Opinion ID: 735522
Heading Depth: 2
Heading Rank: 4

Heading: The Tolands

Text: 33 Christal Toland, now deceased, and her husband John purchased a $450,000 interest in PSI's Energy Income Fund Partnerships. The Tolands were originally members of a class of purchasers in In Re Prudential-Bache Energy Income Partnerships Securities Litigation, MDL No. 888, a multi-district class action in the United States District Court for the Eastern District of Louisiana (Livaudais, J.) (the Louisiana class action). However, the Tolands received notice of a proposed settlement of the Louisiana class action in January 1993, and timely opted out of that class. 34 In June 1993, the Tolands filed an arbitration with the American Arbitration Association. The original respondents in that arbitration included PSI and its parent company, Prudential Insurance Company of America (PI). In September 1993, the Tolands and the two Prudential respondents agreed that: the Tolands would dismiss PI from the arbitration and would not attempt to compel it to arbitrate in the future; and in return, the remaining respondents--including PSI--would voluntarily submit to and [ ] remain parties in the arbitration to its resolution. Tolands' counsel confirmed that PSI and the other non-PI respondents were expected to remain viable and available for the resolution of any judgment which should result from the arbitration proceedings. 35 Thereafter, the following events unfolded: the original settlement of the Louisiana class action was rejected by the Eastern District of Louisiana; a second settlement was reached, which was approved in February 1994; notice of the second settlement was sent out ten days after PI was dismissed from the Tolands' arbitration; Mr. Toland did not receive the notice of the second settlement; neither he nor his counsel submitted a new opt out form. 36 In the meantime, the Tolands' arbitration continued, they spent approximately $100,000 on it, and no mention was made of the Louisiana settlement. In July 1995, the claims administrator in the Louisiana class action sent Mr. Toland a settlement check. The Tolands' counsel returned the check, explaining that the Tolands were in arbitration by agreement with PSI. 1 37 The terms of the New York settlement excluded the members of the Louisiana class. Presumably because the Tolands did not opt out of the second Louisiana class settlement, they were recorded as members of the Louisiana class, and no notice of the New York class action settlement was sent to them. Class counsel verified that the Tolands' names were not provided to the administrators, and the notice administrators confirmed that they sent no notice to the Tolands. The Tolands claim that their first notice of the New York class action was PSI's motion before the arbitral panel on November 30, 1995--one month after the opt out deadline--to stay the arbitration based on the final order of the district court. The panel stayed the arbitration, and the Tolands moved for a late opt out. 38 In mid-October 1995, at the arbitration, PSI's lawyer asked whether the Tolands had received notice of the New York class action. According to his affidavit, PSI's lawyer proceeded to tell the Tolands' lawyer about the Tolands' membership in the class and about the opt out deadline. 39 At the January 18 district court hearing in New York, the Tolands' attorney could not recall the particulars of that conversation, but did remember that PSI's arbitration lawyer provided the telephone number of an in-house PSI lawyer. He went on to say that he did not follow up on the conversation, but rather operated on the assumption that the Tolands would have received notice if they were class members. 40 The district court's denial of the Tolands' motion was not an abuse of discretion. The fact that they were omitted from the mailing list is not determinative, because publication notice was afforded and in any event, their attorney received personal notice two weeks before the opt out deadline. 2 Judge Pollack need not have found that the failure of their attorney to respond to inquiry notice constituted excusable neglect, and he did not abuse his discretion by refusing to do so. See Nemaizer v. Baker, 793 F.2d 58, 62 (2d Cir.1986). PSI's agreement with the Tolands to arbitrate their dispute to its conclusion does not alter this result; the Settlement Agreement provided and the notice clearly and frequently indicated that the release was extremely broad and applied to all currently-pending claims against PSI regarding the partnerships, without exception.