Opinion ID: 735522
Heading Depth: 1
Heading Rank: 3

Heading: Jeffrey Schiller

Text: 58 Jeffrey Schiller sold partnerships for PSI. Having been told by PSI that ownership of the product was a good sales tool, Schiller bought partnerships for himself as well. 59 Schiller was the only PSI broker to be indicted for securities fraud in connection with the sales of partnerships. The indictment was dismissed a year later, but it cost Schiller four years of income, as well as legal fees. 60 After dismissal of the indictment, Schiller filed an action against PSI alleging, inter alia, fraud and breach of contract, arising out of his employment, indictment, and his small partnership purchases. At PSI's request, the action was stayed in favor of arbitration. 61 Schiller did not receive notice of the class action until after the opt out date. His attorney was also unaware of the class action, and did not represent any other clients regarding the partnerships. 62 On November 3, 1995, PSI's attorney in the arbitration requested an adjournment of PSI's time to answer until 1996. She did not mention the existence of the class action, the settlement, or the impending fairness hearing. In late November 1995, Schiller received a class action notice, and on November 30, 1995, Schiller's lawyer received a letter demanding the dismissal of the proceedings because of the settlement. 63 Upon receipt of the notice, Schiller's lawyer called the claims administrator to ascertain the effect of the settlement on Schiller's claims. Counsel was told that the employment claims would be unaffected by the settlement (sound advice for anyone who had been an employee but not a purchaser). Thereafter, Schiller filed no claim in the class action, but discontinued his arbitration claims regarding the partnership purchases. 64 At the January 18 hearing, Schiller's counsel stated that Schiller had not received notice until after the opt out period had passed. The Court found that Schiller was a class member, and denied his motion for a late opt out, noting that Schiller was in the middle of the events leading to the settlement. 65 It was not an abuse of discretion for the district court to deny Schiller's motion. The evidence is consistent with timely dispatch of Schiller's notice, even though Schiller received it late. Moreover, notice was given via publication, and the settlement received extensive publicity in the media. Judge Pollack's reference to Schiller's being in the middle of these events is a polite reference to, inter alia, the fact that Schiller was the sole broker indicted as a result of the fraudulent partnerships. The district court was free to find that Schiller knew: that a settlement had been achieved; that he (as a purchaser of the Partnerships) was a part of it; and that the release was potentially broad enough to affect employment claims arising out of the transactions that were the subject of the class action. J. Leslie and Dorothy Bishofberger 66 The Bishofbergers bought $266,000 in partnerships. Early in 1995, they received a notice that the SEC had settled its proceeding with PSI and that the settlement afforded a separate avenue (leading to arbitration) for claims by dissatisfied customers. That claims mechanism, called the Expedited Dispute Arbitration Program (EDAP), was set up by the SEC, and is wholly independent of the claims procedure that was later established under the New York class action settlement. 4 The Bishofbergers elected to pursue the EDAP procedures. They filled out the form and sent it to their former PSI broker (who by then was no longer employed by PSI) for submission to the EDAP, but the broker did not forward the form to the EDAP administrator, because he was hospitalized with a heart attack. 67 The Bishofbergers received timely notice of the class action settlement in late September 1995. The notice specified, however, that those who had elected the EDAP were not class members. The Bishofbergers, who thought at first that they were not class members because they were in EDAP, called their former broker, and learned then that he had been ill and could not remember what he had done with their EDAP form. The Bishofbergers thus sent a new EDAP form on October 16, 1995, but did nothing at that time regarding the class action. 68 Two weeks later, a PSI employee called to ask the Bishofbergers why their EDAP form was late. They explained the situation to him, and he told them to do nothing while they awaited a ruling as to their late claim. They did nothing, which also meant that they did not file the opt out form in the New York class action. On November 11, 1995, they received a rejection of their request to participate in the EDAP. With the rejection was a recommendation--from the PSI employee with whom they had spoken--that their claim be dismissed as untimely. 69 The Bishofbergers, preferring industry arbitration to the class action settlement, moved to be allowed to opt out late. Judge Pollack denied the motion and held that the Bishofbergers were class members and bound by the settlement. 70 The district court did not abuse its discretion in denying the Bishofbergers' motion. The Bishofbergers received timely notice of the class action, and could easily have opted out of the class before the deadline. That was the prudent and obvious thing to do, particularly because they knew that their EDAP form had been untimely filed and they might well be class members. Their situation was unusual, but that is all the more reason they should not have ignored the warning on the notice that they should consult an attorney with any questions. 71 For the reasons set forth above, the judgments of the district court are AFFIRMED.