In re Charles Schwab Corp. Securities Litigation

Filing 1146

ORDER DENYING MOTION FOR EXCLUSION FROM CLASS AND RELIEF FROM JUDGMENT by Judge William Alsup denying #1135 Motion]. (whasec, COURT STAFF) (Filed on 5/1/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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No. C 08-01510 WHA
IN RE:

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For the Northern District of California

United States District Court

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CHARLES SCHWAB CORPORATION
SECURITIES LITIGATION.

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/

ORDER DENYING MOTION
FOR EXCLUSION FROM CLASS
AND RELIEF FROM JUDGMENT
AND VACATING HEARING

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This order addresses the motion filed by class member Donald Klus seeking permission

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to opt out of the class after the applicable deadline and for relief from judgment (Dkt. No. 1135).

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Mr. Klus is an elderly class member who suffers from several medical conditions.

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Mr. Klus received three notices in this now-settled class action: (1) a notice of pendency

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of class action dated September 21, 2009; (2) a notice of proposed settlement of class action

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dated June 25, 2010; and (3) a supplemental notice of proposed settlement of class action

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dated December 1, 2010 (Joaqin Decl. ¶ 2). Mr. Klus does not deny receipt of these notices

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but contends he attempted in good faith to opt-out of this action. On his copy of the first notice,

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Mr. Klus underlined the instructions for electing exclusion and thought he sent a request

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pursuant to those instructions (Klus Decl. ¶1). Upon receipt of the supplemental notice of

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proposed settlement, Mr. Klus mailed a letter to the U.S. District Court for the Northern District

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of California, stating: “I invested my IRA savings in the Schwab YIELDPLUS FUND SWYSX

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because I was told that it was the safest place to put my savings. Attached please review my

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losses” (Klus Decl. Exh. C). A spreadsheet of capital losses for two accounts was appended.

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The clerk stamped Mr. Klus’s letter as received on January 18, 2011 — within the opt-out period

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specified in the notice of settlement. Because it did not indicate an addressee, the clerk wrote:

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“Please provide case number and judge” on the letter and returned it. Mr. Klus received the

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returned letter but did not respond. In April 2011, thinking he had opted out of the settlement,

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Mr. Klus spoke to an Associate General Counsel for defendant Schwab about the losses he had

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incurred. An email confirmation of that conversation reads: “Thank you for speaking with me

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today regarding your losses in the YieldPlus Fund. As we discussed, you will be sending me

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documentation in support of your damage claim. I will review what you send me and will

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get back to you” (id. at ¶ 3; Exh. E).
In June 2011, Mr. Klus received two settlement checks totaling $1,299.36, which remain

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For the Northern District of California

United States District Court

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uncashed. Believing receipt of the checks was “just what happens in a class action,” Mr. Klus

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took no action at that time. He also informed his daughter of the checks, who then “realized his

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memory and understanding [were] far worse than [she] had thought” (Dibb Decl. ¶ 4). Mr. Klus

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then received a notice stating the deadline to cash his checks or request reissue thereof was

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February 10, 2012 (Br. 4; Klus Decl. ¶ 4). Upon receipt of that notice, Mr. Klus retained counsel

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and filed the instant motion. Class counsel does not oppose. Defendant initially opposed this

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motion but has since withdrawn its opposition and requested to discontinue the motion hearing

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(Dkt. Nos. 1139, 1143).

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The standard for determining whether a class member should be allowed to opt out of

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a class action after the applicable exclusion deadline has passed is whether the class member’s

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failure to meet the deadline is the result of “excusable neglect.” Silber v. Mabon, 18 F.3d 1449,

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1454–55 (9th Cir. 1994). This standard allows courts, “where appropriate, to accept late filings

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caused by inadvertence, mistake, or carelessness, as well as by intervening circumstances

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beyond the party’s control.” Pioneer Inv. Serv. Co. v. Brunswick Ass’n. Ltd. P’ship, 507 U.S.

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380, 388 (1993). When evaluating whether “excusable neglect” applies, the Ninth Circuit

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instructs courts to consider the “degree of compliance with the best practicable notice

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procedures; when notice was actually received and if not timely received, why not; what caused

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the delay, and whose responsibility was it; how quickly the belated opt out request was made
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once notice was received; how many class members want to opt out; and whether allowing a

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belated opt-out would affect either the settlement or finality of the judgment.” Silber, 18 F.3d at

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1455 (internal footnote omitted). Additionally, the court should consider the danger of prejudice

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to the opposing party, and whether the movant acted in good faith. Pioneer, 507 U.S. at 395.

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This order finds Mr. Klus’s failure to timely opt-out was not the result of excusable

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neglect. Mr. Klus received multiple notices of this action and admits to having read the opt-out

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instructions (Klus Decl. ¶¶ 1–2). No delay is alleged. Though Mr. Klus made a misguided

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attempt to opt-out in 2011, the letter did not state this intention but only that he had lost money

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as an investor in the fund. Moreover, he failed to respond to the clerk’s request for identifying
information or take any action as to the returned letter. Mr. Klus provides no justification

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For the Northern District of California

United States District Court

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for failing to bring this motion in June 2011, upon receipt of the settlement checks but states only

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that he did not take the checks to mean he was indeed a class member. Even if Mr. Klus’s

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medical conditions caused him to believe he had opted out despite the continued class

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notifications as well as the returned letter, he discussed his communications with his daughter,

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who allegedly was aware of his mistake in June 2011 (Dibb Decl. ¶ 4). Nine months have since

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passed. Finally, this order finds the prejudice to Schwab that would result from granting this

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requests — especially after approval and administration of a $200 million settlement — would

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be significant, since the settlement was negotiated with a stable class membership in mind.

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It is simply too late to allow Mr. Klus to opt-out.

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Mr. Klus argues that the return of his letter by the clerk confirmed his belief that

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he had opted out of the class, and the Associate General Counsel for Schwab’s failure to mention

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the class action in his email reaffirmed this belief. Mr. Klus also contends that only when

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he received written notice instructing him to cash the checks did he realize “something wasn’t

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right” (Br. 3–4; Klus Decl. 2–4). This order finds neither of these arguments compelling at this

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late stage. The clarity of notices to class members in this action was finely tuned. The fact that

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Mr. Klus thought he had opted out based on the first notice cannot sustain a finding of excusable

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neglect. The returned letter plainly requested additional information, which Mr. Klus never

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provided. It is unclear how the clerk’s response would have confirmed his mistaken belief.
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Similarly, the email from Schwab states only that Mr. Klus was expected to submit

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documentation. Mr. Klus knew about the pendency of this action. The fact that it was not

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referenced in the confirmation email cannot have reasonably confirmed anything about the class

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or inclusion therein. Finally, even if Mr. Klus truly was unaware of his inclusion in this action,

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his daughter states she too reviewed the returned letter in early 2011, and was aware that

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Mr. Klus received settlement checks in June.

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The circumstances presented here do not warrant a finding of excusable neglect.

Court has denied similar requests (Dkt. Nos. 824–26). It would be unfair to reopen the door at

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this juncture. Mr. Klus’s untimely request is accordingly DENIED. The hearing scheduled for

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For the Northern District of California

Even in instances where class members claimed to have received no notice of this action, the

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United States District Court

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May 3, 2012, is hereby VACATED.

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IT IS SO ORDERED.

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Dated: May 1, 2012.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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