FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

JUNE 17, 2009

THOMAS K. KAHN

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

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No. 07-11908

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D. C. Docket No. 03-01500-CV-BE-S

IN RE: HEALTHSOUTH CORPORATION SECURITIES LITIGATION

LEAD PLAINTIFFS, Central States Group and

New Mexico Group for Stockholder Litigation and

Retirement Systems of Alabama for Bondholder Litigation,

Plaintiff-Appellee,

AIG GLOBAL INVESTMENT CORPORATION,

Plaintiff-Appellant,

versus

HEALTHSOUTH CORPORATION,

Corporate defendant in Master Litigation,

Defendant-Appellee.

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Appeal from the United States District Court

for the Northern District of Alabama

_________________________

(June 17, 2009)

Before MARCUS, ANDERSON and CUDAHY,* Circuit Judges.

________________________

* Honorable Richard D. Cudahy, United States Circuit Judge for the Seventh Circuit,

sitting by designation.
PER CURIAM:

This appeal arises from a $445 million partial settlement between Appellees,

Lead Plaintiffs and Defendant HealthSouth Corporation (the “Settling Parties”), in

the HealthSouth Corporation (“HealthSouth”) securities fraud class action. 

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AIG Global Investment Corporation (“AIG Global”), an unnamed member of the

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settling bondholder class, appeals the district court’s denial of its untimely request 3

to opt out of the bondholder class and the denial of its motion for reconsideration. 

AIG Global mounts several arguments to support its position that the district

court erred, which arguments we discuss in turn below. Responding to AIG

Global’s appeal, the Settling Parties contend that this Court does not have

jurisdiction to hear this appeal, and that AIG Global does not have standing to bring

this appeal. 

We hold that we do have jurisdiction over this appeal and that AIG Global

does have standing to bring this appeal. We also hold that the district court did not

abuse its discretion in denying AIG Global’s untimely opt-out request or denying its

motion for reconsideration. Accordingly, we affirm.

We sua sponte sever this appeal from Richard M. Scrushy’s appeal of the Partial 1

Final Judgment on an unrelated issue, appeal number 07-10701.

AIG Global is a wholly owned subsidiary of American International Group, Inc. 2

The class members are divided into a bondholder class and a stockholder class. 3

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I. FACTS

This appeal stems from the HealthSouth securities fraud litigation. In March

of 2003, HealthSouth acknowledged that its previous financial statements had

substantially overstated its income and assets. In response, HealthSouth investors

filed several class actions against HealthSouth alleging violations of the Securities

Act of 1933 and the Securities Exchange Act of 1934. In July of 2003, these actions

were consolidated in the Northern District of Alabama, and separate bondholder and

stockholder classes were established. AIG Global is an unnamed member of the

bondholder class.

After years of litigation, the Settling Parties agreed to a Partial Settlement

valued at $445 million in cash, HealthSouth stock, and HealthSouth warrants. On

September 26, 2006, the Settling Parties filed a Stipulation of Partial Settlement

with the district court providing for certification of the class for settlement purposes,

establishing a settlement fund, and releasing claims by all members participating in

the settlement. The Stipulation included a “blow provision,” granting HealthSouth

the opportunity to withdraw from the proposed settlement if a certain undisclosed

number of class members opted out of the Partial Settlement. If the threshold of 4

The threshold number of opt outs required to trigger the blow provision is 4

typically not disclosed and is kept confidential to encourage settlement and discourage third

parties from soliciting class members to opt out. 

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opt outs was met to trigger the blow provision, then HealthSouth would have until

January 4, 2007 to exercise its right to terminate the Partial Settlement. 

On October 2, 2006, the district court entered a preliminary order approving

the Partial Settlement. The preliminary order certified the stockholder and

bondholder classes for settlement purposes, approved the terms of the Stipulation,

and authorized publication of the Class Notice. The preliminary order established

December 8, 2006 as the deadline for filing objections and for opting out of the

class. In addition, the preliminary order scheduled the fairness hearing for final

approval for January 8, 2007. 

The preliminary order approved the form and content of the Class Notice. 

The district court determined that the requirements for class notice under Rule 23

were met and the notice comprised the “best notice practicable under the

circumstances.” The Settling Parties were required to make reasonable efforts to

identify all class members and have notice mailed to them by October 23, 2006. In

addition, the Settling Parties were required to publish the Summary Notice by

November 6, 2006, in The Wall Street Journal and Investor’s Business Daily. 

AIG Global had purchased approximately $180 million of HealthSouth debt

securities during the class period. Despite AIG Global’s significant HealthSouth

holdings and its apparent desire to opt out of the settling bondholder class, AIG

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Global failed to meet the December 8, 2006 deadline for opting out of the class. 

Instead, on Friday January 5, 2007—the day after the blow provision expired and

three days before the fairness hearing—the district court received a letter from

American International Group, Inc. (“AIG”) requesting permission to opt out of the

settlement because AIG Global allegedly did not receive notice of the Partial

Settlement. On January 8, 2007, at the fairness hearing, the district court heard oral

argument on AIG Global’s motion to enlarge the time permitting it to opt out of the

settlement class. 

On January 11, 2007, the district court denied AIG Global’s untimely request

to opt out of the settlement class. The district court determined that AIG had both

actual and constructive notice of the opt-out deadline. The district court noted that

AIG received at least 12 copies of the Class Notice in addition to publication in

national editions of prominent business publications. Furthermore, the district court

noted that AIG’s counsel had been in close communication with HealthSouth’s

counsel regarding the existence of the Partial Settlement, but AIG Global failed to

exercise due diligence and meet the opt-out deadline. In addition, the district court

noted that allowing AIG Global’s untimely opt-out request would result in great

prejudice to the Settling Parties because AIG Global’s $180 million in bonds could

have potentially triggered the blow provision allowing HealthSouth to terminate the

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settlement, but HealthSouth’s deadline to exercise the termination option had

passed. 

AIG Global filed a motion to reconsider the Partial Final Judgment based in

part on the fact that the Settlement Agreement and the Class Notice did not include

the preliminary Plan of Allocation containing an Exclusion Date that made 65% of

AIG Global’s securities ineligible for recovery. The preliminary Plan of Allocation

was part of a supplemental agreement for establishing the threshold for triggering

the blow provision. AIG Global argues that the Class Notice was invalid because

the Settling Parties concealed the Exclusion Date. AIG Global contends that it

should be allowed to opt out or that a second opt-out opportunity should be granted

after the class is notified of the final Plan of Allocation. The Class Notice stated

that the Plan of Allocation would be submitted at a later time and that parties would

have an opportunity to object to the fairness of the Plan at a later hearing. 

The district court denied AIG Global’s motion for reconsideration because it

found that AIG Global had adequate notice of the class settlement. The district

court determined that the Class Notice did not have to include the preliminary Plan

of Allocation because the Plan was in fact preliminary and dependent on ongoing

negotiations with the Securities and Exchange Commission (“SEC”) to obtain

additional money for the class. Furthermore, the Class Notice informed class

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members that the Plan of Allocation would be submitted later, and class members

had the choice of opting out if they did not want to join the class because the Plan of

Allocation had not yet been submitted. Furthermore, the preliminary Plan of

Allocation was created to calculate the blow provision, which is traditionally

concealed and not included in the Class Notice. AIG Global appeals the Partial

Final Judgment and the Reconsideration Order. 

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II. STANDARD OF REVIEW

Whether the district court erred in denying an untimely opt-out request is

reviewed under an abuse of discretion standard. Grilli v. Metro. Life Ins. Co., 78

F.3d 1533, 1538 (11th Cir. 1996). We review the district court’s excusable neglect

decisions for an abuse of discretion. Advanced Estimating Sys., Inc. v. Riney, 77

F.3d 1322, 1325 (11th Cir. 1996). The district court’s findings of fact are reviewed

for clear error, and its conclusions of law are reviewed de novo. Wexler v.

Anderson, 452 F.3d 1226, 1230 (11th Cir. 2006). 

A district court’s denial of a motion for reconsideration is reviewed for an

abuse of discretion. Corwin v. Walt Dinsey Co., 475 F.3d 1239, 1254 (11th Cir.

Final Plans of Allocation were eventually submitted and approved determining 5

allocation of the Partial Settlement of the class action and the SEC’s $100 million disgorgement

fund. AIG Global was the only class member that attempted to opt out of the Partial Settlement

and the only class member that objected to the fairness of the Plan of Allocation. The district

court determined that the Plan of Allocation was fair. AIG Global appealed that decision also,

but later dismissed its appeal.

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2007). This Court’s review of the Class Notice is limited to whether the district

court abused its discretion in approving the Notice. In re Corrugated Container

Antitrust Litig., 643 F.2d 195, 224 (5th Cir. 1981); cf. Christo v. Padgett, 223 F.3d 6

1324, 1335 (11th Cir. 2000) (“We review an approval of a settlement agreement

under the abuse of discretion standard.”). 

III. DISCUSSION

A. Jurisdictional questions

As a preliminary matter, we must address three jurisdictional questions that

were carried with the case: (1) whether the March 22, 2007 order denying AIG

Global’s motion for reconsideration is immediately appealable; (2) whether AIG

Global has perfected a timely appeal of the January 11, 2007 Partial Final Judgment;

and (3) whether AIG Global has standing to appeal. 

This Court has jurisdiction to hear this appeal because the district court’s

denial of AIG Global’s untimely opt-out request was a properly certified final order

under Rule 54(b) of the Federal Rules of Civil Procedure. The Settling Parties

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contend that the Partial Final Judgment did not resolve AIG Global’s claims against

This Court adopted as binding precedent all decisions of the former Fifth Circuit 6

prior to October 1, 1981. Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir. 1981)

(en banc). 

We also hold that the notice of appeal was timely.

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HealthSouth because the district court had not yet ruled on a final Plan of

Allocation. However, the Partial Final Judgment did resolve several claims; in

particular, it conclusively determined that AIG Global was a class member and

could not bring separate claims against HealthSouth. Cf. Armstrong v. Martin

Marietta Corp., 138 F.3d 1374, 1388 n.29 (11th Cir. 1998) (en banc) (noting that a

final judgment supporting review of a class certification decision could arise

pursuant to a Rule 54(b) certification). The ultimate distribution—and AIG

Global’s share as a class member—of the $445 million settlement under the final

Plan of Allocation has no bearing on whether AIG Global was improperly denied

the right to opt out of the class and pursue claims separately. The Partial Final 8

Judgment, including the denial of AIG Global’s untimely opt-out request, was a

final order and was properly certified under Rule 54(b).

AIG Global has standing to appeal the denial of its untimely request to opt

out of the settlement class. As a matter of common sense, AIG Global is the only

party that could appeal the district court’s denial of its untimely request to opt out of

the class. The Supreme Court has held that the right of unnamed class members to

appeal a settlement does not raise jurisdictional or standing issues because class

The Plan of Allocation has since been submitted to, and approved by, the district 8

court, but it had not been submitted at the time of this appeal. AIG Global was not given a

second opportunity to opt out, and its objections to the Plan of Allocation were rejected. 

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members have sufficient interest to meet the requirements of injury, causation, and

redressability, and unnamed class members are bound by the judgment. Devlin v.

Scardelletti, 536 U.S. 1, 6-7, 122 S. Ct. 2005, 2009 (2002). The fact that AIG

Global’s opt-out request was untimely does not eliminate AIG Global’s standing to

appeal the denial of the untimely request. AIG Global requested additional time to

opt out because it allegedly did not receive timely notice. AIG Global has standing

to have this Court determine whether the district court erred in finding that AIG

Global received actual or constructive notice and in denying its motion for

reconsideration. 

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B. The district court’s denial of AIG Global’s opt out

AIG Global made several challenges to the district court’s denial of its

untimely opt-out request and motion for reconsideration. First, AIG Global

contends that the district court clearly erred in determining that AIG Global had

actual and constructive notice of the settlement. The district court found that AIG

Global had actual notice because it received at least 12 copies of the Class Notice

through its affiliates and other entities. Furthermore, the district court found that

AIG Global had constructive notice because summary notice was published in

several prominent newspapers, and AIG Global’s counsel was in regular contact

Accordingly, all jurisdictional challenges are rejected. 9

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with HealthSouth’s counsel about the settlement. The district court’s findings that

AIG Global had actual and constructive notice were not clearly erroneous. 

Second, AIG Global contends that the district should have enlarged its optout time due to excusable neglect. Excusable neglect is an equitable determination

that requires an examination into whether the moving party had a good reason for

not responding timely and whether the opposing party would be prejudiced. In re

Worldwide Web Sys., Inc., 328 F.3d 1291, 1297 (11th Cir. 2003); see also Walter v.

Blue Cross & Blue Shield United of Wis., 181 F.3d 1198, 1201 (11th Cir. 1999)

(listing the relevant factors as (1) the danger of prejudice, (2) the length of delay and

its potential impact on the proceedings, (3) the reason for the delay, and (4) whether

the movant acted in good faith). The district court determined that the Settling

Parties would have been prejudiced because AIG Global’s holdings could have been

sufficient to trigger the blow provision—allowing HealthSouth to terminate the

settlement—but AIG Global attempted to opt out after the deadline had passed for

HealthSouth to terminate the Settlement. The district court’s finding that the

Settling Parties would have been prejudiced was not clearly erroneous. 

Furthermore, AIG Global did not have a good reason for failing to timely opt out. 

AIG Global is a sophisticated party with extensive holdings at issue in this

litigation, and counsel’s failure to opt out before the deadline was inexcusable. The

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district court did not abuse its discretion in refusing to extend AIG Global’s time to

opt out. 

Finally, AIG Global contends that the Class Notice was defective for failing

to include the preliminary Plan of Allocation containing an Exclusion Date that

excluded 65% of AIG Global’s holdings from recovery. AIG Global contends that 10

the Private Securities Litigation Reform Act (“PSLRA”) and Rule 23 of the Federal

Rules of Civil Procedure require the disclosure of the Plan of Allocation and the

Exclusion Date in the Class Notice. See 15 U.S.C. § 78u-4(a)(5) (allowing filings

under seal of the terms and provisions of settlement agreements only when good

cause has been shown because “publication of a term or provision of a settlement

agreement would cause direct and substantial harm to any party”); Fed. R. Civ. P.

23(e)(3) (“The parties seeking approval must file a statement identifying any

agreement made in connection with the proposal.”). Rule 23 requires the court to

“direct to class members the best notice that is practicable under the circumstances,

including individual notice to all members who can be identified through reasonable

effort.” Fed. R. Civ. P. 23(c)(2)(B). Notice to class members must “contain

AIG Global has acknowledged that it had every intention of opting out of the class 10

well in advance of the allegedly defective Class Notice and before it was aware of the Exclusion

Date. AIG Global is attempting to circumvent its original failure to comply with the opt-out

deadline while admitting that it had every intention of opting out without any regard for the

eventual Plan of Allocation. 

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information reasonably necessary to make a decision to remain a class member and

be bound by the final judgment or opt out of the action.” Twigg v. Sears, Roebuck

& Co., 153 F.3d 1222, 1227 (11th Cir. 1998) (quoting In re Nissan Motor Corp.

Antitrust Litig., 552 F.2d 1088, 1105 (5th Cir. 1977). 

The district court had reasonable grounds to withhold the preliminary Plan of

Allocation from the Class Notice. The Plan of Allocation was preliminary—the

final Plan of Allocation was dependent on other ongoing negotiations—and portions

of the Plan were necessarily confidential to avoid revealing details about the blow

provision. Although the Exclusion Date did not need to be kept confidential to 11

conceal the blow provision, we cannot conclude that the district court abused its

discretion. The Class Notice expressly informed class members that the Plan of

Allocation would be determined at a later date. If AIG Global, or any other class

member, needed to obtain the Plan of Allocation before agreeing to participate in

the settlement, then AIG Global could have opted out based on the Settling Parties

failure to finalize the Plan of Allocation prior to the Class Notice. Furthermore, it 12

The Supplemental Agreement containing the blow provision was identified to the 11

district court in the Stipulation of Partial Settlement, meeting the requirement of Rule 23(e)(3)

that the Settling Parties identify agreements made in connection with the settlement. 

AIG Global’s alternative argument that it should be given an additional 12

opportunity to opt out, under Rule 23(e)(4), after submission of the final Plan of Allocation is

without merit because Rule 23(e)(4) addresses a different situation and the decision is wholly

within the discretion of the district court. See Fed. R. Civ. P. 23(e)(4) (addressing a situation in

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was common knowledge, and AIG Global was fully aware, that bonds held past the

Exclusion Date had rebounded in value; therefore, it should have been obvious to

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AIG Global that little or no allocation would be made for those bonds. The district 14

court complied with the PSLRA and Rule 23, and the district court did not abuse its

discretion by approving the Class Notice.

The district court did not clearly err in finding that AIG Global had actual and

constructive notice of the settlement, and the district court did not abuse its

discretion in denying AIG Global’s untimely opt out request and its motion for

reconsideration.

IV. CONCLUSION

Based on the foregoing, we affirm the district court’s denial of AIG Global’s

untimely opt-out request and the denial of its motion for reconsideration.

which the class was certified prior to approval of a settlement and stating that “the court may

refuse to approve a settlement unless it affords a new opportunity to request exclusion to

individual class members who had an earlier opportunity to request exclusion but did not do so”)

(emphasis added). 

Lead Plaintiffs request that this Court take judicial notice of a chart showing that

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the bonds at issue – i.e., the 65% of AIG Global’s bonds for which no recovery was had because

of the Exclusion Date – suffered no loss because the value of the bonds had rebounded by the

time of the Exclusion Date. We need not take judicial notice of the chart because we are able to

reach this conclusion without referring to the chart. 

AIG Global’s argument that it did not receive consideration for the release of its 14

claims is wholly without merit because, under the settlement, AIG Global is entitled to recovery

for the 35% of its holdings that suffered losses. 

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AFFIRMED.

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