Of Counsel:

Mathias E. Mone

John M. McSherry

CAHILL GORDON & REINDEL

(a partnership including

a professional corporation)

80 Pine Street

New York, New York 10005

(212) 701-3000

cedures, did in fact review the adequacy of the notice procedures de novo

prior to addressing Judge Pollack’s alleged abuses of discretion.

APPENDIX

la

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Docket No. 95-9209 (Lead) and 96-7147 (Con)

In Re: PRUDENTIAL SECURITIES INCORPORATED LIMITED

PARTNERSHIP LITIGATION, MDL DOCKET No. 1005

MATT NILSON, DAVID MATUS, MELINDA MATUS, LESLIE

BISHOFBERGER, DOROTHY BISHOFBERGER, THOMAS

BARRETT, JAMES M. BARRETT, REBECCA BARRETT,

Executrix of the Estate of James Barrett, CARL ROBA,

JAY JABLONSKI, VINCENT LAZARA, and JEFFREY A.

SCHILLER,

Movants-Appellants,

—_—_vV—

PRUDENTIAL SECURITIES INCORPORATED,

Respondent-Appellee.

JOHN D. TOLAND and CHRISTAL TOLAND, as husband and

wife and d/b/a The John Toland Company, MACDANIEL

JACKSON, and MIRIAM JACKSON,

Plaintiffs-Appellants,

2a

ame _ onen

IN RE: PRUDENTIAL SECURITIES INCORPORATED LIMITED

PARTNERSHIP LITIGATION,

Defendant-Appellee.

PETITION FOR REHEARING, BY PLAINTIFFS-

APPELLANTS MACDANIEL JACKSON

and MIRIAM JACKSON

Plaintiffs-Appellants MacDaniel Jackson and Miriam Jack-

son (the “Jacksons”) respectfully make this Petition to this

Court of Appeals, for the Court’s rehearing of this matter as

to the appeal made herein by the Jacksons, with respect to the

Court’s Summary Order filed December 27, 1996, a copy of

which Summary Order is attached hereto as Exhibit A, inso-

far as the Summary Order is dispositive of the appeal of the

Jacksons.

The appeal of the Jacksons was ordered previously by this

Court to be consolidated with appeals herein by other Appel-

lants. In this Petition for Rehearing, the Jacksons do not seek

rehearing as to any Appellants other than the Jacksons, nor as

to any appeal other than the Jacksons’ appeal.

THIS COURT’S SUMMARY ORDER FAILED TO

ADDRESS THE JACKSONS’ ARGUMENT AS TO

“SETTLED CLAIMS” UNDER THE CLASS

SETTLEMENT RELEASE

In the Jacksons’ Supplemental Brief and the Jacksons’ Sup-

plemental Reply Brief herein, the Jacksons argue, inter alia,

that their claim against Appellee Prudential Securities Incor-

porated (“PSI”), based upon PSI’s failure to supply the class

notice and mailing administrators with the Jacksons’ address

3a

last-known to PSI, for use in sending the Jacksons notice of

the pendency of the class action and of the Jacksons’ right to

opt out of the class action, is not a matter within the “Settled

Claims”, as the term “Settled Claims” is defined by the par-

ties’ Settlement Agreement (A 71).'

Consequently, such claim of the Jacksons was not agreed,

by the parties’ Settlement Agreement, to be released in set-

tlement of the class action. Further, the District Court’s Order

No. 44, as amended (A 1523, A 1677), erroneously fails to

permit the Jacksons to maintain their said claim in a pending

arbitration proceeding against PSI, based upon PSI’s failure

to supply and utilize the Jacksons’ said last-known address.

The Jacksons argued the above points, including the Jack-

sons’ citation of dispositive precedent of this Court of

Appeals and of the District Court for the Southern District of

New York, within the Jacksons’ Supplemental Brief and Sup-

plemental Reply Brief. The Jacksons’ argument on this point

was not discussed, nor was the Jacksons’ argument on this

point decided, by the Summary Order.

THE DISTRICT COURT ERRED IN NOT PERMITTING

THE JACKSONS TO MAINTAIN A CLAIM IN

THE JACKSON ARBITRATION BASED ON PSI’S

FAILURE TO PROVIDE THE JACKSONS’

KNOWN, CORRECT ADDRESS

Numbered paragraph 6 of the District Court’s Class Order

compromised and resolved “Settled Claims” against PSI, and

enjoined the prosecution of any “Settled Claims” against PSI

(A 645). The Class Order also provided that capitalized terms

used therein would be given the meaning defined in the par-

ties’ Settlement Agreement (A 641). The Settlement Agree-

]

Parenthetical references are as follows, unless otherwise spec-

ified: References to “A”, followed by a page number, are references to

the parties’ Joint Appendix on appeal; References to Appellants’ Sup-

plemental Briefs are designated “App. Supp.” and the Appellants’ names,

followed by a page number.

4a

ment, in turn, defined “Settled Claims” in its numbered para-

graph 21 (A 71) as follows:

“21. ‘Settled Claims’ means any and all claims, rights

or causes of action or liabilities whatsoever, whether

based on federal, state, local, statutory or common law

or any other law, rule or regulation, including both

known and unknown claims, that have been, could have

been, or in the future might be asserted in any forum by

the Class Members or any of them or the successors and

assigns of any of them, whether directly, indirectly, rep-

resentatively, derivatively or in any other capacity,

against any of the Released Parties, in connection with or

which arise out of or relate in any way to the allegations,

transactions, facts, matters or occurrences, represen-

tations or omissions involved, set forth or referred to in

the Consolidated Complaint, or which relate in any way

to the marketing, purchase, sale or holding of Units or

other interests in, or to the operation, oversight, moni-

toring or management of, any of the Partnerships during

the Class Period.” (emphasis added)

Thus, reduced to its essence, the definition of “Settled

Claims” refers to any of a number of legal claims, described

in the first one-half of the above lengthy definition: (1.)

Which are in connection with, or which arise out of, or which

relate in any way to, the allegations, facts and other matters,

involved or referred to in the Consolidated Complaint; or (2.)

Which relate in any way to the marketing, purchase, sale or

holding of Partnership interests during the Class Period; or

(3.) Which relate in any way to the operation, oversight, or

management of the Partnerships during the Class Period.

The contracting parties’ above definition of “Settled

Claims” is a definition which is stated with reference to the

factual transactions or factual allegations which are referred

to in, and which underlie, the Consolidated Complaint: For

example, alleged RICO violations, or alleged fraud in mar-

Sa

keting of Partnership interests. The Consolidated Complaint

was described by the District Court as follows:

“C. The Consolidated Complaint.

“14. Count I of the Consolidated Complaint alleges

RICO violations under 18 U.S.C. § 1962(c) and a civil

RICO conspiracy under 18 U.S.C. § 1962(d). . . Count

I also serves as a model for pleading thirty-four addi-

tional RICO violations under 18 U.S.C. § 1962(c) and

thirty-four violations under 18 U.S.C. § 1962(d) that fol-

low the same pattern as Count I but substitute the dif-

ferent groups of conspirators, RICO enterprises, and

offering periods listed in Appendix H. Through a simi-

lar procedure, Count II asserts thirty-five RICO viola-

tions under 18 U.S.C. § 1962(a) and thirty-five violations

of 18 U.S.C. § 1962(d). Counts III through V allege that

all defendants named in the Consolidated Complaint con-

spired together to commit racketeering acts and to vio-

late 18 U.S.C. §§ 1962(a) and (c). The remaining counts

allege fraud (Count VI), negligent misrepresentation

(Count VII), breach of fiduciary duty (Count VIII),

breach of a third-party beneficiary contract (Count IX),

breach of implied covenant (Count X), and violations of

New Jersey’s RICO statute (Count XI). Counts VI

through VIII allege that nearly all of the defendants

named in the Consolidated Complaint are jointly and

severally liable for one another’s torts. Count IX is

directed exclusively at PSI while Count X is directed

exclusively at Prudential Insurance. Count XI duplicates

the first five federal counts, but is brought pursuant to an

analogous state statute, N.J. Stat. §§ 2C:41-1 et seg., that

state’s RICO statute. . . .” District Court’s Findings of

Facts and Conclusions of Law, Sec. II (C.) (14.). (A 592

et seq., at para. 14.)

6a

The Settlement Agreement, by its clear terms, was directed

to claims arising with reference to the Partnerships’ man-

agement, marketing and sale, and the RICO, fraud and other

factual allegations and matters referred-to in the Consolidated

Complaint. If language used by parties in a contract is unam-

biguous, a court must enforce the plain, ordinary and common

meaning of those terms as a matter of law, without reference

to extrinsic evidence. John Hancock Mutual Life Insurance

Company v. Amerford International Corporation, 22 F.3d 458,

462 (2nd Cir. 1994); Chrysler Capital Corporation v. Bankers

Trust Company, 810 F. Supp 74, 76 (S.D. N.Y. 1992).

Any failure of PSI to give the Class Counsel the Jacksons’

accurate address, last-known to PSI, for mailing the Jacksons

the Class Notice of the class membership hearing in this pro-

ceeding, is not any of the types of matters defined as a “Set-

tled Claim” in PSI’s Settlement Agreement. Such a PSI

failure is not a matter in connection with, arising out of, nor

related in any way to alleged RICO or other wrongs, nor facts

nor other “matter involved in or referred to in the Consoli-

dated Complaint.”; It is not a matter “related in any way to

the marketing, purchase, sale or holding of the Partnership

interests during the Class Period”; And it is not a matter

“related in any way to the operation nor management of the

Partnerships during the Class Period”.

The clear direction of the settlement release, to the alleged

RICO and other wrongs, and other factual matters underlying

the Consolidated Complaint, is shown by the language the set-

tling parties used, and by the treatment they gave these mat-

ters, in their Setthkement Agreement. Under the heading

“TERMS AND CONDITIONS OF THE SETTLEMENT’, on

Page 11 of the Settlement Agreement (A 75), the settling par-

ties make provision for various terms, including, in numbered

paragraph 34 thereof, the basic agreement to settle (/bid.).

Thereafter, commencing on Page 21 of the Settlement Agree-

ment (A 85), in an entirely separate discussion, are provisions

entitled “CLASS CERTIFICATION CLASS NOTICE, AND

SETTLEMENT FAIRNESS HEARING”. Indeed, PSI’s duty to

tite Doiaisinainiies

7a

provide putative Class members’ addresses and other infor-

mation is contained in yet another separate section of the

Settlement Agreement, entitled “MJSCELLANEOUS” com-

mencing on Page 25 (A 89). The clear meaning of the parties’

contract terms is that matters of “Class certification, class

notice and the Settlement Fairness Hearing” are treated sep-

arately and distinctly from the parties’ basic agreement to set-

tle the dispute, and the matters which the settlement is to

resolve.

Alternatively, PSI’s duty to provide a correct address of the

Jacksons, known to PSI, for use by Class Counsel in mailing

notices in this litigation, may be viewed as arising pursuant to

the District Court’s “‘Preliminary Order in Connection with

Settlement Proceedings” (A 184 et seq.):

“

. . The PSI Settling Defendants shall cooperate in

making their books, records and information available to

Lead Class Counsel or their agent for the purpose of

identifying and giving notice to the Class.” (A 191)

Indeed, the parties’ settlement contract illustrates the dis-

tinction which that contract makes, between the “Settled

Claims” to be settled thereby, and, by contrast, other matters

in execution of the litigation settlement. The two matters—the

“Settled Claims” and the other duties—are spoken of sepa-

rately, at the conclusion of the same sentence:

“45. The obligations of the Class Members and the

PSI Settling Defendants under this Settlement Agree-

ment shall be in full settlement . . . of the Settled

Claims .. . and the Released Parties shall have no other

or further liability or obligation to the Class. . . with

respect to-the Settled Claims except to fulfill the obli-

gations created hereunder.” (A 84) (emphasis added)

Given the unambiguous language which the settling parties

used in limiting the settlement release to the RICO, fraud and

other factual allegations contained in the Consolidated Com-

8a

plaint, the plain meaning of the parties’ chosen language

should be applied. As this Circuit Court of Appeals stated in -

a prior case:

“Language whose meaning is otherwise plain is not

ambiguous merely because the parties urge different

interpretations in the litigation. (citation omitted) The

court should not find the language ambiguous on the

basis of the interpretation urged by one party, where that

interpretation would ‘strain [ ] the contract language

beyond its reasonable and ordinary meaning.’ (citation

omitted)

“The parties’ rights under an unambiguous contract

should be fathomed from the terms expressed in the

instrument itself rather than from extrinsic evidence as

to terms that were not expressed or judicial views as to

what terms might be preferable. . .” Metropolitan Life

Insurance Company v. RJR Nabisco, Incorporated, 906

F.2d 884, 889 (2nd Cir. 1990). (applying New York law)

(emphasis added)

John Hancock Mutual Life Insurance Co. v. Amerford Inter-

national Corp., supra; Natwest USA Credit Corp. v. Alco

Standard Corporation, 858 F. Supp. 401 (S.D. N.Y. 1994).

The plain meaning of the Settlement Agreement, and the

single and only meaning of which said definition is suscep-

tible, is that “Settled Claims” are defined as claims having

reference to the RICO, fraud and other factual matters alleged

in, and underlying, the Consolidated Complaint, and with ref-

erence to PSI’s marketing and management of its Partner-

ships. This unambiguous meaning thus excludes, by its

express terms, the Jacksons’ claim against PSI based on PSI’s

provision of a known-incorrect address for the Jacksons, and

the District Court erred in prohibiting the Jacksons from

bringing an arbitration claim based on PSI’s deliberate use of

an incorrect address for the Jacksons.

9a

CONCLUSION; RELIEF SOUGHT

The Jacksons respectfully request this Court rehear this

matter as to the Jacksons’ appeal, and reconsider this Court’s

said Summary Order as to the Jacksons’ appeal, as to this

Court’s failure in said Summary Order to address the Jack-

sons’ argument concerning “Settled Claims” in relation to the

parties’ Settlement Agreement in this matter, all as described

hereinabove and in the Jacksons’ previous Supplemental Brief

and Supplemental Reply Brief, and that the District Court's

Order No. 44, as amended, be modified as requested in the

Jacksons’ previous Supplemental Brief and Supplemental

Reply Brief, and for such other and further relief to which the

Jacksons might show themselves to be entitled.

Respectfully submitted,

. FERGUSON & COMPANY, P.C.,

By: JEROME H. FERGUSON, III

Jerome H. Ferguson, III

SBOT No. 06925400

300 Embassy Court

624 N. Good-Latimer Expressway

Dallas, Texas 75204-5850

Voice: 214/824-5555

Fax: 214/823-3888