Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_08-cv-01510/USCOURTS-cand-3_08-cv-01510-132/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE: 

CHARLES SCHWAB CORPORATION

SECURITIES LITIGATION.

This Document Relates

To All Cases.

 /

No. C 08-01510 WHA

ORDER DENYING PROFESSOR

JACK GARVEY’S REQUEST TO

OPT OUT AFTER THE DEADLINE

This order addresses Professor Jack Garvey’s request to opt out of the certified class after

the deadline for requesting exclusion from the class has expired. The opt-out deadline for this

class action was December 28, 2009. Professor Garvey made his request to opt out on March 29,

2010 (Dkt. No. 618, Sylvester Decl. ¶¶ 10, 12). 

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.” See Silber v. Mabon, 18 F.3d

1449, 1454-55 (9th Cir.1994). This standard allows courts, “where appropriate, to accept late

filings caused by inadvertence, mistake, or carelessness, as well as by intervening circumstances

beyond the party’s control.” Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P’ship, 507 U.S.

380, 388 (1993). When evaluating whether “excusable neglect” applies, the Ninth Circuit

instructs courts to consider the “degree of compliance with the best practicable notice procedures; 

Case 3:08-cv-01510-WHA Document 824 Filed 05/27/10 Page 1 of 3
United States District Court

For the Northern District of California

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when notice was actually received and if not timely received, why not; what caused the delay, and

whose responsibility was it; how quickly the belated opt out request was made once notice was

received; how many class members want to opt out; and whether allowing a belated opt out would

affect either the settlement or finality of the judgment.” Silber, 18 F.3d at 1455 (internal footnote

omitted). Additionally, the court should consider the danger of prejudice to the opposing party,

and whether the movant acted in good faith. Pioneer, 507 U.S. at 395.

On balance, these factors do not support a finding of excusable neglect given the specific

circumstances underlying Professor Garvey’s request. First, it is undisputed that the claims

administrator had Professor Garvey’s correct mailing address on record when notice by first-class

mail was sent to class members on October 12, 2009 (id. at ¶ 8). This point was reiterated

multiple times at the hearing on class notice held on April 26, 2010, in which Professor Garvey

was an invited and active participant (see, e.g., Dkt. No. 723 at 43–44, 68). Despite having the

opportunity to testify under oath at the April 26 hearing, Professor Garvey did not dispute this

fact. Second, Professor Garvey’s notice was not returned to the claims administrator as

“undeliverable.” This too remained undisputed after the April 26 hearing. Third, after an

evidentiary hearing on April 26 addressing the question of whether notices were in fact “sticking

together” (as opposed to whether Ms. Carole Sylvester from Gilardi & Co., the claims

administrator, merely mentioned it as a hypothetical), this order finds — based upon the

testimony of Ms. Sylvester and Professor Garvey — that the evidence does not support Professor

Garvey’s assertion that there was “a problem with notices sticking together” in this class action. 

Fourth, Professor Garvey’s opt-out request comes three months after the applicable deadline. 

There is no good excuse for this lengthy delay. Professor Garvey stated at the April 26 hearing

that he was not out of the country traveling or otherwise unable to receive first-class mail at his

mailing address (id. at 32). Moreover, given the publicity surrounding this case and the fact that a

student law clinic at the University of San Francisco School of Law (where Professor Garvey is

an instructor) was actively and successfully arbitrating YieldPlus-related claims against Schwab,

this untimely request appears even less excusable. Fifth, there is no question that an opt-out

request made on the eve of preliminary approval of a 200 million dollar class-wide settlement

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For the Northern District of California

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would be prejudicial to Schwab, since the settlement was negotiated with the current class

membership in mind. Taken together, this order finds that these factors weigh against a finding of

excusable neglect with respect to Professor Garvey.

Two additional points must be made. At the April 26 hearing, Professor Garvey argued

that the longstanding practice of providing notice to class members by first-class mail should be

reconsidered, because “a lot of that junk mail these days is made to look like notices” (id. at 31). 

While this observation may have merit in the abstract, it does not apply here. As the undersigned

stated to Professor Garvey at the April 26 hearing, “after getting your correspondence . . . I

looked at the envelope, and it did say ‘Important Legal Document’ on there” (ibid.). Considering

this and other characteristics of the particular notice used in this class action, this order finds that

Professor Garvey’s argument regarding first-class mail does not excuse his untimely opt-out

request. Finally, Professor Garvey’s argument that he has been “inadequately represented” by

counsel has been considered by this order. Having considered all the submissions and

correspondence regarding Professor Garvey’s request, this order finds that the argument of

“inadequate representation” is not a sufficient basis to permit Professor Garvey to opt out long

after the deadline has passed.

In sum, Professor Garvey’s request to be excluded from the class is DENIED. That said, if

counsel choose to stipulate to release Professor Garvey from being bound to the settlement, they

are still free to do so.

IT IS SO ORDERED.

Dated: May 26, 2010. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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