In re Cendant Corp. Litigation

At least 64 securities-fraud class-action lawsuits were filed against Cendant Corporation (defendant) regarding alleged accounting irregularities that impacted stock values. The lawsuits were consolidated into a single class-action lawsuit in the United States District Court for the District of New Jersey that was governed by the Private Securities Litigation Reform Act of 1995 (PSLRA). The district court found that a pension-fund group named CalPERS Group (CalPERS) (plaintiff) (1) had the largest financial interest in the requested class relief, (2) held claims that were typical of the other class members’ claims, and (3) could adequately represent the class’s interests. The district court named CalPERS the presumptive lead plaintiff in the consolidated action. After ruling that no objector had rebutted CalPERS’s presumptive qualifications, the court named CalPERS as the lead plaintiff. CalPERS hired two law firms that had experience with securities-fraud class actions and signed a retainer agreement with them. However, the district court declined to automatically appoint the firms as class counsel. Instead, the court held an auction for the class-counsel position but allowed the firms selected by CalPERS to match the lowest auction bid. The firms matched the lowest bid, and the district court then appointed them as class counsel. CalPERS and class counsel negotiated a $3.2 billion class settlement with Cendant, which the court approved. Under the original retainer agreement’s terms, class counsel could have received up to $187 million in fees. Under the auction bid’s terms, the court awarded class counsel $262 million in fees. Objectors appealed. Among other issues, the objectors challenged the selection of CalPERS as the lead plaintiff and the attorney-fee award.