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Securities Regulation Keyed to Coffee
In re Cendant Corp. Litigation
Facts
A $3.2 billion settlement of a securities fraud class action was approved by the district court and brought against Cendant Corp. and its auditors, Ernst & Young, and the plaintiff class was awarded $262 million in fees to counsel. A group comprised of three pension funds (the CalPERS Group) was selected by the court as lead plaintiff. As instructed by the Private Securities Litigation Reform Act (PSLRA), the court identified that Group as being the movant with the largest financial interest in the relief sought by the class. The court concluded that the CalPERS Group was the presumptive lead plaintiff, once they found the CalPERS Group as satisfying the adequacy and typicality requirements. Without a rebuttal to this statutory presumption, the lead plaintiff was appointed as CalPERS Group by the court. Then the CalPERS Grouprequested that the court appoint as lead counsel two firms it had elected. The court originally refused, opting to select lead counsel through an auction, however, the court permitted the CalPERS Group's chosen counsel the choice to match what the court decided to be thelowest qualified bid. That option was exercised by the firms and they were appointed as lead counsel. The petition of lead counsel of $262 million in fees was at least $76 million higher than that listed under its retainer agreement with the CalPERS Group. The court's use of an auction to choose lead counsel and its selection of CalPERS as lead plaintiff were challenged, and the court of appeals granted review.
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