Court Opinion

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Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

5-9-2001

In Re: Cendant Corp
Precedential or Non-Precedential:

Docket 00-2185

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Recommended Citation
"In Re: Cendant Corp" (2001). 2001 Decisions. Paper 100.
http://digitalcommons.law.villanova.edu/thirdcircuit_2001/100

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Volume 1 of 2

Filed May 9, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-2185

IN RE: CENDANT CORPORATION LITIGATION

JANICE G. DAVIDSON; ROBERT M. DA VIDSON, in his
capacity as trustee of Robert M. Davidson Charitable
Remainder Unitrust, and as co-trustee of Elizabeth A.
Davidson Irrevocable Trust, Emilie A. Davidson Irrevocable
Trust, John R. Davidson Irrevocable T rust, Emilie A.
Davidson Charitable Remainder Unitrust and John R.
Davidson Charitable Remainder Unitrust,
        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. W alls

Argued: November 16, 2000

Before: SLOVITER, AMBRO, and GARTH, Circuit Judges

(Filed: May 9, 2001)

        GERALD W. PALMER, ESQUIRE
         (Argued)
        RICKY L. SHACKELFORD, ESQUIRE
        EUGENIA L. CASTRUCCIO,
         ESQUIRE
        Jones, Day, Reavis & Pogue
        555 West Fifth Street, Suite 4600
        Los Angeles, California 90013

        Counsel for Appellants
SAMUEL KADET, ESQUIRE (Argued)
JOSEPH N. SACCA, ESQUIRE
KAREN CACACE, ESQUIRE
Skadden, Arps, Slate, Meagher &
 Flom LLP
Four Times Square
New York, New York 10036

Counsel for Appellee Cendant
Corporation

LEONARD BARRACK, ESQUIRE
GERALD J. RODOS, ESQUIRE
JEFFREY W. GOLAN, ESQUIRE
Barrack, Rodos & Bacine
3300 Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19103

MAX W. BERGER, ESQUIRE
DANIEL L. BERGER, ESQUIRE
JEFFREY N. LEIBELL, ESQUIRE
Bernstein Litowitz Berger &
 Grossmann LLP
1285 Avenue of the Americas
New York, New York 10019

Counsel for Appellees California
Public Employees' Retirement System,
New York State Common Retirement
Fund, and New York City Pension
Funds

                       2
OPINION OF THE COURT

AMBRO, Circuit Judge:

Janice G. Davidson and Robert M. Davidson, in their
individual capacities and as trustees of certain trusts
(collectively, the "Appellants"),1 appeal from a final decision
of the United States District Court for the District of New
Jersey (the "District Court"). That decision, involving a
securities class action lawsuit (the "class action"), held that
Appellants, as a result of their failur e to opt out of the
class, were subject to the class settlement, and could not
further pursue arbitration in California of claims they
brought against Appellee Cendant Corporation ("Cendant").

Appellants have presented this Court with thr ee issues
on appeal. First, they assert that the District Court erred in
holding that the class included them. Second, Appellants
argue that the District Court abused its discr etion in failing
to grant them an extension of time to opt out of the class.
Finally, they contend that the District Court err ed in
enjoining their arbitration claims and, in doing so, violated
the Federal Arbitration Act, 9 U.S.C. S 1 et seq. (the "FAA").
After considering these arguments, we hold that the District
Court did not err in finding that Appellants wer e members
of the class and did not abuse its discretion in refusing to
grant them an extension of time to opt out of the class.
However, we hold that the District Court did err in
enjoining, in its entirety, Appellants' arbitration. While
Appellants are subject to the class settlement, and
therefore are enjoined from pursuing any claims that fall
within that settlement, they are not enjoined from
pursuing, in arbitration, any claims that fall outside the
settlement's scope.

I. Facts and Procedural History

In 1982, Janice Davidson founded Davidson &
_________________________________________________________________

1. Janice G. Davidson and Robert M. Davidson, solely in their individual
capacities, are collectively referr ed to as the "Davidsons."

                                  3
Associates, Inc. ("DAI"), an entity later incorporated in
California in 1984. From 1984 until 1996, the Davidsons
were officers and directors of DAI. In that capacity, they led
the company as it developed, manufactured, published, and
distributed educational and entertainment softwar e
products for home and school use. The company derived its
revenues from sales to software distributors, specialty
software stores, computer superstor es and mass
merchandisers in international markets, international
catalog sales to schools and teachers, and thr ough
technology licensing and software manufacturing.

In April 1993, DAI issued an initial public of fering ("IPO"),
selling 200 million shares of common stock at $13 per
share. Thereafter, DAI listed its stock on NASDAQ. After the
IPO, the Davidsons controlled approximately 70% of DAI's
outstanding common stock, with a majority of that stock in
various charitable and irrevocable trusts contr olled by the
Davidsons as trustees.2

Following the IPO, DAI received a number of unsolicited
inquiries with respect to possible mergers, acquisitions,
joint ventures, and direct investments. No initial inquiry
resulted in a transaction. However, in June 1995, the
Davidsons were approached by CUC Inter national, Inc.
("CUC") in connection with its possible acquisition of DAI.
Although the first round of negotiations ended without an
agreement, the negotiations were r esumed in December
1995 and continued until July 1996, when CUC acquir ed
DAI through a merger and DAI became a subsidiary of
CUC.

In connection with the merger, DAI shar eholders received
85/100 of a CUC share in exchange for each DAI share, as
negotiated in part based on the market price of each
company's shares. As a result, the Davidsons received
1,259,634 shares of CUC common stock, and the trusts
controlled by the Davidsons received 31,245,465 shares of
_________________________________________________________________

2. The Davidsons claim to have controlled 78% of DAI's outstanding
shares immediately after the IPO. Cendant alleges that, at the time DAI
merged with CUC International, Inc. (later Cendant), the Davidsons
controlled 71.3% of the outstanding DAI common shares (1.4% in each
person's individual capacity and 68.5% in the various trusts).

                               4
CUC common stock. The merger agreement also contained
an arbitration provision3 and a "bust out" provision.4

Following the merger, the Davidsons became directors of
CUC and officers and directors of CUC's DAI subsidiary. In
addition, the DAI shares owned by the public were
exchanged for common shares of CUC that could be
immediately traded over the New York Stock Exchange
("NYSE"). Appellants' shares, however , could not be
immediately traded. Due to the number of shar es
Appellants received, they were deemed affiliates of CUC and
could not publicly trade their stock on the NYSE unless
their shares were subsequently made part of a registered
public offering separate from the DAI/CUC merger.5

In January 1997, following several months of acrimony
between CUC senior management and the Davidsons, CUC
terminated them as corporate officers though they
remained directors. In March 1997, Appellants served CUC
with a demand for arbitration, asserting claims in
connection with the DAI/CUC merger agr eement and
specifically as to the Davidsons' employment
responsibilities with CUC. In May 1997, Appellants and
_________________________________________________________________

3. The arbitration provision provided:

        Any controversy, dispute or claim arising out of or relating to
this
        Agreement or the breach hereof which cannot be settled by mutual
        agreement . . . shall be finally settled by arbitration . . . .
The parties
        agree that this clause has been included to rapidly and
        inexpensively resolve any disputes between them with respect to
this
        Agreement, and that this clause shall be gr ounds for dismissal of
        any court action commenced by either party with r espect to this
        Agreement, other than post-arbitration actions seeking to enforce
an
        arbitration award.
4. The "bust out" provision per mitted DAI to terminate the merger
agreement if CUC's average share price fell below $29 per share in a
defined period in order to protect the bargained-for value to be received
by the DAI shareholders.

5. As discussed below, Appellants' shares were restricted pursuant to the
Securities Act of 1933. See 17 C.F.R.S 230.145; infra note 16 and
accompanying text. However, the restrictions could be easily
circumvented. In fact, just four months after the merger, in October
1996, Appellants sold more than twenty million of the shares they
received in the DAI/CUC merger.
5
CUC entered into a settlement agreement (the "Settlement
Agreement"), which provided, inter alia, for the Davidsons
to receive options to purchase 1.6 million shares of CUC
common stock6 in exchange for a r elease by Appellants and
the Davidsons' resignation from all r emaining positions
with CUC. The Settlement Agreement also contained an
arbitration provision.7

Thereafter, on December 18, 1997, CUC and HFS, Inc.
("HFS") merged, with CUC as the surviving company. Upon
completion of the merger the company became known as
Cendant.

After the close of the stock market on April 15, 1998,
Cendant publicly disclosed that accounting and
bookkeeping irregularities had occurred at CUC and that it
would restate its earnings for 1997. This caused its stock
value to plummet 46% and triggered several class action
lawsuits on behalf of investors who purchased CUC or
Cendant stock during 1997. In late August 1998, Cendant
further disclosed that the irregular accounting activity
dated back to 1995, and that in addition to the 1997
restatement, new earnings would be r eleased for 1995 and
1996. This second disclosure triggered several more
lawsuits involving purchases of CUC securities during the
_________________________________________________________________

6. Interestingly, at oral argument Cendant conceded that these 1.6
million options are not, and have never been, considered part of the
class action.

7. That provision stated:

        Notwithstanding anything to the contrary contained in this
        Agreement or the Surviving Agreements and Rights, any
        controversy, dispute or claim arising out of or relating to this
        Agreement or any of the Surviving Agreements and Rights or the
        breach hereof or thereof which cannot be settled by mutual
        agreement shall be finally settled by binding arbitration in
        accordance with the Federal Arbitration Act . .. . The parties
agree
        that this Section has been included to rapidly and inexpensively
        resolve any disputes between them with r espect to this Agreement
        or any of the Surviving Agreements and Rights, and that this
        Section shall be grounds for dismissal of any court action
        commenced by any party with respect to this Agr eement or any of
        the Surviving Agreements and Rights, other than post-arbitration
        actions seeking to enforce an arbitration awar d.

                                6
broader period of alleged fraud. This new time frame
presumably included the time during which Appellants
engaged in the merger transaction with CUC. In total,
Cendant restated and reduced its pr e-tax operating income
for the relevant periods by approximately $500 million.

Between April and August 1998, at least sixty-four
purported securities fraud class action lawsuits wer e filed
as a result of the April 1998 disclosur e. By order of the
Judicial Panel on Multidistrict Litigation (the"MDL Panel"),
all Cendant cases relating to the accounting irregularities
were transferred to the District of New Jersey. During the
process to consolidate the class actions in the District of
New Jersey, fifteen motions were filed for appointment as
the lead plaintiff. On May 29, 1998, the District Court
consolidated all of the accounting irregularity actions
pending against Cendant under the caption In r e Cendant
Corporation Securities Litigation.8 On September 8, 1998,
the District Court appointed the California Public
Employees' Retirement System, the New Y ork State
Common Retirement Fund, and the New York City Pension
Funds, all public investment funds, as lead plaintif fs
(collectively, the "Lead Plaintiffs").

Following a case management conference, the Lead
Plaintiffs on December 14, 1998, filed their Amended and
Consolidated Class Action Complaint (the "Complaint").
That Complaint defined the class repr esented as

        [a]ll persons and entities who purchased or otherwise
        acquired publicly traded securities . . . either of
        Cendant or CUC during the period beginning May 31,
        1995 through and including August 28, 1998 and who
        were injured thereby, including all persons or entities
        who exchanged shares of HFS common stock for
        shares of CUC stock pursuant to the Registration
_________________________________________________________________

8. While this Court has heard arguments on and issued decisions in
other Cendant cases involving different subject matters, see, e.g., In re
Cendant Corp. Prides Litig., 233 F.3d 188 (3d Cir. 2000) (hereinafter
Cendant Prides I); In re Cendant Corp. Prides Litig., 235 F.3d 176 (3d
Cir.
2000) (hereinafter Cendant Prides II); In re Cendant Corp. Prides Litig.,
243 F.3d 722 (3d Cir. 2001), those decisions do not affect the outcome
of this case.

                                7
        Statement . . . . Excluded from the Class ar e: (i)
        defendants; (ii) members of the family of each
        individual defendant; (iii) any entity in which any
        defendant has a controlling interest; (iv) officers and
        directors of Cendant and its subsidiaries and affiliates;
        and (iv) [sic] the legal representatives, heirs, successors
        or assigns of any such excluded party.

Also on December 14, 1998, the Lead Plaintif fs filed a
motion for class certification. That motion defined the class
as

        all persons and entities who purchased or acquired
        Cendant Corporation ("Cendant" or the "Company") or
        CUC International, Inc. ("CUC") publicly traded
        securities during the period May 31, 1995 thr ough
        August 28, 1998, inclusive (the "Class Period"), and
        were injured thereby, including but not limited to all
        persons who exchanged their HFS Incorporated ("HFS")
        common stock for common stock of CUC pursuant to
        a Registration Statement and Joint Proxy
        Statement/Prospectus dated August 28, 1997.
        Excluded from the Class are defendants her ein,
        members of the immediate family of each of the
        Individual Defendants, officers and directors of
        Cendant, parents, subsidiaries and affiliates of the
        Company, and the legal representatives, heirs,
        successors or assigns of any such excluded party. . . .

Lead Plaintiffs asserted they would be adequate class
representatives because they "allege a continuing course of
conduct that affected all Class members, whether they
bought early or late in the Class Period, or whether they
bought Cendant securities on the open market or pursuant
to the Registration Statement and Joint Prospectus in the
Merger."

Three days later, on December 17, 1998, Appellants
initiated arbitration in California against Cendant, seeking
rescission of the Settlement Agreement and damages
resulting from receipt of the overvalued CUC shares in
connection with the DAI/CUC merger. In response, on
January 21, 1999, Cendant filed suit in the United States
District Court for the Central District of Califor nia (the

                               8
"California Central District") seeking to enjoin the
arbitration. Cendant's complaint alleged violations of its
rights under the FAA and did not interpose the existence of
the class action as a ground for seeking injunctive relief
from the arbitration.

Meanwhile, on January 27, 1999, the District Court
granted Lead Plaintiffs' motion for class certification.
Without restating or affirmatively announcing the class
definition, the District Court ordered the certified class to
represent "all purchasers or acquirers of Cendant
Corporation or CUC International, Inc. publicly traded
securities between May 31, 1995 and August 28, 1998 who
were injured thereby."

In response to Cendant's motion to enjoin pr eliminarily
the California arbitration and Appellants' motion for
summary judgment to dismiss Cendant's complaint,filed
on February 17, 1999, the California Central District, on
April 14, 1999, found in favor of Appellants. It ruled that
Appellants were entitled to summary judgment because
"the evidence indicates that claims for r escission of the
agreement are covered by the br oad arbitration provision."
The California Central District entered afinal order
dismissing Cendant's injunction action, though it did not
explicitly compel arbitration. Cendant appealed that order.9

In an exercise of caution, Appellants, on April 14, 1999,
filed a "placeholder" action in the Califor nia Central
District. They did so to ensure that, in the event a court
determined that some or all of their claims were not
arbitrable, they nonetheless would comply with the one
year statute of limitations applicable to their claims. That
complaint expressly stated that they wer e not waiving their
right to arbitrate.10
_________________________________________________________________

9. That appeal, Cendant Corp. v. Davidson, J., et al., No. 99-55788, is
currently pending before the United States Court of Appeals for the
Ninth Circuit. The parties agreed to stay further proceedings in the
arbitration until the Ninth Circuit rules on Cendant's appeal.
10. "[T]his Complaint is filed in or der to ensure that plaintiffs have
brought an action with respect to the claims asserted herein within any
applicable statute of limitation, . . . in the event that any of
plaintiffs'
claims are determined not to be arbitrable . . . . By bringing this
action,
however, plaintiffs do not intend to waive, and are not waiving, their
rights under various agreements to arbitrate all or any of the claims
asserted herein."

                               9
Meanwhile, the District Court, on August 6, 1999,
approved the form, and order ed dissemination, of the notice
to be sent in the class action. In that order , the District
Court required that Cendant make available to Lead
Plaintiffs the stock transfer recor ds reflecting the names
and addresses of Cendant's and CUC's shar eholders. The
District Court further required Lead Plaintiffs to mail notice
to all record holders of Cendant and CUC stock and to all
brokers in the transfer records, and to publish notice of the
class action on three different days in The Wall Street
Journal, The New York T imes (National Edition), and the
Dow Jones Business Newswire. The District Court
determined that this notice "constitute[d] the best notice
practicable under the circumstances to members of the
Class, and will satisfy the requirements of constitutional
due process and Rule 23 of the Federal Rules of Civil
Procedure."

Thereafter, Cendant petitioned the MDL Panel to transfer
Appellants' placeholder action pending in the California
Central District. On August 12, 1999, the MDL Panel
transferred that action from the Califor nia Central District
to the District of New Jersey pursuant to 28 U.S.C.S 1407.

On October 8, 1999, the accounting firm of Heffler,
Radetich & Saitta LLP, the Class Administrator, mailed the
class notice to all known potential class members, as well
as 239 brokerage firms and 141 banks and other
institutions. Initially, 19,069 notices were sent via first
class mail. Then, through November 29, 1999, the Class
Administrator mailed notice to numerous other potential
plaintiffs based on written requests, telephone requests,
names supplied by nominees, and bulk requests by
nominees. In all the Class Administrator sent 261,224
notices.

Of these notices, at least ten were mailed to Appellants at
three separate addresses -- two in Palos Verdes, California
and one in Torrance, California. The notices mailed to the
Palos Verdes addresses were all returned to the Class
Administrator by the United States Postal Service as
undeliverable, with no forwarding address. The notice sent
to the Torrance address was not r eturned. However, the
Davidsons claim never to have received the individual

                               10
notice because they had moved to Incline Village, Nevada
and did not inform Cendant of their change of address. The
Davidsons also claim to have missed the published notice.

Both the individually mailed notices and the published
notice included the definition of the class as stated in the
Complaint. Further, in accordance with an order of the
District Court, the class notice warned potential class
members that if they failed to follow the specific exclusion
procedures, they would be deemed class members and
would be bound by any settlement or judgment. The
individual notice stated:

         15. If you are a member of the Class . .. and you
        wish to remain a member of the Class, you need not
        take any further action at this time. . . .

        16. As a Class member (unless you request to be
        excluded from the Class), you will be bound by any
        judgment, whether favorable or unfavorable, enter ed in
        this Action. . . .

         . . .

         19. How To Be Excluded From The Class: YOU WILL
        BE EXCLUDED FROM THE CLASS ONLY UPON
        SPECIFIC REQUEST AS DESCRIBED BELOW. If you
        request to be excluded, you will not be entitled to share
        in the proceeds of a recovery obtained by settlement or
        favorable judgment in the litigation, if any. Y ou also
        will not be bound by a judgment, if any, in favor of
        either the Class or defendants.

         20. If you wish to be excluded from the Class, you
        must so indicate by filing a written Request for
        Exclusion, POSTMARKED ON OR BEFORE December
        27, 1999 . . . .

The published notice similarly warned:

         IF YOU PURCHASED OR ACQUIRED THE PUBLICL Y
        TRADED SECURITIES . . . OF CENDANT OR CUC AS
        DESCRIBED ABOVE, AND YOU DO NOT REQUEST
        EXCLUSION FROM THE CLASS, YOUR RIGHTS WILL
        BE AFFECTED BY THIS LITIGATION. . . .

                                11
         If you wish to be excluded from the Class, you must,
        in accordance with the instructions contained in the
        Notice, submit a written request for exclusion . . . .

Additionally, the class action received considerable media
coverage independent from the published notices.

On December 7, 1999, almost three weeks befor e the
final opt-out date, Cendant announced a pr oposed
settlement that would require it to pay $2.85 billion to the
class members (the "Class Action Settlement"). 11 On
December 27, 1999, pursuant to the class notice, the opt-
out period closed. The Appellants never filed a written opt-
out, as required by the District Court and the class notice.

In February 2000, Appellants claim that Cendant
indicated, for the first time, that it would take the position
that they were class members. On March 17, 2000,
Cendant and the Lead Plaintiffs submitted settlement
documents to the District Court, including a Plan of
Allocation for the distribution of settlement pr oceeds among
class members. Then, on March 29, 2000, the District
Court preliminarily approved the Class Action Settlement12
and enjoined all actions or claims that were contemplated
by it. Pursuant to the order containing that approval, the
Class Administrator on April 7, 2000, mailed notice of the
Class Action Settlement and proof of claim for m packages
to Appellants at their new Nevada address. This package
included Lead Plaintiffs' Plan of Allocation of the settlement
funds.

The Plan of Allocation provided that any losses class
members suffered from their transactions in CUC and
Cendant securities would be offset by any gains they
received through transactions in CUC and Cendant
securities prior to Cendant's April 15, 1998 disclosure of
the alleged accounting fraud. Thus, any damages
Appellants suffered as a result of the DAI/CUC merger
would be offset by the substantial gains they received in the
_________________________________________________________________

11. It is interesting to note that the Davidsons never claim that they
were
unaware of this announcement.

12. Formal approval of the Class Action Settlement occurred on August
15, 2000.

                                12
sale of over twenty million shares of the artificially-inflated
stock before the disclosure.

On April 27, 2000, possibly after learning of their
discounted recovery under the Class Action Settlement and
Plan of Allocation, Appellants filed a motion seeking
clarification of the class definition, or in the alternative an
extension of the time period to opt out of the class. Cendant
opposed Appellants' motion, and cross-moved to enforce the
injunction against other proceedings. The Lead Plaintiffs
filed a brief responding to Appellants' motion, asserting that
they did not represent the interests of Appellants in
prosecuting their claims.13

Finally, on June 20, 2000, the District Court ruled that
Appellants were within the class, denied them an extension
of time to opt out, and enjoined them from arbitrating their
claims in California. See In re Cendant Corp. Sec. Litig., 194
_________________________________________________________________

13. The Lead Plaintiffs stated:

         Lead Plaintiffs agree that the Davidsons are excluded from the
        Class. The Davidsons were officers and dir ectors of CUC and its
DAI
        subsidiary during the Class Period. CUC was the surviving entity
in
        the merger of HFS into CUC; the name was simply changed to
        Cendant after the merger. Thus, while it was necessary to make it
        clear to Class Members in the Notice of Pendency that whether they
        purchased Cendant or CUC publicly-traded securities, they were all
        part of the same Class, the exclusion of Cendant's officers and
        directors applied to all such officers and directors, whether
before or
        after the name change. Indeed, it would make no sense to exclude
        only officers and directors of Cendant after the merger, when it
was
        CUC's fraudulent financial statements -- issued by the officers
and
        directors of the company before the mer ger (when the company was
        named CUC) -- that formed the heart of this Action. Lead
Plaintiffs
        did not prosecute this class action to pr otect the interests of
        Cendant's officers and directors, whether they served before or
after
        the CUC/HFS merger, and such officers and directors should not be
        allowed to participate in the distribution of the Settlement Funds
        that have now been recovered.

         As a result, the Davidsons are, and should be, excluded from the
        Class.
At oral argument before the District Court the Lead Plaintiffs took the
position that the trust shares were included in the class.

                               13
F.R.D. 158, 165-66 (D.N.J. 2000). First, the District Court
held that Appellants were within the class because their
shares were publicly traded within the meaning of the class
definition. See id. at 164. Second, it looked to the class
exclusions and determined that, despite the exclusion of
officers and directors of Cendant, the Davidsons, as former
officers and directors of CUC, were not excluded from the
class. See id. Further, it found that Appellants did not meet
their burden of showing excusable neglect for an extension
of time to opt out of the class pursuant to Federal Rule of
Civil Procedure 6(b), and therefor e denied their request. See
id. at 165. Finally, the District Court held that it had the
authority to enjoin the ongoing California arbitration
between Appellants and Cendant in order to implement the
proposed Class Action Settlement, and thus it enjoined that
arbitration. See id. at 165-66.

On July 19, 2000, Appellants filed a timely notice of
appeal.

II. Discussion

A. Class Membership

Appellants claim initially that the District Court erred in
holding that they were class members. The District Court
concluded that their shares were publicly traded, and thus
were within the class definition.14 See Cendant Sec. Litig.,
194 F.R.D. at 163-64. It further found that the Davidsons
were not "officers and directors of Cendant and its
subsidiaries and affiliates," and concluded that they did not
qualify for exclusion from the class on those grounds. See
id. at 164.

We accord a District Court's interpr etation of its own
orders "particular deference." In re Fine Paper Antitrust
Litig., 695 F.2d 494, 498 (3d Cir . 1982). The District Court,
in determining whether Appellants were class members,
interpreted its own orders, the or der certifying the class
_________________________________________________________________

14. As previously noted, the class definition included "all persons and
entities who purchased or acquired Cendant. . . or CUC . . . publicly
traded securities during the period May 31, 1995 thr ough August 28,
1998," and excluded "officers and dir ectors of Cendant."

                               14
and the order approving the class notice, both of which
contained the class definition. Therefor e, its interpretation
of the class definition in those orders is entitled to
"particular deference."15

1. The Class Definition

The class definition begins: "[A]ll persons and entities
who purchased or acquired" stock. Appellants received their
shares through the DAI/CUC merger . This Court has
defined "purchasers" of stock to include those who buy on
an open market and those who exchange stock in one
company for stock in another company pursuant to a
merger between the two companies or an acquisition of one
company by the other. See In re Penn Cent. Sec. Litig., 494
F.2d 528, 533 (3d Cir. 1974) (citing SEC v. Nat'l Sec. Inc.,
393 U.S. 453, 467 (1969)). By virtue of the DAI/CUC
merger, Appellants "purchased" stock.

The class definition then requires that the purchaser or
acquirer obtained "Cendant . . . or CUC . . . publicly traded
securities." As a result of the DAI/CUC mer ger Appellants
received a total of 32,505,099 shares of CUC stock. The
question that we must address is whether that stock was
"publicly traded" so as to fall within the class definition.

Appellants argue the District Court err ed in holding that
their shares were publicly traded securities because the
Court did not give the term "publicly traded" its commonly-
used definition. They assert that "publicly traded" means
_________________________________________________________________

15. Appellants' attempt to distinguish Fine Paper by relying on Pittsburgh
Terminal Corp. v. Baltimore & Ohio R.R. Co., 824 F.2d 249, 254 (3d Cir.
1987), is unfounded as the Pittsburgh T erminal court itself distinguished
its case from Fine Paper as well as the current situation. Pittsburgh
Terminal did not involve a court interpreting its own order, but instead
dealt with the court interpreting a stipulation by the parties. "There is
no
basis for extending this principle [of "particular deference" articulated
in
Fine Paper] to demand similar deference in the present case to the
district court's interpretation of a stipulation underlying a previous
order
. . . ." Id. Moreover, "Fine Paper is further distinguishable because it
was
a class action and because it involved distribution of a single fund." Id.
at 254 n.5. Just as in Fine Paper, this case is a class action where the
District Court is interpreting its own or ders and ultimately distributing
a single fund of $2.85 billion.

                               15
tradeable on the public markets. Because the shar es they
received were newly issued, had not been traded on any
market, and were precluded when issued fr om being traded
on those markets, Appellants argue that these shares could
not, in the plain sense of the term, have been"publicly
traded." In essence, they contend that because their shares
were not immediately tradeable publicly, they could not be
deemed "publicly traded" within the meaning of the class
definition. We believe the publicly traded/publicly tradeable
argument to be a distinction without a dif ference and agree
with the District Court that Appellants' shar es were indeed
"publicly traded" securities.

At the outset, Appellants' argument does not paint the
picture fully. While it is true that their shar es differed from
the shares issued to other public investors as a result of
the DAI/CUC merger (the difference being that Appellants'
shares were not immediately tradeable), that difference was
not due to the quality of the shares received. Appellants
received exactly the same type of shares of common stock
as all other DAI shareholders, specifically a class of CUC
security that was publicly traded on the NYSE.

The restriction on sale of the CUC stock held by
Appellants emanated solely from the quantity of shares
they received as a result of the mer ger, not in any way from
the type of security they received. Due to the number of
shares Appellants received, they wer e deemed to be
affiliates of CUC and their ability immediately to resell
these shares was subject to the limitations of the Securities
Act of 1933,16 as well as the ter ms of affiliate agreements
signed by the Davidsons in connection with the DAI/CUC
merger agreement.17
_________________________________________________________________

16. While Cendant alleges that the restriction is based on Rule 144A, it
seems that Appellants were restricted fr om immediately selling their
shares pursuant to Rule 145. See Cendant Sec. Litig., 194 F.R.D. at 163.
That rule deems Appellants to be affiliates for Rule 145 purposes and
thus subjects them to the registration r equirements for sale of those
securities pursuant to the Securities Act of 1933. See 17 C.F.R.
S 230.145.

17. The affiliate agreements, signed by the Davidsons, provided in part,
"I understand that I may be deemed to be an `affiliate' of the Company,
as such term is defined for purposes of Rule 145 . . . promulgated under
the Securities Act of 1933 . . . and that the transferability of the
shares
of common stock . . . is restricted."

                               16
These restrictions could be avoided entir ely, however, if
Appellants were to sell shares of CUC stock under any
subsequent registration statement. Noticing the burden
placed on Appellants, CUC granted Appellants liberal rights
to demand a second registration statement that would allow
them to "piggyback" their shares and ther efore remove any
sales restriction from the securities. In fact, Appellants did
just that, selling more that twenty million shares just four
months after the transfer. In all, by January 16, 1998,
Appellants had disposed of more than twenty-five million of
their thirty-two and a half million CUC shar es for proceeds
totaling more than $635 million. This exposes a logical
disconnect in Appellants' argument. Having traded publicly
tens of millions of shares of CUC common stock so soon
after the DAI merger, and then to claim that they are not
"publicly traded" securities within the class definition, is a
non sequitur. Thus, despite the restriction on immediate
resale, Appellants did receive "publicly traded" securities
within the meaning of the class definition.

The class definition sets the relevant period of trading as
"May 31, 1995 through and including August 28, 1998."
The DAI/CUC merger, in which Appellants"purchased"
their shares, took place in July 1996. This clearly places
Appellants within the relevant period under the class
definition.

The relevant part of the class definition concludes: "and
who were injured thereby." Appellants' alleged injury is
shown by the fact that they pursued their claims against
Cendant. Yet they posit that the class did not adequately
represent them in redressing the injury they actually
received, as the class relied on the fraud on the market
theory. Appellants proffer that the claims pursued by the
Lead Plaintiffs on behalf of the class r elating to the
accounting irregularities affected those who purchased CUC
and/or Cendant stock on the open market. However , they
argue that the only way the fraud on the market theory
could have affected the DAI/CUC merger was to keep CUC's
price inflated so that the "bust out" pr ovision that could
have terminated that merger was not triggered. Because
Appellants did not purchase their securities on the open
market, but instead acquired them through individual

                               17
negotiations with CUC, they argue that the fraud on the
market theory is not applicable to them.

We find this argument unavailing. First, the fraud on the
market theory did affect the DAI/CUC mer ger because,
during the negotiations between DAI and CUC, the
purchase price was determined by "r eference to, among
other factors, the range of prices at which CUC stock was
trading." This demonstrates that Appellants' Rule 10(b)(5)
claim rests, at least in part, on the same fraud on the
market theory pursued by the class, as the mer ger
negotiations were based on artificial market prices. In fact,
Cendant points out that membership in the class actually
gave Appellants an advantage in their Rule 10(b) claim by
lessening their burden of proof because in a typical Rule
10(b) claim a plaintiff must show individual r eliance on a
material misstatement, whereas under the fraud on the
market theory reliance is presumed. See In re Apple
Computer Sec. Litig., 886 F.2d 1109, 1113-14 (9th Cir.
1989).

Cendant further points this Court to In r e Discovery Zone
Securities Litigation, 181 F.R.D. 582 (N.D. Ill. 1998), to
show that Appellants' fraud on the market ar gument is
incorrect. In that case, the court consider ed whether an
entity that acquired newly-issued shares of common stock
through a merger that were not immediately tradeable (just
as Appellants' shares were not) was a member of a class
proceeding under a fraud on the market theory. See id. at
590-92. The court concluded that the fact that the
acquiring entity's claims were based on its individual
negotiations with the defendant, rather than on pur chases
in the open market, did not exclude it from a"fraud-on-the-
market class" given that its claims and the claims of open
market purchasers were based on the same"overall
scenario" of conduct by the defendants. See id. at 591-92;
see also In re Scorpion Techs., Inc. Sec. Litig., No. C 93-
20333, 1994 WL 774029, at *5 (N.D. Cal. Aug. 10, 1994);
In re Nat'l Student Mktg. Litig., M.D.L. Docket No. 105, 1973
WL 431, at *5 (D.D.C. Oct. 2, 1973).

Appellants cannot argue that their claims ar e based on a
qualitatively different "overall scenario" from the claims
raised in the class action. Under Discovery Zone ,

                                18
Appellants' claims would be properly included in the class
despite their individual negotiations with CUC that shape
their particular fraud claim. Accordingly, we believe that
Appellants' injuries fit within the class definition.

2. Class Exclusions

Having concluded that Appellants are within the class
because they purchased or acquired CUC publicly traded
securities during the relevant class period and allege they
were injured thereby, we must next determine whether they
fall within any of the exclusions. The only exclusion
possible is that the Davidsons are excepted fr om the class
as "officers and directors of Cendant." The District Court
determined that, pursuant to the plain meaning of the class
definition, the exclusion only disqualified officers and
directors of Cendant, and did not exclude for mer officers
and directors of CUC. See Cendant Sec. Litig., 194 F.R.D. at
164.

The Davidsons submit that Cendant, as the surviving
entity of the CUC/HFS merger, is mer ely a continuation of
CUC and therefore the exclusion includes all officers and
directors of CUC and Cendant. Most important, the
Davidsons point to the Lead Plaintiffs' belief that they did
not represent the interests of the Davidsons, as Lead
Plaintiffs believed that the Davidsons wer e excluded from
the class due to their former positions as officers and
directors of CUC. See supra note 13.

Again, we accord "particular deference" to the District
Court's interpretation of its own orders. See Fine Paper,
695 F.2d at 498. While we find the Lead Plaintiffs'
statement to be of interest, we do not believe that the
District Court erred in finding that the officer and director
exception did not apply to the Davidsons. In fact, the plain
meaning rule, as well as other canons of construction,
require such a finding.

When the language of an instrument is plain, we look no
further than the words of that document itself to determine
its meaning. See Tamarind Resort Assocs. v. Govt. of V.I.,
138 F.3d 107, 110 (3d Cir. 1998) ("It is axiomatic that
where the language of a contract is clear and unambiguous,
it must be given its plain meaning."); Mellon Bank v. Aetna

                                19
Bus. Credit, Inc., 619 F.2d 1001, 1010 (3d Cir. 1980) ("A
court is not authorized to construe a contract in such a
way as to modify the plain meaning of its wor ds, under the
guise of interpretation.") (internal quotations omitted); see
also Richard A. Lord, 11 Williston on Contracts S 32:3, at
408 (4th ed. 1999).

Further, we look by analogy to canons of interpretation
for statutes. One is that "[w]e presume that [Congress's]
clear use of different terminology within a body of
legislation is evidence of an intentional dif ferentiation."
Lankford v. Law Enforcement Assistance Admin., 620 F.2d
35, 36 (4th Cir. 1980); accord Russello v. United States, 464
U.S. 16, 23 (1983) ("[W]here Congr ess includes particular
language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate
inclusion or exclusion.") (internal quotations omitted);
Barmes v. United States, 199 F.3d 386, 389 (7th Cir. 1999)
("Different language in [a] separate clause in a statute
indicates Congress intended distinct meanings."); Cabell
Huntington Hosp. v. Shalala, 101 F.3d 984, 988 (4th Cir.
1996) ("Where Congress has chosen dif ferent language in
proximate subsections of the same statute, courts are
obligated to give that choice effect.") (internal quotations
omitted); Fla. Public Telecomms. Assoc., Inc. v. FCC, 54 F.3d
857, 860 (D.C. Cir. 1995) (stating that when Congress uses
different language in differ ent sections of statute, it does so
intentionally). Cf. Booth v. Churner, 206 F.3d 289, 294 (3d
Cir. 2000) ("[It is the] normal rule of statutory construction
that identical words used in differ ent parts of the same act
are intended to have the same meaning.") (internal
quotations omitted). Thus, the choice of dif ferent words to
address analogous or related issues signifies different
meanings. See E. Allan Farnsworth, 2 Farnsworth on
Contracts S 7.11, at 284 & n.12 (2d ed. 1998).

Similarly, we look to the canon expressio unius est
exclusio alterius (the expression of one thing is the
exclusion of another) for the proposition that when parties
list specific items, without any more general or inclusive
term, they intend to exclude unlisted items, even though
they are similar to listed items. See id. at 281. Finally, this

                               20
Court has stated that we "must give full cr edit to the
language the parties have chosen to include -- or not
include -- in their agreement." Orlando v. Interstate
Container Corp., 100 F.3d 296, 301 (3d Cir. 1996).

Applying these rules of interpretation to the language of
the class definition, we find that the District Court correctly
interpreted the class exclusion to include only officers and
directors of Cendant and not any of its pr edecessors in
interest, including pre-merger officers and directors of CUC.
The language used in the class definition clearly excludes
only Cendant's officers and directors. Because the
Davidsons were never officers and dir ectors of Cendant, the
plain language excludes them.

Looking to the class definition as a whole supports the
conclusion that the intention was only to exclude Cendant's
officers and directors. We need not look further than the
first sentence of the class definition to confirm this view. It
begins by stating that the class intends to cover all
purchasers of Cendant or CUC securities. This indicates
that the drafter, as well as the adopting court, intended to
include purchasers of either company's stock. However, the
language of the class exclusion only excludes officers and
directors of Cendant. Following the canons of construction,
the choice of different words --"Cendant or CUC" as
opposed to "Cendant" -- indicates that the two clauses
have different meanings. To conclude otherwise is
counterintuitive.

Further, we look to the canon of expr essio unius est
exclusio alterius for the proposition that when parties list
specific items, without a term of general inclusion, they
intend to exclude unlisted items. Here the class definition's
language indicates that it intentionally excluded CUC from
the class exception. Because we must give ef fect to the
language included, as well as not included, we conclude
that the District Court was correct in holding that the
Davidsons were not excluded from the class as former
officers and directors of pre-mer ger CUC.

3. Opt-Out by Implication

After finding that Appellants fit within the class
definition, and that the Davidsons are not excluded under

                               21
the exceptions, we must determine if Appellants opted out
of the class. At oral argument and thr oughout their briefs,
Appellants concede that they did not follow the for mal opt-
out procedure provided in the class notice, but appear to
argue that they impliedly opted out of the class. They
contend that the purpose of an opt-out requir ement is to
force a party to take a position in or out of a class so that,
in attempting to resolve claims against it, a defendant
knows the exposure it faces, both to the class and to the
opt-outs. Appellants further argue that they clearly took a
position outside the class by filing the Califor nia arbitration
and by reaffirming their unequivocal desire to arbitrate in
the placeholder action. They cite In re Piper Funds, Inc.,
Institutional Government Income Portfolio Litigation, 71 F.3d
298 (8th Cir. 1995), for the proposition that a formal opt-
out is not always necessary. See id. at 304.

However, we find Piper Funds distinguishable from this
case. In Piper Funds, the appellant attempted to opt out of
the class by formally advising the district court through a
letter of its intention and desire to opt out before an opt-out
period and procedure had been developed by the court.
Although the district court denied that request, the Eighth
Circuit reversed, stating that it did not dispute the normal
rule forbidding an opt-out until after a Rule 23 notice, but
believed that in some cases there must be an exception. It
found that the exception applies when a party with an
immediate right to arbitrate attempts to opt out before the
Rule 23 procedure is initiated but is denied that request.
See id. Here Appellants never infor med the District Court of
their intention to opt out, neither before nor after the Rule
23 class notice was distributed. Thus, Piper Funds does not
advance their argument.

Moreover, numerous courts have held that the mere
pendency of an individual litigation or arbitration does not
relieve a plaintiff of the obligation to opt out of a class
action. See, e.g., In re Prudential Sec. Inc. Ltd. P'ship Litig.,
164 F.R.D. 362, 370 (S.D.N.Y. 1996) ("It is well-established
that pendency of an individual action does not excuse a
class member from filing a valid request for exclusion.")
(internal quotations omitted); In r e Prudential-Bache Energy
Income P'ship Sec. Litig., No. MDL-0888, 1995 WL 20613, at

                               22
*2 (E.D. La. Jan. 6, 1995) (rejecting class member's claim
that pending arbitration proceeding was sufficient notice of
intent to opt out); Supermarkets Gen. Corp. v. Grinnell
Corp., 59 F.R.D. 512, 513 (S.D.N.Y . 1973) ("[T]he existence
of [the individual] action did not automatically exclude
plaintiffs as potential members of the class. The exclusion
could only be effected by compliance with the provisions of
Rule 23(c)(2)(B)."). In this context, Appellants cannot
succeed in their argument that Cendant's knowledge of the
arbitration was sufficient notice for their opting out, and
thus Appellants did not opt out of the class impliedly.

* * * * *

In sum, Appellants fall within the class definition
because they purchased or acquired CUC or Cendant
publicly traded securities. The Davidsons wer e not excluded
from the class as former officers and directors of pre-
merger CUC because the exception only excluded officers
and directors of Cendant. Furthermor e, we conclude that
Appellants failed to opt out of the class and thus are bound
by the class settlement. We therefor e affirm the District
Court's finding that Appellants are within the class.

B. Extension of the Opt-Out Deadline

Appellants further allege that the District Court erred in
refusing to grant them an extension of time to opt out of
the class. They maintain that if they are enjoined from
pursuing the arbitration and are found to be within the
class definition, they should still not be included as class
members because the District Court abused its discr etion
in failing to extend the time for them to opt out of the class.

Federal Rule of Civil Procedure 6(b) pr ovides:

        When by these rules or by a notice given ther eunder or
        by order of court an act is requir ed or allowed to be
        done at or within a specified time, the court for cause
        shown may at any time in its discretion . . . (2) upon
        motion made after the expiration of the specified period
        permit the act to be done where the failure to act was
        the result of excusable neglect . . . .

Fed. R. Civ. P. 6(b). The definition of"excusable neglect"
recently has been discussed in a related litigation, In re

                                23
Cendant Corp. Prides Litigation. There, the United States
District Court for the District of New Jersey, District Judge
Walls (the same District Judge as in this case), stated:

        The Supreme Court has decreed that the determination
        of whether one party's neglect to adhere to a deadline
        is excusable should take into account all relevant
        circumstances surrounding the delay. See Pioneer
        Invest. Servs. Co. v. Brunswick Assoc. Ltd. Partnership,
        507 U.S. 380, 395 (1993). Relevant factors include"the
        danger of prejudice to the [nonmovant], the length of
        the delay and its potential impact on judicial
        proceedings, the reason for the delay, including
        whether it was within the reasonable contr ol of the
        movant, and whether the movant acted in good faith."
        Id. at 395. To this roster, the Third Circuit has added
        "(1) whether the inadvertence reflected pr ofessional
        incompetence such as ignorance of the rules of
        procedure, (2) whether an asserted inadvertence
        reflects an easily manufactured excuse incapable of
        verification by the court, and, (3) a complete lack of
        diligence." Dominic v. Hess Oil V.I. Corp., 841 F.2d 513,
        517 (3d Cir. 1988).

In re Cendant Corp. Prides Litig., 189 F.R.D. 321, 324
(D.N.J. 1999), aff 'd, 233 F .3d 188, 196-97 (3d Cir. 2000)
(alteration in original).

This Court reviews a District Court's findings concerning
excusable neglect for abuse of discretion. See Cendant
Prides I, 233 F.3d at 189, 197; Jones v. Chemetron Corp.,
212 F.3d 199, 205 (3d Cir. 2000); see also In re
PaineWebber Ltd. P'ship Litig., 147 F .3d 132, 135 (2d Cir.
1998); Silber v. Mabon, 18 F.3d 1449, 1453 (9th Cir. 1994).
An abuse of discretion occurs when the action of the
District Court is clearly contrary to reason and not justified
by the evidence. See Springfield Crusher , Inc. v.
Transcontinental Ins. Co., 372 F.2d 125, 126 (3d Cir. 1967).
A District Court also abuses its discretion if it is influenced
by erroneous legal conclusions or applies the wrong legal
standards. See Cendant Prides I, 233 F .3d at 192 (holding
that an abuse of discretion occurs when the District Court's
decision "rests upon a clearly erroneous finding of fact, an
errant conclusion of law or an improper application of law

                               24
to fact.") (internal quotations omitted); Oddi v. Ford Motor
Co., 234 F.3d 136, 146 (3d Cir. 2000); Hanover Potato
Prods., Inc. v. Shalala, 989 F.2d 123, 127 (3d Cir. 1993);
see also Corley v. Rosewood Care Ctr., Inc., 142 F.3d 1041,
1052 (7th Cir. 1998). In addition, we have stated that "[a]n
abuse of discretion can occur when no r easonable person
would adopt the district court's view." Rode v. Dellarciprete,
892 F.2d 1177, 1182 (3d Cir. 1990).

Here the District Court found that Appellants' alleged
failure to receive notice did not warrant an extension of the
opt-out deadline. See Cendant Sec. Litig., 194 F.R.D. at
165; In re NASDAQ Market-Makers Antitrust Litig., No. 94-
3996, 1999 WL 395407, at *2 (S.D.N.Y. June 15, 1999);
Gross v. Barnett Banks, Inc., 934 F . Supp. 1340, 1345
(M.D. Fla. 1995) (finding that no extension was warranted
where the class notice was sent to a potential class
member's old address despite having been advised of the
change of address). The District Court found unconvincing
Appellants' argument that Cendant had not tr eated them as
class members until after the class opt-out deadline had
passed. It found that Appellants did not become class
members until they failed to opt out before the deadline.
Consequently, Cendant had no reason to tr eat Appellants
as class members or inform them of their potential class
status. Finally, the District Court did not accept Appellants'
explanation of their delay as warranting an extension of
time to opt out. See Cendant Sec. Litig., 194 F.R.D. at 165.

We hold that the District Court did not abuse its
discretion in refusing to allow Appellants an extension of
time to opt out of the class. As stated above, we will not
find an abuse of discretion unless the decision is clearly
contrary to reason and not justified by the evidence or
prevailing law. Here the District Court found that
Appellants did not meet the excusable neglect standard
simply because they allegedly did not receive notice and
because Cendant (the defendant) did not infor m potential
plaintiffs (Appellants) of their rights and duties. See In re
Prudential Ins. Co. of Am. Sales Practices Litig. , 177 F.R.D.
216, 231 (D.N.J. 1997) ("[D]ue process does not require
that every class member receive actual notice so long as the
court reasonably selected a means likely to apprise

                               25
interested parties."). The District Court pointed to the
individually mailed notice, the published notice, and the
press coverage that the initiation of the class action and the
proposed settlement received in holding that Appellants
should have been aware of the class action and the
potential it had to affect their inter ests. See Cendant Sec.
Litig., 194 F.R.D. at 165.

In addition to the District Court's reasoning, Appellants
do not qualify for the excusable neglect exception because
their actions cause prejudice to Cendant and may not
comport with the good faith requirement. 18 See Cendant
Prides I, 233 F.3d at 195. While Appellants argue that
_________________________________________________________________

18. The dissent argues that "the majority's attempt to cure the
deficiencies of the District Court's analysis[is in]consistent with our
jurisprudence which requires the District Court to explain its excusable
neglect reasoning." It points out that our most recent articulation of
this
principle is in In re Orthopedic Bone Scr ew Products Liability
Litigation,
No. 99-2054, wherein we assert that we " `have imposed a duty of
explanation on District Courts when they conduct"excusable neglect"
analysis.' " Id. at 13 (quoting Cendant Prides I, 233 F.3d at 196). From
these statements the dissent makes the leap of logic that the duty to
explain the rationale for excusable neglect deter minations means that all
Pioneer factors must be explicitly consider ed by the District Court.
While
a consideration of all relevant Pioneer factors is optimal, this best
practice is not our law. Our law is that " `it is a salutary practice [for
a
court] to give the litigants, either orally or in writing, at least a
minimum
articulation of the reasons for its decision.' " Orthopedic Bone Screw,
No.
99-2054, at 13 (quoting Interpace Corp. v. City of Philadelphia, 438 F.2d
401, 404 (3d Cir. 1971)). What the District Court did in this case, unlike
in Orthopedic Bone Screw in which no explanation was given, meets the
minimum articulation threshold.

The dissent then castigates our opinion for noting additional reasons
not to find excusable neglect in this appeal. Y et we are merely following
precisely what we did in one of the Cendant opinions the dissent cites to
support its position. In Cendant Prides II, 235 F.3d 176 (3d Cir. 2000),
this Court, after holding that the District Court abused its discretion by
failing to analyze the Pioneer excusable neglect factors, went on to
analyze those factors, including prejudice and bad faith, the same
factors the dissent finds us in error for analyzing. After determining
that
any delay or neglect on the part of appellant was excusable neglect, the
Cendant Prides II Court remanded "solely for inclusion in settlement
proceedings," not for analysis of the excusable neglect factors, as the
dissent seems to imply is required. See id. at 182, 183-84.

                               26
Cendant will not be prejudiced by excluding them from the
class because Cendant knew of their claims befor e it
reached the class settlement, their argument is
unpersuasive. Reliance by Appellants on Mars Steel Corp. v.
Continental Illinois National Bank & Trust Co. of Chicago,
120 F.R.D. 51 (N.D. Ill. 1988), In r e Del-Val Financial Corp.
Securities Litigation, 154 F.R.D. 95 (S.D.N.Y. 1994), and
Dominic v. Hess Oil V.I. Corp., 841 F .2d 513 (3d Cir. 1988),
is unavailing, as those cases are easily distinguishable on
the prejudice issue. In Mars Steel, the court granted an
extension of time to opt out because the defendant did not
even argue that it would suffer pr ejudice. See Mars Steel,
120 F.R.D. at 53. Similarly, in Del-V al, the court extended
the time to opt out of the class action because the party
seeking exclusion intended to proceed with arbitration
against a non-settling defendant, and therefor e the settling
defendant would not be prejudiced by the extension. See
Del-Val, 154 F.R.D. at 97 n.2. Finally, Dominic did not even
involve a class action. In that individual pr oducts liability
action, the District Court granted plaintiff an extension of
_________________________________________________________________

The dissent argues as pungently as possible that the procedural
posture of the Cendant Prides II case makes its excusable neglect
analysis unavailable for support by the majority her e in analyzing
whether the District Court correctly denied Appellants' motion to extend
the time for them to opt out of the class. Cendant Prides II made a de
novo determination with respect to the excusable neglect factors not
applied by the District Court in that case afterfinding that the District
Court abused its discretion by failing to apply the Pioneer factors in
denying the late filing of a proof of claim in a class action. Cendant
Prides II, 235 F.3d at 183. Here we conclude that the District Court did
not abuse its discretion in denying the motion to extend the time for
Appellants to opt out of the class. In so doing, we apply the same
standard of review (abuse of discr etion) as our Court applied in Cendant
Prides II. While we also discuss other Pioneer factors supporting our
affirmance, this discussion is not necessary to our decision to affirm.
But in Cendant Prides II the analysis of Pioneer factors was necessary to
the decision and thus required de novo consideration.

In this context, we find the dissent's characterization of our excusable
neglect analysis as "[in]consistent with[this Court's] jurisprudence" to
be
unsupported. Moreover, for the dissent to conclude that a duty of
explanation meeting a minimum articulation thr eshold equals full blown
articulation is fallacious.

                               27
time to serve notice and the complaint on a thir d party
defendant who was already subject to personal jurisdiction
of the court. See Dominic, 841 F.2d at 516. This Court
affirmed, finding no prejudice to the third-party defendant
because it was already a party to the suit and knew of all
the claims and specific allegations.

Here Cendant, the settling defendant, would clearly be
prejudiced by a finding that Appellants ar e not within the
class. Appellants' substantial holdings could subject
Cendant to additional liabilities for the accounting fraud
allegations that they settled in the class action vis-a-vis all
eligible persons who did not opt out of the class. Permitting
Appellants to opt out now will deprive Cendant of the
finality it sought in settling the class action, r egardless
whether the March 24, 2000 letter from Appellants'
counsel, see infra note 21, put it on notice of Appellants'
claims and specific allegations before the District Court
formally approved the settlement.19 Cf. Prudential Sales
Practices Litig., 164 F.R.D. at 371-72 ("Defendants would be
loath to offer substantial sums of money in compromise
settlements of class actions unless they can r ely on the
notice provision of Rule 23 to bind class members.").

Finally, it is plausible to argue that Appellants do not
meet the excusable neglect standard because the record
draws into question whether they may have failed to
comport with the good faith requirement. See Mars Steel,
120 F.R.D. at 52 (holding that a party's tar diness designed
to gain a tactical advantage violates the good faith
requirement). Appellants, in their brief to this Court, claim
that "[t]hey did not wait strategically to see what kind of
settlement was proposed before communicating their intent
to arbitrate their claims." Yet it is possible to infer they did
_________________________________________________________________

19. One could argue that because Cendant pr oposed a settlement before
the opt-out period passed it could not have known whether Appellants
later would opt out. While it is true that Cendant proposed a settlement
on December 7, 1999, three weeks before the final opt-out date,
December 27, 1999, that settlement was not appr oved until March 29,
2000, three months after the final opt-out date. Therefore, because the
Appellants did not opt out, it is fair to say that Cendant was bargaining
for finality as to the Appellants' claims when its settlement was
approved.

                               28
just that, seemingly seeking a strategic advantage in not
filing a formal opt-out, and in the timing of their motion for
clarification of the class or in the alter native for an
extension of time to opt out of the class.

From the time of the initial disclosure of the accounting
irregularities through the present, Appellants have acted
with abundant caution. First, they filed a placeholder suit
in the California Central District to ensur e that they
complied with the statute of limitations in the event that
the Ninth Circuit ruled against them (thus for eclosing their
opportunity to arbitrate). In addition, Appellantsfiled
objections to the Class Action Settlement and Plan of
Allocation, just in case this Court, as we have, determines
that they are class members subject to the ter ms of the
settlement.20 However, even though they were aware of the
existence of the class action before the opt-out date passed,
Appellants never filed a protective opt-out to ensure that
their claims would be arbitrated. With sophisticated
investors such as the Davidsons, who were assisted by
exceptional counsel, it is not a leap of faith to make the
logical inference that their failure tofile a formal opt-out
was a strategic decision.

Additionally, as previously mentioned, the opt-out period
closed on December 27, 1999. Appellants contend in their
brief to this Court that they learned in February 2000 that
Cendant considered them class members. Y et, they took no
court action until after they received the Plan of Allocation
mailed on April 7, 2000.21 Only after they discovered that
their recovery under the Class Action Settlement was
significantly less than expected did they file, on April 27,
2000, a motion for clarification of the class definition, or in
the alternative for an extension of time to opt out of the
class. This tardiness again points to Appellants attempting
to gain a tactical advantage and counsels against extending
the opt-out period.
_________________________________________________________________

20. That case is currently pending befor e this Court, No. 00-2709.
21. While Appellants' counsel did send Cendant's counsel a letter on
March 24, 2000, indicating that Appellants did not consider themselves
to be part of the class, they took no formal action to ensure this
position
until three weeks after the Class Administrator provided them with the
Plan of Allocation.

                               29
As a result, we find that the District Court did not abuse
its discretion in refusing to grant Appellants an extension
of time to opt out. We agree with the District Court that
Appellants did not qualify for the excusable neglect
exception and therefore affirm its holding.

C. Enjoining of the California Arbitration

Finally, Appellants and the dissent argue that the District
Court erred in enjoining the ongoing Califor nia arbitration.
They specifically contend that it violated the F AA by
enjoining the arbitration mandated by the Califor nia
Central District as well as several agreements among the
Appellants, DAI, and CUC/Cendant calling for , inter alia,
arbitration of disputes.22
_________________________________________________________________

22. Conversely, Appellants and the dissent ar gue that the District Court
should have been res judicata bound by the decision of the California
Central District with respect to its decision to deny Cendant's motion to
enjoin the arbitration. In other words, they allege that the District
Court
should have given preclusive effect to the California Central District's
decision that the Appellants' claims were arbitrable and, under the
doctrine of res judicata, referred their claims back to arbitration in
California. The fatal flaw of this contention is acknowledged by the
dissent. The parties before the Califor nia Central District Court did not
brief, and that Court in its three and one-half page decision did not
mention, whether any of the Appellants were putative class members.
Without even acknowledgment of the class action, it is spurious to
suggest that res judicata precludes the District Court from deciding
whether Appellants' claims could be decided in the class action, i.e.,
whether they were class members. See Hopewell Township Citizens I-95
Comm. v. Volpe, 482 F.2d 376, 381 (3d Cir. 1973) (finding res judicata
does not apply where "at least much of the subject matter of the present
lawsuit has not been and could not have been ar gued in the previous
actions"); see also Sid Richardson Carbon & Gasoline Co. v. Interenergy
Res., Ltd., 99 F.3d 746, 756 (5th Cir . 1996) (holding that res judicata
did
not apply on the basis that it "is axiomatic that a claim that has not yet
accrued is not ripe for adjudication, and hence it is not a claim that
`could have been litigated' in a previous lawsuit").

Here the California Central District"was not, and could not have    been,
presented with -- and thus did not, and could not, decide -- the    issue
of whether the Davidsons and the Trusts ar e Class Members." The
California Central District issued its or der on April 14, 1999,    over
eight
months before the final opt-out date for the class action in New    Jersey

                               30
The District Court's authority to enter such an injunction
derives from the All Writs Act, 28 U.S.C. S 1651. Under that
Act, "[t]he Supreme Court and all courts established by Act
of Congress may issue all writs necessary or appropriate in
aid of their respective jurisdictions and agr eeable to the
usages and principles of law." When a federal court has
jurisdiction over a case, the All Writs Act grants it ancillary
jurisdiction to issue all writs "necessary or appropriate in
aid of " that jurisdiction. See In r e Baldwin-United Corp.,
770 F.2d 328, 335 (2d Cir. 1985). Ther e is an analogous
provision in the Anti-Injunction Act. 28 U.S.C.S 2283 ("A
court of the United States may not grant an injunction to
stay proceedings in a State court except as expressly
authorized by Act of Congress, or where necessary in aid of
its jurisdiction, or to protect or effectuate its judgments.").

The power given to federal courts under the All W rits Act
and the Anti-Injunction Act allows them to enjoin state
court proceedings when necessary to protect federal court
judgments. See Kelly v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 985 F.2d 1067, 1068-69 (11th Cir. 1993). "Such
`federal injunctive relief may be necessary to prevent a state
court from so interfering with a federal court's
consideration or disposition of a case as to seriously impair
the federal court's flexibility and authority to decide that
case.' " Baldwin-United, 770 F .2d at 335 (quoting Atlantic
Coast Line R.R. Co. v. Bhd. of Locomotive Eng'rs, 398 U.S.
281, 295 (1970)). In class actions, this power allows federal
courts to protect settlement efforts and to prevent
"inconsistent and inequitable results." In re Joint E. & S.
Dist. Asbestos Litig., 134 F.R.D. 32, 38 (S.D.N.Y. 1990).
Further, "the All-Writs Act per mits courts to certify a
national class action and to stay pending federal and state
cases brought on behalf of class members." Id. at 37.
_________________________________________________________________

-- December 27, 1999. Consequently, at the time the California Central
District issued its ruling, Appellants were no more than potential class
members, with every right to opt out of the class to pursue their
arbitration claims. Cendant could not have asked the California Central
District to declare Appellants class members given their unilateral right
to opt out of the class up until December 27, 1999. Because the issue
of whether Appellants were class members could not have been argued
in the previous action, res judicata is inapplicable.

                               31
The All Writs Act and the Anti-Injunction Act also give
the federal courts the power to enjoin arbitrations. See
Kelly, 985 F.2d at 1069; PaineW ebber P'ship Litig., 1996 WL
374162, at *4 ("[A] Court may enjoin arbitration -- even
before judgment has been entered in this action -- where
that injunction would be `in aid of its jurisdiction' within
the terms of the Baldwin-United line of cases."). The District
Court, in finding that it had the authority to enjoin the
continued prosecution of class members' claims, relied on
PaineWebber for the proposition that a district court has
the ability to enjoin an ongoing arbitration in or der to give
effect to a class settlement. See PaineW ebber, 1996 WL
374162. In that case, the court denied fifteen plaintiffs'
attempts to arbitrate claims covered by a class action where
they all failed to opt out of the class befor e the deadline.
See id. at *4-5.

We agree that, notwithstanding the federal courts' power
to enjoin other proceedings, there ar e strong policies that
support giving effect to agreements to arbitrate. "The FAA
was enacted to reverse centuries of judicial hostility to
arbitration agreements by placing arbitration agreements
upon the same footing as other contracts." Pritzker v. Merrill
Lynch, Fenner & Smith, Inc., 7 F.3d 1110, 1113 (3d Cir.
1993) (internal quotations omitted). Put another way, the
FAA seeks "to assure those who desir ed arbitration and
whose contracts related to interstate commer ce that their
expectations would not be undermined by federal judges."
Southland Corp. v. Keating, 465 U.S. 1, 13 (1984). In
particular, our Court recognizes that"federal law
presumptively favors the enforcement of arbitration
agreements." Harris v. Green T ree Fin. Corp., 183 F.3d 173,
178 (3d Cir. 1999).

We also recognize that the Supreme Court requires that
arbitrable claims be arbitrated, "even wher e the result
would be the possible inefficient maintenance of separate
proceedings in different forums." Dean Witter Reynolds, Inc.
v. Byrd, 470 U.S. 213, 217 (1985); accord Piper Funds, 71
F.3d at 303. In fact, the FAA "r equires piecemeal resolution
when necessary to give effect to an arbitration agreement."
Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460
U.S. 1, 20 (1983) (emphasis omitted). Securities lawsuits

                               32
often may require bifurcated pr oceedings in order to give
effect to arbitration agreements. See Dean Witter, 470 U.S.
at 218 n.5.

In the same vein, the mere existence of a parallel
proceeding that seeks to adjudicate the same in personam
cause of action does not in itself provide sufficient grounds
for an injunction against a state action or arbitration in
favor of a pending federal action. See Carlough v. Amchem
Prods., Inc., 10 F.3d 189, 202 (3d Cir. 1993); see also
Baldwin-United, 770 F.2d at 336 (citing Vendo Co. v. Lektro-
Vend Corp., 433 U.S. 623, 642 (1977) ("We have never
viewed parallel in personam actions as inter fering with the
jurisdiction of either court.")); PaineW ebber, 1996 WL
374162, at *3. Even actions derived from the same cause
against the same defendants may be maintained
simultaneously in federal and state courts. See Carlough,
10 F.3d at 202; see also Westinghouse Elec. Corp. v.
Newman & Holtzinger, P.C., 992 F .2d 932, 937 (9th Cir.
1993) (refusing to apply the All Writs Act because the state
complaint alleged a contract breach independent of the
District Court's protective order, and thus the state court
adjudication would not affect interpretation or enforcement
of the order). "Any doubts as to the pr opriety of a federal
injunction against state court proceedings should be
resolved in favor of permitting the state courts to proceed
in an orderly fashion . . . ." Atlantic Coast Line R.R., 398
U.S. at 297.

Moreover, an injunction may only be issued under the
Anti-Injunction Act when there is a "r eal or potential
conflict [that] threatens the very authority of the federal
court." Vernitron Corp. v. Benjamin, 440 F.2d 105, 108 (2d
Cir. 1971). For an injunction to be "necessary . . . in aid of
. . . jurisdiction" "it is not enough that the requested
injunction is related to that jurisdiction, but it must be
necessary in aid of that jurisdiction." Carlough, 10 F.3d at
202 (internal quotations and emphasis omitted). That is, an
injunction will only be "necessary" "to pr event a state court
[or arbitrator] from so interfering with a federal court's
consideration or disposition of a case as to seriously impair
the federal court's flexibility and authority to decide that
case." Id.

                               33
Yet a class action calls for distinct rules in connection
with the need to have as many common issues as possible
disposed of in a single proceeding. See Coopers & Lybrand
v. Livesay, 437 U.S. 463, 470 (1978) ("Ther e are special
rules relating to class actions and, to that extent, they are
a special kind of litigation."); Henry v. City of Detroit
Manpower Dept., 763 F.2d 757, 763 (6th Cir. 1985) (same);
Avila v. Van Ru Credit Corp., No. 94-c-3234, 1995 WL
41425, at * 9 (N.D. Ill. Jan. 31, 1995) ("[C]lass actions
involve complex litigation and special rules."); Coca-Cola
Bottling Co. of Elizabethtown, Inc. v. Coca-Cola Co. , 98
F.R.D. 254, 271 (D. Del. 1983) ("[C]ommon issues should be
resolved in one class proceeding."); Fed. R. Civ. P. 23 (b)(3)
(stating that a class action is maintainable when"questions
of law or fact common to the members of the class
predominate over any questions affecting only individual
members, and that a class action is superior to other
available methods for the fair and efficient adjudication of
the controversy"). For example, in multidistrict class
actions consolidated in a single district court, sound
authority exists to enjoin other parties, even states, from
bringing actions that would affect the rights of any
plaintiffs or class members. In Baldwin-United, the Second
Circuit found that the existence of multiple and harassing
state actions could only frustrate the district court's effort
to craft a settlement because the success of any federal
settlement depended on the parties agreeing to release "any
and all related civil claims the plaintif fs had against the
settling defendants based on the same facts." See Baldwin-
United, 770 F.2d at 337. The court concluded "that the
existence of actions in state court would jeopar dize [the
district court's] ability to rule on the settlements, would
substantially increase the cost of litigation,[and] would
create a risk of conflicting results . .. . Under the
circumstances we conclude that the injunction .. . was
unquestionably `necessary or appropriate in aid of ' the
federal court's jurisdiction." Id. at 333, 338. Similarly, in
Asbestos Litigation, the court's injunction was necessary to
implement the settlement covering "all pr esent and future
persons injured by asbestos-containing pr oducts." Asbestos
Litig., 134 F.R.D. at 38.

                               34
In deciding whether to enter the injunction that Cendant
sought enjoining the California arbitration, the District
Court here had to reconcile two seemingly conflicting lines
of authority and policies: the one giving it authority to issue
all orders to maintain and preserve its jurisdiction over the
consolidated multidistrict litigation cases in this Cendant
group of actions, and the public policy favoring giving effect
to arbitration agreements such as those enter ed between
Cendant and Appellants.

Appellants and the dissent rely on the Eighth Circuit's
decision in Piper Funds, 71 F.3d 298, in support of their
argument that the District Court violated the FAA by
enjoining the California arbitration. Despite their assertions
to the contrary, Piper Funds is of little help to Appellants.
Although the Eighth Circuit did find that the district court
there should not have enjoined the arbitration, it did so
under circumstances far different fr om ours. It found that
because the appellant clearly, in writing, expr essed its
desire to opt out of a class before the class notice and opt-
out procedure were even developed, the injunction violated
the FAA and appellant's immediate right to arbitrate by
enjoining the arbitration pending a formal opt-out. See
Piper Funds, 71 F.3d at 303-04; see also VMS Sec. Litig, 21
F.3d 139, 141-42 (7th Cir. 1994) (holding that where class
members had not opted out of class action, they wer e
bound by class action settlement which released their
claims against the defendant even though they had
obtained an award in the arbitration filed before resolution
of the class action).

In Piper Funds, the Eighth Circuit stated:

        [P]roper regard for the F AA required that the court
        promptly take one of three actions: it could stay the
        class action while [the potential class member's] claim
        is arbitrated; it could deny the request to opt out (for
        example, because [the potential class member's]
        arbitration claim is not arbitrable or its r equest to opt
        out was too late); or it could grant the r equest to opt
        out.
71 F.3d at 304 (emphasis added). Its acknowledgment that
proper regard for the FAA allows a court to deny a request

                                35
to opt out, because that request came too late, concedes
the merits of the situation we have here, a point the dissent
glosses over. Where a party who desir es arbitration fails
timely to opt out of the class, the FAA does not preclude a
district court from denying a class member's r equest to
pursue arbitration. Thus, Piper Funds is, by its own words,
unavailing where Appellants fail to opt out of the class. See
PaineWebber, 1996 WL 374162, at *5 (finding that case
inapposite to Piper Funds where the plaintiffs did not
immediately express their position that they would opt out
but instead waited until after the opt-out deadline had
passed); Prudential P'ship Litig., 158 F .R.D. at 304 ("Class
members who wish to opt out in order to . . . seek
arbitration in a forum in existence at the time of the
original opt-out deadline have no excuse for their neglect to
opt out; they are simply seeking to escape consequences
known to them at the time they chose to remain in the
class.").

Appellants and the dissent cite no case law holding that
the FAA trumps, and thereby forgives, Appellants' failure to
opt out. This presages that the District Court did not
violate the policies of the FAA when it enjoined Appellants
from proceeding with their arbitration after they did not opt
out of the class. See, e.g., VMS Sec. Litig., 21 F.3d at 141-
42.

As for the enjoining of the California arbitration in its
entirety, we review the terms of an injunction for abuse of
discretion. John F. Harkins Co. v. W aldinger Corp., 796 F.2d
657, 658 (3d Cir. 1986). Any finding that is a prerequisite
to the issuance of an injunction (here whether Appellants
were subject to the class action, e.g., were members of the
class and were properly denied an extension of time to opt
out) is reviewed according to the standar d applicable to
that particular determination, and we willfind an abuse of
discretion vis-a-vis the injunction if the District Court's
prerequisite finding was in error under the applicable
standard of review. See id.

We note, however, that the District Court could enjoin
only claims in arbitration that were resolved by the Class
Action Settlement. Conversely, the District Court could not
enjoin the arbitration with respect to any claims that were

                               36
not covered by the Class Action Settlement. In its June 20,
2000 Order, the District Court granted Cendant's cross-
motion to enforce the March 29, 2000 injunction against
continued prosecution by Appellants of their arbitration
proceeding against Cendant. To the extent that their prior
agreements to arbitrate covered claims not disposed of or
released in the Class Action Settlement, the District Court
was without the authority to enjoin those pr oceedings
because its action was not "necessary or appr opriate in aid
of [its] . . . jurisdiction." The arbitration of issues outside
the scope of the class action, e.g., possibly the 1.6 million
stock options that Cendant concedes were beyond the
scope of the class action, does not interfer e with the
District Court's disposition and does not seriously impair
its flexibility and authority to decide the class action.
Further, arbitration of issues outside the bounds of the
class action issues cannot lead to inconsistent and
inequitable results, as that arbitration pr esents no "real or
potential conflict that threatens the very authority of the
federal court." Vernitron Corp., 440 F.2d at 108. These
"parallel" actions can be maintained without conflict. See
Carlough, 10 F.3d at 202.

Unlike Baldwin-United and Asbestos Litigation, where the
proposed settlements called for enjoining all claims, as they
would have affected the settlement and pr ovided for
inconsistent holdings, the settlement in this case only
requires that the class members release claims dealing with
"publicly traded securities."23 The arbitration of peripheral
claims, possibly including the 1.6 million options, cannot
affect the District Court's ability or authority to settle the
class claims dealing with publicly traded securities. An
injunction preventing the arbitration of those claims is
clearly not necessary in aid of the District Court's
jurisdiction in the class action. Therefor e, we find the
District Court abused its discretion in enjoining, in its
entirety, the California arbitration, as it did not have the
_________________________________________________________________

23. "Each Class Member shall release all`Released Claims,' which
include any and all claims . . . that are based upon, related to, arise
from, or are connected with the pur chase, acquisition, sale or
disposition
of CUC, HFS, or Cendant publicly-traded securities .. . during the Class
Period . . . ."

                               37
authority, under the All Writs Act, to enjoin those actions or
proceedings that were outside the scope of the class action
and could not have had any effect on its flexibility and
authority to decide and settle the class action. 24

It must be noted that through this opinion we take no
position on whether any issues remain for r esolution in
arbitration. It is entirely possible that all of the issues
before the arbitrator have been settled and/or released by
the class action. We make no determination on this issue
because we believe it is for the arbitrator, not the District
Court, to determine whether a claim befor e him was
decided in the class action. See, e.g., Great Western
Mortgage Corp. v. Peacock, 110 F.3d 222, 232 (3d Cir. 1997)
("[A] court compelling arbitration should pr eserve the
remaining disputed issues for the arbitrator to decide.").

Respecting the principles of the FAA, as well as the opt-
out requirement of class actions, we will allow the
California arbitration to proceed, subject to affirmance by
the Court of Appeals for the Ninth Circuit, but only to the
extent of arbitrating claims that were not settled and
released in the class action. We further hold that it is for
the arbitrator to determine whether the claims Appellants
are pursuing in the California arbitration were disposed of
in the Class Action Settlement. To the extent that the
claims were not included in the class action, the arbitrator
has the power to decide those issues. He is only pr ecluded
from deciding any issues that were r esolved (either through
a court decision or release of claims) as part of the class
action. See PaineWebber, 1996 WL 374162, at *4 ("[T]he
Court has the ability to enjoin further litigation by class
members involving the subject matter of this class action,
pursuant to the reasoning of Baldwin-United and its
progeny.").
_________________________________________________________________

24. Strangely, the dissent gives the strong impression that we approve
and are not reversing the District Court's order enjoining the
arbitration.
As review of this opinion shows, that is misleading. What the dissent
really argues is that, in limiting our r eversal to only those issues
outside
the scope of the class action, we are not r eversing the District Court
enough. In our view, the dissent's position -- that reversal of the
injunction is called for as to all issues included as well as not included
in the class action -- simply goes too far .

                               38
We close with a general comment on the well-crafted
dissent of Judge Garth challenging, inter alia , our holding
that the District Court can enjoin those claims in the
arbitration resolved in the Class Action Settlement.
Hyperbole aside, the dissent's theme is implicitly as follows.
The FAA trumps the All Writs Act. If arbitration is elected
as a means to resolve a dispute, a subsequent injunction,
the dissent argues, "can never be appr opriate in a case
such as this one." Because arbitration was elected by
Appellants the month prior to class certification, and
because the California District Court ruled over Cendant's
objection that the California arbitration should not be
enjoined, the New Jersey District Court in a class action is
shorn of the ability to enjoin any aspect of Appellants'
claims in that arbitration.

The dissent's theme is counterposed by our theme:
Appellants -- who concededly knew of the class action, filed
their arbitration complaint after the class action was
begun, knew that there was an opt-out r equirement in that
action (though they claim not to have received notice of the
precise date), and did not request an extension of time to
opt out until no less than two months after they learned of
the opt-out deadline -- can no longer seek to arbitrate
claims already decided in the class action. Appellants (and
no one else) controlled whether they wer e in or out of the
class. They could have opted out of the class at any time
during the opt out period, covering almost a full year after
they sought arbitration, but never did so. Had they done so,
they could have arbitrated their claims en toto .25

This theme, juxtaposed against that of the dissent,
follows a reasoning tailored to the specific facts of each case
rather than a certitude generalized to exclude all
consideration of when class action determinations prevail
over arbitration. We leave for another day that issue. Also
not before us is whether the claims of Appellants are
enforceable under the FAA. They ar e. But not always! As
noted in Piper Funds, in quoting S 12(d) of the National
Association of Security Dealers' Code with r espect to
_________________________________________________________________

25. Thus, we disclaim the dissent's Rabelaisian r emark that enjoining an
arbitration in this case "can never be appr opriate."

                               39
arbitration as a means of resolving disputes in the
securities industry, " `such claims shall be eligible for
arbitration . . . pursuant to the parties' contractual
agreement, if any, if a claimant demonstrates that it has
elected not to participate in the putative or certified class
action or, if applicable, has complied with any conditions
for withdrawing from the class prescribed by the court.' "
Piper Funds, 71 F.3d at 302. Here Appellants failed to
demonstrate that they affirmatively elected not to
participate in the putative or certified class and did not
comply with any conditions for withdrawing fr om that class.
They are left with the consequences of their failure to act.

III. Conclusion

For the foregoing reasons, we affir m the District Court's
rulings as to the inclusion of Appellants in the class as well
as its refusing to grant them an extension of time to opt
out. However, we reverse the District Court's enjoining of
the entire arbitration and will allow that arbitration to
proceed, though only as to issues not r esolved as part of
the class action. We further hold that it is for the arbitrator,
not the District Court, to determine which, if any, of
Appellants' claims are ripe for decision in accordance with
this Opinion and the Class Action Settlement.

                                 40

Volume 2 of 2

Filed May 9, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-2185

IN RE: CENDANT CORPORATION LITIGATION

JANICE G. DAVIDSON; ROBERT M. DA VIDSON, in his
capacity as trustee of Robert M. Davidson Charitable
Remainder Unitrust, and as co-trustee of Elizabeth A.
Davidson Irrevocable Trust, Emilie A. Davidson Irrevocable
Trust, John R. Davidson Irrevocable Trust, Emilie A.
Davidson Charitable Remainder Unitrust and John R.
Davidson Charitable Remainder Unitrust,
       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. W alls
Argued: November 16, 2000

Before: SLOVITER, AMBRO, and GARTH, Circuit Judges

(Filed: May 9, 2001)
GARTH, Circuit Judge, dissenting.

I respectfully dissent from the majority's decision. In
particular, and apart from any other doctrine of law, I
cannot understand how the majority can permit a New
Jersey District Court to enjoin arbitration and thereby
overrule an order by a companion district court in
California compelling arbitration,1 when that arbitration
order was entered months before notice of class
certification was even distributed and when that order
embraced each and every one of the Davidsons' claims.

This issue of arbitration vis-a-vis class certification is of
overriding importance, and its proper r esolution cannot be
overemphasized. Indeed, just recently this Court has
announced the formation of a Task For ce on selection of
class counsel and has enumerated a number of issues for
the Task Force to consider.2 I suggest that this question of
arbitration-class certification is one which in my opinion
should assume prominence in the Task For ce's labors.

I.

I suggest that the sequence in which the majority
discusses issues in its opinion is inappropriate and in effect
"puts the cart before the horse." I should not be surprised
that the discussion of the arbitration injunction issue--
unquestionably the most significant and important in this
case and an issue of first impression--was relegated to the
very last discussion in an otherwise mundane appeal.
Obviously, if one "goes into" the arbitration injunction
discussion with a holding that the appellants--the
Davidsons--were and are class members, all else falls into
the majority's theory. As one goes in, that's how one comes
out. That is the tactic employed by the majority her e.
_________________________________________________________________

1. The California Central District Court's order, Cendant Corp. v.
Davidson, No. 99-0587 (C.D. Cal. April 8, 1999) appears in the appendix
at App. 704-09.

2. See, e.g., Cendant Corp. PRIDES Litig., 243 F.3d 721 (3d Cir. 2001),
discussing our overall supervisory role and our responsibilities in the
selection of class counsel and in attorneys' fee awards as well as in
safeguarding fair settlements of class actions.

                               42
However, if, with an understanding of the r ecord and a
correct understanding of the case authority and res
judicata, we recognize, as I do, that the opinion and order
of the California Central District Court which required
Cendant to arbitrate with the Davidsons pr eceded any class
certification and also preceded by approximately seven
months any distribution of a class notice which pr escribed
an opt-out period, then a completely differ ent and a correct
result obtains.

Accordingly, the proper course of action for the majority
would have been to deal with the arbitration injunction
first. If the majority then concluded, as I feel it should have,
that the arbitration order both preceded and preempted the
class action as to the Davidsons, then the issue of whether
the Davidsons fit within the class definition is completely
irrelevant because they could not have been class
members. As I will discuss later, that is the only and the
correct result of this appeal. In light of my conviction that
the arbitration issue necessarily had to be decided before
the issue of the Davidsons' inclusion in the class, I will
discuss the issues in that order.

II.

The majority characterizes its holding with r espect to the
New Jersey District Court's injunction of the Davidsons'
arbitration as follows: "we hold that the District Court did
err in enjoining, in its entirety, Appellants' arbitration.
While Appellants are subject to the class settlement, and
therefore are enjoined fr om pursuing any claims that fall
within that settlement, they are not enjoined from pursuing,
in arbitration, any claims that fall outside the settlement's
scope." (Maj. Op. at 1 (emphasis added).)

In discussing the arbitration injunction, the majority
correctly cites language from the Supr eme Court
emphasizing the preferred status of arbitration under the
Federal Arbitration Act ("FAA"). (Maj. Op. at 32.) However,
because "Appellants . . . cite no case law holding that the
FAA trumps, and thereby forgives,[the Davidsons'] failure
to opt out," the majority holds that "the District Court did
not violate the policies of the FAA when it enjoined

                               43
Appellants from proceeding with their arbitration after they
did not opt out of the class." (Maj. Op. at 36.) Accordingly,
the majority concludes that "the District Court could enjoin
. . . claims in arbitration that were r esolved by the Class
Action Settlement." (Maj. Op. at 36.) The majority could not
be more wrong.

Indeed, I strongly disagree with the majority's decision for
several reasons. I would hold that the New Jersey District
Court did abuse its discretion, indeed it gr ossly abused its
discretion, in enjoining the arbitration and not giving effect
to the California Central District Court's or der compelling
arbitration, and I would hold that the entir e arbitration
must be allowed to go forward.

A.

First, the majority wholly ignored the timing of the
initiation of the arbitration and of the class action. Because
of the importance of the various events, I note in the
margin the timeline of these events and the dates on which
they occurred.3 Further, I recite the chronology of the most
significant events that occurred:
_________________________________________________________________

3. Timeline:

December 14, 1998 Lead Plaintiffs file an Amended Consolidated Class
       Action Complaint ("ACCAC") and move for class
       certification.
December 17, 1998 The Davidsons initiate arbitration against Cendant
       pursuant to their Settlement Agreement.
January 21, 1999 Cendant files suit in the District Court for the
       Central District of California to enjoin the
       arbitration (claiming that the Davidsons' claims
       are barred by the Settlement Agreement).
January 27, 1999 The New Jersey District Court grants the motion
       for class certification.
February 17, 1999 Cendant moves for a pr eliminary injunction of the
       arbitration; the Davidsons move for summary
       judgment on the injunction action.
April 8, 1999 The California Central District Court dismisses
       Cendant's injunction action and finds that the
       Davidsons' claims must be arbitrated.
April 1999 Cendant appeals the California Central District
       Court's decision, and Cendant and the Davidsons

                               44
1) the Amended Consolidated Class Action Complaint and
       motion for class certification were filed on December 14,
       1998;

2) the Davidsons filed a Notice of Claims for arbitration
       against Cendant on December 17, 1998;

3) the class was certified on January 27, 1999;

4) on April 8, 1999, the California Central District Court
       issued an opinion and order declining to enjoin the
       Davidsons' arbitration and finding that the Davidsons'
       claims must be arbitrated;

5) in October 1999, class notice was first disseminated
       and the opt-out period began (almost a year after the
       Notice of Claims for arbitration was filed);

6) the opt-out period for the class action expir ed on
       December 27, 1999.

The majority ignores the most salient fact--that the
Davidsons initiated arbitration before the class was certified
--indeed, before any notice of certification was ever
formulated or distributed. Despite this and despite the fact
_________________________________________________________________

       agree to stay arbitration pending the Ninth
       Circuit's resolution of the appeal.
August 6, 1999 The New Jersey District Court or ders
       dissemination of class notice.
October 1999 Class notice is disseminated.
December 17, 1999 A proposed settlement of the class action is
       reached.
December 27, 1999 The opt-out period for the class action expires.
March 29, 2000 The New Jersey District Court grants preliminary
       approval of the settlement of the class action.
April 2000 The Davidsons file a motion in the New Jersey
       District Court for clarification of the class to
       exclude them or for extension of the opt-out
       period.
June 20, 2000 The New Jersey District Court enjoins the
       Davidsons' arbitration and finds that they ar e
       class members.
August 15, 2000 The final settlement of the class action is approved
       by the New Jersey District Court and class
       members release all claims against Cendant.

                               45
that no case authority--I repeat, no case authority--exists
which holds that an arbitration initiated prior to class
certification, thereafter ordered by a federal district court,
and on appeal to its Court of Appeals4 may be enjoined, the
majority here nevertheless and perplexingly holds that the
New Jersey District Court properly enjoined the Davidsons'
arbitration of issues covered by the class action.

B.

The majority states that the District Court had authority
to enjoin the Davidsons' arbitration under the All W rits Act,
28 U.S.C. S 1651.5 The majority goes on, however, to make
several points that contravene its own eventual holding: 1)
that the Supreme Court, and the FAA,"require[ ] that
arbitrable claims be arbitrated" in most cir cumstances; 2)
that federal district courts may only enjoin state court
proceedings and arbitrations under the All W rits Act in rare
instances;6 and 3) that the Anti-Injunction Act, 28 U.S.C.
S 2283, also limits the situations in which injunctions of
other proceedings by federal district courts ar e permissible.
(Maj. Op. at 31-39.) By making these points, the majority
has, in effect, done much of my work for me.
_________________________________________________________________

4. The California Central District Court's order of April 8, 1999 is
presently pending before the Ninth Cir cuit.
5. Incidentally, the New Jersey District Court did not explicitly invoke
the
All Writs Act in enjoining the Davidsons' arbitration. I will assume,
however, that the All Writs Act is where the District Court found its
authority to issue the injunction, in light of the lack of such authority
under Rule 23 of the Federal Rules of Civil Pr ocedure itself. As the
Second Circuit observed in In re Baldwin-United Corp. Litig.:

       We do not find independent authority for the issuance of the
       injunction in the Fed.R.Civ.P. 23(d) pr ovision empowering the
       district judge to issue orders appropriate"for the protection of
the
       members of the class or otherwise for the fair conduct of the
action";
       that rule is a rule of procedure and cr eates no substantive rights
or
       remedies enforceable in federal court.

770 F.2d 328, 335 (2d Cir. 1985).

6. We should not lose sight of the fact that, here, a federal district
court
in New Jersey enjoined a California arbitration after a California federal
district court had previously denied Cendant's application to reject the
Davidsons' arbitration claims.
46
Picking up after the majority's eloquent recitation of these
points, one would expect that the majority would logically
hold that the District Court's order enjoining the Davidsons'
arbitration was without legal foundation and authority and
must, therefore, be reversed. Inexplicably, the majority,
without basis in reason and without support in the cases
and statutes on which it relies, has err oneously held
otherwise, leading to this dissent.

1.

The All Writs Act states: "The Supr eme Court and all
courts established by Act of Congress may issue all writs
necessary or appropriate in aid of their r espective
jurisdictions and agreeable to the usages and principles of
law." 28 U.S.C. S 1651(a). To explain why the majority erred
in relying on the All Writs Act to support its affirming the
District Court's injunction, I will flesh out in more detail
the scope of the Act and the meaning of the phrase
"necessary7 . . . in aid of . . . jurisdiction[ ]."

In Turner Broadcasting System, Inc. v. Federal
Communications Commission, the Supreme Court stated:

       The All Writs Act, 28 U.S.C. S 1651(a), is the only
       source of this Court's authority to issue an injunction.
       We have consistently stated, and our own Rules so
       require, that such power is to be used sparingly.
       "[J]udicial power to stay an act of Congr ess, like
       judicial power to hold that act unconstitutional, is an
       awesome responsibility calling for the utmost
       circumspection in its exercise. . . .
_________________________________________________________________

7. Though the All Writs Act contains the phrase "necessary or appropriate
in aid of . . . jurisdiction[ ]," 28 U.S.C. S 1651(a) (emphasis added),
the
scope of authority to issue injunctions under the Act is necessarily
limited by the Anti-Injunction Act, which pr ovides that "[a] court of the
United States may not grant an injunction to stay pr oceedings in a State
court except as expressly authorized by Act of Congress, or where
necessary in aid of its jurisdiction, or to pr otect or effectuate its
judgments." 28 U.S.C. S 2283. Therefor e, the appropriate inquiry under
the All Writs Act in conjunction with the Anti-Injunction Act is whether
the injunction is "necessary in aid of . . . jurisdiction." (Emphasis
added).

                               47
       An injunction is appropriate only if (1) it is"necessary
       or appropriate in aid of [our] jurisdictio[n]," 28 U.S.C.
       S 1651(a), and (2) the legal rights at issue are
       "indisputably clear."

507 U.S. 1301, 1303 (1993) (internal citations omitted).

In sanctioning the New Jersey District Court's injunction
as authorized under the All Writs Act, the majority
erroneously relies on several cases.8 First, the majority
misapplies In re Baldwin-United Corp. Litig., 770 F.2d 328
(2d Cir. 1985). In Baldwin-United, the district court had
issued an injunction against state court actions under the
All Writs Act, stating that "the injunction was necessary `in
aid of preserving [the court's] jurisdiction.' " 770 F.2d at
333 (quoting 28 U.S.C. S 1651). The district court had
found that "the existence of competitive litigation . . . would
jeopardize its ability to rule on the settlements, would
substantially increase the cost of litigation, would create a
risk of conflicting results, and would pr event the plaintiffs
from benefiting from any settlement alr eady negotiated or
from reaching a new and improved settlement in the federal
court." 770 F.2d at 333.

The Second Circuit affirmed the district court's grant of
a preliminary injunction in Baldwin-United , observing that
an injunction is proper under the All W rits Act when
"necessary to prevent a state court fr om so interfering with
a federal court's consideration or disposition of a case as to
seriously impair the federal court's flexibility and authority
to decide that case." 770 F.2d at 335 (quoting Atlantic Coast
_________________________________________________________________

8. The majority also perplexingly contradicts itself in its discussions of
the FAA and the Anti-Injunction Act. It corr ectly observes that "the
Supreme Court requires that arbitrable claims be arbitrated, even where
the result would be the possible inefficient maintenance of separate
proceedings in different forums," and it points out that "the FAA requires
piecemeal resolution when necessary to give ef fect to an arbitration
agreement." (Maj. Op. at 32 (internal citations and quotation marks
omitted).) However, only two pages later , the majority contradicts this
mandate, averring in its discussion of the Anti-Injunction Act that "a
class action calls for distinct rules in connection with the need to have
as many common issues as possible disposed of in a single proceeding."
(Maj. Op. at 34.) This statement is simply incorr ect in the context of
this
case, in light of FAA and Anti-Injunction Act jurisprudence.

                               48
Line R.R. Co. v. Brotherhood of Locomotive Engineers, 398
U.S. 281, 295 (1970) (dicta)). The Second Cir cuit held that
this standard was met in Baldwin-United because "[t]he
existence of multiple and harassing actions by the states
could only serve to frustrate the district court's efforts to
craft a settlement in the multidistrict litigation before it
[because t]he success of any federal settlement was
dependent on the parties' ability to agree to the release of
any and all related civil claims the plaintif fs had against the
settling defendants based on the same facts," which release
would be uncertain "[i]f states or others could derivatively
assert the same claims on behalf of the same class or
members of it." 770 F.2d at 337.

The holding in Baldwin-United that an injunction was
proper under the All Writs Act is wholly inapplicable to this
case for several reasons. First, it concer ned derivative
lawsuits in state courts by the states themselves, not
arbitration by an individual under the FAA. Second, the
lawsuits were commenced after the class settlement was
reached, contrasted with the Davidsons' arbitration, which
was initiated before the CalPERS class was even certified.
Finally, whereas the district court in Baldwin-United
properly held that the injunction was necessary to preserve
its jurisdiction under the All Writs Act because of the
dangers to the class settlement from these derivative
lawsuits, an injunction of the Davidsons' arbitration is not
necessary to the settlement of the claims of the other
CalPERS class members because the settlement of the class
action here is not at all contingent on the Davidsons'
participation in the class action. Moreover , the Davidsons
have already received a final judgment in their favor from a
competent court--the California Central District Court--
holding their claims to be arbitrable. (I discuss this issue of
res judicata hereafter.)

The majority also cites In re PaineW ebber Partnership
Litig., 1996 WL 374162 (S.D.N.Y. July 1, 1996), a case that
the District Court relied upon in enjoining the arbitration.
The majority observes that, in PaineWebber, "the court
denied fifteen plaintiffs' attempts to arbitrate claims covered
by a class action where they all failed to opt out of the class
before the deadline," a situation which the majority
apparently likens to the instant case. (Maj. Op. at 32.)

                               49
In PaineWebber, after the opt-out period had expired and
a tentative settlement had been reached, fifteen class
members who had failed to opt out initiated separate state
court litigation and arbitration, both covering similar claims
to those in the class action. Relying on Baldwin-United, the
district court enjoined the state litigation and the
arbitration under the All Writs Act, observing that such an
injunction was appropriate "where a federal court is on the
verge of settling a complex matter, and state court
proceedings may undermine its ability to achieve that
objective." 1996 WL 374162, at 3 (quoting Standard
Microsystems Corp. v. Texas Instruments, Inc., 916 F.2d 58,
60 (2d Cir. 1990). The district court further noted that "this
consolidated class action is analogous to a r es over which
the Court requires full control, ther eby justifying a stay
pursuant to the All Writs and Anti-Injunction Acts, at least
to the extent that parties to this litigation seek to bring a
new action in a different forum." 1996 WL 374162, at 3.

In fact and in law, PaineWebber is wholly inapposite to
this case, and I fail to understand why the majority has
relied upon it. In PaineWebber, the plaintiffs did not seek
arbitration until after the class had been certified, after
notice of the class action had been sent out, after the opt-
out period had expired, and after a tentative settlement of
the class action had been reached. The observations by the
district court in PaineWebber that"the Court has the ability
to enjoin further litigation by class members involving the
subject matter of this class action," 1996 WL 374162, at 4
(S.D.N.Y. July 1, 1996) (emphasis added), and that an
injunction was proper "to the extent that parties to this
litigation seek to bring a new action in a different forum,"
1996 WL 374162, at 3 (emphasis added), have no r elevance
or application here, where the Davidsons' arbitration did
not constitute "further litigation" or "a new action" but
rather was commenced before class certification and was
confirmed as the appropriate course of action by a federal
district court in California long befor e class notice was
disseminated. Accordingly, the reasoning employed by the
district court in PaineWebber to issue an injunction under
the All Writs Act cannot be used to justify the injunction
here.

                               50
Another case cited by the majority, In r e Joint Eastern
and Southern Districts Asbestos Litig., 134 F.R.D. 32
(E.D.N.Y. 1990), concerned consolidation of asbestos-
related proceedings against the defendant. Class counsel
and the defendant reached a proposed settlement, after
which "the court directed that all inter ested parties appear
. . . and show cause why the proposed class should not be
certified and asbestos-related proceedings in other forums
stayed." 134 F.R.D. at 35. After these hearings, a class
action complaint and motion for certification wasfiled,
which motion was granted by the court in conjunction with
a stay of "any pending asbestos-related pr oceedings
brought on behalf of class members." 134 F .R.D. at 35.

In asserting that the injunction in Asbestos was
"necessary and appropriate in aid of " the district court's
jurisdiction of the class action under the All W rits Act, the
district court pointed out that:

       To permit pending actions against [the defendant] to
       proceed in their present form would substantially
       impair or impede the interests of other asbestos
       claimants and would significantly deplete the assets
       available to resolve all pending and futur e cases. These
       pending cases, if allowed to continue independently,
       will seriously hinder the ability of the court to evaluate
       the adequacy and fairness of the proposed settlement
       of the class action by constantly depleting [the
       defendant]'s assets.
134 F.R.D. at 36. In addition, the district court in Asbestos
described asbestos litigation as having reached"crisis
proportions." Specifically, the district court observed:

       Over 100,000 pending asbestos personal injury and
       wrongful death cases have backlogged the courts--
       preventing many injured persons fr om obtaining much
       needed compensation in a timely and efficient manner.
       Even more troubling is the current r ealization that
       each day, as more judgments are paid, the possibility
       that similarly situated claimants will not r eceive the
       full value of their claims becomes increasingly likely. A
       fundamental tenet of our legal system--equal
       treatment--no longer exists for asbestos victims.

                               51
134 F.R.D. at 33.

To suggest that the necessity of enjoining the Davidsons'
arbitration is even remotely comparable to the national
"crisis" of asbestos litigation is preposterous. The District
Court in this case was not faced with hundreds of
thousands of individual actions threatening to impair the
settlement of the class action before it. Indeed, the District
Court was faced with only a single arbitration pr oceeding
that had been decided and was on appeal in another
Circuit, that had been commenced before class certification
pursuant to arbitration agreements between Cendant and
the Davidsons, and that made claims available to no other
Cendant shareholders. In other words, wher eas the
injunction in Asbestos served to stay countless actions by
class members, which actions could of course seriously
impact the possibility and quality of settlement of the class
action, the District Court here enjoined one arbitration
arising out of circumstances peculiar to the Davidsons and
which could not have any imaginable impact on the
administration and disposition of other class members'
claims.

The case before us simply does not meet the
requirements for issuance of an injunction under the All
Writs Act, and none, I repeat, none, of the cases that the
majority cites furnishes even a modicum of authority for
the conclusion that the majority desires to r each. Unlike
Baldwin-United, PaineWebber, and Asbestos, the injunction
issued by the New Jersey District Court was not"necessary
in aid of its jurisdiction." The Davidsons initiated their
arbitration against Cendant under an agreement between
the Davidsons and Cendant not applicable to other class
members and, as will be discussed infra, the claims in their
arbitration overlapped only slightly with the claims in the
class action. In addition, there is no thr eat that allowing
this arbitration, initiated before class certification and long
before expiration of the opt-out period, to pr oceed would
expose Cendant to future claims by other putative class
members, because such claims would necessarily be
commenced much later in the course of the class action
and would therefore be more analogous to the cases relied
upon by the majority and discussed above.

                               52
The arbitration would neither "interfer[e] with [the New
Jersey District Court's] consideration or disposition" of the
class action, nor would it "seriously impair the[New Jersey
District Court's] flexibility to decide" the class action, nor
would it "undermine [the New Jersey District Court's]
ability to achieve" class settlement. Baldwin-United, 770
F.2d 328, 335 (2d Cir. 1985); PaineWebber, 1996 WL
374162, at 3 (S.D.N.Y. July 1, 1996). Accor dingly, I
fervently disagree with the majority's holding that the New
Jersey District Court had authority to enjoin the arbitration
under the All Writs Act.9

2.

Because the Davidsons initiated arbitration so early,
indeed before the class had even been certified, those cases
cited by the majority which permit injunctions of
arbitrations initiated by class members at the time when
the class action is nearing settlement are just not
applicable to this appeal, and the majority has err ed
grievously in attempting to support its holding based on
such authority. In light of the fact that the Davidsons
commenced arbitration pursuant to unique agr eements
_________________________________________________________________

9. The majority cites still another case, In re Prudential Partnership
Litig.,
158 F.R.D. 301, 304 (S.D.N.Y. 1994), which it claims bolsters its
unsupportable conclusion that one district court can enjoin an
arbitration that another district court has ruled must go forward. In re
Prudential does not invoke the All Writs Act but should be discussed
briefly because it too is completely distinguishable from the instant
case.
The court in In re Prudential Partnership Litig. stated: "Class members
who wish to opt out in order to . . . seek arbitration in a forum in
existence at the time of the original opt-out deadline have no excuse for
their neglect to opt out; they are simply seeking to escape consequences
known to them at the time they chose to remain in the class." 158
F.R.D. 301, 304 (S.D.N.Y. 1994); (See Maj. Op. at 36). By contrast, in
this case, the Davidsons did not "wish to opt out in order to . . . seek
arbitration." They had already sought arbitration almost a year before the
opt-out period even began and over a year before the expiration of the
opt-
out period and, most importantly, had received a final judgment in their
favor. This is not a case in which the Davidsons received notice of the
class settlement and then suddenly decided to arbitrate their claims
instead of participating in the settlement. Rather , they sought to compel
arbitration before the class was even certified.

                               53
between themselves and Cendant, the majority's holding
that the injunction was "necessary . . . in aid of " the
District Court's jurisdiction under the All W rits Act is
equally untenable. Indeed, the one case wher e the facts are
analogous to this appeal, in that the arbitration
commenced before the class was certified and notices were
distributed, is the Eighth Circuit case of In re Piper Funds,
Inc., Inst. Gov't Income Portfolio Litig., 71 F .3d 298 (8th Cir.
1995), a case relying on the FAA rather than the All Writs
Act to reverse a district court's injunction of an arbitration
initiated before class certification.

In Piper Funds, the Eighth Circuit held that the district
court had improperly enjoined an arbitration commenced,
as here, before class certification and before the notice of
class action had been disseminated and the opt-out period
had begun. Piper Funds differs slightly from this case in
that the plaintiff in Piper Funds, Park Nicollet, had
specifically expressed its desire to opt out of the class
before the opt-out period had even begun. The Eighth
Circuit pointed out that "the FAA does not authorize a
district court to enjoin arbitration" and observed that "there
are very few reported cases in which a federal court has
enjoined arbitration." 71 F.3d at 302. It listed three reasons
why the district court's reasons for the injunction were not
sufficient, all of which are equally applicable in this case: 1)
"Park Nicollet has a contractual right to immediate
submission of its securities law claims to arbitration," 71
F.3d at 303; 2) "Park Nicollet's contractual and statutory
right to arbitrate may not be sacrificed on the altar of
efficient class action management," 71 F .3d at 303; and 3)
the Court did not accept "the class action parties'
conclusory assertion that immediate arbitration by Park
Nicollet (and perhaps others) will frustrate their class action
settlement." 71 F.3d at 303.

Though relying on the FAA to hold that the district
court's injunction of the arbitration had been in error, the
Eighth Circuit did address the All W rits Act, stating:

       The district court based its injunction on the All W rits
       Act, 28 U.S.C. S 1651, which has been invoked by
       federal class action courts to enjoin persons not within
       the court's jurisdiction from frustrating a court order

                               54
       or court-supervised settlement. We agr ee with the
       district court that it has the power, under Fed.R.Civ.P.
       23 augmented by the All Writs Act, to contr ol conduct
       by absent class members that affects management or
       disposition of the class action. However, exercise of this
       power must be "agreeable to the usages and principles
       of law," S 1651(a), which in this case include the FAA
       as well as Rule 23.
71 F.3d at 300 n.2 (internal citations omitted).

To put the Eighth Circuit's holding mor e firmly in the
context of the All Writs Act, the FAA's clear preference for
arbitration over other forms of litigation dictates that an
injunction can never be appropriate in a case such as this
one because "the legal rights at issue [can never be]
`indisputably clear' " where issuance of an injunction would
violate the principles of the FAA, and, ther efore, the second
prong of the test of the propriety of an injunction, set forth
by the Supreme Court in Turner Br oadcasting System, Inc.
v. Federal Communications Commission, can never be met.

It is true that the Court in Piper Funds noted in dictum
that the district court may properly have denied the party's
request to opt out if, for example, "its r equest to opt out
was too late." 71 F.3d at 304. The majority seizes upon that
language as reason enough to justify its holding in this
case, disregarding the Eighth Circuit's indisputable
reasoning that it is inappropriate under the FAA for a
district court to enjoin a previously initiated arbitration
simply because the party did not follow the standar d opt-
out procedure. (See Maj. Op. at 35-36.) However, the
majority's willful blindness to the similarities between this
case and Piper Funds is just another example of the
majority's unwillingness to accept the fact that the
arbitration sought by the Davidsons preempted any class
membership and could not be enjoined.

In fact, in both this case and Piper Funds, the plaintiffs
did not follow the standard opt-out procedure. In Piper
Funds, the plaintiff attempted to opt out before the opt-out
period had begun, and, here, the Davidsons initiated
arbitration well before the opt-out period began but did not
explicitly opt out of the class. The Davidsons did not opt

                               55
out at that time, undoubtedly because neither the
Davidsons nor Cendant believed that the Davidsons were
class members. Moreover, when the Davidsons filed their
motion in the District Court seeking clarification of the
class definition, the Lead Plaintiffs filed a brief stating that
"Lead Plaintiffs agree that the Davidsons are excluded from
the class." (App. 918.) The Davidsons obviously could not
have been found to be members of the class if the District
Court had honored the California District Court's order
compelling arbitration.10

Moreover, the majority errs in r elying on In re VMS Sec.
Litig., 21 F.3d 139 (7th Cir. 1994), to support its point that
a late opt-out terminates a party's right to arbitrate.
Though, as the majority notes, the plaintiffs in VMS "had
obtained an award in the arbitration filed before resolution
of the class action," (Maj. Op. at 35), the pr ogression of
events in that case differed markedly fr om this case. In
VMS, class actions were filed and consolidated into one
class action, and a proposed settlement was approved,
subject to notice to class members, hearing, andfinal
approval. Then, the Hubbards initiated arbitration.
Subsequently, class notice was disseminated and the opt-
out period expired without the Hubbards opting out. The
district court then enjoined the Hubbards' arbitration, but
the arbitrators heard the Hubbards' claims anyway and
granted them an award.

The Seventh Circuit held that "[t]he arbitrators `exceeded
their power' when they decided to act on the Hubbar ds'
claims [because t]he Hubbards' claims against Prudential
arising from their investment in the VMS Mortgage
Investment Fund were subject to the class action
settlement, and had already been resolved." VMS, 21 F.3d
at 145. Indeed, the claims in VMS had been r esolved in the
class settlement before the Hubbar ds even initiated
arbitration.
_________________________________________________________________

10. Additionally, in Section IV, infra , I discuss the New Jersey District
Court's failure to comply with this court's dir ections in noting that,
after
the California arbitration had been enjoined, the Davidsons were too late
to opt out of the class. The District Court failed to apply the Supreme
Court's Pioneer analysis and our instructions in its opinion.

                               56
By contrast, the Davidsons' arbitration commenced
before the class was even certified. Additionally, the
Davidsons initiated arbitration pursuant to br oad and
binding arbitration agreements (see Part II.C.2, infra),11the
predominance of which had already been confirmed by a
federal district court in California, wher eas the Hubbards'
arbitration was not pursuant to such an agreement.12
Accordingly, the Seventh Circuit's opinion in VMS
understandably contained no reference to the guiding
principles of the FAA. Because of these significant
differences between VMS and this case, the Seventh
Circuit's decision that the Hubbards wer e bound to the
class settlement after they failed to opt out has no
relevance to the instant case. Indeed, I have no quarrel with
the VMS decision and might very well have joined in the
VMS holding if that case were befor e me.

By asserting that the Davidsons' right to arbitrate is not
extinguished by their failure to opt out of the class, I am
not "gloss[ing] over" the Eighth Cir cuit's statement in Piper
Funds regarding late opt outs as the majority suggests.
(Maj. Op. at 36.) I am simply affording more importance to
the Eighth Circuit's actual holdings r egarding the
predominance of the FAA than to itsfleeting statement in
dictum regarding late opt-outs. The majority, by contrast,
has attempted to support and justify its holding her e by
resorting to odd and assorted dicta from the cases which it
has cited and I have distinguished, all of which, other than
Piper Funds, are irrelevant to the issue presented here of
arbitration preceding class action. (See Maj. at 35-36
(quoting In re VMS Sec. Litig., 21 F .3d 139 (7th Cir. 1994);
In re PaineWebber P'ship Litig., 1996 WL 374162 (S.D.N.Y.
July 1, 1996); In re Prudential P'ship Litig., 158 F.R.D. 301
(S.D.N.Y. 1994).)

I believe, as I have earlier stated, that the only case
relevant to the issue before us is Piper Funds, which, while
_________________________________________________________________

11. Singularly, the majority opinion makes no mention of the terms and
breadth of the arbitration agreements entered into by the Davidsons and
Cendant in its discussion and analysis.

12. In addition, as will be discussed in Part III infra, the class
settlement
here did not "resolve" the Davidsons' claims.

                               57
not binding on us in the Third Circuit, nonetheless, with
unimpeachable reasoning, supports a holding that, under
the FAA, and despite the All Writs Act, the New Jersey
District Court could not have and should not have enjoined
the Davidsons' arbitration.

C.

1.

The Davidsons argue that the New Jersey District Court
should have given res judicata effect to the decision by the
California Central District Court. In addr essing this
argument by the Davidsons, the New Jersey District Court
stated:

       Plaintiffs' assertion that the Court is r es judicata-
       barred from hearing this action is meritless. The
       Central District of California was not pr esented with
       the issue before this Court--whether the Davidsons are
       within the CalPERS settling class. While the Court
       directed arbitration of claims arising fr om the 1996
       acquisition and 1997 Settlement Agreement, that
       direction was made under different factual (and
       procedural) circumstances. As Cendant says, it did not
       argue that the Davidsons were class members--at
       most, they were potential members. Obviously, that
       issue was not before the Central District of California
       impliedly or actually.

194 F.R.D. 158, 166 (D.N.J. 2000). I believe that the New
Jersey District Court incorrectly applied the doctrine of res
judicata and that the Davidsons are corr ect that the
California Central District Court's decision precluded the
New Jersey District Court from enjoining the Davidsons'
arbitration.

Initially,   I should explain that there ar e two forms of
preclusion   under the doctrine of res judicata: claim
preclusion   and issue preclusion (also r eferred to as
collateral   estoppel). As the Third Circuit stated in In re
Graham:

                                 58
       Claim preclusion applies to claims that `wer e or could
       have been raised' in a prior action involving the`parties
       or their privies' when the prior action had been
       resolved by `a final judgment on the merits.' Claim
       preclusion thus bars relitigation of any claim that
       could have been raised in the prior action even if it was
       not so raised.

In re Graham, 973 F.2d 1089, 1093 (3d Cir.1992) (internal
citations omitted). Issue preclusion, on the other hand,
"bars relitigation only of an issue identical to that
adjudicated in the prior action." Witkowski v. Welch, 173
F.3d 192, 198 n.8 (3d Cir. 1999); see also In re Braen, 900
F.2d 621, 628-29 n. 5 (3d Cir.1990).

Here, we are considering Cendant's motion for an
injunction of the arbitration, a motion made in both
California and in New Jersey. The Califor nia Central
District Court dismissed Cendant's action seeking an
injunction, and that decision is currently on appeal before
the Ninth Circuit Court of Appeals.13 The decision of the
California Central District Court constitutes a "final
judgment on the merits" and that the doctrine of claim
preclusion applies to that decision.

The Supreme Court has described the doctrine of claim
preclusion as follows: "A final judgment on the merits of an
action precludes the parties or their privies from relitigating
issues that were or could have been raised in that action."
Federated Department Stores, Inc. v. Moitie, 452 U.S. 394,
398 (1981). Therefore, it must be deter mined whether
Cendant's motion for an injunction of the Davidsons'
arbitration in the New Jersey District Court was"or could
have been raised" in the California Central District Court.

Cendant's complaint before the California Central District
Court asking the court to enjoin the arbitration was based
solely on the several agreements between Cendant and the
Davidsons and did not mention the issue of the Davidsons'
_________________________________________________________________

13. Under federal law, a judgment on appeal is still a final judgment for
res judicata purposes. See Huron Holding Corp. v. Lincoln Mine Operating
Co., 312 U.S. 183, 188-89 (1941); Transaero, Inc. v. La Fuerza Aerea
Boliviana, 99 F.3d 538, 540 (2d Cir . 1996).

                               59
putative class membership at all. In addition, as the New
Jersey District Court pointed out, the issue of the
Davidsons' class membership could not have been before
the California Central District Court because, at the time of
the California Central District Court's decision, the opt-out
period had not even begun and, therefor e, the Davidsons
had not yet irrevocably failed to opt out of the class action.

The New Jersey District Court found this distinguishing
feature to be dispositive of the res judicata question, as
does the majority here, which describes the fact that the
Davidsons' putative class membership was not addr essed
in the California injunction action as a "fatal flaw." (Maj.
Op. at 30-31 n.22.) Indeed, the New Jersey District Court
reasoned that, because the Davidsons' class membership
"was not before the Central District of California impliedly
or actually," 194 F.R.D. at 166, the California court's
decision that the Davidsons' could not be enjoined did not
preclude the New Jersey District Court fr om enjoining the
arbitration after the expiration of the opt-out period.

However, it is the New Jersey District Court's and the
majority's analyses, not mine, that are fatallyflawed. What
the New Jersey District Court and the majority fail to
realize is that the Davidsons' class membership is irrelevant
to the issue of whether to enjoin the arbitration. Because of
the timing of the arbitration and the class action and
because of the lack of authority to enjoin the Davidsons'
arbitration under the All Writs Act, all discussed in detail in
the preceding sections, the New Jersey District Court could
not base its authority to issue an injunction on the
(arguable) fact of the Davidsons' class membership.
Therefore, contrary to the majority's position, it is far from
"spurious to suggest that res judicata pr ecludes the District
Court from deciding whether Appellants' claims could be
decided in the class action." (Maj. Op. at 30-31 n.22.) The
issue before the New Jersey District Court, whether to
enjoin the Davidsons' arbitration at Cendant's r equest, was
precisely the same issue that was befor e the California
Central District Court and that the California court decided
more than a year before the New Jersey District Court dealt
with the issue. Thus, it is completely irrelevant that
"Cendant's complaint [in the California Central District

                               60
Court] . . . did not interpose the existence of the class
action as a ground for seeking injunctive r elief from the
arbitration." (Maj. Op. at 9.)

Because the injunction issues before the California and
New Jersey courts were the same, the New Jersey District
Court was required to afford the decision of the California
court res judicata effect. The Califor nia Central District
Court held that, with regard to the Davidsons' claims
regarding rescission of the Settlement Agreement, "[t]he
Supreme Court has held that an arbitrator must resolve a
claim to rescind a contract based upon fraud in the
inducement when the contract contains a broad arbitration
provision." (App. 705 (citing Prima Paint Corp. v. Flood &
Conklin Mfg. Co., 388 U.S. 395, 404-05 (1967).) The court
also held that the remaining claims, regar ding the merger
of CUC and DAI, should also be submitted to arbitration
because "whether or not the claims were r eleased depends
on whether the settlement agreement can be r escinded, and
depends also on the scope of the release in the agreement.
Both of these issues must be determined by an arbitrator,
pursuant to the clear intent of the parties to submit such
disputes to binding arbitration." (App. 706.) This clear
holding by the California Central District Court left no room
for the New Jersey District Court to enjoin the Davidsons'
arbitration, and the New Jersey District Court err ed in
doing so. The majority has similarly erred in upholding the
New Jersey court's injunction.

2.

It is worth mentioning briefly that a review of the
arbitration clauses in the February 19, 1996 Mer ger
Agreement and the May 27, 1997 Settlement Agr eement
between the Davidsons and Cendant makes clear that the
California Central District Court's decision to dismiss
Cendant's injunction action and to allow the arbitration to
go forward was the correct decision. The arbitration clause
in the Merger Agreement states: "Any controversy, dispute
or claim arising out of or relating to this Agr eement or the
breach hereof which cannot be settled by mutual agreement
. . . shall be finally settled by arbitration . . ." (App. 524.)
The clause goes on to state that "[t]he decision of the

                                61
arbitrator on the points in dispute will be final,
unappealable and binding and judgment on the awar d may
be entered in any court having jurisdiction thereof." (App.
524.) Additionally, the clause states:

       The parties agree that this clause has been included to
       rapidly and inexpensively resolve any disputes between
       them with respect to this Agreement, and that this
       clause shall be grounds for dismissal of any court action
       commenced by either party with respect to this
       Agreement, other than post-arbitration actions seeking
       to enforce an arbitration award.

(App. 524-25 (emphasis added).

The Settlement Agreement contains similar language. The
agreement to arbitrate states:

       Notwithstanding anything to the contrary contained in
       this Agreement or the Surviving Agreements and
       Rights, any controversy, dispute or claims arising out
       of or relating to this Agreement or any of the Surviving
       Agreements and Rights or the breach her eof or thereof
       which cannot be settled by mutual agreement shall be
       finally settled by binding arbitration in accor dance with
       the Federal Arbitration Act . . .

(App. 668.) The arbitration clause in the Settlement
Agreement also states that "[t]he decision of the arbitrator
on the points in dispute will be final, unappealable and
binding, and judgment on the award may be enter ed in any
court having jurisdiction thereof." (App. 669.) Finally, as in
the Merger Agreement, the arbitration clause in the
Settlement Agreement states:

       The parties agree that this Section has been included
       to rapidly and inexpensively resolve any disputes
       between them with respect to this Agreement or any of
       the Surviving Agreements and Rights, and that this
       Section shall be grounds for dismissal of any court
       action commenced by any party with respect to this
       Agreement or any of the Surviving Agr eements and
       Rights, other than post-arbitration actions seeking to
       enforce an arbitrator award.

(App. 669-70 (emphasis added).)

                                  62
In their Notice of Claims for arbitration, the Davidsons
raised claims in connection with both the Mer ger
Agreement and the Settlement Agreement. They explicitly
invoked both arbitration clauses in support of arbitrating
these claims, stating that "[t]his dispute pr operly is before
this arbitration tribunal by virtue of an arbitration
provision set forth in the Settlement Agr eement between the
Davidsons and CUC," and "[t]his dispute also is properly
before this arbitration tribunal by virtue of an arbitration
provision set forth in . . . the `Mer ger Agreement.' " (App.
535-36.) The Davidsons also cited similarly wor ded
arbitration provisions in their Employment Agr eements with
CUC and in their Noncompetition Agreements with CUC in
support of arbitrating their claims. (App. 537-38.)

These broad arbitration clauses clearly pr eclude a court
from mandating that the Davidsons participate in a class
action concerning the claims for which they sought
arbitration, and the clauses support the Califor nia Central
District Court's decision.

3.

One final point in connection with the preclusive effect of
the California Central District Court's decision: in light of
the California court's clear holding that the arbitration
could not be enjoined, the majority misapplies our decision
in Great Western Mortgage Corp. v. Peacock, 110 F.3d 222
(3d Cir. 1997). This court held in Peacock: "Once a dispute
is determined to be validly arbitrable, all other issues are to
be decided at arbitration. . . . It would be anomalous for a
court to decide that a claim should be referr ed to an
arbitrator rather than a court, and then, by deciding issues
unrelated to the question of forum, for eclose the arbitrator
from deciding them." 110 F.3d at 230-31.9

The majority perplexingly fails to realize that the dispute
between the Davidsons and Cendant has already been
"determined to be validly arbitrable" by the California
Central District Court. Accordingly, it is"anomalous" and
indeed erroneous for the majority here to issue this opinion
which clearly "foreclose[s] the arbitrator from deciding" the
very issues raised in the arbitration, which a competent

                               63
court with jurisdiction over both parties has held to be
arbitrable.

D.

Because of the timing of the Davidsons' commencement
of the arbitration and the initiation of the class action,
because of the fact that the requirements of the All Writs
Act were not met in this case for issuance of an injunction,
because of this case's dissimilarity to Baldwin-United,
PaineWebber, and Asbestos and its similarity to Piper
Funds, and because of the appropriate application of the
doctrine of res judicata to this case, ther e can be no doubt
that the New Jersey District Court grossly abused its
discretion in enjoining the Davidsons' arbitration.

Accordingly, I am satisfied that, at this point, the issue of
whether the Davidsons can be deemed to fall within the
class definition is irrelevant. The Davidsons sought
arbitration pursuant to the arbitration clauses in the
Merger Agreement and the Settlement Agr eement, and the
California Central District Court confir med that arbitration
was proper. As noted earlier, that order is presently on
appeal to the Court of Appeals for the Ninth Cir cuit and
should have been given res judicata effect by the New
Jersey District Court. The only way the issue of the
Davidsons' class membership could become relevant is if
the Ninth Circuit reversed the Califor nia Central District
Court's decision and held that the Davidsons' claims were
not properly before the arbitrator . Because of that remote
possibility, I will nonetheless discuss below the issue of the
Davidsons' class membership.

III.

The majority holds that the District Court did not err in
finding that the Davidsons were within the class definition.
It bases its holding in part on its interpretation of the term
"publicly traded" in the class definition, which the majority
reads to include the Cendant shares acquir ed by the
Davidsons in the Merger Agreement. The majority concedes
that there were restrictions placed on the Davidsons' sales
of the stock they acquired in the Merger Agreement, but

                               64
observes that "[t]he restriction on sale of the CUC stock
held by Appellants emanated solely from the quantity of
shares they received as a result of the merger, not in any
way from the type of security they received." (Maj. Op. at
16.)

Further, the majority notes that the r estrictions on the
Davidsons' sale of their shares "could be avoided entirely
. . . if Appellants were to sell shares of CUC stock under
any subsequent registration statement." (Maj. Op. at 17.)
Accordingly, the majority reaches the conclusion--a
conclusion for which no relevant authority is cited--that
the Davidsons' shares were "publicly traded," asserting that
"[h]aving traded publicly tens of millions of shares of CUC
common stock so soon after the DAI merger , and then to
claim that they are not `publicly traded' securities within
the class definition, is a non sequitur." (Maj. Op. at 17.)

I cannot agree with the majority's holding on this issue,
because the Davidsons' shares were not"publicly traded,"
and I would hold that the District Court and the majority
of this court have erred in holding otherwise.

Pursuant to the Agreement and Plan of Mer ger of DAI
and CUC, shares of DAI were to be converted as follows:
"each share of common stock, par value $0.00025 per
share, of [DAI] issued and outstanding immediately prior to
the Effective Time . . . shall, by virtue of the Merger . . . be
converted into and shall become 0.85 of one fully paid and
nonassessable share of common stock, $.01 par value per
share, of [CUC]." (App. 475.) The Agr eement was entered
into on February 19, 1996. Also on that date, the
Davidsons signed letters upon which the merger was
conditioned. The letters stated, inter alia:

       I hereby represent, warrant and covenant to [CUC]
       that:

       (a) I will not transfer, sell or otherwise dispose of any
       of the [CUC] shares except (i) pursuant to an effective
       registration statement under the Securities Act, or (ii)
       as permitted by, and in accordance with, Rule 145, if
       applicable, or another applicable exemption under the
       Securities Act; and

                                65
       (b) I will not (i) transfer, sell, or otherwise dispose of
       any [DAI] Shares prior to the Effective Time (as defined
       in the Merger Agreement) or (ii) sell or otherwise reduce
       my risk (within the meaning of the Securities and
       Exchange Commission's Financial Reporting Release
       No. 1, "Codification of Financial Reporting Policies,"
       Section 201.01 [47 F.R. 21028] (May 17, 1982) with
       respect to any [CUC] shares until after such time (the
       "Delivery Time") as consolidated financial statements
       which reflect at least 30 days of post-mer ger combined
       operations of [CUC] and [DAI] have been published by
       [CUC], except as permitted by Staf f Accounting Bulletin
       No. 76 issued by the Securities and Exchange
       Commission.

(App. 1129, 1131.)

In light of these limitations on the Davidsons' shar es, the
District Court clearly erred in finding that they were
"publicly traded," and the majority compounded that error
by subscribing to the District Court's ruling. The
Davidsons' shares were certainly "common stock," but not
all common stock is necessarily "publicly traded." The
Merger Agreement placed restrictions on the Davidsons'
trading of their CUC shares, differ entiating them from freely
and publicly traded CUC common stock. Further , there is
no basis for the majority's speculative assertion that the
restrictions were entered into because of the quantity, and
not the quality, of the shares. Regardless of the reason,
there were restrictions on the Davidsons' shares of CUC
common stock, and, therefore, those shar es were not
"publicly traded."

Nor am I convinced by the majority's argument that the
Davidsons could have avoided the restrictions on their
shares by selling under subsequent registration statements.
The fact that the Davidsons were able to over come the
restriction on their shares (in other wor ds, that the
restriction did not amount to an absolute pr ohibition on
trading) does not suddenly transform the r estricted shares
which are not publicly traded into "publicly traded
securities." Whether the restriction made the Davidsons'
shares wholly untradeable or tradeable only after some

                               66
maneuvering, the fact remains that the shar es simply were
not "publicly traded securities."

I agree with the majority that the Davidsons meet the
class definition in other respects, because they "purchased
or otherwise acquired" their shares within the relevant time
period, they were "injured ther eby," and they are not
"officers and directors of Cendant." However, the dispositive
point, and the point on which I diverge fr om the majority,
is the majority's position that the Davidsons' shar es are
"publicly traded securities." "Publicly traded securities" is
the cornerstone of "class membership" as the class was
certified. Because the Davidsons' shares wer e not "publicly
traded," they do not meet the class definition. Accordingly,
the District Court erred in finding the Davidsons to be class
members, even according "particular defer ence" to the
District Court on this finding.14
_________________________________________________________________

14. The majority uses the "particular defer ence" standard of review in
referring to the District Court's interpr etations of the District Court's
own orders. I do not think that it is appr opriate to accord the District
Court "particular deference" on this issue because I do not believe that
the District Court's finding as to the Davidsons' membership in the class
amounted to an "interpretation of its own or der." The majority asserts
that, "[h]ere, the District Court, in determining whether Appellants were
class members, interpreted its own orders, the order certifying the class
and the order approving the class notice, both of which contained the
class definition." (Maj. Op. at 14-15.) In so holding, the majority
accords
a "particular deference" to the District Court's interpretations.

While it is true that those orders gave content to the class definition,
the District Court did not draft the definition itself. I believe that
"particular deference" can be accor ded when the District Court claims to
have a better insight on the meaning of an or der as the author of that
order. This is not such a case.

Indeed, I believe that the orders in this case approving class
certification and approving class notice ar e analogous to consent decrees
approved by courts, in that they are "hybrid[s] of . . . contract[s] and .
. .
court order[s]." Holland v. New Jersey Dept. of Corrections, Nos. 00-1801,
2356, 2357, at 20. As this court has just recently held in Holland, the
appropriate standard of review for such decrees is plenary or de novo
review, and not the "particular defer ence" review held by the majority.
Holland, at 21-24. Hence, the majority exer cised an incorrect standard
of review over the District Court's orders certifying the class and
approving class notice.

                                67
My interpretation of "publicly traded" as not including the
Davidsons' shares is bolstered by the definition of "publicly
traded" in the Internal Revenue Code Regulations.
Regulation S 1.170A-13 defines "publicly traded securities"
as follows:

       In general. Except as provided in paragraph (c)(7)(xi)(C)
       of this section, the term `publicly traded securities'
       means securities . . . for which (as of the date of
       contribution) market quotations are readily available
       on an established securities market.

I.R.C. Reg. S 1.170A-13(c)(7)(xi)(A). The exceptions section
states:

       Exception. Securities described in paragraph (c)(7)(xi)
       (A) or (B) of this section shall not be consider ed
       publicly traded securities if-- (1) The securities are
       subject to any restrictions that materially af fect the
       value of the securities to the donor or pr event the
       securities from being freely traded . . . .

I.R.C. Reg. S 1.170A-13(c)(7)(xi)(C)(1) (emphasis added).

The Davidsons' shares precisely fall into this exception,
in that restrictions were placed on the shares that
prevented them from being freely traded. Therefore,
according to the definition of "publicly traded" in the
Internal Revenue Code Regulations, the Davidsons' shares
were not "publicly traded."

Moreover, the majority once again tur ns a blind eye to
the Amended and Consolidated Class Action Complaint
("ACCAC"), which by its terms supports the Davidsons'
position that the class action was not intended to cover
their claims. The ACCAC describes the class members"as
purchasers on the [NYSE] and acquir ers pursuant to the
Registration Statement and the Joint Proxy
Statement/Prospectus [of the merger of CUC and HFS]."
(App. 156.) In addition, the ACCAC states:

       Lead Plaintiffs' claims are typical of the members of the
       Class. Plaintiffs and all other members of the Class
       acquired their CUC common stock pursuant to the
       Registration Statement and Joint Proxy
       Statement/Prospectus, and purchased their CUC and

                               68
       Cendant publicly traded securities on the open market
       and sustained damages as a result of defendants'
       wrongful conduct complained of herein.

(App. 156.) These statements make clear that the lead
plaintiffs intended the class to consist only of purchasers of
the Cendant shares on the market and pur chasers
pursuant to the HFS/CUC merger. The Davidsons fall into
neither of these categories.

In addition, the fact that the claims in the ACCAC for the
most part differ from the Davidsons' claims against
Cendant lends still further support to excluding the
Davidsons from the class. Of the fourteen counts in the
ACCAC, only five cover the time period during which the
Davidsons acquired their shares. In addition, as the
Davidsons point out, the ACCAC alleges claims for violation
of Section 11 of the Securities Act, 15 U.S.C. S 77k, only in
connection with the HFS/CUC merger. The Davidsons
would (and did) pursue such claims on their own behalf in
arbitration, but the ACCAC does not make those claims for
the Davidsons.15 The ACCAC only intended to cover merger-
related claims in connection with the HFS/CUC merger and
further reinforces the point that the CalPERS class did not
include the Davidsons.16

I therefore disagree with the majority's holding regarding
the Davidsons' class membership, because I am convinced
that the District Court clearly erred in finding that the
Davidsons are within the class.
_________________________________________________________________

15. In their Notice of Claims for arbitration, the Davidsons made claims
under SS 11, 12(a)(2), and 17 of the Securities Act, 15 U.S.C. S 77a, et
seq., S 10(b) of the Securities and Exchange Act, 15 U.S.C. S 78j(b), as
well as under various sections of the Califor nia Corporations Law and
common law. The ACCAC also alleges violations of sections 11 and 12 of
the Securities Act and S 10(b) of the Securities and Exchange Act, but its
section 11 and section 12 claims are not the same claims that the
Davidsons have asserted in arbitration, and only theS 10(b) claims in
the ACCAC arguably cover claims of the Davidsons.

16. See note 4, supra.

                               69
IV.

I have still another disagreement with the majority
opinion and its holdings. The majority holds that the
District Court did not abuse its discretion in its analysis of
whether to grant the Davidsons' request for an extension of
the time to opt out. In considering the Davidsons's request
for an extension of the opt-out deadline under Rule 6(b) of
the Federal Rules of Civil Procedure, the District Court
described the factors to be considered in connection with
the excusable neglect standard in detail, citing the Supreme
Court's decision in Pioneer Investment Services Co. v.
Brunswick Assoc. Ltd. Partnership, 507 U.S. 380, 395
(1993), and the Third Circuit's earlier opinion concerning
this standard, Dominic v. Hess Oil V .I. Corp., 841 F.2d 513,
517 (3d Cir. 1988). See In re Cendant Corp. Sec. Litig., 194
F.R.D. 158, 165 (D.N.J. 2000).

However, the District Court in this case, as in other cases
when it gave only lip service to the Pioneer factors, did not
comply with the Supreme Court's or our instructions. See
In re Cendant Corp. PRIDES Litig., 235 F .3d 176 (3d Cir.
2000); In re Cendant Corp. PRIDES Litig. , 234 F.3d 166 (3d
Cir. 2000).17 The District Court here stated only that the
Davidsons' "alleged failure to receive notice . . . does not
warrant an extension of the exclusion deadline." 194 F.R.D.
at 165. It gave as its reasons: class notice was adequately
published; the case got independent press coverage; "the
Davidsons' assertion that their failure to opt out is
excusable because Cendant acted as though they wer e not
_________________________________________________________________

17. The majority cites another Cendant appeal in which we affirmed the
District Court's decision that certain plaintif fs' late filing of proofs
of
claim was "excusable neglect." (Maj. Op. at 28 (citing In re Cendant Corp.
PRIDES Litig., 233 F.3d 188 (3d Cir . 2000)).) Because that appeal
concerned a situation in which the District Court had found excusable
neglect, it does not particularly illuminate our analysis of the District
Court's failure to conduct a complete excusable neglect analysis here.
Moreover, as I note in the text above, at least two other Cendant cases
have been remanded because the same District Court judge who
presided over the instant case failed to explain his analysis in those
cases as well. See In re Cendant Corp. PRIDES Litig., 235 F.3d 176 (3d
Cir. 2000); In re Cendant Corp. PRIDES Litig., 234 F.3d 166 (3d Cir.
2000).

                               70
class members is not convincing"; and Cendant's"defensive
maneuvers" in reaction to the Davidsons' arbitration before
the expiration of the opt-out period "are irrelevant." 194
F.R.D. at 165.

The District Court said nothing about "the danger of
prejudice" to Cendant if an extension wer e granted, "the
length of the delay and its potential impact" on the case, or
"whether the defendant acted in good faith," Pioneer, 507
U.S. at 395, nor did the District Court consider"(1) whether
the inadvertence reflected professional incompetence such
as ignorance of the rules of procedure, (2) whether an
asserted inadvertence reflects an easily manufactured
excuse incapable of verification by the court, and, (3) a
complete lack of diligence." Dominic, 841 F.2d at 517.

It does not suffice for the majority to attempt tofill in the
gaping gaps left by the District Court in its aborted Pioneer
analysis. Nor is the majority's attempt to cur e the
deficiencies of the District Court's analysis consistent with
our jurisprudence which requires the District Court to
explain its excusable neglect reasoning.

When we direct a district court to take a particular
action, it is not only customary but I suggest it is our
mandate that the issue or case be retur ned to the district
court for compliance with our instructions. See, e.g., In re
Orthopedic Bone Screw Prods. Litig. , 2001 WL 377052, at 5
(3d Cir. Apr. 16, 2001). It is the district court's discretion
and findings, not our discretion and findings, that are
called for in relating the facts found to the principles that
we have established. Appellate fact finding and"shortcuts"
taken by an appellate court as the majority has taken here
are rarely if ever prudential and sage and, unfortunately,
such fact finding and shortcuts may lead to
misunderstandings in the case sub judice, to say nothing of
eroding our established jurisprudence. See Pullman-
Standard v. Swint, 456 U.S. 273, 291 (1982) (appellate fact
finding); Chalfant v. Wilmington Institute, 574 F.2d 739 (3d
Cir. 1978) (same). We have consistently followed the
practice of having the district court in the first instance
determine whether the factors we have established18 meet
_________________________________________________________________

18. Our cases are legion in which we have set forth factors which are to
be met and analyzed by evidence in the recor d. See, e.g., Holland v. New

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evidentiary requirements. Why now in this case has it
become so necessary to turn our backs on established
procedures, practices, and our announced jurisprudence by
usurping the District Court's role?

As we observed in another Cendant appeal:"In the wake
of Pioneer, we have imposed a duty of explanation on
District Courts when they conduct `excusable neglect'
analysis." In re Cendant Corp. PRIDES Litig., 234 F.3d 166,
171 (3d Cir. 2000). Indeed, in that case, r egarding
appellant's motion pursuant to Federal Rule of Civil
Procedure 60(b) to excuse its late filing of its proof of claim,
we vacated the District Court's finding that ther e was no
excusable neglect "because the District Court did not make
clear its reasoning and application of the`excusable neglect'
factors," and, therefore, "we do not have a sufficient basis
to review the District Court's ruling for abuse of discretion."
234 F.3d at 168.

In yet another Cendant case, also concer ning a party's
Rule 60(b) motion to allow its late filing of a pr oof of claim,
we reversed the District Court's finding that there had not
been excusable neglect, pointing out that "the District
Court failed to apply properly the standar ds for determining
`excusable neglect' outlined in Pioneer." In re Cendant Corp.
PRIDES Litig., 235 F.3d 176, 180 (3d Cir . 2000). We held
"that the District Court's misapplication of the Pioneer
factors in denying Santander's Rule 60(b) motion[was]
beyond the sound exercise of its discretion." In re Cendant
Corp. PRIDES Litig., 235 F.3d at 184.

Indeed, in a recent opinion, the author of the majority
opinion has himself acknowledged our requir ements for
_________________________________________________________________

Jersey Dept. of Corrections, Nos. 00-1801, 2356, 2357, at 34-43 (findings
of fact in connection with enforcement of compliance with consent
decrees); Cendant Corp. PRIDES Litig., 243 F.3d 721 (3d Cir. 2001)
(awards of attorneys' fees in class actions); Oddi v. Ford Motor Co., 234
F.3d 136 (3d Cir. 2000) (deciding whether to conduct Daubert hearings);
In re TMI Litig., 193 F.3d 613 (3d Cir. 1999) (admission of expert
testimony); United States v. Iannone, 184 F .3d 214 (3d Cir.
1999)(sentencing decisions in criminal cases); Poulis v. State Farm Fire &
Casualty Co., 747 F.2d 863 (3d Cir . 1984) (the dismissal of a complaint).

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district courts denying parties' "excusable neglect" motions.
In In re Orthopedic Bone Screw Pr ods. Liab. Litig., Judge
Ambro observed that "[g]enerally we r equire further
explanation of an order terminating a litigant's claim." In re
Orthopedic Bone Screw Prods. Liab. Litig., 2001 WL 377052,
at 5 (3d Cir. Apr. 16, 2001). He then asserted that " `[w]e
have imposed a duty of explanation on District Courts
when they conduct `excusable neglect' analysis.' " In re
Orthopedic Bone Screw Prods. Liab. Litig., 2001 WL 377052,
at 5 (quoting In re Cendant PRIDES Litig. , 233 F.3d 188,
196 (3d Cir. 2000)). In light of the majority's apparent
understanding of what is required of district courts under
Pioneer, as evidenced by the recent opinion in Orthopedic
Bone Screw Prods., it is thor oughly perplexing to me that
the majority fails to hold the District Court to that standard
and instead takes on the District Court's job itself.

The precedent is clear: the District Court must satisfy its
duty of explanation. When it does not, the case must be
remanded for the District Court to do so. This conclusion is
by no means a "leap of logic" as the majority suggests (Maj.
Op. at 26-27 n.18); it is the proper and the only application
of the rule of law in this Circuit.

In re Cendant PRIDES Corp. Litig., 235 F.3d 176 (3d Cir.
2000), relied upon by the majority as support for its own
consideration of the Pioneer factors, is entirely
distinguishable. In that case, our court reviewed the
District Court's denial of a Rule 60(b) "excusable neglect"
motion for an abuse of discretion. We concluded "that the
District Court's decision [denying the motion for`excusable
neglect'] was not consistent with the sound exer cise of its
discretion." 235 F.3d at 181. Because we held that the
District Court abused its discretion, we wer e obliged to
reach the merits of excusable neglect and answer the
"second question . . . : whether `excusable neglect' excused
Santander's duty. . . This involves a review of the matter de
novo, applying the law to the facts." 235 F .3d at 181.

It was only in that procedural posture--reviewing under
a de novo standard--that we applied the Pioneer factors in
Cendant PRIDES, 235 F.3d 176. Ther efore, by relying on
that case, the majority is relying on a case in which we
exercised de novo review in or der to support its actions in

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this case where we must exercise abuse of discretion review.
Such misplaced reliance does not constitute"merely
following precisely what we did in" Cendant PRIDES, 235
F.3d 176, as the majority suggests. (Maj. Op. at 26-27
n.18.) That is, in effect, like saying that it is appropriate to
reconsider facts already found by a jury because a prior
appellate court had reviewed de novo a grant of summary
judgment on a factually similar case. There is simply no
language strong enough to describe how seriously the
majority has erred. Its error not only af fects the decision in
this case, but it also confounds our jurisprudence involving
our own standards of review.

Indeed, no matter how the majority tries to spin and
justify its holding here and Judge Ambr o's recent holding in
Orthopedic Bone Screw Prods., in derogation of its own
admonition that "[w]e [should] r efrain from substituting our
judgment for that of the District Court," see In re
Orthopedic Bone Screw Prods. Litig. , 2001 WL 377052, at 5,
it is the majority that has found: that the Davidsons do not
qualify for the excusable neglect exception because their
actions caused prejudice to Cendant; that their actions do
not comport with the good faith requirement; that their
claims would subject Cendant to additional liabilities; that
permitting the Davidsons to opt out would deprive Cendant
of the finality it bargained for; and that the Davidsons
sought a strategic advantage in not filing a for mal opt-out
request. (Maj. Op. at 26-29.) These wer e findings that the
District Court did not make but was obliged to make under
Pioneer and was then obliged to include in its analysis. Nor
can I understand why the majority has so blithely undercut
our directions to the District Court which have now been
emphasized not just once but at least twice in the Cendant
cases. See In re Cendant Corp. PRIDES Litig., 235 F.3d 176
(3d Cir. 2000); In re Cendant Corp. PRIDES Litig., 234 F.3d
166 (3d Cir. 2000); see also In r e Orthopedic Bone Screw
Prods. Litig., 2001 WL 377052 (3d Cir . Apr. 16, 2001).

We have said, and this majority is bound by our holdings,
that the District Court must satisfy its "duty of explanation
. . . when . . . conduct[ing] `excusable neglect' analysis"
under Pioneer. In re Cendant Corp. PRIDES Litig., 234 F.3d
at 171; In re Orthopedic Bone Scr ew Prods. Litig., 2001 WL
74
377052, at 5. The District Court's mere citation of Pioneer
and recitation of its factors do not satisfy this "duty of
explanation." Nor, I suggest, does the majority's untoward
attempt to furnish its own findings and its own
explanations satisfy the excusable neglect standar d that the
District Court failed to furnish itself. Now, it may well be
that, had the District Court considered the Pioneer factors
explicitly, it still could have reached its same conclusion.
But that cannot excuse the District Court's flagrant failure
to comply with this Court's mandate, nor can it excuse the
majority for attempting to brush this issue under the carpet
by substituting its discretion for that of the District Court.

V.

In conclusion, I am more than satisfied that the New
Jersey District Court egregiously erred in enjoining the
Davidsons' arbitration. After a review of the statutes and
case law, there can be no question that the Davidsons'
claims were properly in arbitration and the California
Central District Court's decision to that ef fect precluded the
New Jersey District Court from enjoining the arbitration.

Additionally, I am satisfied that the Davidsons did not fit
within the class definition because their Cendant shares
were not "publicly traded securities." Infinding that they
were, the New Jersey District Court clearly err ed.

Finally, I believe that the New Jersey District Court, in
failing to comply with the Supreme Court's and our own
unequivocal directions, again clearly err ed in denying the
Davidsons' request to extend the opt-out deadline without
explaining the application of the Pioneer factors as it was
required to do.

I therefore respectfully dissent, and I would reverse and
vacate the District Court's order which enjoined an
arbitration ordered by the Califor nia Central District Court.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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