Northern District Holds That Failing to Receive Opt-Out Notice Insufficient to Support Excusable Neglect Finding to Allow Late Class Member Opt-Out

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The Northern District of California denied a motion by a member of a federal securities class action to opt out after the deadline.  In re Charles Schwab Corporation Securities Litigation, No. C 08-01510 WHA, 2010 WL 4509718 (N.D. Cal. Nov. 1, 2010) (slip op.).   The standard for determining whether a class member should be allowed to opt out of a class action after the applicable exclusion deadline has passed is whether the class member’s failure to meet the deadline is the result of “excusable neglect.”  Id. *1 (citing Silber v. Mabon, 18 F.3d 1449, 1455 (9th Cir. 1994)).

The court found that the excuse provided by the class member—not receiving the opt-out notice—was insufficient to support a finding of excusable neglect:

Having considered the factors set forth above, this order finds that the facts and circumstances underlying the request of Gary Benson do not support a finding of excusable neglect under Ninth Circuit law. The only excuse provided by Mr. Benson is that he did not receive the opt-out notice sent to federal securities class members on October 12, 2009. While it may be true that he did not learn of his involvement in the instant case until recently, the class action notice was properly sent via first-class mail to the address associated with his Schwab account(s) and was not returned to the claims administrator as “undeliverable” (see Dkt. No. 751-1, listing all class members for whom notices were returned “undeliverable” and where new addresses could not be found). In other words, the notice provided to Mr. Benson was reasonably calculated to give him actual notice of this class action and was constitutionally sufficient. This weighs against a finding of excusable neglect.

Id.

The court noted that “if such excuses were deemed sufficient to warrant exclusion at this time, defendants would be prejudiced, given their commitment to a settlement amount that was negotiated with a stable class membership in mind.” Id. Read the rest of this entry »

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