Feder v. Electronic Data Systems Corp. , 248 F. App'x 579 ( 2007 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
F I L E D
September 25, 2007
No. 06-40735
Summary Calendar Charles R. Fulbruge III
Clerk
MICHAEL FEDER, Individually and On Behalf of all others similarly
situated; SECURITIES, Class Plaintiffs
Plaintiffs-Appellees
v.
ELECTRONIC DATA SYSTEMS CORPORATION
Defendant-Appellee
v.
BERNARD STANLEY URBANIK
Appellant
Appeal from the United States District Court
For the Eastern District of Texas
6:03-MD-1512
Before WIENER, GARZA, and BENAVIDES, Circuit Judges
PER CURIAM:*
Bernard Urbanik (“Urbanik”), the appellant, challenges the district court’s
decision to disregard his objections to a settlement reached in a securities class
action between the plaintiff class and Electronic Data Systems Corporation
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 06-40735
(“EDS”). Urbanik argues on appeal that the settlement is not “fair, reasonable,
and adequate” as required by FED. R. CIV. P. 23(e)(1)(C). Because Urbanik did
not prove his membership in the class, he lacks standing to object. We dismiss
without reaching the merits of his claim. See Steel Co. v. Citizens for Better
Env’t, 523 U.S. 83, 93-94 (1998) (holding that federal courts should not assume
jurisdiction over a claim and then reject it on the merits, but should decide
jurisdiction first).
After briefing and a hearing on the matter, the district court granted
preliminary approval of a $137.5 million settlement between the plaintiff class
and EDS. Based on this preliminary approval, the claims administrator mailed
proof of claim and release forms to 594,000 potential class members giving notice
of the settlement. These forms, approved by the district court as providing
requisite notice, stated that class members were to submit genuine and
sufficient documentation for all of their transactions in each eligible security
during the class period, and that any objection to the settlement must include
the number and type of EDS securities purchased, acquired, and sold during the
class period. Urbanik submitted a written objection to the settlement which
included, among his objections, a statement that he purchased or otherwise
acquired securities of EDS during the class period. Urbanik included no further
information regarding EDS securities. The district court then held its fairness
hearing to determine whether to approve the settlement. During the hearing,
Urbanik’s counsel stated that his client bought and sold shares of EDS stock in
the requisite time frame. Urbanik produced no other proof of his class
membership
The text of FED. R. CIV. P. 23(e) is clear in its grant to class members of
the ability to object to a proposed settlement.1 But only class members have an
1
Any class member may object to a proposed settlement, voluntary dismissal, or
compromise that requires court approval under Rule 23(e)(1)(A). FED. R. CIV. P.
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No. 06-40735
interest in the settlement funds, and therefore only class members have
standing to object to a settlement. Anyone else lacks the requisite proof of injury
necessary to establish the “irreducible minimum” of standing. See Patterson v.
Texas, 308 F.3d 448, 451 (5th Cir. 2002) (holding that the state of Texas lacked
standing to object to class action settlement because it had not suffered an
injury); Gould v. Alleco, Inc., 883 F.2d 281, 284 (4th Cir. 1989) (noting that “[t]he
plain language of Rule 23(e) clearly contemplates allowing only class members
to object to settlement proposals”); 4 Newberg on Class Actions § 11:55 (4th Ed.)
(“[A]s a general rule, only class members have standing to object to a proposed
settlement.”). The issue in this case is whether Urbanik has provided enough
evidence to show that he is a class member with standing to object.
Urbanik, as the party seeking to establish jurisdiction, bears the burden
of proving standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
The elements of standing must be supported as any other matter on which the
plaintiff bears the burden of proof at the corresponding stage of litigation. Id.
The necessary elements of Urbanik’s standing to object could be established by
proof of his class membership. See Shaw v. Toshiba Am. Info. Sys., 91 F. Supp. 2d
942, 974-75 (E.D. Tex. 2000) (noting that objector who failed to substantiate his
23(e)(4)(A).
The district court certified a class, with certification affirmed by this court, to include:
All persons and entities who purchased or otherwise acquired the securities of
Electronic Data Systems Click for Enhanced Coverage Linking SearchesCorp.
("EDS") between February 7, 2001 through and including September 18, 2002
(the "Class Period"), and who were damaged thereby. Excluded from the Class
are defendants, members of the families of each the Individual Defendants, any
parent, subsidiary, affiliated, partner, officer, executive, director of any
defendant, any entity in which any such excluded person has a controlling
interest, and the legal representatives, heirs, successors, and assigns of any such
excluded person or entity. In re Elec. Data Sys. Corp. Securities Litig., 226
F.R.D. 559, 572 (E.D. Tex. 2005)
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No. 06-40735
membership in the class did not have “proper standing” to object to class action
settlement).
Aside from Urbanik’s unsupported claim of ownership in his objection
letter, and the statements made by his attorney at the settlement hearing,
Urbanik produced no evidence substantiating his membership in the class. In
this case, where the proof of claims period has closed and the settlement has
been finally approved by the district court, the burden of proving class
membership cannot be satisfied by the appellant’s unsupported assertions of
class membership. Urbanik did not submit a proof of claim form. Nor did he
provide the documentary evidence required by the claim form to support his
contention that he bought or sold EDS stocks during the class period. His
objection did not include the required information as to the number or type of
EDS securities that Urbanik alleges to have dealt in during the period. Allowing
someone to object to settlement in a class action based on this sort of weak,
unsubstantiated evidence would inject a great deal of unjustified uncertainty
into the settlement process.
We do not, in this opinion, venture to set a bar for the quantum of proof
necessary to establish class membership for the purpose of objecting to a
settlement. Rather, we simply note that the right to object to settlement in a
securities class action must rest on something more than the sort of bare
assertions of stock-ownership made by Urbanik. Because Urbanik lacked
standing to object to the settlement, he cannot now appeal the district court’s
ruling on his objection.
Standing being jurisdictional, we DISMISS.
4