2006 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-18-2006

In Re: Cendant Corp

Precedential or Non-Precedential: Precedential

Docket No. 04-1410

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"In Re: Cendant Corp " (2006). 2006 Decisions. Paper 660.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 04-1410

 

IN RE: CENDANT CORPORATION

SECURITIES LITIGATION

 Sheldon Danuff, 

SKAT Capital LP and 

Joel D. Zychick,

Appellants

 

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil Action No. 98-cv-01664)

District Judge: Honorable William H. Walls

 

Argued March 9, 2006
 *

 This case was argued before the panel of Judges Ambro,

Becker, and Stagg. Judge Becker died before the filing of this

Opinion. It is filed by a quorum of the panel. 28 U.S.C.

§ 46(d).

 ** Honorable Tom Stagg, Senior District Judge for the Western

District of Louisiana, sitting by designation. 

2

Before: AMBRO and BECKER,* Circuit Judges, 

and STAGG,** District Judge

(Filed July 18, 2006)

William J. Bailey, Esquire

Huntington Carver, LLP

312 Kinderkamack Road

Westwood, NJ 07675

James S. O’Brien, Jr., Esquire (Argued)

Leah D. Weitzen, Esquire

Pryor Cashman Sherman & Flynn LLP

410 Park Avenue

New York, NY 10022

Counsel for Appellants
3

Max W. Berger, Esquire

Daniel L. Berger, Esquire

Jeffrey N. Leibell, Esquire

Bernstein Litowitz Berger & Grossmann LLP

1285 Avenue of the Americas

New York, NY 10019

Leonard Barrack, Esquire

Gerald J. Rodos, Esquire

Jeffrey W. Golan, Esquire (Argued)

Barrack, Rodos & Bacine

3300 Two Commerce Square

2001 Market Street

Philadelphia, PA 19103

Counsel for Appellees

 

OPINION OF THE COURT 

 

AMBRO, Circuit Judge

Sheldon Danuff, SKAT Capital, and Joel Zychick

(collectively, “Appellants”) challenge a District Court order

rejecting their claims for compensation under a plan of

allocation for a class action settlement. At the threshold, this

case requires us to decide whether Appellants’ notice of appeal

was timely filed. Under the rules of civil and appellate
4

procedure, the notice was timely filed only if the District Court’s

order ruling against Appellants was not a “separate document”

within the meaning of Federal Rule of Civil Procedure 58. To

determine whether the order satisfied the separate-document

requirement, we must resolve two subsidiary questions: (1)

whether Rule 58 mandates that a district court issue two distinct

documents when disposing of a case, and (2) whether a lengthy

recitation of facts and procedural history prevents an order from

complying with the separate-document requirement. 

While we reject the contention that the separatedocument rule requires two separate documents, we hold that a

lengthy discussion of facts and procedural history precludes an

order from complying with Rule 58. Because the final order in

this case was not a separate document that triggered the typical

30-day appeal period, Appellants’ seemingly late notice of

appeal fits in the safe harbor Rule 58 and Federal Rule of

Appellate Procedure 4(a)(7) provide, and was timely filed; we

thus have jurisdiction over the case. 

As to the merits, we determine that Appellants are not

entitled to compensation under the terms of the allocation plan.

Accordingly, we affirm. 

I. Factual and Procedural Background

The relevant facts are undisputed. Appellants held

common stock in Getko Group, which was acquired by CUC
5

International (“CUC”); CUC then merged with another

company, HFS Incorporated, to form Cendant Corporation

(“Cendant”). As a result of these combinations, Appellants

received stock in Cendant in exchange for their stock in Getko.

CUC’s accounting irregularities spawned a securities

class action suit, filed on behalf of all persons or entities who

purchased or otherwise acquired publicly traded securities of

Cendant and CUC and who were injured thereby. A Plan of

Allocation of Net Settlement Fund (the “Plan”), which was

previously approved by this Court, In re Cendant Corp. Litig.,

264 F.3d 201 (3d Cir. 2001), was crafted to resolve all potential

claims. As members of the plaintiff class certified by the

District Court, Appellants were entitled to seek compensation

from the Net Settlement Fund under the terms of the Plan for

losses sustained by holding Cendant (previously CUC) stock

during the period from May 31, 1995, to August 28, 1998 (the

“Class Period”). This case arises from the claims

administrator’s determination that Appellants were not entitled

to any compensation.

At issue is the Plan’s so-called “netting provision,” which

ensures that claimants only recover for net losses. All three

Appellants sold a substantial share of their Cendant holdings

during the Class Period—but before the public disclosure of

Cendant’s accounting irregularities—when the stock price was

artificially inflated due to the accounting irregularities; they also
6

sustained considerable losses on securities held after those

irregularities were disclosed. Each Appellant, with the possible

exception of SKAT, made a net gain; and SKAT reaped a net

gain unless its losses are computed on the basis of the date on

which its shares became freely tradeable (September 6, 1995)

rather than the date on which its shares were acquired (June 27,

1995). Processing Appellants’ claims on the basis of the date of

acquisition, the claims administrator found that Appellants did

not merit compensation under the Plan because the profits they

made by selling stock at artificially inflated prices cancelled out

any losses they suffered on stock held after the irregularities

were disclosed. 

The District Court held a hearing to consider the

objections of class members whose claims had been rejected. At

the hearing, Appellants argued that the netting provision should

not have been applied to their claims because the part of the

Plan that governs their compensation does not provide for losses

to be offset by gains. The District Court rejected this

contention, noting that Appellants’ argument was at odds with

the commonsense principle embedded in the Plan: “If there were

a net impact of the fraud upon [a] claimant’s holding as a

benefit[,] then there is little reason to compensate . . . [such

claimant] for any losses.” App. 30.

On August 19, 2003, the District Court issued an order

granting the class lead plaintiffs’ motion to adopt the claims

administrator’s recommendation to reject all disputed claims
 1

 This impression was incorrect. See Fed. R. App. P. 4(a)(2)

(allowing parties to file a notice of appeal of a decision or order

“before [its] entry”).

7

(the “Order”). It was entered on the docket on August 21, 2003.

Appellants thought that the District Court had not satisfied the

separate-document requirement of Rule 58, and were apparently

under the impression that they could not appeal the Order until

a complementary judgment was separately entered.1

 Hence, on

January 14, 2004, Appellants filed a motion for entry of

judgment on the Order. Appellants now claim that this motion

was rendered moot on January 19, 2004, when they say entry of

judgment was effected by operation of law pursuant to Federal

Rule of Civil Procedure 58(b)(2)(B), and they appealed within

30 days thereafter (February 13, 2004).

We address two questions. First, we determine whether

Appellants filed a timely notice of appeal. As noted above, this

requires us to decide whether the District Court’s Order satisfied

the separate-document rule. Second, assuming Appellants’

notice of appeal was timely filed, we determine whether

Appellants are entitled to compensation under the Plan. 

II. Jurisdiction: Separate-Document Rule

A. Background

 Federal Rule of Appellate Procedure (“FRAP”) 4—in
 2

 Although Rule 58(a)(1) refers to a “judgment,” Federal Rule

of Civil Procedure 54(a) provides that “‘[j]udgment’ as used in

these rules includes a decree and any order from which an

appeal lies.” Fed. R. Civ. P. 54(a) (emphasis added).

Also, the separate-document requirement applies to

partial dispositions such as the Order before us—it was certified

as final by the District Court under Federal Rule of Civil

Procedure 54(b). See Fed. R. Civ. P. 58(a)(1) (not including

Rule 54(b) certification orders in list of exceptions to separatedocument requirement); Silivanch v. Celebrity Cruises, Inc., 333

F.3d 355, 363 (2d Cir. 2003).

8

conjunction with Federal Rule of Civil Procedure 58—sets out

the mechanism for determining when the time to appeal begins.

FRAP 4(a)(1)(A) requires (with exceptions irrelevant here) that

notices of appeal be filed “within 30 days after the . . . order

appealed from is entered.” Thus, Appellants typically would

have had 30 days from the entry of the Order to appeal. Under

FRAP 4(a)(7)(A)(ii), however, “if Federal Rule of Civil

Procedure 58(a)(1) requires a separate document” to put the

parties on notice that the time to appeal has started, the appeal

period begins on the earlier of (1) when that separate document

is entered or (2) when 150 days have run from the entry of the

Order in the docket.

Because certain exceptions in Rule 58 do not apply here,

the general requirement of Rule 58 governed: “[e]very

judgment2

 . . . must be set forth on a separate document,” Fed.

R. Civ. P. 58(a)(1). To know whether Appellants’ appeal was
9

timely, we must determine which date in Rule 4(a)(7)(A)(ii)

applies to begin the appeal period: August 21, 2003, or January

19, 2004. If the former, Appellants’ appeal—filed on February

13, 2004—was too late; if the latter, the appeal was timely. The

answer depends on whether the District Court’s Order qualifies

as a separate document.

Both Rule 58 and Rule 4 were amended in 2002. Before

2002, if a district court did not enter a separate judgment, the

appeal period never started—and thus theoretically never ended.

After the amendments, the lack of a separate document only

gives the potential appellant another 150 days. The situation for

potential appellants is now more certain, but the touchstone of

the separate-document requirement remains: a judgment

separate from an opinion or decision.

We face the question whether the Order issued by the

District Court (after an oral ruling) meets the separate-document

requirement when it contains an extensive factual and

procedural background discussion.

B. Analysis

Appellants assert that the Order was not a separate

document in the way required by Rule 58(a)(1). Instead, they

claim that judgment was entered by operation of law on January

19, 2004, pursuant to Rule 58(b)(2)(B) (providing that a

judgment entered in the civil docket and subject to Rule
 3

 Some of our sister Circuits are divided on this point. 

Compare Kanematsu-Gosho, Ltd. v. M/T Messiniaki Aigli, 805

F.2d 47, 49 (2d Cir. 1986) (per curiam) (holding that a

document must be denominated a “judgment” in order to satisfy

Rule 58), with United States v. Johnson, 254 F.3d 279, 285 n.7

(D.C. Cir. 2001) (“The fact that the page is labeled ‘Order’

rather than ‘Judgment’ is not relevant.”).

10

58(a)(1), but not set forth in a separate document, will be

deemed “entered . . . when 150 days have run from entry in the

civil docket . . . [August 21, 2003]”). (One hundred fifty days

from August 21, 2003, is January 19, 2004.) Appellants filed

their notice of appeal almost six months after the Order was

entered but less than 30 days from the date on which Appellants

claim the judgment was entered by operation of law. Whether

their notice of appeal was timely filed thus depends on whether

the Order was a separate document within the meaning of Rule

58(a). If it was, Appellants’ notice of appeal was not timely

filed and their appeal must be dismissed. 

Our Court’s application of Rule 58(a) is controlled by

Local Union No. 1992, IBEW v. Okonite Co., 358 F.3d 278, 285

(3d Cir. 2004). There we held that an “order’s denomination as

an ‘order,’ rather than a ‘judgment,’ does not mean that it fails

to satisfy the separate document requirement.” Id.3

 Instead, we

explained that an order will be treated as a separate document if

it meets three criteria: first, the order must be self-contained and

separate from the opinion; second, the order must note the relief

granted; and third, the order must omit (or at least substantially
 4

 The District Court made clear that its oral ruling was the

only opinion it would make available. See App. 27 (“I’m not

going to spend time, gentlemen, crafting an opinion because

frankly the issues are so uncomplicated that those who dislike

the decision can order the [transcript] and take the appeal.”). In

addition, at the end of the May 16 hearing the District Court

suggested that its forthcoming order was the only document

needed to get the appeals process started. See App. 30 (“So,

those claims are denied. You can send in the order and I will

sign it [and] then you can take your appeals.”). While it may

seem counterintuitive, the fact that the parties knew, or should

have known, that the Order was intended to serve as a final

judgment does not make it compliant with Rule 58. See

Gregson & Assocs. Architects v. Gov’t of the Virgin Islands, 675

F.2d 589, 592 (3d Cir. 1982) (applying separate-document

11

omit) the District Court’s reasons for disposing of the parties’

claims. See id. (noting, by way of qualification as to the third

criterion, that some “courts of appeals have found that including

a bit of analysis does not run afoul of the separate judgment

requirement,” but reserving judgment on that issue). 

The Order satisfies the first criterion. The whole

document—not just the last page—is presented as an “order,”

rather than an opinion, and this designation is confirmed by the

docket. The Order is “self-contained” in the sense that it is not

stapled or otherwise attached to an opinion or memorandum.

Indeed, the only “opinion” that the District Court offered was its

oral ruling on May 16, 2003.4
requirement and holding that notice of appeal was timely filed

because 30-day period never began to run, even though

appellant correctly “believed that the order was the final

judgment”). Put simply, Rule 58 is a touch-the-base

requirement that lays perception aside.

12

Appellants argue that the Order is not “separate from” the

District Court’s prior oral ruling because it is the sole document

issued by the District Court that purports to dispose of

Appellants’ claims. The only authority they cite for this

proposition is Miller v. Marriott International, 300 F.3d 1061

(9th Cir. 2002), where the Ninth Circuit held that, “because the

dismissal order provide[d] the basis for the entry of judgment,”

it is but a single document, and “one document, by definition,

cannot also constitute a separate document.” Id. at 1064.

While on its face Miller seems logical, we decline to

follow it for several reasons. Rule 58 does not expressly state

that the “separate document” must be distinct from another

document (as opposed to an oral decision on the record). And

we cannot discern any value that would be furthered by finding

a two-document rule implicit in the text. Hence, the Rule is

most reasonably read to mean only that the judgment must be set

forth in a document that is independent of the court’s opinion or

decision, regardless whether that opinion takes written form.

Notably, Miller is at odds with every other authority we

have found, including earlier Ninth Circuit precedent. In United
 5

 Schimmels applied Bankruptcy Rule 9021, which contains

a separate-document rule “identical to Federal Rule of Civil

Procedure 58.” 85 F.3d at 420. 

13

States v. Schimmels (In re Schimmels), 85 F.3d 416 (9th Cir.

1996), for example, that Court held that a short order satisfied

the separate-document requirement even though the “order was

not followed by an additional document entering judgment.” Id.

at 421.5

 The Court observed:

The separate judgment rule does not

always require the filing of two separate

documents. . . . [W]hen a court enters a short

order that clearly constitutes a final decision, that

short order meets the separate judgment rule.

Similarly, if a court grants a summary judgment

without writing an opinion or memorandum, then

the order granting summary judgment is enough

to meet the separate document

requirement. . . . The separate judgment rule

requires that the court enter a judgment or an

order—it does not require that a court enter an

initial memorandum or opinion.

Id.; see also Pac. Empls. Ins. Co. v. Domino’s Pizza, 144 F.3d

1270, 1278 (9th Cir. 1998) (“[U]nder Rule 58, a district court is
14

not even required to file two separate documents.”); Laidley v.

McClain, 914 F.2d 1386, 1390 (10th Cir. 1990) (holding that a

summary judgment order met the separate-document

requirement and that the rule thus did “not require that two

documents be used instead of one”), superseded by rule on other

grounds; United States v. Perez, 736 F.2d 236, 238 (5th Cir.

1984) (per curiam) (holding that a district court order did not

violate separate-document requirement of Rule 58, as “[t]he

mere fact that the first sentence of the order adopts the

magistrate’s report and recommendation . . . does not require

that two documents be used by the district court rather than

one”), superseded on other grounds as recognized in Kadelski

v. Sullivan, 30 F.3d 399, 402 (3d Cir. 1994); United States v.

Clearfield State Bank, 497 F.2d 356, 358–59 (10th Cir. 1974)

(rejecting as “unfounded” the argument that “two documents are

required in all cases,” and holding that Rule 58 was satisfied

where no opinion was written because the “order granting

summary judgment [was] itself a separate document”).

In short, the Order satisfies the first of the three criteria

set forth in Okonite for a separate document to exist under Rule

58(a) because it was a “self-contained” document that was

separate from the District Court’s oral opinion.

The second criterion set out in Okonite is also met, as the
 6

 The Order reads: “Lead Plaintiffs’ motion for an Order

adopting the Claims Administrator’s recommendation to reject

all disputed Claims as set forth in Exhibits A and B hereto is

GRANTED. All such Claims, as set forth in Exhibits A and B

hereto[,] are rejected.”

15

Order does state the relief granted.6

That leaves the third criterion—omission of reasoning.

As noted above, our Court has yet to rule whether an order that

includes a modicum of analysis may satisfy the separatedocument rule. See Okonite, 358 F.3d at 285. We need not

resolve this question now, as the prefatory “whereas” clauses of

the Order contain only facts, procedural history, and summary

conclusions—not reasoning. Hence, the practical question we

must decide is not whether a little bit of reasoning is acceptable,

but whether a protracted recitation of facts and procedural

history precludes the Order from serving as a “separate

document” under Rule 58(a)(1).

The aim of the separate-document requirement suggests

that a lengthy description of facts and procedural history takes

an order outside the realm of Rule 58(a). As the Supreme Court

has explained, the “sole purpose of the separate-document

requirement . . . was to clarify when the time for

appeal . . . begins to run.” Bankers Trust Co. v. Mallis, 435 U.S.

381, 384 (1978) (per curiam). Clarification was needed

because, prior to the adoption of the separate-document rule,
16

court clerks would often enter judgments in the civil docket on

the basis of opinions or memoranda “containing some

apparently directive or dispositive words.” Id. (internal

quotation marks omitted). If the opinion or memorandum on

which an entry was based did not contain all the elements of a

judgment, or if the judge later signed a formal judgment, it then

became “a matter of doubt whether the purported [initial] entry

of a judgment was effective” for purposes of starting the appeals

period. Id. at 385 (internal quotation marks omitted). The

addition of the separate-document requirement to Rule 58 was

intended to “‘eliminate[] these uncertainties by requiring that

there be a judgment set out on a separate document—distinct

from any opinion or memorandum . . . .’” Id. (quoting Fed. R.

Civ. P. 58 advisory committee notes on 1963 amendments)

(emphasis added). 

The goal of Rule 58(a) is to impose a clear line of

demarcation between a judgment and an opinion or

memorandum. The question thus becomes whether an extensive

recitation of facts and procedural history is as fatal, for separatedocument purposes, as an extensive recitation of legal reasoning

and analysis.

Facts—and conclusions of law—may be either stated

orally at the close of evidence or written in an opinion or

memorandum. Fed. R. Civ. P. 52(a). Neither are to appear in

the Rule 58 judgment. Cf. id. A lengthy overview of

background information, while not setting out the basis for a
17

decision as much as does legal reasoning, nevertheless partakes

more of a judicial opinion or memorandum than it does of a

judgment. Just as for legal reasoning, the purpose of providing

such a factual overview is not to lay out the relief granted, but

to offer context in which the court’s decision may be

understood. Because of the purpose of Rule 58—to eliminate

uncertainty—and because a putative judgment containing an

extensive factual discussion might look to a party more like an

opinion than a judgment, the mechanical application of Rule 58

does not, we believe, contemplate judgments containing

extensive factual recitations to be separate documents.

Our conclusion that the separate-document requirement

does not allow for an extended presentation of facts and

procedural history is supported by Model Forms 31 and 32 of

the Federal Rules of Civil Procedure (“Judgment on Jury

Verdict” and “Judgment on Decision by the Court”). See Fed.

R. Civ. P. 58 advisory committee notes on 2002 amendments.

Added as part of the 2002 amendment to Rule 58, these forms

are intended to facilitate mechanical application of the Rule by

providing examples of qualifying documents. We note the

contrast between the Forms’ brief statements of the terms of the

judgments and the extended recitation of factual and procedural

history in the Order before us. 

The proposition that an extended presentation of facts

and procedural history runs afoul of the separate-document

requirement also finds support in the case law. See, e.g.,
18

Diamond v. McKenzie, 770 F.2d 225, 230 n.10 (D.C. Cir. 1985)

(per curiam) (holding that a three-page order containing two

sentences on the case’s procedural posture and three sentences

summarizing the court’s conclusions transformed the order into

a “combined decision and order”). Indeed, we do not know of

any authority holding that facts and procedural history should be

treated differently than reasoning for purposes of determining

whether an order satisfies the separate-document requirement.

In all cases of which we are aware, the court’s analysis has

focused on the extent to which the order includes material not

traditionally found in a judgment, regardless whether that

material consists of facts, history, or reasoning. See, e.g.,

Schimmels, 85 F.3d at 422 (holding that an order denying a

motion for reconsideration satisfied the separate-document

requirement where “[t]he order contains only a one-sentence

recitation of the procedure, documents, and arguments

considered by the court in denying the motion. There is no

explanation of the reasoning of the court.”). 

Here, the District Court issued a six-page Order, five

pages of which were devoted to expounding the background of

the case. Significantly, this overview was not needed to state

the relief granted. See Fed. R. Civ. P. 58 advisory committee

notes on 2002 amendments (“It is easy to prepare a separate

document that recites the terms of the judgment without offering

additional explanation or citation of authority.” (emphasis

added)). Nevertheless, the overview and the judgment were

both set out in the same document. In these circumstances, the
 7

 Attempting to show that the Order satisfies the separatedocument requirement, Appellees note that in its last paragraph

the document is twice referred to as a “Final Order.” See

Appellees’ Letter Brief dated March 10, 2004, at 3. But this fact

does not help their cause, as an order or judgment may be final

without complying with the formalities of Rule 58. See Shalala

v. Schaefer, 509 U.S. 292, 303 (1993) (“Since the District

Court’s April 4 remand order was a final judgment, a ‘separate

document’ of judgment should have been entered.” (citation

omitted)); id. at 303 n.6 (“By entering a . . . remand order, the

District Court did enter a judgment; it just failed to comply with

the formalities of Rule 58 in doing so.” (emphasis in original));

Diamond, 770 F.2d at 229 (holding that the fact that a document

was a “‘final order of the Court’” does not resolve the Rule 58

19

Order does not satisfy the separate-document requirement.

After all, “the rule is designed to simplify and make certain the

matter of appealability.” Bankers Trust Co., 435 U.S. at 386

(internal quotation marks omitted). That goal would be

thwarted by foreclosing an appeal where a party was reasonably

in doubt whether a final order complied with the formalities of

Rule 58(a). See United States v. Indrelunas, 411 U.S. 216,

221–22 (1973) (per curiam) (“[T]he separate document

provision . . . [is] a mechanical change that must be

mechanically applied in order to avoid new uncertainties as to

the date on which a judgment is entered.” (internal quotation

marks omitted)); see also id. at 219 (emphasizing that the

purpose of the separate-document requirement was “to remove

uncertainties as to when a judgment is entered”).7
problem, since the “question whether an order is a final order is

separate from the question whether a separate document setting

forth the judgment has been properly entered”).

 8

 Indeed, we cannot resist observing that the spare simplicity

of a Rule 58 separate judgment (as bare-boned as “Defendant’s

motion for summary judgment is denied.”) seems to many of us

20

* * * * *

In sum, Appellants’ notice of appeal was only timely if

the Order was not a separate document within the meaning of

Rule 58(a). The Order was not because it contained an extended

discussion of facts and procedural history. This discussion

raised doubt to Appellants whether a final judgment had been

entered. Doubt is exactly what the separate-document

requirement was designed to avoid. See Bankers Trust Co., 435

U.S. at 386 (“[Rule 58] should be interpreted to prevent loss of

the right of appeal, not to facilitate loss.” (internal quotation

marks omitted)); Diamond, 770 F.2d at 230 (“It is precisely this

kind of uncertainty about whether the District Court intended to

enter a final order that warrants the mechanical application of

Rule 58.”).

Our decision here is designed to make the mechanical

application of Rule 58 easier, and more simple, for judges and

parties. For judges, the separate judgment should be as minimal

as possible to comply with Rule 58’s requirements, and should

include little more.8

 (See, for example, Forms 31 and 32 of the
counter to the custom of “talking orders” that explain in detail

the context and reasons for a ruling (thus avoiding the need for

an accompanying opinion).

 9

 We note, however, that Appellants took the wrong course in

their uncertainty. When parties are in doubt about whether the

separate judgment rule has been met, they should file a notice of

appeal. A too-late appeal is fatal, but a too-early appeal

provides safety, as a premature appeal becomes effective on the

entry of the judgment or order, Fed. R. App. P. 4(a)(2). Here, an

early appeal would have avoided all dangers (including the

possibility that we might have held the Order to have satisfied

the separate-document requirement).

21

Federal Rules of Civil Procedure. In fact, the District Court’s

language quoted in our footnote 6 is all that the Court needed.)

For parties, these minimal judgments make clear when the time

to appeal is at hand.9

In this context, Appellants were entitled to consider

January 19, 2004, as the “magic date” to begin their appeal

period. Filing that appeal on February 13, 2004, was thus

timely.

III. Merits

Because the notice of appeal was timely filed, we now

reach the merits. We must decide whether the District Court

erred in granting lead plaintiffs’ motion to adopt the claims
 10 Appellants are not entitled to any compensation for the

shares they sold before April 15, 1998.

22

administrator’s recommendation to reject all disputed claims,

including that of Appellants.

The backdrop for these rejections is as follows.

Appellants were denied any payment from the settlement, which

they claim to be an error. Their principal contention (although

the different Appellants each have different individual

arguments) is that the District Court improperly “netted” their

gains on the sale of Cendant stock against the losses calculated

under the Plan. This netting of gains and losses left them with

no payments due under the Plan. 

Section IV of the Plan gives specific calculations of

allowed loss amounts for each share held to the end of the Class

Period.10 But Section V(B) does two things. First, it matches

stock acquisitions with subsequent stock sales on a first-in-firstout basis—the matching provision. Second, it subtracts all

stock-sale profits from any losses to reduce claimant

recoveries—the netting provision. We quote Section V(B) in

full (adding emphasis to show the matching and netting

provisions):

For Class Members who made multiple

purchases, acquisitions or sales during the Class

Period, the earliest subsequent sale shall be
23

matched with the earliest purchase and

chronologically thereafter for purposes of the

Claim calculations.

PLEASE NOTE: ALL PROFITS SHALL BE

SUBTRACTED FROM ALL LOSSES ON ALL

TRANSACTIONS OF CUC AND CENDANT

PUBLICLY-TRADED SECURITIES DURING

THE CLASS PERIOD TO DETERMINE THE

NET CLAIM OF EACH CLASS MEMBER. IF

A CLASS MEMBER MADE A NET PROFIT,

THE VALUE OF HIS, HER OR ITS CLAIM

SHALL BE ZERO. 

Appellants all want some recovery based on the shares

they held to the end of the Class Period (10,790 shares for

Danuff; 2,103,196 shares for SKAT; and 56,250 shares for

Zychick). Each Appellant made some profits on the stock they

sold during the Class Period. And the District Court found

that—based on the netting provision—those profits outweighed

any losses Appellants had on the shares they continued to hold,

thus giving them no recovery.

Appellants make three arguments in opposition to the

Plan’s netting provision. First, all assert that the “general”

netting provision of the Plan does not apply to any of them

because their “specific” loss calculations are governed solely by

another Plan section, which does not contain a netting provision.
 11 The District Court’s interpretation of the Plan is reviewed de

novo. See In re Orthopedic Bone Screw Prods. Liab. Litig., 350

F.3d 360, 364 (3d Cir. 2003).

24

Second, Danuff and SKAT claim that the netting provision does

not apply to them because they did not engage in “multiple

transactions” that trigger netting. Third, SKAT contends that,

even if deemed subject to the netting provision, it was entitled

to compensation because it did not reap a net gain.

We address each claim in turn.11 

A. Whether netting provision applies to Appellants?

 Appellants first claim that the netting provision in

Section V(B) of the Plan does not apply to them because the

Plan elsewhere provides that their losses should be calculated

solely on the basis of the methodology set forth in Plan Section

IV. As Section IV carves out a “specific” rule for Cendant stock

obtained in exchange for the stock of acquired companies (such

as Getko), Section V’s general provisions, they argue, do not

apply to them.

 We disagree. Although the specific usually controls the

general in contract construction, we are to construe a contract as

a whole. Capitol Bus Co. v. Blue Bird Coach Lines, Inc., 478

F.2d 556, 560 (3d Cir. 1973). Both provisions apply to the pool

of claimants; they simply have different functions. Section IV
25

covers all claimants, dividing potential claims into five

categories; its five corresponding parts calculate the loss amount

for each kind of claim. But the loss amount is not the same as

the net claim. Section V applies to all claimants who sold stock

acquired during the Class Period or who made profits on

Cendant stock sales. Section V does not change the way that

losses are calculated, but it provides that those losses should be

offset by any profits to arrive at the net claim amount. Both

provisions are specific within their spheres. Section IV is

specific to loss amounts (as the title “SPECIFIC LOSS

AMOUNTS” indicates), and Section V is specific to net claims

(by reducing loss amounts for claimants who have made profits

on Cendant stock sales). Moreover, because Section IV governs

the loss calculation of every claim, accepting Appellants’

argument would rob Section V of any effect.

The text of the netting provision of the Plan’s Section

V(B) (quoted above) is the only part of the Plan printed in all

caps, and its language could not be more explicit (“ALL

PROFITS SHALL BE SUBTRACTED FROM ALL LOSSES”).

Yet Appellants not only fail to offer a valid basis for arguing

that the netting provision does not apply to them, and they also

fail to explain why the Plan might be crafted to compensate

shareholders who reaped a net profit.

Section V(B)’s matching provision is also part of the

Plan’s general purpose, designed to apply to every claimant who

sold shares during the Class Period. Complementing Section
26

V(B) is Section II(B). It describes how loss amounts will be

calculated in general and provides that, “[i]n calculating the

Loss Amount for each claim, a sale of a security during the

Class Period will be matched first against those securities in the

opening position [i.e., held before the Class Period], and then

matched chronologically against each purchase or acquisition of

that security made during the Class Period.” Plan § II(B)

(emphasis in original). This makes clear that matching will be

performed for each claimant, where that claimant sold any

shares.

Appellants’ interpretation is thus objectionable for three

reasons: it violates the principle that a legal text should be

interpreted to give effect to every provision, see Capitol Bus

Co., 478 F.2d at 560 (“A contract is to be considered as a whole,

and, if possible, all its provisions should be given effect . . . .”);

it departs from the unambiguous terms of the Plan; and it carves

out an unexplained and inexplicable exception to the netting

provision. 

B. Whether Danuff and SKAT escape the netting

provision because they did not engage in multiple

transactions?

Two Appellants, Danuff and SKAT, argue that the

netting provision does not apply to them because they did not

engage in multiple transactions. In support of this claim, they

note that “both Appellants made but one sale of a portion of his
 12 Danuff and SKAT do not argue that the term “multiple”

means more than two. “Multiple” is commonly defined as

“more than one.” See The American Heritage Dictionary of the

English Language 1186 (3d ed. 1992). 

27

[its] shares, holding the remaining shares beyond the end of the

Class Period.” In other words, Danuff and SKAT contend that,

because they made only one sale, they were involved in only

one transaction. The assumption underlying this argument is

that the initial acquisition of their shares was not a transaction

within the meaning of Section V(B).12

This assumption is invalid for three reasons. First, the

text of the provision does not exclude an initial acquisition from

the phrase “purchases, acquisitions or sales.” Given that an

initial acquisition is a type of acquisition, the text of the Plan

would seem to favor its inclusion. 

Second, excluding the initial acquisition does not accord

with the purpose of the netting provision—to make sure that the

calculation of compensable losses is offset by profits, many of

which were reaped because of artificially high share prices

attributable to fraudulent accounting practices. That aim is no

less on point when a claimant has only made one sale during the

Class Period. Thus, it makes no sense to think that the netting

provision is not triggered by the sales executed by Danuff and

SKAT.
28

Third, if Section V(B)’s matching provision applies to

Danuff and SKAT, its netting provision also applies to them. As

noted above, Section V(B)’s matching provision applies to each

claimant who acquired securities during the Class Period and

then sold securities during the Class Period. See also Plan

§ II(B). Danuff and SKAT both acquired CUC securities during

the Class Period. The deemed date of acquisition was the

effective date of the Getko–CUC acquisition: June 27, 1995.

Plan § IV(B)(2)(a). Danuff and SKAT sold some of these

securities during the Class Period. Thus, they are subject to

Section V(B)’s matching provision. There is no sensible reason,

therefore, that they would not be subject to Section V(B)’s

netting provision as well.

Significantly, they do not identify any interest that would

be served by restricting the reach of the netting provision to

claimants who have made more than one sale. Nor do they

explain the anomaly their interpretation would yield: for

example, a claimant who sold 500 shares on one occasion would

not be subject to the netting provision, but a claimant who sold

250 shares on two separate occasions would, even though both

sold a total of 500 shares.

In sum, the text and purpose of the netting provision are

both at odds with the interpretation urged by Danuff and SKAT.

C. Whether SKAT had a net loss or gain under the
29

Plan? 

Finally, Appellants argue that SKAT’s sale of its Cendant

stock during the Class Period should have no effect on its

recovery for losses from the stock it held until the end of the

Class Period. In any event, they argue, even if netting does

apply, it did not realize a net gain and should receive some

money from the settlement.

As for the first argument, the plain language of the

netting provision controls. It reads: “All profits shall be

subtracted from all losses on all transactions of CUC and

Cendant publicly-traded securities during the Class Period to

determine the net claim of each Class Member. If a Class

Member made a net profit, the value of his, her or its claim shall

be zero.” Plan § V(B) (capitalization altered). SKAT made a

sale during the Class Period, and that sale resulted in some

profits. Under the netting provision, this profit must be set off

against SKAT’s losses to determine its net claim. SKAT’s stock

sales do have an effect on its recovery for losses from unsold

stock.

Meeting the second argument requires some arithmetic.

SKAT describes itself as having a $3,188,385 profit from its

sale and a $3,407,178 loss under Section IV(B)(2). Thus, it

argues that it had a net loss (and consequently a payable claim).

The principal problem with SKAT’s calculations is that it used
 13 SKAT’s brief misstates this as “September 6, 2004.”

30

September 6, 1995,13 as the acquisition date. As noted above,

the correct acquisition date is June 27, 1995. See Plan

§ IV(B)(2)(a).

SKAT sold 261,129 shares on January 20, 1998, at

$34.88 each—for a total of $9,108,180. The stock price on June

27, 1995, was $18.44. SKAT’s January 20, 1998 sale thus

represented a $4,292,961 profit—that is, 261,129 multiplied by

the share-price difference ($16.44) between the correct

acquisition date (June 27) and the sale date (January 20, 1998).

So we know SKAT’s profits ($4,292,961). Under the

netting provision, we must subtract these profits from all losses

on Cendant securities transactions. Plan § V(B). If SKAT is

left with a net profit, it does not get a payout from the Plan. Id.

Now we must calculate SKAT’s losses on Cendant stock.

The Plan provides that, for holders of Cendant stock acquired in

a business acquisition (like the Getko–CUC merger), we

multiply the number of unsold shares held by SKAT (2,103,196)

by the Plan’s defined per-share loss amount. Id. § IV(B)(2)(a).

This per-share loss amount is based on the amount of artificial

inflation (from the accounting irregularities) built into Cendant’s

share price. Id. § III. The Plan provides a specific per-share

loss amount for each acquisition date in the Class Period. Id.

tbl.A. The per-share loss amount for June 27, 1995, is $0.66.
31

Multiplying $0.66 times 2,103,196 gives us

$1,388,109—SKAT’s losses on Cendant stock. Netting

SKAT’s profit ($4,292,961) and its loss ($1,388,109) gives

SKAT almost $3 million in net profit.

The bottom line: SKAT’s profit far outweighs its loss

amount. Thus, it is not entitled to any payout.

IV. Conclusion

In sum, we reach two conclusions. As to jurisdiction, we

hold that Appellants filed a timely notice of appeal on February

13, 2004. The District Court’s final order failed to comply with

the separate-document requirement of Federal Rule of Civil

Procedure 58. Lengthy recitation of facts and procedural history

prevents an order from serving as a separate document within

the meaning of the Rule. Because the District Court’s order did

not satisfy Rule 58, the time limit for filing an appeal did not

start to run until January 19, 2004, when entry of judgment was

effected by operation of law. 

As to the merits, we conclude that none of Appellants’

three arguments is meritorious. First, Sections IV and V of the

Plan are not mutually exclusive provisions; thus, Appellants are

not exempt from the netting provision of Section V(B) simply

because the method of computing their loss amount is set out in

Section IV. Second, Danuff and SKAT err in asserting that they

did not engage in multiple transactions; because the initial
32

acquisition of Cendant stock counts for purposes of the multiple

transactions provision, any subsequent sale suffices to trigger

the netting provision. Finally, SKAT is not entitled to

compensation under the Plan because, under its terms, SKAT

reaped a net gain rather than a net loss.

We thus affirm the judgment of the District Court.