Fifth Circuit Upholds Rejection of Late Opt-Out from Enron Settlement Class

The White Rabbit was always late for a very important date.

As all the world knows, a settlement class member who wants to opt out must timely tell the court of opt-outer's desire for exclusion.  But what happens if the settlement notice that the class member receives doesn't specify the opt-out deadline but the member could've figured it out anyway?  Should the court allow more time for opting out?

The Fifth Circuit said no this week to several Canadian companies (which we'll call "Silvercreek") that tardily tried to exclude themselves from a $69 million settlement with Bank of America in a piece of the sprawling Enron securities litigation.  Silvercreek admitted getting a copy of the district court's order that preliminarily approved the settlement and directed the sending of notice to class members.  The order established March 28, 2005 as the deadline for filing "objections" to the settlement and April 11 as the date for the "[f]inal approval hearing".  But it left a blank in the space for the opt-out deadline.  The court nevertheless directed the claims administrator to identify March 28 as the end date for opting out in the electronic and paper notices it would post on a litigation website and mail to class members. 

Silvercreek said nothing about objecting to the settlement or opting out until April 27 -- 16 days after the final approval hearing -- when it requested more time.  The district court demurred.  The Fifth Circuit affirmed, holding that Silvercreek failed to justify its tardiness with a showing of "excusable neglect".  Even if Silvercreek never got a notice specifying an opt-out deadline, the court concluded, it could and should have learned of the March 28 cut-off with a little investigation.  And anybody with a lick of sense, the court suggested, ought to have figured that the deadline must precede the April 11 final approval hearing.  A request for opt out more than two weeks after the hearing thus came too late. Silvercreek Mgmt. Inc. v. Banc of America Securities LLC, No. 06-20026 (5th Cir. July 7, 2008).

Tempus fugit.