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Monday, February 5, 1996
by Karen Donovan, The National Law Journal
The drawn-out battle between Prudential Securities Inc. and the dogged crew of plaintiffs' lawyers that has been chasing it apparently has frayed some nerves, including those of U.S. District Judge Milton Pollack in New York.
At a day-long hearing on Jan. 18, Judge Pollack rejected the lawyers' objections to Prudential's $110 million settlement of a "global" class action approved last November. He also granted Prudential's motions to force dismissal of ongoing arbitrations and lawsuits of plaintiffs who failed to opt out by the Oct. 30, 1995, deadline. The proceeding, a hearing for motions requesting to be exempt from the opt-out deadline, could be the first of many letters seeking exception continued to arrive even as Judge Pollack presided over the hearing.
The judge rejected the reasons asserted by plaintiffs' lawyers for their clients' failure to opt out, dismissing them like so many excuses from students with lost homework. He made many observations, but they came down to the fact that Prudential had met the "best notice practicable" standard under federal law.
The plaintiffs claimed that Prudential, while defending these suits, should have contacted the lawyers instead of mailing notices to their clients. The strangest outcome involved a motion from a lawyer who battled Prudential in 90 hours of arbitration hearings. Phillip J. Duncan, of Little Rock, Ark.'s Duncan & Rainwater, represented John and Christal Toland, who invested $450,000 in limited partnerships from the Prudential-Bache Energy Income Fund.
A Hint Is Enough
Mr. Duncan said he first learned of the global case from Prudential's defense counsel, who casually mentioned it at an arbitration hearing in October 1995. A month later, with the proceeding about to end, Prudential demanded that Mr. Duncan drop his clients' case, citing the Tolands' failure to opt out. Judge Pollack said that the casual remark should have caused Mr. Duncan to inquire further.
Prudential's lawyer, Thomas J. Kavaler, of New York's Cahill Gordon & Reindel, argued that the Tolands were never contacted because they were potential members of a class action in New Orleans, where the presiding judge threw out the first proposed settlement because he said it was inadequate. The Tolands opted out once, but failed to opt out of the deal that was finally approved. Instead, they sent back a $50,000 check received for their claim, though they can still accept it if they choose to.
Seth E. Lipner, of Garden City, N.Y.'s Deutsch & Lipner, which represented former Prudential brokers who had purchased limited partnerships, made the most far-reaching claims, arguing that the notice's sweeping language made it impossible to conclude that it referred to lost business claims.
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